Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed Rules 27823 

PPS standard Federal rate for FY 2014 based 

on the full LTCH PPS market basket increase 

estimate (for this proposed rule, estimated to 

be 2.5 percent), subject to an adjustment 

based on changes in economy-wide 

productivity and an additional reduction 

required by sections 1886(m)(3)(A)(ii) and 

(m)(4)(D) of the Act, provided the LTCH 

submits quality data in accordance with 

section 1886(m)(5)(C) of the act and our 

rules. Beginning in FY 2014, in accordance 

with the LTCHQR Program under section 

1886(m)(5) of the Act, we are proposing to 

reduce the annual update to the LTCH PPS 

standard Federal rate by 2.0 percentage 

points for failure of a LTCH to submit quality 

data. The productivity adjustment described 

in section 1886(b)(3)(B)(xi)(ii) of the Act is 

currently estimated to be 0.4 percent for FY 

2014. In addition, section 1886(m)(3)(A)(ii) of 

the Act requires that any annual update for 

FY 2014 be reduced by the ‘‘other 

adjustment’’ at section 1886(m)(4)(D) of the 

Act, which is 0.3 percentage point. Therefore, 

based on IGI’s first quarter 2013 forecast of 

the FY 2014 market basket increase, we are 

proposing an annual update to the LTCH PPS 

standard Federal rate of 1.8 percent (that is, 

the current FY 2014 estimate of the market 

basket rate-of-increase of 2.5 percent less a 

proposed adjustment of 0.4 percentage point 

for economy-wide productivity and less 0.3 

percentage point), provided the LTCH 

submits quality data in accordance with the 

LTCHQR Program under section 

1886(m)(5)(C) of the Act. Accordingly, we are 

proposing to apply an update factor of 1.018 

in determining the LTCH PPS standard 

Federal rate for FY 2014 provided the LTCH 

submits quality data in accordance with 

section 1886(m)(5)(C) of the Act and our 

rules. For LTCHs that fail to submit quality 

data, we are proposing an annual update to 

the LTCH PPS standard Federal rate of ¥0.2 

percent (that is, the FY 2014 estimate of the 

market basket rate-of increase of 2.5 percent 

less a proposed adjustment of 0.4 percentage 

point for economy-wide productivity, less an 

additional adjustment of 0.3 percentage 

point, and less 2.0 percentage points for 

failure to submit quality data) by applying an 

update factor of 0.998 in determining the 

LTCH PPS standard Federal rate for FY 2014. 

Furthermore, we are proposing to make an 

adjustment for the second year of the 3-year 

phase-in of the one-time prospective 

adjustment to the standard Federal rate under 

§ 412.523(d)(3) by applying a factor of 

0.98734 (or approximately ¥1.3 percent) in 

FY 2014, consistent with current law. 

III. Secretary’s Recommendations 

MedPAC is recommending an inpatient 

hospital update equal to one percent for FY 

2014. MedPAC’s rationale for this update 

recommendation is described in more detail 

below. As mentioned above, section 

1886(e)(4)(A) of the Act requires that the 

Secretary, taking into consideration the 

recommendations of MedPAC, recommend 

update factors for inpatient hospital services 

for each fiscal year that take into account the 

amounts necessary for the efficient and 

effective delivery of medically appropriate 

and necessary care of high quality. Consistent 

with current law, we are recommending an 

applicable percentage increase to the 

standardized amount of 1.8 percent (that is, 

the FY 2014 estimate of the market basket 

rate-of-increase of 2.5 percent less a proposed 

adjustment of 0.4 percentage point for 

economy-wide productivity and less 0.3 

percentage point). We are recommending that 

the same applicable percentage increase 

apply to SCHs and the Puerto Rico-specific 

standardized amount. 

In addition to making a recommendation 

for IPPS hospitals, in accordance with 

section 1886(e)(4)(A) of the Act, we are 

recommending update factors for certain 

other types of hospitals excluded from the 

IPPS. Consistent with our policies for these 

facilities, we are recommending an update 

for children’s hospitals, cancer hospitals, and 

RNHCIs of 2.5 percent. 

For FY 2014, consistent with policy set 

forth in section VIII. of the preamble of this 

proposed rule, we are recommending an 

update of 1.8 percent (that is, the current FY 

2014 estimate of the market basket rate-ofincrease of 2.5 percent less a proposed 

adjustment of 0.4 percentage point for 

economy-wide productivity and less 0.3 

percentage point) to the LTCH PPS standard 

Federal rate. 

IV. MedPAC Recommendation for Assessing 

Payment Adequacy and Updating Payments 

in Traditional Medicare 

In its March 2013 Report to Congress, 

MedPAC assessed the adequacy of current 

payments and costs, and the relationship 

between payments and an appropriate cost 

base. MedPAC recommended an update to 

the hospital inpatient rates equal to 1.0 

percent. MedPAC expects Medicare margins 

to remain low in 2013. At the same time, 

MedPAC’s analysis finds that efficient 

hospitals have been able to maintain positive 

Medicare margins while maintaining a 

relatively high quality of care. MedPAC also 

recommended that Congress should require 

the Secretary to use the difference between 

the increase of the applicable percentage 

increase under the IPPS for FY 2014 and 

MedPAC’s recommendation of a 1.0 percent 

update to gradually recover past 

overpayments due to documentation and 

coding changes. 

Response: With regard to MedPAC’s 

recommendation of an update to the hospital 

inpatient rates equal to 1 percent, for FY 

2014, as discussed above, sections 3401(a) 

and 10319(a) of the Affordable Care Act 

amended section 1886(b)(3)(B) of the Act. 

Section 1886(b)(3)(B) of the Act, as amended 

by these sections, sets the requirements for 

the FY 2014 applicable percentage increase. 

Therefore, we are proposing an applicable 

percentage increase for FY 2014 of 1.8 

percent, provided the hospital submits 

quality data, consistent with these statutory 

requirements. 

With regard to MedPAC’s recommendation 

that Congress should require the Secretary to 

use the difference between the increase of the 

applicable percentage increase under the 

IPPS for FY 2014 and MedPAC’s 

recommendation of a 1.0 percent update to 

gradually recover past overpayments due to 

documentation and coding changes, we refer 

readers to section II.D. of the preamble of this 

proposed rule for a complete discussion of 

the FY 2014 documentation and coding 

adjustment. We note that section 631 of the 

ATRA amended section 7(b)(1)(B) of Public 

Law 110–90 to require the Secretary to make 

a recoupment totaling $11 billion by 2017. 

This adjustment represents the amount of the 

increase in aggregate payments as a result of 

not completing the prospective adjustment 

authorized under section 7(b)(1)(A) of Public 

Law 110–90 until FY 2013. Our actuaries 

estimate that if CMS were to fully account for 

the $11 billion recoupment required by 

section 631 of the ATRA in FY 2014, a ¥9.3 

percent adjustment to the standardized 

amount would be necessary. MedPAC 

estimates that a ¥2.4 percent adjustment 

made in FY 2014, and not removed until FY 

2018, also would recover the required 

recoupment amount. It is often our practice 

to delay or phase in rate adjustments over 

more than 1 year, in order to moderate the 

effect on rates in any one year. Therefore, 

consistent with the policies that we have 

adopted in many similar cases, we are 

proposing a ¥0.8 percent adjustment to the 

standardized amount in FY 2014. 

We also note that, because the operating 

and capital prospective payment systems 

remain separate, we are continuing to use 

separate updates for operating and capital 

payments. The proposed update to the 

capital rate is discussed in section III. of the 

Addendum to this proposed rule. 

[FR Doc. 2013–10234 Filed 4–26–13; 4:15 pm] 

BILLING CODE 4120–01–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 418 

[CMS–1449–P] 

RIN 0938–AR64 

Medicare Program; FY 2014 Hospice 

Wage Index and Payment Rate Update; 

Hospice Quality Reporting 

Requirements; and Updates on 

Payment Reform 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

update the hospice payment rates and 

the wage index for fiscal year (FY) 2014, 

and continue the phase out of the wage 

index budget neutrality adjustment 

factor (BNAF). Including the FY 2014 15 

percent BNAF reduction, the total 

BNAF reduction in FY 2014 will be 70 

percent. The BNAF phase-out will 

continue with successive 15 percent 

reductions in FY 2015 and FY 2016. 

This proposed rule would also clarify 

how hospices are to report diagnoses on 

hospice claims, and proposes changes in 

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27824 Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed Rules 

the requirements for the hospice quality 

reporting program. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on June 28, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–1449–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1449–P, P.O. Box 8010, Baltimore, 

MD 21244–8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1449–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201 (Because access 

to the interior of the Hubert H. 

Humphrey Building is not readily 

available to persons without Federal 

government identification, commenters 

are encouraged to leave their comments 

in the CMS drop slots located in the 

main lobby of the building. A stamp-in 

clock is available for persons wishing to 

retain a proof of filing by stamping in 

and retaining an extra copy of the 

comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850 

If you intend to deliver your comments 

to the Baltimore address, call telephone 

number (410) 786–9994 in advance to 

schedule your arrival with one of our 

staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Debra Dean-Whittaker, (410) 786–0848 

for questions regarding the hospice 

experience of care survey. Robin 

Dowell, (410) 786–0060 for questions 

regarding quality reporting for hospices 

and collection of information 

requirements. Hillary Loeffler, (410) 

786–0456 for general questions about 

hospice payment. Katherine Lucas, 

(410) 786–7723 for questions regarding 

payment reform. Anjana Patel, (410) 

786–2120 for questions regarding the 

hospice wage index and payment rates. 

Kelly Vontran, (410) 786–0332 for 

questions on diagnosis reporting on 

hospice claims. 

SUPPLEMENTARY INFORMATION: 

Wage Index Addenda: In the past, the 

wage index addenda referred to in the 

preamble of our proposed and final 

rules were available in the Federal 

Register. However, the wage index 

addenda of the annual proposed and 

final rules will no longer be available in 

the Federal Register. Instead, these 

addenda will be available only through 

the Internet on the CMS Web site at: 

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

Medicare-Fee-for-Service-Payment/ 

Hospice/index.html.) Readers who 

experience any problems accessing any 

of the wage index addenda related to the 

hospice payment rules that are posted 

on the CMS Web site identified above 

should contact Anjana Patel at 410– 

786–2120. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Executive Summary 

A. Purpose 

B. Summary of the Major Provisions 

C. Summary of Costs, Benefits, and 

Transfers 

II. Background 

A. Hospice Care 

B. History of the Medicare Hospice 

Benefit 

C. Services Covered by the Medicare 

Hospice Benefit 

D. Medicare Payment for Hospice 

Care 

E. Trends in Medicare Hospice 

Utilization 

III. Provisions of the Proposed Rule 

A. Diagnosis Reporting on Hospice 

Claims 

1. ICD–9–CM Coding Guidelines 

2. Use of Nonspecific, Symptom 

Diagnoses 

3. Use of ‘‘Mental, Behavioral and 

Neurodevelopmental Disorders’’ 

ICD–9–CM Codes 

4. Guidance on Coding of Principal 

and Other, Additional, and/or Coexisting Diagnoses 

5. Transition to ICD–10–CM 

B. Proposed Update to the Hospice 

Quality Reporting Program 

1. Background and Statutory 

Authority 

2. Quality Measures for Hospice 

Quality Reporting Program and Data 

Submission Requirements for 

Payment Year FY 2014 

3. Quality Measures for Hospice 

Quality Reporting Program and Data 

Submission Requirements for 

Payment Year FY 2015 and Beyond 

4. Quality Measures for Hospice 

Quality Reporting Program for 

Payment Year FY 2016 and Beyond 

5. Public Availability of Data 

Submitted 

6. Proposed Adoption of the CMS 

Hospice Experience of Care Survey 

for the FY 2017 Payment 

Determination and That of 

Subsequent Fiscal Years 

7. Notice Pertaining To 

Reconsiderations Following APU 

Determinations 

C. FY 2014 Hospice Rate Update 

1. Hospice Wage Index 

2. FY 2014 Wage Index With an 

Additional 15 Percent Reduced 

Budget Neutrality Adjustment 

Factor (BNAF) 

3. Hospice Payment Update 

Percentage 

4. Proposed Updated FY 2014 

Hospice Payment Rates 

D. Update on Hospice Payment 

Reform and Data Collection 

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Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed Rules 27825 

1. Update on Reform Options 

a. Rebasing the Routine Home Care 

(RHC) Rate 

b. Site of Service Adjustment for 

Hospice Patients in Nursing 

Facilities 

2. Reform Research Findings 

3. Additional Data Collection 

E. Technical and Clarifying 

Regulatory Text Change 

IV. Collection of Information 

Requirements 

V. Response to Comments 

VI. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

1. Detailed Economic Analysis 

2. Regulatory Flexibility Act Analysis 

3. Unfunded Mandates Reform Act 

Analysis 

VII. Federalism Analysis and 

Regulations Text 

Acronyms 

Because of the many terms to which 

we refer by acronym in this proposed 

rule, we are listing the acronyms used 

and their corresponding meanings in 

alphabetical order below: 

APU Annual Payment Update 

BBA Balanced Budget Act of 1997 

BNAF Budget Neutrality Adjustment Factor 

BLS Bureau of Labor Statistics 

CAHPS Consumer Assessment of 

Healthcare Providers and Systems 

CBSA Core-Based Statistical Area 

CMS Centers for Medicare & Medicaid 

Services 

CCW Chronic Conditions Warehouse 

CHC Continuous Home Care 

COPD Chronic Obstructive Pulmonary 

Disease 

CoPs Conditions of Participation 

CR Change Request 

CVA Cerebral Vascular Accident 

DME Durable Medical Equipment 

FEHC Family Evaluation of Hospice Care 

FY Fiscal Year 

GIP General Inpatient Care 

HIS Hospice Item Set 

HHS Health and Human Services 

HQRP Hospice Quality Reporting Program 

LUPA Low Utilization Payment Amount 

MedPAC Medicare Payment Advisory 

Commission 

MFP Multi-factor Productivity 

MSA Metropolitan Statistical Area 

NEC Not Elsewhere Classified 

NPI National Provider Identifier 

NQF National Quality Forum 

OACT Office of the Actuary 

OMB Office of Management and Budget 

OIG Office of Inspector General 

PRA Paperwork Reduction Act 

PRRB Provider Reimbursement Review 

Board 

QAPI Quality Assessment and Performance 

Improvement 

QRP Quality Reporting Program 

RFA Regulatory Flexibility Act 

RHC Routine Home Care 

SBA Small Business Administration 

TEFRA Tax Equity and Fiscal 

Responsibility Act of 1982 

TEP Technical Expert Panel 

I. Executive Summary for This 

Proposed Rule 

A. Purpose 

This rule proposes updates to the 

payment rates for hospice providers for 

fiscal year (FY) 2014 as required under 

section 1814 (i) of the Social Security 

Act (the Act). The proposed updates 

incorporate the use of updated hospital 

wage index data, the 5th year of the 7- 

year Budget Neutrality Adjustment 

Factor (BNAF) phase-out, and an update 

to the hospice payment rates by the 

hospice payment update percentage. 

Additionally, this proposed rule 

clarifies diagnosis reporting on hospice 

claims, provides an update on hospice 

payment reform and additional data 

collection requirements, and proposes 

changes to the quality reporting 

requirements for hospice providers. 

B. Summary of the Major Provisions 

In this rule we propose to update the 

hospice payment rates for FY 2014 by 

1.8 percent as described in section 

III.C.3. The hospice wage index would 

be updated with more current wage data 

and the BNAF will be reduced by an 

additional 15 percent for a total BNAF 

reduction of 70 percent as described in 

section III.C.2. The August 6, 2009 FY 

2010 Hospice Wage Index final rule (74 

FR 39384) finalized a 10 percent 

reduced BNAF for FY 2010 as the first 

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

to be followed by an additional 15 

percent per year reduction in the BNAF 

in each of the next 6 years. The total 

BNAF phase-out will be complete by FY 

2016. This proposed rule also clarifies 

diagnosis reporting on hospice claims, 

especially regarding the use of nonspecific symptom diagnoses; provides 

an update on hospice payment reform 

and additional data collection 

requirements; proposes a technical 

regulations text change; and proposes 

changes to the hospice quality reporting 

program. 

C. Summary of Costs, Benefits, and 

Transfers 

TABLE 1—TRANSFERS

Provision 

description Total 

FY 2014 Hospice Payment 

Rate Update.

The overall economic impact of this proposed 

rule is an estimated 

$180 million in increased payments to 

hospices. 

II. Background 

A. Hospice Care 

Coping with a life-limiting illness can 

be an overwhelming experience, 

physically, emotionally and spiritually, 

for both the person and his or her 

family. Recognition that the care needs 

at end-of-life are different from other 

health care needs is a foundation of the 

Medicare hospice benefit. Hospice is a 

compassionate care philosophy and 

practice for those who are terminally ill. 

It is a holistic approach to treatment that 

recognizes that the impending death of 

an individual warrants a change from 

curative to palliative care. Palliative 

care means ‘‘patient and family-centered 

care that optimizes quality of life by 

anticipating, preventing, and treating 

suffering. Palliative care throughout the 

continuum of illness involves 

addressing physical, intellectual, 

emotional, social, and spiritual needs 

and to facilitate patient autonomy, 

access to information, and choice (42 

CFR 418.3).’’ Palliative care is at the 

core of hospice philosophy and care 

practices. The person beginning hospice 

care, or his or her representative, needs 

to understand that his or her illness is 

no longer responding to medical 

interventions to cure or slow the 

progression of disease and then must 

choose to stop further curative attempts 

while palliative care continues and 

intensifies, as needed, for continued 

symptom management. As we stated in 

the June 5, 2008 Hospice Conditions of 

Participation final rule (73 FR 32088), 

palliative care is an approach that 

‘‘optimizes quality of life by 

anticipating, preventing, and treating 

suffering’’. The goal of palliative care in 

hospice is to improve the quality of life 

of individuals and their families facing 

the issues associated with lifethreatening illness through the 

prevention and relief of suffering by 

means of early identification, 

assessment and treatment of pain and 

other issues. In addition, palliative care 

in hospice includes coordinating care 

services, reducing unnecessary 

diagnostics or ineffective therapies, and 

offering ongoing conversations with 

individuals and their families about 

changes in the disease and shifts in the 

plan of care to meet the changing needs 

with disease progression as the 

individual approaches the end-of-life. 

Medicare hospice care is palliative 

care for individuals with a prognosis of 

living 6 months or less if the terminal 

illness runs its normal course. As 

generally accepted by the medical 

community, the term ‘‘terminal illness’’ 

refers to an advanced and progressively 

deteriorating illness, and the illness is 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2

27826 Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed Rules 

1Connor, Stephen. (2007). Development of 

Hospice and Palliative Care in the United States. 

OMEGA. 56(1), p89–99. 

2Harder, PharmD, CGP, Julia. (2012). To Cover or 

Not To Cover: Guidelines for Covered Medications 

in Hospice Patients. The Clinician. 7(2), p1–3. 

3Paolini, DO, Charlotte. (2001). Symptoms 

Management at End of Life. JAOA. 101(10). p609– 

615. 

diagnosed as incurable. When an 

individual is terminally ill, many health 

problems are brought on by underlying 

condition(s), as bodily systems are 

interdependent. In the June 5, 2008 

Hospice Conditions of Participation 

final rule (73 FR 32088), we stated ‘‘the 

medical director must consider the 

primary terminal condition, related 

diagnoses, current subjective and 

objective medical findings, current 

medication and treatment orders, and 

information about unrelated conditions 

when considering the initial 

certification of the terminal illness.’’ As 

referenced in our regulations at 42 CFR 

418.22(b)(1), to be eligible for Medicare 

hospice services, the beneficiary’s 

attending physician (if any) and the 

hospice medical director must certify 

that the individual is terminally ill, that 

is, the individual’s prognosis is for a life 

expectancy of 6 months or less if the 

terminal illness runs its normal course 

as defined in section 1861(dd)(3)(A) of 

the Act and further clarified in § 418.3. 

The certification of terminal illness 

must include a brief narrative 

explanation of the clinical findings that 

supports a life expectancy of 6 months 

or less as part of the certification and 

recertification forms as stated in 

§ 418.22(b)(3). 

The goal of hospice care is to make 

the hospice patient as physically and 

emotionally comfortable as possible, 

with minimal disruption to normal 

activities, while remaining primarily in 

the home environment. Hospice care 

uses an interdisciplinary approach to 

deliver medical, nursing, social, 

psychological, emotional, and spiritual 

services through the use of a broad 

spectrum of professional and other 

caregivers and volunteers. While the 

goal of hospice care is to allow for the 

individual to remain in his or her home 

environment, circumstances during the 

end-of-life may necessitate short-term 

inpatient admission to a hospital, 

skilled nursing facility (SNF), or hospice 

facility for procedures necessary for 

pain control or acute or chronic 

symptom management that cannot be 

managed in any other setting. These 

acute hospice care services are to ensure 

that any new or worsening symptoms 

are intensively addressed so that the 

individual can return to his or her home 

environment under routine hospice 

care. Short-term, intermittent, inpatient 

respite services are also available to the 

family of the hospice patient when 

needed to relieve the family or other 

caregivers. Additionally, an individual 

can receive continuous home care 

during a period of crisis in which an 

individual requires primarily 

continuous nursing care to achieve 

palliation or management of acute 

medical symptoms to maintain the 

individual at home. Continuous home 

care may be covered on a continuous 

basis for as much as 24 hours a day and 

these periods must be predominantly 

nursing care per our regulations at 

§ 418.204. A minimum of 8 hours of 

care must be furnished on a particular 

day to qualify for the continuous home 

care rate (§ 418.302(e)(4)). 

B. History of the Medicare Hospice 

Benefit 

Before the creation of the Medicare 

hospice benefit, hospice was originally 

run by volunteers who cared for the 

dying. During the early development 

stages of the Medicare Hospice Benefit, 

hospice advocates, working with 

legislators, were clear that they wanted 

a Medicare benefit available that 

provided all-inclusive care for 

terminally-ill individuals, provided 

pain relief and symptom management, 

and offered the opportunity to die with 

dignity in the comfort of one’s home 

rather than in an institutional setting.1

As stated in the August 22, 1983 

proposed rule entitled ‘‘Medicare 

Program; Hospice Care’’ (48 FR 38146), 

‘‘the hospice experience in the United 

States has placed emphasis on home 

care. It offers physician services, 

specialized nursing services, and other 

forms of care in the home to enable the 

terminally ill individual to remain at 

home in the company of family and 

friends as long as possible.’’ The 

concept of a beneficiary ‘‘electing’’ the 

hospice benefit and being certified as 

terminally ill were two key components 

put into the legislation responsible for 

the creation of the Medicare hospice 

benefit (section 122 of the Tax Equity 

and Fiscal Responsibility Act of 1982 

(TEFRA), (Pub. L. 97–248)). Section 122 

of TEFRA created the Medicare hospice 

benefit, which was implemented on 

November 1, 1983 under section 

1861(dd) of the Social Security Act (the 

Act), codified at 42 U.S.C. 1395x(dd), to 

provide coverage of hospice care for 

terminally ill Medicare beneficiaries 

who elected to receive care from a 

Medicare-certified, hospice. In 

§ 418.54(c), our regulations stipulate 

that the comprehensive hospice 

assessment must identify the patient’s 

physical, psychosocial, emotional, and 

spiritual needs related to the terminal 

illness and related conditions which 

must be addressed in order to promote 

the hospice patient’s well-being, 

comfort, and dignity throughout the 

dying process. The comprehensive 

assessment must take into consideration 

the following factors: the nature and 

condition causing admission (including 

the presence or lack of objective data 

and subjective complaints); 

complications and risk factors that affect 

care planning; functional status; 

imminence of death; and severity of 

symptoms. The Medicare hospice 

benefit requires the hospice to cover all 

palliative care related to the terminal 

illness and related conditions. In the 

December 16, 1983 Hospice final rule, 

hospices are also to cover care for 

interventions to manage pain and 

symptoms (48 FR 56008). Clinically, 

related conditions are any physical or 

mental condition(s) that are related to or 

caused by either the terminal illness or 

the medications used to manage the 

terminal illness.2 Additionally, per the 

hospice Conditions of Participation at 

§ 418.56, hospice must provide all 

services necessary for the palliation and 

management of the terminal illness, 

related conditions and interventions to 

manage pain and symptoms. Therapy 

and interventions must be assessed and 

managed in terms of providing 

palliation and comfort without undue 

symptom burden for the hospice patient 

or family.3 For example, a hospice 

patient with lung cancer (the terminal 

illness) may receive inhalants for 

shortness of breath (related to the 

terminal condition). The patient may 

also suffer from metastatic bone pain (a 

related condition) and would be treated 

with opioid analgesics. As a result of the 

opioid therapy, the patient may suffer 

from constipation (an associated 

symptom) and requires a laxative for 

symptom relief. It is often not a single 

diagnosis that represents the terminal 

illness of the patient, but the combined 

effect of several conditions that makes 

the patient’s condition terminal. We are 

restating what we communicated in the 

December 16, 1983 Hospice final rule 

regarding what is related versus 

unrelated to the terminal illness: ‘‘. . . 

we believe that the unique physical 

condition of each terminally ill 

individual makes it necessary for these 

decisions to be made on a case–by-case 

basis. It is our general view that . . . 

‘‘hospices are required to provide 

virtually all the care that is needed by 

terminally ill patients’’ (48 FR 56010 

through 56011). Therefore, unless there 

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is clear evidence that a condition is 

unrelated to the terminal illness, all 

services would be considered related. It 

is also the responsibility of the hospice 

physician to document why a patient’s 

medical need(s) would be unrelated to 

the terminal illness. 

The fundamental premise upon which 

the hospice benefit was designed was 

the ‘‘revocation’’ of traditional curative 

care and the ‘‘election’’ of hospice care 

for end-of-life symptom management 

and maximization of quality of life as 

stated in the December 16, 1983 Hospice 

final rule (48 FR 56008). After electing 

hospice care, the patient typically 

returns to the home from an 

institutionalized setting or remains in 

the home, to be surrounded by family 

and friends, and to prepare emotionally 

and spiritually for death while receiving 

expert symptom management and other 

supportive services. Election of hospice 

care also includes waiving curative 

treatment for the terminal prognosis, 

and instead receiving palliative care to 

manage pain or symptoms. 

The benefit was originally designed to 

cover hospice care for a finite period of 

time that roughly corresponded to a life 

expectancy of 6 months or less. Initially, 

beneficiaries could receive three 

election periods: two 90-day periods 

and one 30-day period. Currently, 

Medicare beneficiaries can elect hospice 

care for two 90-day periods and an 

unlimited number of subsequent 60-day 

periods; however, the expectation 

remains that beneficiaries have a life 

expectancy of 6 months or less if the 

terminal illness runs its normal course. 

C. Services Covered by the Medicare 

Hospice Benefit 

To be covered under the Medicare 

hospice benefit, hospice services must 

be reasonable and necessary for the 

palliation and management of the 

terminal illness and related conditions. 

Section 1861(dd)(1) of the Act 

establishes the services that are to be 

rendered by a Medicare certified 

hospice program. These covered 

services include: nursing care; physical 

therapy; occupational therapy; speechlanguage pathology therapy; medical 

social services; home health aide 

services (now called hospice aide 

services); physician services; 

homemaker services; medical supplies 

(including drugs and biologics); medical 

appliances; counseling services 

(including dietary counseling); shortterm inpatient care (including both 

respite care and procedures necessary 

for pain control and acute or chronic 

symptom management) in a hospital, 

nursing facility, or hospice inpatient 

facility; continuous home care during 

periods of crisis and only as necessary 

to maintain the terminally ill individual 

at home; and any other item or service 

which is specified in the plan of care 

and for which payment may otherwise 

be made under Medicare, in accordance 

with Title XVIII of the Act. 

Section 1814(a)(7)(B) of the Act 

requires that a written plan for 

providing hospice care to a beneficiary 

who is a hospice patient be established 

before care is provided by, or under 

arrangements made by, that hospice 

program and that the written plan be 

periodically reviewed by the 

beneficiary’s attending physician (if 

any), the hospice medical director, and 

an interdisciplinary group (described in 

section 1861(dd)(2)(B)) of the Act. 

The services offered under the 

hospice benefit must be available, as 

needed, to beneficiaries 24 hours a day, 

7 days a week (section 1861(dd)(2)(A)(i) 

of the Act). Upon the implementation of 

the hospice benefit, the Congress 

expected hospices to continue to use 

volunteer services, though these 

services are not to be reimbursed. The 

hospice interdisciplinary group should 

be comprised of paid hospice employees 

as well as hospice volunteers, as stated 

in the August 22, 1983 Hospice 

proposed rule (48 FR 38149). This 

expectation is in line with the history of 

hospice and philosophy of holistic, 

comprehensive, compassionate, end-oflife care. 

The National Hospice Study was 

initiated in 1980 through a grant 

sponsored by the Robert Wood Johnson 

and John A. Hartford Foundations and 

CMS (formerly, the Health Care 

Financing Administration (HCFA). The 

study was conducted between October 

1980 and March 1983. The study 

summarized the hospice care 

philosophy as the following: 

• Patient and family know of the 

terminal condition. 

• Further medical treatment and 

intervention are indicated only on a 

supportive basis. 

• Pain control should be available to 

patients as needed to prevent rather 

than to just ameliorate pain. 

• Interdisciplinary teamwork is 

essential in caring for patient and 

family. 

• Family members and friends should 

be active in providing support during 

the death and bereavement process. 

• Trained volunteers should provide 

additional support as needed. 

In the August 22, 1983 Hospice 

proposed rule (48 FR 38149) we stated 

‘‘the hospice benefit and the resulting 

Medicare reimbursement is not 

intended to diminish the voluntary 

spirit of hospices’’. 

D. Medicare Payment for Hospice Care 

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

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

Act, and our regulations in 42 CFR part 

418, establish eligibility requirements, 

payment standards and procedures, 

define covered services, and delineate 

the conditions a hospice must meet to 

be approved for participation in the 

Medicare program. Part 418, subpart G, 

provides for a per diem payment in one 

of four prospectively-determined rate 

categories of hospice care (routine home 

care, continuous home care, inpatient 

respite care, and general inpatient care) 

to hospices, based on each day a 

qualified Medicare beneficiary is under 

hospice election. This per diem 

payment is to include all of the services 

needed to manage the beneficiaries’ 

care, as required by section 1861(dd)(1) 

of the Act. There has been little change 

in the hospice payment structure since 

the benefit’s inception. The per diem 

rate based on level of care was 

established in 1983, and this payment 

structure remains today with some 

adjustments, as noted below: 

1. Omnibus Budget Reconciliation Act 

of 1989 

Section 6005(a) of the Omnibus 

Budget Reconciliation Act of 1989 (Pub. 

L 101–239) amended section 

1814(i)(1)(C) of the Act and provided for 

the following two changes in the 

methodology concerning updating the 

daily payment rates: (1) effective 

January 1, 1990, the daily payment rates 

for routine home care and other services 

in included in hospice care were 

increased to equal 120 percent of the 

rates in effect on September 30, 1989; 

and (2) the daily payment rate for 

routine home care and other services 

included in hospice care for fiscal years 

beginning on or after October 1, 1990, 

were the payment rates in effect during 

the previous Federal fiscal year 

increased by the hospital market basket 

percentage increase. 

2. Balanced Budget Act of 1997 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) (Pub. L 105– 

33) amended section 1814(i)(1)(C)(ii)(VI) 

of the Act to establish updates to 

hospice rates for FYs 1998 through 2002 

Hospice rates were updated by a factor 

equal to the hospital market basket 

percentage increase, minus 1 percentage 

point. Payment rates for FYs since 2002 

have been updated according to section 

1814(i)(1)(C)(ii)(VII) of the Act, which 

states that the update to the payment 

rates for subsequent fiscal years will be 

the hospital market basket percentage 

increase for the FY. The Social Security 

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Act requires us to use the inpatient 

hospital market basket to determine 

hospice payment rates. 

3. Hospice Wage Index Final Rule for 

FY 1998 

In the August 8, 1997 FY 1998 

Hospice Wage Index final rule (62 FR 

42860), we implemented a new 

methodology for calculating the hospice 

wage index based on the 

recommendations of a negotiated 

rulemaking committee. The original 

hospice wage index was based on 1981 

Bureau of Labor Statistics hospital data 

and had not been updated since 1983. 

In 1994, because of disparity in wages 

from one geographical location to 

another, the Hospice Wage Index 

Negotiated Rulemaking Committee was 

formed to negotiate a new wage index 

methodology that could be accepted by 

the industry and the government. This 

Committee was comprised of 

representatives from national hospice 

associations; rural, urban, large and 

small hospices, and multi-site hospices; 

consumer groups; and a government 

representative. The Committee decided 

that in updating the hospice wage 

index, aggregate Medicare payments to 

hospices would remain budget neutral 

to payments calculated using the 1983 

wage index, to cushion the impact of 

using a new wage index methodology. 

To implement this policy, a Budget 

Neutrality Adjustment Factor (BNAF) 

would be computed and applied 

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

deriving the hospice wage index, subject 

to a wage index floor. 

4. Hospice Wage Index Final Rule for 

FY 2010 

Inpatient hospital pre-floor and prereclassified wage index values, as 

described in the 1997 Hospice Wage 

Index final rule are subject to either a 

budget neutrality adjustment or 

application of the wage index floor. 

Wage index values of 0.8 or greater are 

adjusted by the budget neutrality 

adjustment factor (BNAF). Starting in 

FY 2010, a 7-year phase-out of the 

BNAF began (August 6, 2009 FY 2010 

Hospice Wage Index final rule, 74 FR 

39384), with a 10 percent reduction in 

FY 2010, and additional 15 percent 

reduction for a total of 25 percent in FY 

2011, an additional 15 percent 

reduction for a total 40 percent in FY 

2012, and an additional 15 percent 

reduction for a total of 55 percent in FY 

2013. The phase-out will continue with 

an additional 15 percent reduction for a 

total reduction of 70 percent in FY 2014, 

an additional 15 percent reduction for a 

total reduction of 85 percent in FY 2015, 

and an additional 15 percent reduction 

for complete elimination in FY 2016. 

Note that the BNAF is an adjustment 

which increases the hospice wage index 

value. Therefore the BNAF reduction is 

a reduction in the amount of the BNAF 

increase applied to the hospice wage 

index value. It is not a reduction in the 

hospice wage index value, or in the 

hospice payment rates. 

5. The Affordable Care Act 

Starting with FY 2013 (and in 

subsequent fiscal years), the market 

basket percentage update under the 

hospice payment system referenced in 

sections 1814(i)(1)(C)(ii)(VII) and 

1814(i)(1)(C)(iii) of the Act will be 

annually reduced by changes in 

economy-wide productivity, as 

specified in section 1886(b)(3)(B)(xi)(II) 

of the Act, as amended by section 

3132(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) (the Affordable 

Care Act)). In FY 2013 through FY 2019, 

the market basket percentage update 

under the hospice payment system will 

be reduced by an additional 0.3 

percentage point (although for FY 2014 

to FY 2019, the potential 0.3 percentage 

point reduction is subject to suspension 

under conditions as specified in section 

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

In addition, sections 1814(i)(5)(A) 

through (C) of the Act, as amended by 

section 3132(a) of the Affordable Care 

Act, require hospices to begin 

submitting quality data, based on 

measures to be specified by the 

Secretary, for FY 2014 and subsequent 

fiscal years. Beginning in FY 2014, 

hospices which fail to report quality 

data will have their market basket 

update reduced by 2 percentage points. 

Section 1814(a)(7)(D)(i) of the Act was 

amended by section 3132 (b)(2)(D)(i) of 

the Affordable Care Act, and requires, 

effective January 1, 2011, that a hospice 

physician or nurse practitioner have a 

face-to-face encounter with an 

individual to determine continued 

eligibility of the individual for hospice 

care prior to the 180th-day 

recertification and each subsequent 

recertification and attest that such visit 

took place. When implementing this 

provision, we decided that the 180thday recertification and subsequent 

recertifications corresponded to the 

recertification for a beneficiary’s third or 

subsequent benefit periods (August 4, 

2011 FY 2012 Hospice Wage Index final 

rule (76 FR 47314)). 

Further, section 1814(i) of the Act, as 

amended by section 3132(a) of the 

Affordable Care Act, authorizes the 

Secretary to collect additional data and 

information determined appropriate to 

revise payments for hospice care and 

other purposes. The types of data and 

information suggested in the Affordable 

Care Act would capture accurate 

resource utilization, which could be 

collected on claims, cost reports, and 

possibly other mechanisms, as the 

Secretary determines to be appropriate. 

The data collected may be used to revise 

the methodology for determining the 

payment rates for routine home care and 

other services included in hospice care, 

no earlier than October 1, 2013, as 

described in section 1814(i)(6)(D) of the 

Act. In addition, we are required to 

consult with hospice programs and the 

Medicare Payment Advisory 

Commission (MedPAC) regarding 

additional data collection and payment 

revision options. 

6. Hospice Wage Index Final Rule for 

FY 2012 

When the Medicare hospice benefit 

was implemented, the Congress 

included an aggregate cap on hospice 

payments, which limits the total 

aggregate payments any individual 

hospice provider can receive in a year. 

The Congress stipulated that a ‘‘cap 

amount’’ be computed each year. The 

cap amount was set at $6,500 per 

beneficiary when first enacted in 1983 

and is adjusted annually by the change 

in the medical care expenditure 

category of the consumer price index for 

urban consumers from March 1984 to 

March of the cap year (section 

1814(i)(2)(B) of the Act). The cap year is 

defined as the period from November 

1st to October 31st. As we stated in the 

August 4, 2011 FY 2012 Hospice Wage 

Index final rule (76 FR 47308 through 

47314), for the 2012 cap year and 

subsequent cap years, the hospice 

aggregate cap will be calculated using 

the patient-by-patient proportional 

methodology, within certain limits. We 

will allow existing hospices the option 

of having their cap calculated via the 

original streamlined methodology, also 

within certain limits. New hospices will 

have their cap determinations 

calculated using the patient-by-patient 

proportional methodology. The patientby-patient proportional methodology 

and the streamlined methodology are 

two different methodologies for 

counting beneficiaries when calculating 

the hospice aggregate cap. A detailed 

explanation of these methods is found 

in the August 4, 2011 FY 2012 Hospice 

Wage Index final rule (76 FR 47308 

through 47314). If a hospice’s total 

Medicare reimbursement for the cap 

year exceeded the hospice aggregate 

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cap, then the hospice would have to 

repay the excess back to Medicare. 

E. Trends in Medicare Hospice 

Utilization 

Since the implementation of the 

hospice benefit in 1983, and especially 

within the last decade, there has been 

substantial growth in hospice 

utilization. The number of Medicare 

beneficiaries receiving hospice services 

has grown from 513,000 in FY 2000 to 

over 1.3 million in FY 2012. Similarly, 

Medicare hospice expenditures have 

risen from $2.9 billion in FY 2000 to 

$14.7 billion in FY 2012. Our Office of 

the Actuary (OACT) projects that 

hospice expenditures are expected to 

continue to increase by approximately 8 

percent annually, reflecting an increase 

in the number of Medicare beneficiaries, 

more beneficiary awareness of the 

Medicare hospice benefit for end-of-life 

care, and a growing preference for care 

provided in home and communitybased settings. However, this increased 

spending is partly due to an increased 

average lifetime length of stay for 

beneficiaries, from 54 days in 2000 to 86 

days in FY 2010, an increase of 59 

percent. 

There have also been noted changes 

in the diagnosis patterns among 

Medicare hospice enrollees, with a 

growing percentage of beneficiaries with 

non-cancer diagnoses. Specifically, 

there were notable increases between 

2002 and 2007 in neurologically-based 

diagnoses, including various dementia 

diagnoses. Additionally, there have 

been significant increases in the use of 

non-specific, symptom-classified 

diagnoses, such as ‘‘debility’’ and ‘‘adult 

failure to thrive.’’ In FY 2012, both 

‘‘debility’’ and ‘‘adult failure to thrive’’ 

were in the top five claims-reported 

hospice diagnoses and were the first and 

third most common hospice diagnoses, 

respectively (see table 2 below). 

TABLE 2—THE TOP TWENTY PRINCIPAL HOSPICE DIAGNOSES, FY 2002, FY 2007, FY 2012 

Rank ICD–9/Reported Principal Diagnosis Total patients Percentage 

Year: 2002 Total Patients = 663,406 

1 ............. 162.9 Lung Cancer ................................................................................................................... 73,769 11 

2 ............. 428.0 Congestive Heart Failure ................................................................................................ 45,951 7 

3 ............. 799.3 Debility Unspecified ........................................................................................................ 36,999 6 

4 ............. 496 COPD ................................................................................................................................. 35,197 5 

5 ............. 331.0 Alzheimer’s Disease ....................................................................................................... 28,787 4 

6 ............. 436 CVA/Stroke ........................................................................................................................ 26,897 4 

7 ............. 185 Prostate Cancer ................................................................................................................. 20,262 3 

8 ............. 783.7 Adult Failure To Thrive ................................................................................................... 18,304 3 

9 ............. 174.9 Breast Cancer ................................................................................................................. 17,812 3 

10 ........... 290.0 Senile Dementia, Uncomp. ............................................................................................. 16,999 3 

11 ........... 153.0 Colon Cancer .................................................................................................................. 16,379 2 

12 ........... 157.9 Pancreatic Cancer .......................................................................................................... 15,427 2 

13 ........... 294.8 Organic Brain Synd Nec ................................................................................................. 10,394 2 

14 ........... 429.9 Heart Disease Unspecified ............................................................................................. 10,332 2 

15 ........... 154.0 Rectosigmoid Colon Cancer ........................................................................................... 8,956 1 

16 ........... 332.0 Parkinson’s Disease ....................................................................................................... 8,865 1 

17 ........... 586 Renal Failure Unspecified .................................................................................................. 8,764 1 

18 ........... 585 Chronic Renal Failure (End 2005) ..................................................................................... 8,599 1 

19 ........... 183.0 Ovarian Cancer ............................................................................................................... 7,432 1 

20 ........... 188.9 Bladder Cancer ............................................................................................................... 6,916 1 

Year: 2007 Total Patients = 1,039,099 

1 ............. 799.3 Debility Unspecified ........................................................................................................ 90,150 9 

2 ............. 162.9 Lung Cancer ................................................................................................................... 86,954 8 

3 ............. 428.0 Congestive Heart Failure ................................................................................................ 77,836 7 

4 ............. 496 COPD ................................................................................................................................. 60,815 6 

5 ............. 783.7 Adult Failure To Thrive ................................................................................................... 58,303 6 

6 ............. 331.0 Alzheimer’s Disease ....................................................................................................... 58,200 6 

7 ............. 290.0 Senile Dementia Uncomp. .............................................................................................. 37,667 4 

8 ............. 436 CVA/Stroke ........................................................................................................................ 31,800 3 

9 ............. 429.9 Heart Disease Unspecified ............................................................................................. 22,170 2 

10 ........... 185 Prostate Cancer ................................................................................................................. 22,086 2 

11 ........... 174.9 Breast Cancer ................................................................................................................. 20,378 2 

12 ........... 157.9 Pancreas Unspecified ..................................................................................................... 19,082 2 

13 ........... 153.9 Colon Cancer .................................................................................................................. 19,080 2 

14 ........... 294.8 Organic Brain Syndrome NEC ........................................................................................ 17,697 2 

15 ........... 332.0 Parkinson’s Disease ....................................................................................................... 16,524 2 

16 ........... 294.10 Dementia In Other Diseases w/o Behav. Dist. ............................................................. 15,777 2 

17 ........... 586 Renal Failure Unspecified .................................................................................................. 12,188 1 

18 ........... 585.6 End Stage Renal Disease .............................................................................................. 11,196 1 

19 ........... 188.9 Bladder Cancer ............................................................................................................... 8,806 1 

20 ........... 183.0 Ovarian Cancer ............................................................................................................... 8,434 1 

Year: 2012 Total Patients = 1,328,651 

1 ............. 799.3 Debility Unspecified ........................................................................................................ 161,163 12 

2 ............. 162.9 Lung Cancer ................................................................................................................... 89,636 7 

3 ............. 783.7 Adult Failure To Thrive ................................................................................................... 86,467 7 

4 ............. 428.0 Congestive Heart Failure ................................................................................................ 84,333 6 

5 ............. 496 COPD ................................................................................................................................. 74,786 6 

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TABLE 2—THE TOP TWENTY PRINCIPAL HOSPICE DIAGNOSES, FY 2002, FY 2007, FY 2012—Continued 

Rank ICD–9/Reported Principal Diagnosis Total patients Percentage 

6 ............. 331.0 Alzheimer’s Disease ....................................................................................................... 64,199 5 

7 ............. 290.0 Senile Dementia, Uncomp. ............................................................................................. 56,234 4 

8 ............. 429.9 Heart Disease Unspecified ............................................................................................. 32,081 2 

9 ............. 436 CVA/Stroke ........................................................................................................................ 31,987 2 

10 ........... 294.10 Dementia In Other Diseases w/o Behavioral Dist. ....................................................... 27,417 2 

11 ........... 174.9 Breast Cancer ................................................................................................................. 22,421 2 

12 ........... 153.9 Colon Cancer .................................................................................................................. 22,197 2 

13 ........... 157.9 Pancreatic Cancer .......................................................................................................... 22,007 2 

14 ........... 332.0 Parkinson’s Disease ....................................................................................................... 21,183 2 

15 ........... 185 Prostate Cancer ................................................................................................................. 21,042 2 

16 ........... 294.8 Other Persistent Mental Dis.-classified elsewhere ......................................................... 17,762 1 

17 ........... 585.6 End Stage Renal Disease .............................................................................................. 17,545 1 

18 ........... 518.81 Respiratory Failure ........................................................................................................ 12,962 1 

19 ........... 294.11 Dementia In Other Diseases w/Behavioral Dist ........................................................... 11,751 1 

20 ........... 188.9 Bladder Cancer ............................................................................................................... 10,511 1 

Source: FY 2002, 2007, and 2012 hospice claims data from the Chronic Condition Warehouse (CCW), accessed on February 14 and February 

20, 2013. 

Note(s): The frequencies shown represent beneficiaries that had a least one claim with the specific ICD–9 code listed as the principal diagnosis. Beneficiaries could be represented multiple times in the results if they have multiple claims during that time period with different principal 

diagnoses. 

III. Provisions of the Proposed Rule 

A. Diagnosis Reporting on Hospice 

Claims 

This section is a clarification of 

existing ICD–9–CM coding guidelines. 

No proposals are being made in this 

proposed rule with regards to diagnosis 

coding. These clarifications are not 

intended to preclude any clinical 

judgment in determining a beneficiary’s 

eligibility for hospice services, rather 

these clarifications are to address 

current and ongoing diagnosis reporting 

patterns noted on hospice claims. A 

beneficiary who elects hospice care and 

meets our eligibility requirements at 

§ 418.20, is admitted to the hospice and 

receives hospice care prior to any claim 

submission, which occurs at the end of 

each calendar month while under 

hospice services, or upon the death or 

discharge of the beneficiary, whichever 

occurs first. In the July 27, 2012 FY 

2013 Hospice Wage Index notice (77 FR 

44247), we provided in-depth 

information regarding longstanding, 

existing ICD–9–CM coding guidelines. 

We also discussed related versus 

unrelated diagnosis reporting on claims 

and clarified that ‘‘all of a patient’s 

coexisting or additional diagnoses’’ 

related to the terminal illness or related 

conditions should be reported on the 

hospice claims. Based on analysis of 

preliminary claims data from the first 

quarter of FY 2013 (October 1, 2012 

through December 31, 2012), 72 percent 

of providers still only report one 

diagnosis on the hospice claim. This 

hospice diagnosis data is comparable to 

the hospice diagnosis data reported in 

the July 27, 2012 FY 2013 Hospice Wage 

Index notice (77 FR 44242), in which we 

stated that over 77 percent of the 

hospice claims reported only a principal 

diagnosis. Therefore, in this year’s 

proposed rule, we are further clarifying 

the ICD–9–CM coding guidelines and 

CMS’ expectations for diagnosis 

reporting on the hospice claims in order 

to ensure the Medicare hospice 

beneficiaries are receiving the holistic 

comprehensive hospice services based 

on the initial and ongoing 

comprehensive assessment and the 

individualized hospice plan of care. 

Eligibility for hospice services is based 

on meeting the eligibility requirements 

as stated in § 418.20 of our regulations. 

For beneficiaries eligible for the 

Medicare hospice benefit, access to 

hospice care or the continuation of 

hospice care should not be affected or 

limited by the following ICD–9–CM 

coding guidelines for diagnosis 

reporting on claims. 

1. ICD–9–CM Coding Guidelines 

As previously reported in Section II.E 

of this proposed rule there have been 

noted changes in reported hospice 

diagnosis patterns with the top reported 

hospice diagnoses being non-cancer 

diagnoses. The hospice benefit covers 

all care for the terminal illness, related 

conditions, and for the management of 

pain and symptoms. As noted in the 

ICD–9–CM Official Guidelines for 

Coding and Reporting, effective October 

1, 2011, available at the CMS Web site 

at the CMS Web site at: http://www.cms.

gov/Medicare/Coding/ICD9Provider

DiagnosticCodes/index.html?redirect=/

ICD9ProviderDiagnosticCodes/ or on the 

CDC’s Web site at: http://www.cdc.gov/ 

nchs/data/icd9/icd9cm_guidelines_

2011.pdf, ‘‘these coding and reporting 

guidelines are a set of rules that have 

been developed to accompany and 

complement the official conventions 

and instructions provided with the ICD– 

9–CM itself. Adherence to these 

guidelines when assigning ICD–9–CM 

diagnosis and procedure codes is 

required under the Health Insurance 

Portability and Accountability Act 

(HIPAA).’’ 

Additionally, 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. The CMS’ 

Hospice Claims Processing manual (Pub 

100–04, chapter 11) requires that 

hospice claims include other diagnoses 

‘‘as required by ICD–9–CM Coding 

Guidelines’’ available at https://www.

cms.gov/Regulations-and-Guidance/

Guidance/Manuals/Downloads/

clm104c11.pdf. HIPAA, federal 

regulations, and the Medicare hospice 

claims processing manual all require 

that these ICD–9–CM Coding Guidelines 

be applied to the coding and reporting 

of diagnoses on hospice claims. 

Regarding diagnosis reporting on 

hospice claims, we clarified in our July 

27, 2012 FY 2013 Hospice Wage Index 

notice (77 FR 44247 through 44248) that 

all providers should code and report the 

principal diagnosis as well as all 

coexisting and additional diagnoses 

related to the terminal condition or 

related conditions to more fully describe 

the Medicare patients they are treating. 

We are actively collecting and 

analyzing hospice data for evaluation of 

hospice payment reform methodologies 

as mandated in section 3132(a) of the 

Affordable Care Act. To adequately 

account for any clinical complexities a 

given hospice patient might have as a 

result of related conditions, these 

related conditions must be included on 

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the Medicare hospice claim. Some 

hospice providers already report related 

additional and coexisting diagnoses on 

their claims; however, the majority of 

hospice providers do not report this 

information. The reporting of only one 

principal diagnosis does not lend to a 

comprehensive, holistic, and accurate 

description of the beneficiaries’ end-oflife conditions and may not fully reflect 

the individualized needs in the 

individual’s required hospice plan of 

care. As a result, analysis of current 

claims data does not allow us to 

appropriately determine whether casemix adjustment, or other considered 

methods would or would not be a 

reasonable approach to, or part of, 

hospice payment reform. Ongoing 

hospice data analysis is available on the 

CMS Hospice Center Web page at: 

http://www.cms.gov/Center/ProviderType/Home-Health-Agency-HHACenter.html. 

2. Use of Nonspecific, Symptom 

Diagnoses 

As mentioned in section II.E, of this 

proposed rule, there have been changes 

in the reported hospice principal 

diagnoses since the inception of the 

Medicare hospice benefit. In 1983, the 

most common reported hospice 

diagnoses were cancer diagnoses. Over 

time, and with the advancements in 

medical technology and interventions, 

there has been a notable shift in the 

most commonly reported hospice 

diagnoses from cancers to non-cancer 

terminal illnesses, such as ‘‘debility’’ 

and ‘‘adult failure to thrive,’’ which are 

considered to be nonspecific, symptom 

diagnoses according to ICD–9–CM 

Coding Guidelines and are under the 

ICD–9–CM classification of ‘‘Symptoms, 

Signs and Ill-defined Conditions’’. 

Codes under the classification, 

‘‘Symptoms, Signs, and Ill-defined 

Conditions’’, are not to be used as 

principal diagnosis when a related 

definitive diagnosis has been 

established or confirmed by the 

provider. ‘‘Debility’’ is medically 

defined as: an unspecified syndrome 

characterized by unexplained weight 

loss, malnutrition, functional decline, 

multiple chronic conditions 

contributing to the terminal progression, 

and increasing frequency of outpatient 

visits, emergency department visits and/ 

or hospitalizations. ‘‘Debility’’ is 

associated with multiple primary 

conditions. The individual diagnosed 

with ‘‘Debility’’ may have multiple 

comorbid conditions that individually, 

may not deem the individual to be 

terminally ill. However, the collective 

presence of these multiple comorbid 

conditions will contribute to the 

terminal status of the individual. Data 

analysis using FY 2012 claims data for 

those beneficiaries with a reported 

principal hospice diagnosis of 

‘‘debility,’’ and reported secondary 

diagnoses, shows that congestive heart 

failure, coronary artery disease, heart 

disease, atrial fibrillation, Parkinson’s 

disease, Alzheimer’s disease, renal 

failure, chronic kidney disease, and 

chronic obstructive pulmonary disease 

are among the most common secondary 

diagnoses reported. ‘‘Adult Failure to 

Thrive’’ is often used interchangeably 

with ‘‘Debility’’ as a primary hospice 

diagnosis. Despite the specificity of 

ICD–9–CM Coding Guidelines, it is 

unclear as to why these two diagnoses 

are often used interchangeably. ‘‘Adult 

Failure to Thrive’’ is defined as 

undefined weight loss, decreasing 

anthromorphic measurements, and a 

Palliative Performance Scale < 40 

percent. It is also associated with 

multiple primary conditions 

contributing to the physical and 

functional decline of the individual. 

Four syndromes known to be 

individually predictive of adverse 

outcomes in older adults are repeatedly 

cited as prevalent in patients with 

‘‘adult failure to thrive’’ impaired 

physical functioning, malnutrition, 

depression, and cognitive impairment. 

Data analysis using FY 2012 claims data 

for those beneficiaries with a reported 

principal hospice diagnosis of ‘‘adult 

failure to thrive,’’ and reported 

secondary diagnoses, shows that 

pneumonia, cerebral vascular accident 

(stroke), atrial fibrillation, heart disease, 

Alzheimer’s disease, congestive heart 

failure, and Parkinson’s disease are 

among the most common secondary 

diagnoses reported. 

By the nature of the clinical criteria of 

‘‘debility’’ and ‘‘adult failure to thrive’’, 

these symptom syndromes are the result 

of multiple primary conditions that 

contribute to the terminal decline. If any 

or all of these multiple primary 

conditions have been or are being 

treated or managed by a health care 

provider, or if medications have been 

prescribed for the patient to treat or 

manage any or all of these multiple 

primary conditions, we believe that 

these conditions meet the criteria of 

being established and/or confirmed by 

the beneficiary’s health care provider 

and, thus, ‘‘debility’’ or ‘‘adult failure to 

thrive’’ would not be listed as the 

principal hospice diagnosis per ICD–9– 

CM coding guidelines. 

Moreover, at the initial hospice 

election period, an eligible Medicare 

beneficiary must be certified as 

terminally ill. This certification is based 

on the recommendation of the medical 

director in consultation with, or with 

input from, the beneficiary’s attending 

physician (if any) and a comprehensive 

assessment of all body systems. Per our 

regulations at § 418.25, Admission to 

Hospice Care, ‘‘in reaching a decision to 

certify that the patient is terminally ill, 

the hospice medical director must 

consider at least the following 

information: 

• Diagnosis of the terminal condition 

of the patient. 

• Other health conditions, whether 

related or unrelated to the terminal 

condition. 

• Current clinical relevant 

information supporting all diagnoses.’’ 

All physical, emotional, and spiritual 

issues are assessed and an 

individualized, specific hospice plan of 

care is established by the hospice 

interdisciplinary team. A reported 

principal hospice diagnosis in the nonspecific ICD–9–CM category, 

‘‘Symptoms, Signs, and Ill-Defined 

Conditions’’, such as ‘‘debility’’ or 

‘‘adult failure to thrive,’’ does not 

encompass the comprehensive, holistic 

nature of the assessment and care to be 

provided under the Medicare hospice 

benefit. For the eligible Medicare 

beneficiary who has elected the 

Medicare hospice benefit, and has been 

certified as terminally ill per the 

eligibility criteria, the hospice benefit 

provides services for all care related to 

the terminal illness, related conditions, 

and, for the management of pain and 

symptoms that result from the terminal 

illness and related conditions. If a nonspecific, ill-defined diagnosis is 

reported as the principal hospice 

diagnosis, a comprehensive, 

individualized patient-centered plan of 

care, as required, may be difficult to 

accurately develop and implement, and, 

as a result, the hospice beneficiary may 

not receive the full benefit of hospice 

services. According to the hospice 

Conditions of Participation at § 418.56, 

‘‘The hospice must develop an 

individualized written plan of care for 

each patient. The plan of care must 

reflect patient and family goals and 

interventions based on the problems 

identified in the initial, comprehensive, 

and updated comprehensive 

assessments. The plan of care must 

include all services necessary for the 

palliation and management of the 

terminal illness and related conditions, 

including the following: 

1. Interventions to manage pain and 

symptoms. 

2. A detailed statement of the scope 

and frequency of services necessary to 

meet the specific patient and family 

needs. 

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3. Measurable outcomes anticipated 

from implementing and coordinating 

the plan of care. 

4. Drugs and treatment necessary to 

meet the needs of the patient. 

5. Medical supplies and appliances to 

meet the needs of the patient. 

6. The interdisciplinary group’s 

documentation of the patient’s or 

representative’s level of understanding, 

involvement, and agreement with the 

plan of care, in accordance with the 

hospice’s own policies, in the clinical 

record’’(42 CFR 418.56(c)). 

A comprehensive hospice plan of care 

starts with accurate and thorough 

assessment and identification of the 

conditions contributing to the terminal 

illness and decline. ‘‘Debility’’ and 

‘‘adult failure to thrive’’ are not 

appropriate principal diagnoses in the 

terminally ill population as these 

diagnoses are incongruous to the 

comprehensive nature of the hospice 

assessment, the specific, individualized 

hospice plan of and care, and the 

hospice services provided. CMS is 

aware that diagnosing diseases is not 

always a perfect science but the 

expectation is that based on the 

comprehensive hospice assessment, the 

certifying physicians are using their best 

clinical judgment in determining the 

principal diagnosis and related 

conditions. 

In this proposed rule, we would 

clarify that ‘‘debility’’ and ‘‘adult failure 

to thrive’’ would not be used as 

principal hospice diagnoses on the 

hospice claim form. When reported as a 

principal diagnosis, these would be 

considered questionable encounters for 

hospice care, and the claim would be 

returned to the provider for a more 

definitive principal diagnosis. 

‘‘Debility’’ and ‘‘adult failure to thrive’’ 

could be listed on the hospice claim as 

other, additional, or coexisting 

diagnoses. We believe that the private 

sector requires that ICD–9–CM coding 

guidelines be followed; this includes 

not allowing ‘‘debility’’ and ‘‘adult 

failure to thrive’’ as principal diagnoses 

on private sector hospice claims. The 

principal diagnosis listed should be 

determined by the certifying hospice 

physician(s) as the diagnosis most 

contributory to the terminal condition. 

When there are two or more interrelated 

conditions (such as diseases in the same 

ICD–9–CM chapter or manifestations 

characteristically associated with a 

certain disease) potentially meeting the 

definition of principal diagnosis, either 

condition may be sequenced first, 

unless the circumstances of the 

admission, the therapy provided, the 

Tabular List, or the Alphabetic Index 

indicate otherwise. In the unusual 

instance when two or more diagnoses 

equally meet the criteria for principal 

diagnosis as determined by the 

circumstances of admission, diagnostic 

workup and/or therapy provided, and 

the Alphabetic Index, Tabular List, or 

other coding guidelines do not provide 

sequencing direction, any one of the 

diagnoses may be sequenced first. We 

expect hospice providers to code the 

most definitive, contributory terminal 

diagnosis in the principal diagnosis 

field with all other related conditions in 

the additional diagnoses fields for 

hospice claims reporting. As stated 

previously, these clarifications are not 

intended to preclude any clinical 

judgment in determining a beneficiary’s 

eligibility for hospice services. 

Therefore, CMS does not expect that 

these coding clarifications will create 

any limitations or barriers to accessing 

Medicare hospice services by eligible 

Medicare beneficiaries as coding on 

claims occurs after the beneficiary has 

elected and accessed hospice services. 

In fact, adherence to the ICD–9–CM 

coding guidelines should promote 

access to appropriate and 

comprehensive hospice services. We 

solicit comments regarding these ICD– 

9–CM coding guideline clarifications. 

3. Use of ‘‘Mental, Behavioral and 

Neurodevelopmental Disorders’’ ICD–9– 

CM Codes 

Another concerning trend noted in 

the top twenty claims-reported principal 

hospice diagnoses is the use of codes 

that fall under the classification of 

‘‘Mental, Behavioral and 

Neurodevelopmental Disorders.’’ There 

are several codes that fall under this 

classification that encompass multiple 

dementia diagnoses that are frequently 

reported principal hospice diagnoses on 

hospice claims, but are not appropriate 

principal diagnoses per ICD–9–CM 

Coding Guidelines. Some of these ICD– 

9–CM codes are considered 

manifestation codes. In accordance with 

the 2012 ICD–9–CM Coding Guidelines, 

certain conditions have both an 

underlying etiology and multiple body 

system manifestations due to the 

underlying etiology. For such 

conditions, the ICD–9–CM has a coding 

convention that requires 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, these 

manifestation codes will have in the 

code title, ‘‘in diseases classified 

elsewhere’’ or ‘‘in conditions classified 

elsewhere.’’ Codes with this in the title 

are a component of the etiology/ 

manifestation convention. The codes 

with ‘‘in diseases classified elsewhere’’ 

or ‘‘in conditions classified elsewhere’’ 

in the title indicates that it is a 

manifestation code. ‘‘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. 

However, there are manifestation 

codes that do not have ‘‘in diseases 

classified elsewhere’’ or ‘‘in conditions 

classified elsewhere’’ in their title. For 

such codes a ‘‘use additional code’’ note 

would still be present, and the rules for 

coding sequencing still apply. We note 

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 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.’’ Data analysis using FY 2012 

claims data for those beneficiaries with 

a reported principal hospice diagnosis 

of a dementia classified under ‘‘Mental, 

Behavioral and Neurodevelopmental 

Disorders’’ and reported secondary 

diagnoses shows that Alzheimer’s 

disease, Parkinson’s disease, and stroke 

were the among the most common 

secondary diagnoses reported. 

Therefore, we are further reiterating the 

importance of following the ICD–9–CM 

coding guidelines for diagnosis 

reporting on the hospice claims 

submission. 

There are, however, other ICD–9–CM 

dementia codes, such as those for 

Alzheimer’s disease and others that fall 

under the ICD–9–CM classification, 

‘‘Diseases of the Nervous System and 

Sense Organs’’ which are acceptable as 

principal diagnoses per ICD–9–CM 

coding guidelines. However, there are 

also dementia codes under this 

classification that do have 

manifestation/etiology or sequencing 

conventions; therefore, it is imperative 

that hospice providers follow ICD–9– 

CM coding guidelines and sequencing 

rules for all diagnoses and pay 

particular attention to dementia coding 

as there are dementia codes found in 

more than one ICD–9–CM classification 

chapter and there are multiple coding 

guidelines associated with these 

dementia conditions. 

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Again, these clarifications are not 

intended to preclude any clinical 

judgment in determining a beneficiary’s 

eligibility for hospice services; rather 

these are clarifications regarding the 

reporting of dementia diagnoses on the 

hospice claims. We are restating that 

CMS expects hospice providers to code 

the most definitive, contributory 

terminal illness in the principal 

diagnosis field with all other related 

conditions in the additional diagnoses 

fields for hospice claims reporting. The 

reporting of accurate diagnoses of the 

principal terminal condition and all 

related conditions is keeping with the 

intent of the comprehensive, holistic 

nature of the Medicare hospice benefit. 

By adhering to these comprehensive 

assessment and diagnostic principals 

and coding guidelines, CMS expects 

that there will be no limitations or 

barriers to access to hospice care by 

eligible Medicare beneficiaries, and 

should; in fact, promote appropriate and 

comprehensive hospice services as per 

the original intent of the Medicare 

hospice benefit as proposed and 

finalized in the 1983 rules. We solicit 

comments regarding these ICD–9–CM 

coding guideline clarifications. 

4. Guidance on Coding of Principal and 

Other, Additional, and/or Co-Existing 

Diagnoses 

a. General Rules for Principal Diagnosis 

Based on the ICD–9–CM coding 

guidelines, the circumstances of an 

inpatient admission always govern the 

selection of principal diagnosis. The 

principal diagnosis is defined in the 

Uniform Hospital Discharge Data Set 

(UHDDS) as ‘‘that condition established 

after study to be chiefly responsible for 

occasioning the admission of the patient 

to the hospital for care.’’ In analyzing 

frequently reported principal hospice 

diagnoses, data analysis revealed 

differences between reported principal 

hospice diagnoses and reported 

principal hospital diagnoses in patients 

who elected hospice within 3 days of 

discharge from the hospital. In 

analyzing data on cancer diagnoses of 

Medicare hospice beneficiaries for 2009 

through 2011, Table 3 below shows that 

beneficiaries with a hospital-reported 

principal cancer diagnosis that elected 

hospice within three days of hospital 

discharge did not always have a 

hospice-reported principal cancer 

diagnosis. Although ICD–9–CM Coding 

Guidelines specify that the 

circumstances of an inpatient hospital 

admission diagnosis are to be used in 

determining the selection of a principal 

diagnosis, this guideline is not always 

being adhered to for the selection of the 

principal hospice diagnosis following a 

hospice beneficiary’s inpatient 

hospitalization. It is unclear as to why 

there is this discrepancy in the hospital/ 

hospice diagnosis patterns as ICD–9–CM 

Coding Guidelines are specific regarding 

principal diagnosis selection. 

TABLE 3—PRINCIPAL HOSPICE DIAGNOSES AND INCIDENCE OF SAME DIAGNOSES FROM HOSPITALIZATIONS WITHIN THREE

DAYS PRIOR TO HOSPICE ELECTION, FY 2009–2011 

ICD–9 Diagnoses Instances of principal hospital diagnosis . . . . . . That then also became hospice principal diagnosis 

Label ICD–9 Code 

ranges Number Number 

Percent of total 

instances of principal hospital 

diagnosis 

Lung & Chest Cavity Cancer ........................................................... 162–165s 32,428 27,939 86.2 

Colo-Rectal Cancer ......................................................................... 153–154s 10,360 8,270 79.8 

Blood & Lymphatic Cancer .............................................................. 200–208s 15,491 12,747 82.3 

Breast Cancer .................................................................................. 174–175s 1,881 1,651 87.8 

Pancreatic Cancer ........................................................................... 157s 11,334 9,887 87.2 

Prostate Cancer ............................................................................... 185s 1,764 1,520 86.2 

Liver Cancer .................................................................................... 155–156s 6,710 5,009 74.6 

Bladder Cancer ................................................................................ 188s 2,844 2,218 78.0 

Source: FY 2009–2011 Hospice claims matched with hospital inpatient claims where no more than three days passed between hospital discharge and hospice admission. 

Note(s): Data sources included the Hospice Claims File (FYs 2009–2011) and the Hospitalizations File (FY 2009 through 2011). These two 

files were combined and records utilized for analysis were trimmed where Hospital Beneficiary ID equaled Hospice Beneficiary ID and Hospice 

Admit Date was within three days of Hospital Discharge Date. The data included the beneficiaries’ ID number, their hospice admission date, the 

ICD–9 code for their principal hospice diagnosis, the hospital discharge date, and the ICD–9 code for their admitting hospital diagnosis. 

Further, ICD–9–CM coding guidelines 

state, to list first the diagnosis shown in 

the medical record to be chiefly 

responsible for the services provided 

and to list additional codes that describe 

any coexisting conditions. 

b. General Rules for Other (Additional) 

Diagnoses 

For reporting purposes the definition 

for ‘‘other diagnoses’’ is interpreted as 

additional conditions that affect patient 

care in terms of requiring: 

• clinical evaluation; or 

• therapeutic treatment; or 

• diagnostic procedures; or 

• extended length of hospital stay; or 

• increased nursing care and/or 

monitoring. 

The UHDDS item #11–b defines Other 

Diagnoses as ‘‘all conditions that coexist 

at the time of admission, that develop 

subsequently, or that affect the 

treatment received and/or the length of 

stay’’. Section IV.K of the ICD–9–CM 

Coding Guidelines addresses outpatient 

settings, and instructs providers to 

‘‘code all documented conditions at the 

time of the encounter/visit, and require 

or affect patient care treatment or 

management.’’ These guidelines for 

determining principal and other 

diagnoses are stated in the ICD–9–CM 

Coding Guidelines. 

We do not believe that requiring the 

reporting of other, additional, and/or 

coexisting diagnoses that are related to 

the terminal illness and related 

conditions would create a clinical or 

administrative burden on hospices. We 

note that some hospice providers are 

already reporting these diagnoses on 

their claims. Information on a patient’s 

related and unrelated diagnoses should 

already be included as part of the 

hospice comprehensive assessment and 

appropriate interventions for the 

palliation and management of the 

terminal illness and related conditions 

should be incorporated into the 

patient’s plan of care, as determined by 

the hospice interdisciplinary group 

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(IDG). The hospice Conditions of 

Participation (CoPs) at § 418.54(c)(2) 

require that the comprehensive 

assessment ‘‘include complications and 

risk factors that affect care planning.’’ 

The CoPs at § 418.56(e)(4) require that 

the hospice IDG ‘‘provide for an ongoing 

sharing of information with other nonhospice healthcare providers furnishing 

services unrelated to the terminal illness 

and related conditions.’’ It is common 

for hospices to include the related and 

unrelated diagnoses on the 

comprehensive assessment in order to 

assure coordinated, holistic, patient care 

and to monitor the effectiveness of the 

care that is delivered. 

With the specificity of both the ICD– 

9–CM coding guidelines and the ICD– 

10–CM coding guidelines, it is expected 

that complete, comprehensive coding 

will be applied to hospice claims 

submissions. Hospice providers are 

expected to report all coexisting or 

additional diagnoses related to the 

terminal illness and related conditions 

on the hospice claim to be in 

compliance with existing policy, and 

provide the data needed for evaluating 

potential hospice payment reform 

methodologies. This accurate coding of 

the principal hospice diagnosis and the 

other, additional, and/or coexisting 

diagnoses is in keeping with the 

comprehensive assessment and 

incorporated into the individualized 

hospice plan of care to aid hospices in 

identifying and meeting the hospice 

beneficiaries’ needs. Currently, the 

hospice claim includes a field for the 

patient’s principal hospice diagnosis, 

but allows for up to 17 additional 

diagnoses on the paper UB–04 claim, 

and up to 24 additional diagnoses on 

the 837I 5010 electronic claim. 

5. Transition to ICD–10–CM 

We note that ICD–10–CM will replace 

the ICD–9–CM on October 1, 2014. We 

would apply the coding clarifications 

discussed above to the ICD–10–CM 

coding guidelines, as well as the ICD– 

9–CM guidelines. A critical issue 

associated with the transition to ICD– 

10–CM involves the matter of 

crosswalking between the ICD–9–CM 

and ICD–10–CM code sets. The term 

‘‘crosswalking’’ is generally defined as 

the act of mapping or translating a code 

in one code set to a code or codes in 

another code set. (The terms 

‘‘crosswalking’’ and ‘‘mapping’’ are 

sometimes used interchangeably.) 

Understanding crosswalking will be 

important to physicians during the 

transition phase when learning which 

new ICD–10 code to use in place of an 

ICD–9 code. The National Center for 

Health Statistics (NCHS) has developed 

what is known as a ‘‘General 

Equivalence Mappings’’ (GEMs) for the 

diagnosis codes. Likewise, we have 

developed the GEMs for the procedure 

codes. The GEMs are considered to be 

the authoritative source for 

crosswalking between ICD–10 and ICD– 

9. The GEMs are data files that list the 

ICD–9 and ICD–10 codes and the 

attributes of the mapping between the 

two code sets. There is a file for 

mapping from ICD–10 to ICD–9 and 

another for mapping from ICD–9 to ICD– 

10. The GEMs files are available for free 

and can be downloaded from the NCHS 

Web site, www.cdc.gov/nchs/icd/ 

icd10cm.htm. Hospices should not 

substitute crosswalking for learning and 

fully implementing ICD–10–CM into 

their procedures. Additional 

information regarding the transition to 

ICD–10–CM is available through the 

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

Medicare/Coding/ICD10/index.html?

redirect=/icd10 and ICD–10–CM coding 

guidelines can be found on the CDC’s 

Web site at www.cdc.gov/nchs/data/

icd10/10cmguidelines2012.pdf. 

B. Proposed Update to the Hospice 

Quality Reporting Program 

1. Background and Statutory Authority 

Section 3004 of the Affordable Care 

Act amended the Act to authorize a 

quality reporting program for hospices. 

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

requires that beginning with FY 2014 

and each subsequent FY, the Secretary 

shall reduce the market basket update 

by 2 percentage points for any hospice 

that does not comply with the quality 

data submission requirements with 

respect to that FY. Depending on the 

amount of the annual update for a 

particular year, a reduction of 2 

percentage points could result in the 

annual market basket update being less 

than 0.0 percent for a FY and may result 

in payment rates that are less than 

payment rates for the preceding FY. Any 

reduction based on failure to comply 

with the reporting requirements, as 

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

Act, would apply only for the particular 

FY involved. Any such reduction would 

not be cumulative or be taken into 

account in computing the payment 

amount for subsequent FYs. 

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

requires that each hospice submit data 

to the Secretary on quality measures 

specified by the Secretary. The data 

must be submitted in a form, manner, 

and at a time specified by the Secretary. 

Any measures selected by the Secretary 

must have been endorsed by the 

consensus-based entity which holds a 

contract regarding performance 

measurement with the Secretary under 

section 1890(a) of the Act. This contract 

is currently held by the National Quality 

Forum (NQF). However, section 

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

in the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practical measure has not been endorsed 

by the consensus-based entity, the 

Secretary may specify measures that are 

not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by a 

consensus-based organization identified 

by the Secretary. Section 

1814(i)(5)(D)(iii) of the Act requires that 

the Secretary publish selected measures 

applicable with respect to FY 2014 no 

later than October 1, 2012. 

2. Quality Measures for Hospice Quality 

Reporting Program and Data Submission 

Requirements for Payment Year FY 2014 

The successful development of a 

Hospice Quality Reporting Program 

(HQRP) that promotes the delivery of 

high quality healthcare services is our 

paramount concern. We seek to adopt 

measures for the HQRP that promote 

efficient and safer care. Our measure 

selection activities for the HQRP takes 

into consideration input we receive 

from the Measure Applications 

Partnership (MAP), convened by the 

National Quality Forum (NQF), as part 

of a pre-rulemaking process that we 

have established and are required to 

follow under section 1890A of the Act. 

The MAP is a public-private partnership 

comprised of multi-stakeholder groups 

convened by the NQF for the primary 

purpose of providing input to CMS on 

the selection of certain categories of 

quality and efficiency measures, as 

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

Act. By February 1st of each year, the 

NQF must provide that input to CMS. 

Input from the MAP is located at: 

(http://www.qualityforum.org/Setting_

Priorities/Partnership/Measure_

Applications_Partnership.aspx). For 

more details about the pre-rulemaking 

process, see the FY 2013 IPPS/LTCH 

PPS final rule (77 FR at 53376 (August 

31, 2012)). 

We also take into account national 

priorities, such as those established by 

the National Priorities Partnership at 

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

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

secretary/about/priorities/

priorities.html), and the National 

Strategy for Quality Improvement in 

Healthcare located at (http://

www.healthcare.gov/news/reports/

nationalqualitystrategy032011.pdf). To 

the extent practicable, we have sought 

to adopt measures that have been 

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endorsed by the national consensus 

organization, recommended by multistakeholder organizations, and 

developed with the input of providers, 

purchasers/payers, and other 

stakeholders. 

As stated in the August 4, 2011 FY 

2012 Hospice Wage Index final rule (76 

FR 47302, 47320), to meet the quality 

reporting requirements for hospices for 

the FY 2014 payment determination as 

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

we finalized the requirement that 

hospices report two measures: 

• An NQF-endorsed measure that is 

related to pain management, NQF 

#0209. The data collection period for 

this measure was October 1, 2012 

through December 31, 2012, and the 

data submission deadline was April 1, 

2013. The data for this measure are 

collected at the patient level, but are 

reported in the aggregate for all patients 

cared for within the reporting period, 

regardless of payer. 

• A structural measure that is not 

endorsed by NQF: Participation in a 

Quality Assessment and Performance 

Improvement (QAPI) program that 

includes at least three quality indicators 

related to patient care. The data 

collection period for this measure was 

October 1, 2012 through December 31, 

2012, and the data submission deadline 

was January 31, 2013. Hospices are not 

asked to report their level of 

performance on these patient care 

related indicators. 

Hospices failing to report quality data 

before the specified deadline in 2013, 

would have their market basket update 

reduced by 2 percentage points in FY 

2014. Hospice programs would be 

evaluated for purposes of the quality 

reporting program based on whether or 

not they submit data, not based on their 

performance level on required 

measures. 

For the FY 2014 payment 

determination, hospices were asked to 

provide identifying information, and 

then complete a web based data entry 

for the required measures. For hospices 

that could not complete the web based 

data entry, a downloadable data entry 

form was made available upon request. 

Electronic data submission would be 

required for the FY 2015 payment 

determination and beyond; there would 

be no other data submission method 

available. 

3. Quality Measures for Hospice Quality 

Reporting Program and Data Submission 

Requirements for Payment Year FY 2015 

and Beyond 

In the November 8, 2012 CY 2013 

Home Health Prospective Payment 

System Rate Update final rule (77 FR 

67068, 67133), to meet the quality 

reporting requirements for hospices for 

the FY 2015 payment determination and 

each subsequent year, as set forth in 

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

finalized the requirement that hospices 

report two measures: 

• The NQF-endorsed measure that is 

related to pain management, NQF #0209 

• The structural measure: 

Participation in a Quality Assessment 

and Performance Improvement (QAPI) 

Program that includes at least three 

quality indicators related to patient care. 

We did not extend the requirement that 

hospices complete a check list of their 

patient care indicators and indicate the 

data sources they used for their quality 

indicators. 

In this rule, we propose that the 

structural measure related to QAPI 

indicators and the NQF #0209 pain 

measure would not be required for the 

hospice quality reporting program 

beyond data submission for the FY 2015 

payment determination. The original 

intent of the structural measure was for 

hospices to submit information about 

number, type, and data source of quality 

indicators used as a part of their QAPI 

Program. Data gathered as part of the 

structural measure were used to 

ascertain the breadth and context of 

existing hospice QAPI programs to 

inform future measure development 

activities including the data collection 

approach for the first year of required 

reporting (FY 2014). To date, hospices 

have reported two cycles worth of 

structural measure data to CMS: 

• Voluntary reporting period 

(submitted to CMS by January 31, 

2012)—For the voluntary reporting 

period hospices submitted free text data 

describing each quality indicator in 

their QAPI programs; data regarding 

number and data source of quality 

indicators were also submitted. 

• FY 2014 (submitted to CMS by 

January 31, 2013)—For the FY 2014 

cycle, hospices submitted data about the 

topic areas of care addressed by quality 

indicators in their QAPI Programs, using 

a drop-down menu checklist rather than 

free text to reduce burden. Data 

regarding number and data source of 

quality indicators were also submitted. 

CMS has analyzed data from both 

reporting periods. Findings from the 

voluntary reporting period showed that 

hospices use quality indicators that 

address a wide range of patient care 

related topics and that there is great 

variation in how hospices collect and 

use ‘‘standardized’’ quality indicators. 

The majority of reported indicators 

addressed patient safety and physical 

symptom management. Likewise, 

findings from analysis of the FY 2014 

structural measure data reiterated 

findings from the voluntary reporting 

period. 

Other topics addressed included 

management of psychosocial aspects of 

care, bereavement and grief, 

communication, and care coordination. 

Overall, findings from both data 

collections of the structural measure 

have provided adequate information on 

hospice’s patient care-related indicators 

making further reporting on the 

structural measure unnecessary. 

In addition, we have determined that 

the NQF #0209 measure as it is 

currently collected and reported by 

hospices is not suitable for long term 

use as part of the Hospice Quality 

Reporting Program (HQRP). In making 

this decision, we considered findings 

from the Voluntary Reporting Period 

and the Hospice Item Set pilot. We will 

also examine data from the first year of 

reporting on the measure (impacting FY 

2014 APU determination). In addition, 

we considered stakeholder input 

including comments submitted during 

rulemaking, expert input from a 

Technical Expert Panel (TEP), and 

provider questions and comments 

submitted to the hospice quality help 

desk during the 2012/2013 data 

collection and reporting period. There 

are two central concerns with the NQF 

#0209 measure. First, the measure does 

not easily correspond with the clinical 

processes for pain management, 

resulting in variance in what hospices 

collect, aggregate, and report. This 

concern could potentially be addressed 

by extensive and ongoing provider 

training or standardizing data 

collection. However, even with 

extensive training and the use of a 

standardized item set during the pilot 

test, the data showed continued 

variance in implementation of the 

measure. Second, there is a high rate of 

patient exclusion due to patient 

ineligibility for the measure and 

patients’ denying pain at the initial 

assessment. This high rate of patient 

exclusion from the measure results in a 

small denominator and creates validity 

concerns. These concerns cannot be 

addressed by training or standardizing 

data collection. We recognize the value 

of measuring hospices’ ability to achieve 

patient comfort and the desire to 

include a patient outcome measure such 

as the NQF #0209 in the HQRP. By 

removing the requirement that hospices 

submit the NQF #0209 measure, pain 

comfort would not be measured as part 

of the HQRP. However, we plan to 

collect two other measures that reflect 

care for pain. The standardized item set 

that CMS has developed contains data 

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elements to collect 7 quality measures 

endorsed by NQF for hospice. Among 

these are two process measures related 

to pain: The NQF #1634, Pain screening, 

and NQF #1637, pain assessment. 

However, while these measures provide 

insight about screening and assessment 

of patients, they do not offer 

information about patient comfort 

related to pain. An alternative proposal 

would be to retain NQF #0209 until a 

more suitable outcome measure was 

available for use in the HQRP, in order 

to maintain a focus on achieving patient 

comfort. We also recognize the 

importance of adherence to 

standardized data collection 

specifications when producing 

measures for public reporting. We 

intend to work toward the HQRP’s 

future inclusion of an improved pain 

outcome measure. We solicit comment 

on the removal of the checklist and data 

source questions from the structural 

measure, and the removal of the NQF 

#0209 measure. We also solicit 

comment on the alternative proposal of 

maintaining NQF #0209 until another 

pain outcome measure is available. 

4. Quality Measures for Hospice Quality 

Reporting Program for Payment Year FY 

2016 and Beyond 

As stated in the November 8, 2012 CY 

2013 Home Health Prospective Payment 

System Rate Update final rule (77 FR 

67068, 67133), we considered an 

expansion of the required measures to 

include additional measures endorsed 

by NQF. We also stated that to support 

the standardized collection and 

calculation of quality measures, 

collection of the needed data elements 

would require a standardized data 

collection instrument. We have 

developed and tested a hospice patientlevel item set to be used by all hospices 

to collect and submit standardized data 

items about each patient admitted to 

hospice. We contracted with RTI 

International to support the 

development of the Hospice Item Set 

(HIS) for use as part of the HQRP. In 

developing the HIS, RTI focused on the 

NQF endorsed measures that had 

evidence of use and/or testing with 

hospice providers. Most of these 

measures were initially developed 

during the PEACE (Prepare, Embrace, 

Attend, Communicate, and Empower) 

Project, which was funded by CMS to 

develop and test an initial set of quality 

measures for use in hospice and 

palliative care. The PEACE project, 

which ended in 2008, resulted in the 

identification of recommended quality 

measure and data collection tools that 

hospice providers could use in their 

Quality Assessment and Performance 

Improvement (QAPI) programs to assess 

quality of care and target areas for 

improvement. Additional information 

on the PEACE project can be found at 

http://www.thecarolinascenter.org/ 

default.aspx?pageid=24. 

Most of the measures endorsed by 

NQF are already widely in use by 

hospices nationwide as part of their 

internal Quality Reporting and 

Performance Improvement (QAPI) 

programs. Data we received from 

hospices during the Voluntary 

Reporting Period in 2011 showed that 

hospices had implemented and were 

using the PEACE measures. Some of the 

PEACE measures were endorsed by NQF 

in February, 2012, and are listed below 

with their NQF endorsement numbers. 

The HIS standardizes the collection of 

the data elements that are needed to 

calculate seven of the NQF endorsed 

measures. The HIS was pilot tested 

during the early summer of 2012. The 

primary objective of the pilot was to 

explore data collection methods and the 

feasibility of implementing a patientlevel item set for possible future use as 

part of the HQRP. 

In developing the standardized HIS, 

we considered comments offered in 

response to the July 13, 2012 CY 2013 

Home Health Prospective Payment 

System Rate Update proposed rule (77 

FR 41548, 41573). We have included 

data items that support the following 

NQF endorsed measures for hospice: 

• NQF #1617 Patients Treated with an 

Opioid who are Given a Bowel 

Regimen 

• NQF #1634 Pain Screening 

• NQF #1637 Pain Assessment 

• NQF #1638 Dyspnea Treatment 

• NQF #1639 Dyspnea Screening 

• NQF #1641 Treatment Preferences 

• NQF #1647 Beliefs/Values 

Addressed (if desired by the patient) 

To achieve a comprehensive set of 

hospice quality measures available for 

widespread use for quality improvement 

and informed decision making, and to 

carry out our commitment to develop a 

quality reporting program for hospices 

that uses standardized methods to 

collect data needed to calculate quality 

measures, we propose the 

implementation of the HIS in July 2014. 

We believe that to support the 

standardized collection and calculation 

of any or all of the hospice quality 

measures listed above, it is necessary to 

use a standardized data collection 

mechanism. The HIS was developed 

specifically for this data collection 

purpose. We expect the HIS Paperwork 

Reduction Act (PRA) package to post on 

or within several days after the 

publication of this FY 2014 Hospice 

proposed rule. The HIS will be posted 

on the Paperwork Reduction Act (PRA) 

area of the CMS.gov Web site at: 

https://www.cms.gov/Regulations-andGuidance/Legislation/ 

PaperworkReductionActof1995/ 

index.html. 

We propose that hospices begin the 

use and submission of the HIS in July 

2014. To meet the quality reporting 

requirements for hospices for the FY 

2016 payment determination and each 

subsequent year, we propose regular 

and ongoing electronic submission of 

the HIS data for each patient admitted 

to hospice on or after July 1, 2014, 

regardless of payer. Hospices would be 

required to complete and submit an 

admission HIS and a discharge HIS for 

each patient. Hospices failing to report 

quality data via the HIS in 2014 would 

have their market basket update reduced 

by 2 percentage points in FY 2016. 

Hospice programs would be evaluated 

for purposes of the quality reporting 

program based on whether or not they 

submit data, instead of their 

performance level on required 

measures. If our proposals for use of the 

Hospice Item Set are finalized, we plan 

to provide Hospices with further 

information and details about use of the 

Hospice Item Set. We will provide this 

information through venues such as 

postings on the Hospice Quality 

Reporting Program Web page, Special 

Open Door Forums, announcements in 

the CMS E-News, providers training, 

and National Provider calls. Electronic 

data submission would be required for 

HIS submission in CY 2014 and beyond; 

there would be no other data 

submission method available. We would 

make available submission software for 

the HIS to hospices at no cost. We 

would also provide reports to individual 

hospices on their performance on the 

measures calculated from data 

submitted via the HIS. The specifics of 

the reporting system and precisely when 

specific measures would be made 

available have not yet been determined. 

We would report to providers on the 

following measures on a schedule to be 

determined: 

• NQF #1617 Patients Treated with an 

Opioid who are Given a Bowel 

Regimen 

• NQF #1634 Pain Screening 

• NQF #1637 Pain Assessment 

• NQF #1638 Dyspnea Treatment 

• NQF #1639 Dyspnea Screening 

• NQF #1641 Treatment Preferences 

• NQF #1647 Beliefs/Values 

Addressed (if desired by the patient) 

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TABLE 4—SUMMARY TABLES

Data collection Data submission APU Impact Measure name 

Finalized in the CY 2013 HH PPS Final Rule 

1/1/2013–12/31/2013 ............................... 4/1/2014 ........... FY 2015 (10/1/2014) .............................. Structural/QAPI measure, NQF #0209. 

Proposed in this Proposed Rule 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Hospice and Palliative Care—Pain 

Screening, NQF #1634. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Hospice and Palliative Care—Pain Assessment, NQF #1637. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Hospice and Palliative Care—Dyspnea 

Screening, NQF #1639. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Hospice and Palliative Care—Dyspnea 

Treatment, NQF #1638. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Patients Treated with an Opioid who 

are Given a Bowel Regimen, NQF 

#1617. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Hospice and Palliative Care—Treatment 

Preferences, NQF #1641. 

7/1/2014–12/31/2014 ............................... Rolling .............. FY 2016 (10/1/2015) .............................. Beliefs/Values Addressed (if desired by 

patient), NQF #1647. 

As stated in the August 4, 2011 FY 

2012 Hospice Wage Index final rule (76 

FR 47302, 47320), we finalized that all 

hospice quality reporting periods 

subsequent to that for Payment Year FY 

2014 would be based on a CY instead 

of a calendar quarter and for FY 2015 

and beyond, the data submission 

deadline would be April 1st of each 

year. Our proposal to implement the 

HIS in July 2014 would negate the CY 

data collection requirement and the 

April 1st data submission deadline. We 

would provide details on data collection 

and submission timing prior to 

implementation of the HIS in July 2014. 

5. Public Availability of Data Submitted 

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

the Secretary is required to establish 

procedures for making any quality data 

submitted by hospices available to the 

public. The procedures ensure that a 

hospice would have the opportunity to 

review the data regarding the hospice’s 

respective program before it is made 

public. In addition, under section 

1814(i)(5)(E) of the Act, the Secretary is 

authorized to report quality measures 

that relate to services furnished by a 

hospice on the CMS Web site. We 

recognize that public reporting of 

quality data is a vital component of a 

robust quality reporting program and are 

fully committed to developing the 

necessary systems for public reporting 

of hospice quality data. We also 

recognize it is essential that the data 

made available to the public be 

meaningful and that comparing 

performance between hospices requires 

that measures be constructed from data 

collected in a standardized and uniform 

manner. The development and 

implementation of a standardized data 

set for hospices must precede public 

reporting of hospice quality measures. 

Once hospices have implemented the 

standardized data collection approach, 

we will have the data needed to 

establish the scientific soundness of the 

quality measures that can be calculated 

using the standardized data collection. 

It is critical to establish the reliability 

and validity of the measures prior to 

public reporting in order to demonstrate 

the ability of the measures to 

distinguish between the quality of 

services provided. To establish 

reliability and validity of the quality 

measures, at least four quarters of data 

will need to be analyzed. Typically the 

first two quarters of data reflect the 

learning curve of the providers as they 

adopt a standardized data collection; 

these data are not used to establish 

reliability and validity. This means that 

if the proposal to begin data collection 

in CY 2014 (Q3) is finalized, the data 

from CY 2014 (Q3, Q4) would not be 

used for assessing validity and 

reliability of the quality measures. Data 

collected by hospices during CY 2015 

would be analyzed starting in CY 2015. 

Decisions about whether to report some 

or all of the quality measures publicly 

would be based on the findings of 

analysis of the CY 2015 data. In 

addition, as noted, the Affordable Care 

Act requires that reporting be made 

public on a CMS Web site and that 

providers have an opportunity to review 

their data prior to public reporting. CMS 

will develop the infrastructure for 

public reporting, and provide hospices 

an opportunity to review their data. In 

light of all the steps required prior to 

data being publicly reported, we 

anticipate that public reporting will not 

be implemented in FY 2016. Public 

reporting may occur during the FY 2018 

APU year, allowing ample time for data 

analysis, review of measures’ 

appropriateness for use for public 

reporting, and allowing hospices the 

required time to review their own data 

prior to public reporting. We will 

announce the timeline for public 

reporting of data in future rulemaking. 

We welcome public comment on what 

we should consider when developing 

future proposals related to public 

reporting. 

6. Proposed Adoption of the CMS 

Hospice Experience of Care Survey for 

the FY 2017 Payment Determination 

and That of Subsequent Fiscal Years 

In the CY 2013 Home Health 

Prospective Payment System Rate 

Update final rule (77 FR 67135), we 

stated that were considering the use of 

a patient/family experience of care 

survey in addition to other hospice 

quality of care (clinical) measures. We 

are currently developing a Hospice 

Experience of Care Survey questionnaire 

drawing heavily on questionnaires in 

the public domain such as the Family 

Evaluation of Hospice Care (FEHC). The 

Hospice Experience of Care Survey 

would treat the dying patient and his or 

her informal caregivers (family members 

or friends) as the unit of care. 

Before the development of this 

survey, there was no official national 

standard experience of care survey that 

included standard survey 

administration protocols. This is one 

reason we did not adopt the FEHC as 

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our experience of care survey. In 

addition, topic areas that were not 

addressed by the FEHC were identified 

by the public as important to their 

experiences. The Hospice Experience of 

Care Survey would include detailed 

survey administration protocols which 

would allow for comparisons across 

hospices. The survey would focus on 

topics that are important to hospice 

users and for which informal caregivers 

are the best source for gathering this 

information. In addition, the ‘‘About 

You’’ section of the instrument includes 

demographic characteristics of the 

patients and their caregivers which can 

be used to feed into case mix 

adjustments of the publicly reported 

data. 

The Hospice Experience of Care 

Survey now under development would 

seek information from informal 

caregivers of patients who died while 

enrolled in hospices. We plan to field 

the questionnaires after the patient’s 

death. Fielding timelines would be 

established to give the respondent some 

time from the death of their loved one, 

while simultaneously not delaying so 

long that the respondent is likely to 

forget details of the hospice experience. 

Caregivers would be presented with a 

set of standardized questions about their 

own experiences and the experiences of 

the patient in hospice care. During 

national implementation of this survey, 

hospices would be required to offer the 

survey, but individual caregivers would 

respond only if they voluntarily chose 

to do so. 

The Hospice Experience of Care 

Survey captures such topics as hospice 

provider communications with patients 

and family members, hospice provider 

care, and patient and family member 

characteristics. The survey would allow 

the informal caregiver (family member 

or friend) to provide an overall rating of 

the hospice care their patient received, 

and would ask if they would 

recommend ‘‘this hospice’’ to others. 

The Hospice Experience of Care 

Survey is undergoing development in 

accordance with the principles used in 

the development of the Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS®) surveys. Therefore, 

we are— 

• Obtaining input from consumers 

and stakeholders regarding how hospice 

patients perceive hospice care and what 

elements in hospice programs are of 

greatest importance to patients and 

informal caregivers. 

• Drafting a version of the hospice 

questionnaire that would be cognitively 

tested with a small number of 

respondents in both English and 

Spanish. This type of testing will allow 

us to assess how respondents interpret 

and respond to individual questionnaire 

items. 

• Providing a pilot test of the Hospice 

Experience of Care Survey instrument 

after the development of an initial 

questionnaire is completed. This pilot 

test would allow us to review survey 

implementation procedures and use 

statistical analysis of the survey results 

to select the final set of questions. In 

addition, it will allow us to select 

variables which may be used in the case 

mix adjustment of survey results for 

public reporting. 

The Hospice Experience of Care 

Survey, as well as the CAHPS® family 

of surveys, focuses on patient 

perspectives on the experience of care, 

rather than on patient satisfaction. 

CAHPS® data complements other data, 

including clinical measures. CAHPS®

surveys are specifically intended to 

focus on issues where the patient (or in 

this case the caregiver) is the best source 

of information. We intend the Hospice 

Experience of Care Survey to have a 

similar focus. 

We are planning to move forward 

with a model of survey administration 

in which we would approve and train 

survey vendors to administer the survey 

on behalf of hospices. Hospices would 

be required to contract with an 

approved survey vendor and to provide 

the sampling frame to the approved 

vendor on a monthly basis. The 

following are proposed key dates for the 

national implementation of the Hospice 

Experience of Care Survey: 

• Based on the model of CMSimplemented CAHPS® surveys (that is, 

Hospital CAHPS® and Home Health 

Care CAHPS®), we propose that 

hospices would contract with a CMSapproved survey vendor to conduct a 

‘‘dry run’’ of the survey for at least 1 

month in the first quarter of CY 2015 

(January 2015 through March 2015). 

Vendors would submit data on the 

hospice’s behalf to the CMS hospice 

patient experience data center. The 

deadline for data submission has not yet 

been finalized. For the ‘‘dry run’’ the 

survey vendor would follow all the 

national implementation procedures, 

but the data would not be publicly 

reported. The dry run would provide 

hospices and their vendors with the 

opportunity to work together under 

‘‘test’’ conditions before they are 

required to start publicly reporting data. 

We propose that hospices would 

contract with CMS-approved vendors to 

begin continuous monthly data 

collection starting April 1, 2015. Data 

submission dates are being developed; 

however, we expect that data would be 

submitted quarterly. 

• We propose that the FY 2017 

Annual Payment Update (APU) 

determination, based in part on the 

Hospice Experience of Care Survey, 

would include a dry run for at least 1 

month in the first quarter of CY 2015 

(January 2015, February 2015, and/or 

March 2015) plus 3 quarters of 

continuous monthly participation (April 

1, 2015 through December 31, 2015). 

• We propose that subsequent APU 

determinations would be based upon 4 

quarters of continuous monthly 

participation from January 1 through 

December 31 of the relevant CY. 

• We propose to exempt very small 

hospices from the survey requirements. 

Hospices that had fewer than 50 

unduplicated or unique deceased 

patients in the period from January 1, 

2014 through December 31, 2014 would 

be exempt from the Hospice Experience 

of Care Survey data collection and 

reporting requirements for the FY 2017 

payment determination. The hospices 

would be required to submit their 

patient counts for the period of January 

1, 2014 through December 31, 2014 to 

CMS. Data submission procedures 

would be further specified in future 

rules. There would be similar 

exemptions for subsequent APU 

determinations. However, a hospice 

would need to submit to CMS their 

patient count for each future period to 

qualify for this exemption. 

As part of the national 

implementation, we would develop 

technical specifications for vendors to 

follow and would issue a detailed 

survey guidelines manual prior to the 

dry run months. 

In addition, there would be a Web site 

devoted specifically to the Hospice 

Survey. It would include information 

and updates regarding survey 

implementation and technical 

assistance. Hospices interested in 

viewing similar model Web sites are 

encouraged to visit the Hospital 

CAHPS® Web site at 

www.hcahpsonline.org or to the Home 

Health Care CAHPS® Web site at 

https://homehealthcahps.org. On these 

Web sites, viewers can see and 

download the detailed manuals about 

the surveys (the Quality Assurance 

Guidelines for Hospital CAHPS® and 

the Protocols and Guidelines Manual for 

Home Health Care CAHPS®), as well as 

obtain information about the surveys’ 

histories, data submission information, 

and survey updates. 

Consistent with our other 

implemented surveys, we would 

provide an email address and toll-free 

telephone number for technical 

assistance. 

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The Affordable Care Act requires that 

beginning with FY 2014 and each 

subsequent FY, the Secretary shall 

reduce the market basket update by 2 

percentage points for any hospice that 

does not comply with the quality data 

submission requirements with respect to 

the FY. Any such reduction would not 

be cumulative and would not be taken 

into account in computing the payment 

amount for subsequent FYs. In the 

November 8, 2012 CY 2013 Home 

Health Prospective Payment System 

final rule (77 FR 67068), it was stated 

that all hospice quality reporting 

periods subsequent to that for Payment 

Year 2014 be based on a CY rather than 

on a FY. With the proposed dry run 

timeline of least 1 month in the first 

quarter of CY 2015 and data collection 

beginning April 1, 2015, we propose 

that the survey requirements be part of 

the Hospice Quality Reporting Program 

requirements for the FY 2017 payment 

determination. We are proposing that to 

meet the FY 2017 requirements, 

hospices would participate in a dry run 

for at least 1 month of the first quarter 

of CY 2015 (January 2015, February 

2015, and/or March 2015) and must 

collect the survey data on a monthly 

basis from April 1, 2015 through 

December 31, 2015. 

In summary, we are proposing to start 

the Hospice Experience of Care Survey 

requirements with a test run for at least 

1 month in the first quarter of CY 2015 

with continuous monthly data 

collection beginning April 1, 2015, to 

meet the annual payment update 

requirements for FY 2017. We are 

proposing to add the Hospice 

Experience of Care Survey requirements 

to the Hospice quality reporting 

program requirements for the FY 2017 

annual payment update. Participating 

hospices would have to contract with an 

approved Hospice Experience of Care 

Survey vendor to conduct the survey on 

their behalf. 

7. Notice Pertaining to Reconsiderations 

Following APU Determinations 

At the conclusion of any given quality 

data reporting period, we would review 

the data received from each hospice 

during that reporting period to 

determine if the hospice has met the 

reporting requirements. Hospices that 

are found to be non-compliant with the 

reporting requirements set forth for that 

reporting cycle could receive a 

reduction in the amount of 2 percentage 

points to their annual payment update 

for the upcoming payment year. 

We are aware that there may be 

situations when a hospice has evidence 

to dispute a finding of non-compliance. 

We further understand that there may be 

times when a provider may be 

prevented from submitting quality data 

due to the occurrence of extraordinary 

circumstances beyond their control (for 

example, natural disasters). It is our goal 

not to penalize hospice providers in 

these circumstances or to unduly 

increase their burden during these 

times. 

Other CMS Quality Reporting 

Programs, such as Home Health Quality 

Reporting and Inpatient Quality 

Reporting, include an opportunity for 

providers to request a reconsideration 

pertaining to their APU determinations. 

We are aware of the potential need for 

providers to request reconsideration and 

that we will be making APU 

determinations for FY 2014 in the 

coming months. Therefore, to be 

consistent with other established quality 

reporting programs, we are using this 

proposed rule to notify providers of our 

intent to provide a process that would 

allow hospices to request 

reconsiderations pertaining to their FY 

2014 and subsequent years’ payment 

determinations. 

Specifically, as part of the 

reconsideration process for hospices 

beginning with the FY 2014 payment 

determinations, hospices found to be 

non-compliant with the reporting 

requirements during a given reporting 

cycle would be notified of that finding. 

The purpose of this notification is to put 

hospices on notice of the following: (1) 

That they have been identified as being 

non-compliant with section 3004 of the 

Affordable Care Act for the reporting 

cycle in question; (2) that they would be 

scheduled to receive a reduction in the 

amount of 2 percentage points to the 

annual payment update to the 

applicable fiscal year; (3) that they may 

file a request for reconsideration if they 

believe that the finding of noncompliance is erroneous, or that if they 

were non-compliant, they have a valid 

and justifiable excuse for this noncompliance; and, (4) that they must 

follow a defined process on how to file 

a request for reconsideration, which 

would be described in the notification. 

Upon the conclusion of our review of 

each request for reconsideration, we 

would render a decision. We could 

reverse our initial finding of noncompliance if: (1) The hospice provides 

proof of full compliance with the all 

requirements during the reporting 

period; or (2) the hospice was not able 

to comply with requirements during the 

reporting period, and it provides 

adequate proof of a valid or justifiable 

excuse for this non-compliance. We 

would uphold our initial finding of noncompliance if the hospice could not 

show any justification for noncompliance. 

We would provide details of the 

reconsideration process, including 

mechanisms of notification, time frames 

and mechanisms for filing requests for 

reconsideration, required content for 

requests, required supporting 

documentation, and mechanisms of 

notification of final determinations on 

the HQRP section of cms.gov and by 

program instruction this spring. 

C. FY 2014 Rate Update 

1. Hospice Wage Index 

The hospice wage index is used to 

adjust payment rates for hospice 

agencies under the Medicare program to 

reflect local differences in area wage 

levels based on the location where 

services are furnished. The hospice 

wage index utilizes the wage adjustment 

factors used by the Secretary for 

purposes of section 1886(d)(3)(E) of the 

Act for hospital wage adjustments and 

our regulations at § 418.306(c) require 

each labor market to be established 

using the most current hospital wage 

data available, including any changes by 

the Office of Management and Budget 

(OMB) to the Metropolitan Statistical 

Areas (MSAs) definitions. We have 

consistently used the pre-floor, prereclassified hospital wage index when 

deriving the hospice wage index. In our 

August 4, 2005 FY 2006 Hospice Wage 

Index final rule (70 FR 45130), we began 

adopting the 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 Core-Based 

Statistical Areas (CBSAs). The bulletin 

is available online at http:// 

www.whitehouse.gov/omb/bulletins/ 

b03-04.html. In the FY 2006 Hospice 

Wage Index final rule, we implemented 

a 1-year transition policy using a 50/50 

blend of the CBSA-based wage index 

values and the MSA-based wage index 

values for FY 2006. The one-year 

transition policy ended on September 

30, 2006. For FY 2007 and beyond, we 

have used CBSAs exclusively to 

calculate wage index values. OMB has 

published subsequent bulletins 

regarding CBSA changes. The most 

recent CBSA changes used for the FY 

2014 hospice wage index are found in 

OMB Bulletin 10–02, available at: 

http://www.whitehouse.gov/sites/ 

default/files/omb/assets/bulletins/b10- 

02.pdf. 

When adopting OMB’s new labor 

market designations in FY 2006, we 

identified some geographic areas where 

there were no hospitals, and thus, no 

hospital wage index data, which to base 

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the calculation of the hospice wage 

index. We also adopted the policy that 

for urban labor markets without a 

hospital from which hospital wage 

index data could be derived, all of the 

CBSAs within the state would be used 

to calculate a statewide urban average 

pre-floor, pre-reclassified hospital wage 

index value to use as a reasonable proxy 

for these areas in our August 6, 2009 FY 

2010 Hospice Wage Index final rule (74 

FR 39386). In FY 2014, the only CBSA 

without a hospital from which hospital 

wage data could be derived is 25980, 

Hinesville-Fort Stewart, Georgia. 

In our August 31, 2007 FY 2008 

Hospice Wage Index final rule (72 FR 

50214), we implemented a new 

methodology to update the hospice 

wage index for rural areas without a 

hospital, and thus no hospital wage 

data. In cases where there was a rural 

area without rural hospital wage data, 

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

from all contiguous CBSAs to represent 

a reasonable proxy for the rural area. In 

our August 31, 2007 FY 2008 Hospice 

Wage Index final rule, we noted that we 

interpret the term ‘‘contiguous’’ to mean 

sharing a border (72 FR 50217). 

Currently, the only rural area without a 

hospital from which hospital wage data 

could be derived is Puerto Rico. 

However, our policy of imputing a rural 

pre-floor, pre-reclassified hospital wage 

index based on the pre-floor, prereclassified hospital wage index (or 

indices) of CBSAs contiguous to a rural 

area without a hospital from which 

hospital wage data could be derived 

does not recognize the unique 

circumstances of Puerto Rico. While we 

have not identified an alternative 

methodology for imputing a pre-floor, 

pre-reclassified hospital wage index for 

rural Puerto Rico, we will continue to 

evaluate the feasibility of using existing 

hospital wage data and, possibly, wage 

data from other sources. For FY 2008 

through FY 2013, we have used the 

most recent pre-floor, pre-reclassified 

hospital wage index available for Puerto 

Rico, which is 0.4047. In this proposed 

rule, for FY 2014, we continue to use 

the most recent pre-floor, prereclassified hospital wage index value 

available for Puerto Rico, which is 

0.4047. 

For FY 2014, we would use the 2013 

pre-floor, pre-reclassified hospital wage 

index to derive the applicable wage 

index values for the hospice wage. We 

would continue to use the pre-floor, prereclassified hospital wage data as a basis 

to determine the hospice wage index 

values because hospitals and hospices 

both compete in the same labor markets, 

and therefore, experience similar wagerelated costs. We believe the use of the 

pre-floor, pre-reclassified hospital wage 

index data, as a basis for the hospice 

wage index, results in the appropriate 

adjustment to the labor portion of the 

costs. The FY 2014 hospice wage index 

values presented in this proposed rule 

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

wage index policy (that is, our historical 

policy of not taking into account IPPS 

geographic reclassifications in 

determining payments for hospice). The 

FY 2013 pre-floor, pre-reclassified 

hospital wage index does not reflect 

OMB’s new area delineations, based on 

the 2010 Census, as outlined in OMB 

Bulletin 13–01, released on February 28, 

2013. Moreover, the proposed FY 2014 

pre-floor, pre-reclassified hospital wage 

index does not contain OMB’s new area 

delineations because those changes will 

be in the FY 2014 IPPS proposed rule, 

which will be published in the Federal 

Register, in the near future. CMS 

intends to propose changes to the FY 

2015 hospital wage index based on the 

newest CBSA changes in the FY 2015 

IPPS proposed rule. Therefore, if CMS 

incorporates OMB’s new area 

delineations, based on the 2010 Census, 

in the FY 2015 hospital wage index, 

those changes would also be reflected in 

the FY 2016 hospice wage index. 

2. FY 2014 Hospice Wage Index With an 

Additional 15 Percent Reduced Budget 

Neutrality Adjustment Factor (BNAF) 

This proposed rule would update the 

hospice wage index values for FY 2014 

using the FY 2013 pre-floor, prereclassified hospital wage index. As 

described in the August 8, 1997 Hospice 

Wage Index final rule (62 FR 42860), the 

pre-floor and pre-reclassified hospital 

wage index is used as the raw wage 

index for the hospice benefit. These raw 

wage index values are then subject to 

either a budget neutrality adjustment or 

application of the hospice floor to 

compute the hospice wage index used to 

determine payments to hospices. Prefloor, pre-reclassified hospital wage 

index values below 0.8 are adjusted by 

either: (1) The hospice budget neutrality 

adjustment factor (BNAF); or (2) the 

hospice floor subject to a maximum 

wage index value of 0.8; whichever 

results in the greater value. 

The BNAF is calculated by computing 

estimated payments using the most 

recent, completed year of hospice 

claims data. The units (days or hours) 

from those claims are multiplied by the 

updated hospice payment rates to 

calculate estimated payments. For the 

FY 2014 Hospice Wage Index proposed 

rule, that means estimating payments 

for FY 2014 using units (days or hours) 

from FY 2012 hospice claims data, and 

applying the FY 2014 hospice payment 

rates. The FY 2014 hospice wage index 

values are then applied to the labor 

portion of the payments. The procedure 

is repeated using the same units from 

the claims data and the same payment 

rates, but using the 1983 Bureau of 

Labor Statistics (BLS)-based wage index 

instead of the updated raw pre-floor, 

pre-reclassified hospital wage index 

(note that both wage indices include 

their respective floor adjustments). The 

total payments are then compared, and 

the adjustment required to make total 

payments equal is computed; that 

adjustment factor is the BNAF. 

The August 6, 2009 FY 2010 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

7 years, with a 10 percent reduction in 

the BNAF in FY 2010, and an additional 

15 percent reduction in each of the next 

6 years, with complete phase out in FY 

2016 (74 FR 39384). Once the BNAF is 

completely phased out, the hospice 

floor adjustment would simply consist 

of increasing any wage index value less 

than 0.8 by 15 percent, subject to a 

maximum wage index value of 0.8. 

Therefore, in accordance with the FY 

2010 Hospice Wage final rule, the BNAF 

for FY 2014 will be reduced by an 

additional 15 percent for a total BNAF 

reduction of 70 percent (10 percent from 

FY 2010, an additional 15 percent from 

FY 2011, an additional 15 percent for 

FY 2012, an additional 15 percent for 

FY 2013 and an additional 15 percent in 

FY 2014). 

The unreduced BNAF for FY 2014 is 

0.061498 (or 6.1498 percent). A 70 

percent reduction to the BNAF is 

computed to be 0.018449 (or 1.8449 

percent). For FY 2014, this is 

mathematically equivalent to taking 30 

percent of the unreduced BNAF value, 

or multiplying 0.061498 by 0.30, which 

equals 0.018449 (1.8449 percent). The 

BNAF of 1.8449 percent reflects a 70 

percent reduction in the BNAF. The 70 

percent reduced BNAF (1.8449 percent) 

was applied to the pre-floor, prereclassified hospital wage index values 

of 0.8 or greater. 

The 10 percent reduced BNAF for FY 

2010 was 0.055598, based on a full 

BNAF of 0.061775; the additional 15 

percent reduced BNAF FY 2011 (for a 

cumulative reduction of 25 percent) was 

0.045422, based on a full BNAF of 

0.060562; the additional 15 percent 

reduced BNAF for FY 2012 (for a 

cumulative reduction of 40 percent) was 

0.035156, based on a full BNAF of 

0.058593; the additional 15 percent 

reduced BNAF for FY 2013 (for a 

cumulative reduction of 55 percent) was 

0.027197, based on a full BNAF of 

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0.060438; and the additional 15 percent 

reduced BNAF for FY 2014 (for a 

cumulative reduction of 70 percent) is 

0.018449, based on a full BNAF of 

0.061498. 

Hospital wage index values which are 

less than 0.8 are subject to the hospice 

floor calculation. For example, if in FY 

2013, County A had a pre-floor, prereclassified hospital wage index (raw 

wage index) value of 0.3994, we would 

perform the following calculations using 

the budget-neutrality factor (which for 

this example is an unreduced BNAF of 

0.061498, less 70 percent, or 0.018449) 

and the hospice floor to determine 

County A’s hospice wage index: 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by 1 + 70 percent reduced BNAF: 

(0.3994 × 1.018449 = 0.4068); Pre-floor, 

pre-reclassified hospital wage index 

value below 0.8 multiplied by 1 + 

hospice floor: (0.3994 × 1.15 = 

0.4593).Based on these calculations, 

County A’s hospice wage index would 

be 0.4593. The BNAF may be updated 

for the final rule based on availability of 

more complete data. 

An addendum A and Addendum B 

with the FY 2014 wage index values for 

rural and urban areas will not be 

published in the Federal Register. The 

FY 2014 wage index values for rural 

areas and urban areas are available via 

the internet at: http://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/Hospice/index.html. The 

hospice wage index for FY 2014 set 

forth in this proposed rule includes the 

BNAF reduction and would be effective 

October 1, 2013 through September 30, 

2014. 

3. Hospice Payment Update Percentage 

Section 4441(a) of the Balanced 

Budget Act of 1997 (BBA) amended 

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

establish updates to hospice rates for 

FYs 1998 through 2002. Hospice rates 

were to be updated by a factor equal to 

the market basket index, minus 1 

percentage point. Payment rates for FYs 

since 2002 have been updated according 

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

Act, which states that the update to the 

payment rates for subsequent FYs must 

be the market basket percentage for that 

FY. The Act requires us to use the 

inpatient hospital market basket to 

determine the hospice payment rate 

update. In addition, section 3401(g) of 

the Affordable Care Act mandates that, 

starting with FY 2013 (and in 

subsequent FYs), the hospice payment 

update percentage will be annually 

reduced by changes in economy-wide 

productivity as specified in section 

1886(b)(3)(B)(xi)(II) of the Act. In 

addition, section 3401(g) of the 

Affordable Care Act also mandates that 

in FY 2013 through FY 2019, the 

hospice payment update percentage will 

be reduced by an additional 0.3 

percentage point (although for FY 2014 

to FY 2019, the potential 0.3 percentage 

point reduction is subject to suspension 

under conditions specified in section 

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

proposed hospice payment update 

percentage for FY 2014 is based on the 

inpatient hospital market basket update 

of 2.5 percent (based on IHS Global 

Insight, Inc.’s first quarter 2013 forecast 

with historical data through the fourth 

quarter of 2012). A detailed description 

of how the inpatient hospital market 

basket is derived will be available in the 

FY 2014 IPPS proposed rule, which will 

be published in the Federal Register, in 

the near future. Due to the requirements 

at 1886(b)(3)(B)(xi)(II) and 

1814(i)(1)(C)(v) of the Act, the estimated 

inpatient hospital market basket update 

for FY 2014 of 2.5 percent must be 

reduced by a productivity adjustment as 

mandated by Affordable Care Act 

(currently estimated to be 0.4 percentage 

point for FY 2014). The estimated 

inpatient hospital market basket for FY 

2014 is reduced further by a 0.3 

percentage point, as mandated by the 

Affordable Care Act. In effect, the 

proposed hospice payment update 

percentage for FY 2014 is 1.8 percent. 

We are also proposing that if more 

recent data are subsequently available 

(for example, a more recent estimate of 

the inpatient hospital market basket and 

productivity adjustment), we would use 

such data, if appropriate, to determine 

the FY 2014 market basket update and 

the multi-factor productivity MFP 

adjustment in the FY 2014 Hospice PPS 

final rule. 

Currently, the labor portion of the 

hospice payment rates is as follows: for 

Routine Home Care, 68.71 percent; for 

Continuous Home Care, 68.71 percent; 

for General Inpatient Care, 64.01 

percent; and for Respite Care, 54.13 

percent. The non-labor portion is equal 

to 100 percent minus the labor portion 

for each level of care. Therefore, the 

non-labor portion of the payment rates 

is as follows: for Routine Home Care, 

31.29 percent; for Continuous Home 

Care, 31.29 percent; for General 

Inpatient Care, 35.99 percent; and for 

Respite Care, 45.87 percent. 

4. Proposed Updated FY 2014 Hospice 

Payment Rates 

Historically, the hospice rate update 

has been published through a separate 

administrative instruction issued 

annually in the summer to provide 

adequate time to implement system 

change requirements; however, starting 

in this FY 2014 rule and for subsequent 

fiscal years, we propose to use 

rulemaking as the means to propose 

hospice payment rates. This change is 

proposed to be consistent with the rate 

update process in other Medicare 

benefits, and should provide rate 

information to hospices as quickly as, or 

earlier than, when rates are published in 

an administrative instruction. 

There are four payment categories that 

are distinguished by the location and 

intensity of the services provided. The 

base payments are adjusted for 

geographic differences in wages by 

multiplying the labor share, which 

varies by category, of each base rate by 

the applicable hospice wage index. A 

hospice is paid the routine home care 

rate for each day the beneficiary is 

enrolled in hospice, unless the hospice 

provides continuous home care, 

inpatient respite care, or general 

inpatient care. Continuous home care is 

provided during a period of patient 

crisis to maintain the patient at home, 

inpatient respite care is short-term care 

to allow the usual caregiver to rest, and 

general inpatient care is to treat 

symptoms that cannot be managed in 

another setting. 

The proposed FY 2014 payment rates 

would be the FY 2013 payment rates, 

increased by 1.8 percent, which is the 

proposed hospice payment update 

percentage for FY 2014 as discussed in 

section III.C.3. The proposed FY 2014 

hospice payment rates would be 

effective for care and services furnished 

on or after October 1, 2013, through 

September 30, 2014. 

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TABLE 5—PROPOSED FY 2014 HOSPICE PAYMENT RATES UPDATED BY THE PROPOSED HOSPICE PAYMENT UPDATE

PERCENTAGE

Code Description FY 2013 payment rates 

Multiply by the 

FY 2014 proposed hospice 

payment update of 1.8 

percent 

FY 2014 Proposed payment rate Labor Share of 

the proposed 

payment rate 

Non-Labor 

share of the 

proposed payment rate 

651 ....................... Routine Home Care ........................... $153.45 × 1.018 $156.21 $107.33 $48.88 

652 ....................... Continuous Home Care ..................... 895.56 × 1.018 911.68 626.42 285.26 

Full Rate = 24 hours of care 

$=37.99 hourly rate 

655 ....................... Inpatient Respite Care ....................... 158.72 × 1.018 161.58 87.46 74.12 

656 ....................... General Inpatient Care ...................... 682.59 × 1.018 694.88 444.79 250.09 

The Congress required in sections 

1814(i)(5)(A) through (C) of the Act that 

hospices begin submitting quality data, 

based on measures to be specified by the 

Secretary. Beginning in FY 2014, 

hospices which fail to report quality 

data will have their market basket 

update reduced by 2 percentage points. 

In the August 4, 2011 FY 2012 Hospice 

Wage Index final rule (76 FR 47320 

through 47324), we implemented a 

hospice Quality Reporting Program 

(QRP) as required by section 3004 of the 

Affordable Care Act. Hospices were 

required to begin collecting quality data 

in October 2012, and submit that quality 

data in 2013. Hospices failing to report 

quality data in 2013 will have their 

market basket update reduced by 2 

percentage points in FY 2014. 

TABLE 6—PROPOSED FY 2014 HOSPICE PAYMENT RATES UPDATED BY THE PROPOSED HOSPICE PAYMENT UPDATE

PERCENTAGE FOR HOSPICES THAT DO NOT SUBMIT THE REQUIRED QUALITY DATA

Code Description FY 2013 

payment rates 

Multiply by the 

FY 2014 proposed hospice 

payment update 

percentage of 

1.8 percent percent minus 2 

percentage 

points (¥0.2) 

FY 2014 Proposed payment 

rate 

651 ...................................... Routine Home care ......................................................... $153.45 × 0.998 $153.14 

652 ...................................... Continuous Home Care Full Rate= 24 hours of care 

$=37.99 hourly rate.

895.56 × 0.998 893.77 

655 ...................................... Inpatient Respite Care .................................................... 158.72 × 0.998 158.40 

656 ...................................... General Inpatient Care ................................................... 682.59 × 0.998 681.22 

A Change Request with the finalized 

hospice payment rates, a finalized 

hospice wage index, the Pricier for FY 

2014, and the hospice cap amount for 

the cap year ending October 31, 2013 

would continue to be issued in the 

summer. 

D. Update on Hospice Payment Reform 

and Data Collection 

In 2010, the Congress amended 

section 1814(i)(6) of the Act with 

section 3132(a) of the Affordable Care 

Act. The amendment authorized the 

Secretary to collect additional data and 

information determined appropriate to 

revise payments for hospice care and for 

other purposes. The types of data and 

information described in the Act would 

capture resource utilization and other 

measures of cost, which can be collected 

on claims, cost reports, and possibly 

other mechanisms as we determine to be 

appropriate. The data collected may be 

used to revise the methodology for 

determining the payment rates for 

routine home care and other services 

included in hospice care, no earlier than 

October 1, 2013, as described in section 

1814(i)(6)(D) of the Act. In addition, we 

are required to consult with hospice 

programs and the Medicare Payment 

Advisory Commission (MedPAC) 

regarding additional data collection and 

payment revision options. 

This section of the proposed rule 

contains three subsections which 

update the public or discuss different 

aspects of hospice payment reform; 

there are no proposals in any of these 

three subsections. 

1. Update on Reform Options 

Our hospice contractor, Abt 

Associates, continues to conduct 

research and analyses, to identify 

potential data collection needs, and to 

research and develop hospice payment 

model options. To date, we completed 

an environmental scan; a draft analytic 

plan; and convened technical advisory 

panel meetings under the initial 

contract with Abt in 2010. We are 

continuing with these efforts under a 

contract awarded in September 2011. In 

June 2012, we convened stakeholder 

meetings where research findings were 

presented on potential payment system 

vulnerabilities; utilization of the 

Medicare hospice benefit, including 

general inpatient care use during the 

period the beneficiary is enrolled in 

hospice care; analysis of hospice cost 

reports; and the effects of the face-toface encounter requirement. These and 

other findings are described in the Abt 

Hospice Study Technical Report, which 

is available on the CMS Hospice Center 

Web page, at http://www.cms.gov/ 

Center/Provider-Type/HospiceCenter.html. 

Additionally, we continue to conduct 

analyses of various payment reform 

model options under consideration. 

These models include a U-shaped 

model of resource use which MedPAC 

recommended that we adopt, and which 

is described in Chapter 6 of its March, 

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4The original RHC rate in 1983 was $46.25. The 

FY 2011 rate for RHC was $146.63. $146.63/46.25 

= 3.1704. 

2009 report entitled ‘‘Report to the 

Congress: Medicare Payment Policy’’ 

(available online at: http:// 

www.medpac.gov/chapters/ 

Mar09_Ch06.pdf). MedPAC determined 

that the level of Medicare payment to a 

hospice under the current per diem 

payment system is constant throughout 

a hospice patient’s stay. The report 

noted that the constancy of the per diem 

payment over the course of a hospice 

stay is misaligned with a hospice’s costs 

during the stay. A hospice’s costs 

typically follow a U-shaped curve, with 

higher costs at the beginning and end of 

a stay, and lower costs in the middle of 

the stay. This cost curve reflects 

hospices’ higher service intensity at the 

time of the patient’s admission and the 

time surrounding the patient’s death 

(MedPAC, page 358). Payment under a 

U-shaped model would be higher at the 

beginning and end of a hospice stay, 

and lower in the middle portion of the 

stay. 

The analysis found that very short 

hospice stays have a flatter curve than 

the U-shaped curve seen for longer 

stays, and that average hospice costs are 

much higher. These short stays are less 

U-shaped because there is not a lowercost middle period between the time of 

admission and the time of death. As 

such, we are also considering a tiered 

approach, with payment tiers based on 

the length of stay. For example, 

payment for stays of 5 days or less 

(which occurred for about 25 percent of 

hospice beneficiaries in 2011) could be 

made under a per diem system that 

accounts for the higher hospice costs, 

with no variation in the rate based on 

length of stay as would occur under a 

U-shaped model. Payment for longer 

stays, where costs follow more of a Ushape, could be made under a tier based 

on the U-shaped payment model, where 

the per diem amount fluctuates 

depending upon whether the days billed 

are at the beginning, middle, or end of 

the stay. 

Another option is to analyze whether 

a short-stay add-on payment, similar to 

the home health Low Utilization 

Payment Amount (LUPA) add-on, 

would improve payment accuracy if we 

retain the current per diem system. The 

LUPA add-on is made for home health 

patients who require four or fewer visits 

during the 60-day episode. These home 

health episodes are paid based on the 

visits actually furnished during the 

episode. For LUPA episodes that occur 

as the only episode or the first episode 

in a sequence of adjacent home health 

episodes for a given beneficiary, an 

increased payment is made to account 

for the front-loading of costs (see http:// 

www.cms.gov/Outreach-and-Education/ 

Medicare-Learning-Network-MLN/ 

MLNProducts/downloads/ 

HomeHlthProspaymt.pdf for more 

information). 

Finally, as we collect more accurate 

diagnosis data, including data on related 

conditions, we would also evaluate 

whether case-mix should play a role in 

determining payments. 

a. Rebasing the Routine Home Care 

(RHC) Rate 

We are updating our review of the 

hospice RHC rate, but are not including 

any proposals at this time. Rebasing the 

RHC rate involves using the existing 

components that make up the rate, and 

recalculating based on more current 

data. RHC is the basic level of care 

under the Hospice benefit, where a 

beneficiary receives hospice care, but 

remains at home. With this level of care, 

hospice providers are reimbursed per 

day regardless of the volume or 

intensity of services provided to a 

beneficiary on any given day. It is 

anticipated that there will be days when 

a beneficiary does not require any 

services, as well as days when a 

beneficiary requires several visits from 

the hospice provider. 

When the hospice benefit was created 

in 1983, the RHC base payment rate was 

set using nine different components of 

cost from a relatively small set of 

hospices (n=26) that were participating 

in a CMS hospice demonstration, as 

described in the December 16, 1983 

Hospice final rule (48 FR 56008). The 

nine cost components were: nursing 

care ($16.25); home health aide ($12.74); 

social services/therapy ($3.23); home 

respite ($1.46); interdisciplinary group 

($2.78); drugs ($1.18); supplies ($4.49); 

equipment ($1.13); and outpatient 

hospital therapies ($2.99). The sum of 

all the components’ costs equaled the 

base payment rate for RHC as stated in 

that 1983 hospice final rule. The 

original RHC rate was set at $46.25. In 

addition to RHC, we also established 

three other levels of care for hospice 

care from data obtained from the 

Medicare hospice demonstration 

project: Continuous Home Care (CHC), 

Inpatient Respite Care (IRC) and General 

Inpatient Care (GIP). 

It is CMS’ intent to ensure that 

reimbursement rates under the Hospice 

benefit align as closely as possible with 

the average costs hospices incur when 

efficiently providing covered services to 

beneficiaries. As we continue to gather 

and analyze more data for payment 

reform, we have found evidence of a 

potential misalignment between the 

current RHC payment rate and the cost 

of providing RHC. One potential option 

to address this misalignment could be to 

rebase the hospice RHC rate, though we 

are not proposing to do so at this time, 

so that the cost categories established in 

the rate reflect the changes in the 

utilization of hospice services provided 

for palliation and management of 

terminally ill patients. However, we are 

still evaluating data and are currently 

not proposing any changes to address 

the misalignment. 

At this time, we do not have the data 

to support rebasing six of the nine cost 

components described in the 1983 final 

rule. Information on the utilization of 

drugs, supplies, and equipment is not 

available from hospice claims data, and 

the corresponding information that is 

available from cost reports, such as 

outpatient hospital therapies, is not 

sufficiently detailed to allow for 

rebasing. One approach to consider in 

more closely aligning RHC payments 

with costs is to rebase the three clinical 

service components (nursing, home 

health aide, social services/therapy) that 

currently comprise 69.7 percent of the 

RHC rate by calculating the average cost 

per day, weighted by the number of 

RHC days, for each of the three 

components using FY 2011 cost report 

data matched to FY 2011 claims data. 

As part of rebasing the RHC rate we 

would then inflate the 1983 cost per day 

for each of the six remaining 

components by a factor of 3.1704, which 

corresponds to the market basket 

increases between 1983 and 2011.4 We 

note that our cost report analysis thus 

far found that drug costs over the years 

have declined, and the other non-labor 

components are plateauing. A detailed 

methodology for rebasing the clinical 

service components of the RHC rate can 

be found in the Abt Hospice Study 

Technical Report which is published 

with this proposed rule at http:// 

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

Hospice-Center.html. 

Using the methodology described 

above, the rebased amount for FY 2011 

would be $130.54 as described in Table 

7 below. 

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TABLE 7—COMPARISON OF RHC RATE COST COMPONENTS FROM 1983 TO FY 2011 

RHC components 1983 Final rule 

cost per day Inflation factor FY 2011 Cost per day 

Nursing Care ................................................................................................................................ $16.25 N/A $56.54 

Home Health Aide ....................................................................................................................... 12.74 N/A 19.24 

Social Services/Therapy .............................................................................................................. 3.23 N/A 10.29 

Home respite ............................................................................................................................... 1.46 × 3.1704 4.63 

Interdisciplinary group .................................................................................................................. 2.78 × 3.1704 8.81 

Drugs ........................................................................................................................................... 1.18 × 3.1704 3.74 

Supplies ....................................................................................................................................... 4.49 × 3.1704 14.23 

Equipment .................................................................................................................................... 1.13 × 3.1704 3.58 

Outpatient Hospital Therapies ..................................................................................................... 2.99 × 3.1704 9.48 

Total ...................................................................................................................................... 46.25 ........................ 130.54 

Source: 1983 Final Rule and FY 2011 hospice cost report and claims data. 

Note(s): The costs per day for the clinical services components (nursing care, home health aide and social services/therapy) were calculated 

based on the cost per minute for each discipline using cost report data multiplied by the RHC minutes for each discipline per RHC day from 

claims data to compute the cost of a discipline per RHC day. The average cost per day across all hospices in our sample was weighted by the 

number of RHC days. Of the 2,717 FY 2011 hospice cost reports for freestanding and facility-based hospices that were matched to FY 2011 

claims data, we excluded: (1) cost reports with period less than 10 months or greater than 14 months; (2) cost reports with missing information or 

negative reported values for total costs or payments; (3) providers in the highest and lowest percentile (1% and 99%) in costs per days across all 

levels of care; (4) the top and bottom 5% of provider margin; and (5) providers were excluded if the log payment to cost ratio was greater than 

the 90th or less than the 10th percentile of this value across all providers plus or minus 1.5 times the range between the 10th and 90th percentiles of this log ratio. The number of hospices remaining in our sample was 2,140 representing 73.1 percent of RHC days in 2011.

For example, if we were to apply the 

rebased amounts for the clinical services 

components of RHC to FY 2014, we 

would inflate the FY 2011 rebased 

amount to FY 2013 levels. We first 

inflated the FY 2011 rebased rate by full 

hospital market basket of 3.0 percent for 

FY 2012. The FY 2012 rebased rate 

would be $134.46 ($130.54 × 

1.03=$134.46). We then inflated the FY 

2012 rebased rate by full hospital 

market basket of 2.6 percent for FY 

2013. The FY 2013 rebased rate would 

be $137.96 ($134.46 × 1.026= $137.96). 

Finally, we inflated the rebased FY 2013 

rate ($137.96) by applying the proposed 

hospice payment update percentage of 

1.8 percent to calculate a FY 2014 

rebased RHC rate. Therefore, the FY 

2014 rebased rate would be $140.44, a 

10.1 percent reduction in the FY 2014 

proposed RHC payment rate of $156.21, 

or an estimated reduction in payments 

to hospices of $1.6 billion in FY 2014. 

Rebasing the clinical service 

components of the RHC payment is one 

of several approaches to hospice 

payment reform that CMS could 

consider for revising the RHC payment 

rate. As outlined in the Affordable Care 

Act, hospice payment reform must be 

done in a budget neutral manner. As 

rebasing would be considered part of 

hospice payment reform, any savings 

achieved through the reduction of the 

RHC rate would need to be redistributed 

in a budget neutral manner. 

b. Site of Service Adjustment for 

Hospice Patients in Nursing Facilities 

As part of future hospice payment 

reform, we are considering an OIG 

recommendation to reduce payments to 

Medicare hospices for beneficiaries in 

nursing facilities who are receiving 

hospice care. The OIG’s July 2011 report 

entitled ‘‘Medicare Hospices that Focus 

on Nursing Facility Residents,’’ 

(available at https://oig.hhs.gov/oei/ 

reports/oei-02–10–00070.pdf) studied 

hospice patients in nursing facilities. 

This report noted the growth of hospice 

services provided to beneficiaries in 

nursing facilities, and discussed 

hospices that have a high percentage of 

their beneficiaries in nursing facilities. 

The OIG’s report noted that the current 

payment structure provides incentives 

for hospices to seek out beneficiaries in 

nursing facilities, as these beneficiaries 

often receive longer but less complex 

care. The OIG noted that unlike private 

homes, nursing facilities are staffed with 

professional caregivers and are often 

paid by third-party payers, such as 

Medicaid. These facilities are required 

to provide personal care services, which 

are similar to hospice aide services that 

are paid for under the hospice benefit. 

To lessen this incentive, the OIG 

recommended that we reduce Medicare 

payments for hospice care provided in 

nursing facilities. 

In addition, the March 2012 Medicare 

Payment Advisory Commission 

(MedPAC) report entitled ‘‘Report to 

Congress: Medicare Payment Policy’’ 

noted that hospices with a higher share 

of their patients in nursing facilities 

have margins as high as 13.8 percent 

(pages 302 and 303). MedPAC attributed 

these higher margins to possible 

efficiencies in the nursing home setting 

(multiple patients in a single setting, 

reduced driving time and mileage), and 

to reduced workload due to an overlap 

in aide services and supplies provided 

by the nursing facility. 

In response to both MedPAC’s and 

OIG’s concerns about possible 

duplication of aide services provided 

both by the hospice and the nursing 

facility, we conducted an analysis of the 

number and length of aide visits per day 

using 2011 hospice claims data. Table 8 

below describes the number and length 

of aide visits for RHC beneficiaries at 

home (including patients in an assisted 

living facility) compared to RHC 

beneficiaries in a NF or SNF. 

TABLE 8—HOSPICE ROUTINE HOME CARE AIDE SERVICES 2011 

Sites of service Difference 

Home Q5001/2 NF/SNF Q5003/4 NF/SNF–Home % 

Number of beneficiaries ................................................... 769,640 302,004 (467,636) ................................

Total days ........................................................................ 58,637,171 22,946,972 (35,690,199) ................................

Total visits ........................................................................ 16,625,635 8,501,366 (8,124,269) ................................

Total minutes ................................................................... 1,223,254,095 584,825,520 (638,428,575) ................................

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TABLE 8—HOSPICE ROUTINE HOME CARE AIDE SERVICES 2011—Continued 

Sites of service Difference 

Home Q5001/2 NF/SNF Q5003/4 NF/SNF–Home % 

Visits per beneficiary ....................................................... 21.6 28.1 6.5 30.3 

Minutes per visit ............................................................... 73.6 68.8 (4.8) 6.5 

Total visits/day ................................................................. 0.28 0.37 0.09 30.7 

Total minutes/day ............................................................ 20.86 25.49 4.62 22.2 

Source: Abt Associates Hospice Claims Data File, 2011. 

Table 8 demonstrates that hospice 

patients in a NF/SNF receive more visits 

than patients at home, though the length 

of those visits is shorter. Average 

minutes per day shows that RHC 

patients in a NF/SNF had hospice aide 

services of longer duration (25.49 

minutes) than RHC patients at home 

(20.86 minutes). The Medicare 

Conditions of Participation (CoPs) 

require that hospices provide services at 

the same level and to the same extent as 

those services would be provided if the 

NF/SNF resident were in his or her 

home. Hospices provide aide services to 

beneficiaries at home depending on the 

beneficiaries’ needs. It seems reasonable 

to expect that a beneficiary who has a 

paid caregiver (that is, a NF/SNF aide) 

does not need as many services from the 

hospice aide, because those services are 

being provided by the paid caregiver. As 

described in the June 5, 2008 Hospice 

Conditions of Participation final rule (73 

FR 32095), ‘‘[h]ospice care is meant to 

supplement the care provided by the 

patient’s caregiver.’’ Given the presence 

of the paid caregiver in the NF/SNF, we 

would expect that on average, there 

would be fewer hospice aide services 

provided to hospice patients in a NF/ 

SNF than to hospice patients at home. 

It is not clear why hospice patients in 

nursing facilities are receiving more 

minutes per day of aide services than 

hospice patients at home. We used 

regression analysis to control for age, 

gender, diagnosis, length of stay, and 

provider characteristics (ownership 

status, base, size, age of hospice, 

geographic location) when analyzing the 

visit data. However, we still found that 

significantly more aide services were 

provided to NF/SNF patients than to 

patients at home, even after controlling 

for patient and provider characteristics. 

The June 5, 2008 Hospice Conditions 

of Participation final rule (73 FR 32088) 

preamble details the requirements 

related to aide services provided to 

hospice patients residing in a nursing 

facility. These requirements can also be 

found at § 418.112(c)(4) through (5). The 

CoPs require a written agreement 

between the hospice and NF/SNF, 

which specifies that the NF/SNF should 

continue to provide the aide services 

that are provided prior to the hospice 

election, to meet the patient’s needs at 

that same level of care as if the patient 

were at home. These services include 

providing 24 hour room and board care, 

meeting the patient’s personal care 

needs, and to the degree permitted by 

State law, administering medications or 

therapies. There should be no reduction 

of NF/SNF aide services to a patient in 

anticipation of a future hospice election, 

or once the patient (or his/her 

representative) elects the hospice 

benefit. As such, hospice patients in 

nursing facilities should have much, if 

not most, of their need for aide services 

provided by the facility’s aide. As stated 

previously, we would expect that, on 

average, the hospice aide would be 

providing fewer services to nursing 

facility patients than to patients at 

home. 

Table 8 suggests that the hospice aide 

may be replacing the facility aide, rather 

than supplementing or augmenting the 

care of the facility aide. Or, as the OIG 

and MedPAC identified, there could be 

an overlap in aide services when a 

hospice beneficiary is in a NF/SNF. It 

would not be appropriate for the 

Medicare hospice benefit to subsidize 

the nursing home benefit by providing 

aide services that the facility aide 

should provide. Section 1862(a)(1)(C) of 

the Social Security Act (the Act) forbids 

payment for any items or services which 

are not reasonable and necessary for the 

palliation and management of the 

terminal illness. Services which are not 

needed, or which are duplicative of 

those to be provided by the facility aide, 

would not be reasonable and necessary. 

At this time, we are not proposing to 

make a site of service adjustment to 

reduce payments for RHC patients in a 

nursing facility. Any reform option 

considering reduced payments for RHC 

care provided to hospice patients in a 

NF or SNF should not result in a 

reduction in the services that hospice 

patients in NFs or SNFs receive, but 

would instead be a shifting of who 

provides those aide services; some of 

the services currently provided by the 

hospice aide would be provided by the 

facility aide as expected. As such, we do 

not expect that the quality of care to 

hospice patients in a NF/SNF would be 

diminished. If such a policy were to be 

proposed and implemented, it would be 

made in a budget neutral manner as 

required by the Affordable Care Act. In 

addition, we would monitor for any 

unintended consequences. 

2. Reform Research Findings 

We have conducted a number of 

analyses to better understand hospice 

utilization and trends, to identify 

vulnerabilities in the payment system, 

and to develop and test models that 

would more accurately match hospice 

resource use with Medicare payments. 

We posted the Abt Hospice Study 

Technical Report on hospice payment 

reform on our hospice center Web page, 

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

Provider-Type/Hospice-Center.html. 

The report summarizes research 

findings related to resource use and 

payment system vulnerabilities. 

The report also includes a discussion 

of hospice cost report analyses. Overall, 

the total cost per election period has not 

significantly increased from 2007 to 

2010, in real dollars. Inpatient costs 

constitute about 14 percent of hospice 

costs across freestanding hospice 

providers that reported inpatient costs. 

About one-third of providers reported 

no inpatient costs. It appeared that some 

providers with no inpatient costs were 

substituting continuous home care 

(CHC) for GIP, based on analysis of the 

proportion of CHC days. Visiting 

services (for example, direct labor costs 

for nurses, aides, social workers, 

counselors, and therapists) account for 

about two-thirds of hospice costs, and 

have trended upward from 2004 to 

2010. Nursing care, hospice aides, and 

medical social services comprise 90 

percent of visiting service costs. 

Other hospice service costs include 

non-labor costs such as drugs, durable 

medical equipment (DME), supplies, 

imaging, patient transportation, and 

outpatient services. These types of 

services represent about 20 to 25 

percent of total hospice costs. Drugs, 

DME, and supplies account for 90 

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percent of these other hospice services 

costs. Drug costs have trended 

downward over time, while medical 

supply costs have remained steady. 

Finally, in examining non-reimbursable 

costs, we found that 26 percent of 

providers in 2010 showed no 

bereavement costs on their cost report, 

even though bereavement services are 

required by statute; it is unclear if 

bereavement services were not provided 

or if bereavement costs were not 

correctly reported. 

The report also describes an analysis 

of GIP utilization. In 2010 through 2011, 

a quarter of all hospice beneficiaries had 

at least one GIP stay, with a quarter of 

those stays associated with cancer 

diagnoses. While most GIP stays were 2 

days long, the average GIP length of stay 

was 5.66 days, reflecting a small number 

of extremely long GIP stays. Sixty-five 

percent of GIP stays were provided in a 

hospice inpatient unit. Almost 80 

percent of hospices provided at least 

one GIP day in 2010 through 2011. 

Hospices that provided GIP tended to be 

older and larger. 

The Abt Hospice Study Technical 

Report also provides descriptive 

statistics for all beneficiaries and for 3 

major sites of routine home care 

services. It includes visit data findings, 

including visits per day, visits per 

beneficiary, minutes per day, and 

minutes per beneficiary for key 

disciplines reported on hospice claims. 

Additionally, there are several figures 

which depict the U-shaped curve for 

key personnel by length of stay. The 

curves show that resource use tends to 

follow a U-shaped curve, but one which 

is higher at the beginning rather than at 

the end of the hospice stay. There was 

little evidence that strong differences in 

the U-shape exist across most subgroups 

(for example, freestanding vs. providerbased, ownership status, patient 

diagnosis). 

For more detailed information on 

these findings, and a description of the 

methods used, see the Abt Hospice 

Study Technical Report, which is 

posted on the hospice center Web page 

(http://www.cms.gov/Center/ProviderType/Hospice-Center.html). We have 

also posted a review of pertinent 

hospice literature as of December 2012 

on the hospice center Web page. This 

should be considered an evolving 

document, as Abt Associates updates 

the review periodically. We encourage 

interested stakeholders to review this 

update on our progress. We will 

continue to collaborate with other 

federal experts regarding hospice 

payment reform research efforts and to 

update stakeholders on our progress on 

hospice payment reform. 

3. Additional Data Collection 

Over the past several years, MedPAC, 

the Government Accountability Office 

(GAO), and the HHS Office of Inspector 

General (OIG) have also recommended 

that we collect more comprehensive 

data in order to better understand the 

utilization of the Medicare hospice 

benefit. In December 2012, we posted a 

document to our Hospice Center Web 

page (http://www.cms.gov/Center/ 

Provider-Type/Hospice-Center.html) 

describing additional data collection 

which we are considering, and noting 

that cost report revisions are 

forthcoming. We received 65 comments 

about the claims data collection items 

under consideration, which are briefly 

summarized below. 

• Line item visit data, including 

length of visit in 15-minute increments, 

for hospice chaplains and counselors 

providing care to hospice beneficiaries. 

Commenters were supportive, but 

suggested we include phone calls by 

chaplains and counselors, and allow 

reporting of chaplain time spent 

officiating or attending beneficiary 

funerals, as this is part of their service 

to families. A few suggested that we 

have a separate category for 

Bereavement Counseling to 

acknowledge this requirement even if it 

is not subject to reimbursement. Several 

suggested we define ‘‘other counselors.’’ 

• Line item visit data, including 

length of visits in 15-minute increments, 

for hospice staff providing care to 

hospice patients receiving GIP in a 

hospital or nursing facility, but not for 

hospice patients receiving GIP in a 

hospice facility. Our suggestion to 

collect GIP visit data did not include 

visits by non-hospice staff, and was 

focused on patients in a hospital or 

nursing facility only. Therefore, GIP 

visits to hospice patients in hospice 

inpatient facilities continue to be 

reported as weekly totals, without 

including the length of visits. 

Commenters were generally supportive, 

provided the visits were for hospice 

staff only. Several comments noted that 

this would be no more difficult than 

what already occurs when recording 

visits to patients’ homes. 

• The National Provider Identifier 

(NPI) of facilities where hospice patients 

are receiving care. Most commenters 

noted that it would not be difficult to 

get this information and enter it into 

their systems. A few commenters noted 

that sometimes patients are in more 

than one facility type during a claim 

period, but that there is only space for 

one NPI on the claim. 

• Post-mortem visits on the calendar 

day of death. Commenters suggested we 

collect visit data for various timeframes 

after the time of death, rather than the 

calendar day of death, since many 

deaths occur late at night. They 

suggested we clarify what we mean by 

time of death (time death actually 

occurs, or time the death is 

pronounced). Several commenters 

suggested we gather post-mortem visit 

data regardless of level of care or site of 

service. 

• Any durable medical equipment 

(DME) provided by the hospice. Some 

commenters indicated that this would 

be difficult to collect and record on 

claims. Many indicated that DME 

suppliers bill them monthly, and 

waiting for the DME invoice would 

cause a delay in submission of their 

claims. They also noted that it would 

take a great deal of lead time to set this 

up with suppliers and software vendors 

to track DME at the patient level. A few 

suggested that we use aggregate data on 

DME costs from the cost reports instead. 

• Non-routine supplies provided by 

the hospice. Most commenters indicated 

that this would be difficult to collect 

and record on claims. A number of 

commenters wrote that their software 

does not accommodate such reporting, 

and that it would create an additional 

burden on clinical staff to track these 

items. Several mentioned that it would 

take some lead time to modify existing 

systems to enable hospices to track and 

report this information accurately. A 

few suggested we use aggregate data on 

non-routine supplies from the cost 

reports instead. 

• Drugs (injectable, non-injectable, 

and over-the-counter) provided by the 

hospice. Most commenters indicated 

that this would be difficult to collect 

and record on claims. Several asked if 

injectable drugs include infusion 

pumps, which is considered DME. 

Several commenters noted that the 

hospice staff person is not always the 

person administering drugs, making 

tracking more complicated; they 

suggested focusing on the fills, rather 

than drugs administered. Some wrote 

that hospices get their drugs from 

multiple pharmacies, making reporting 

more difficult due to inconsistencies in 

pharmacy billing. Others wrote that 

their data systems are not able to track 

drugs by patient, and suggested that we 

use aggregate data from the cost reports 

instead. Some noted that they purchase 

some drugs in larger quantities, making 

reporting at the patient level more 

complicated. A few noted that this 

could be done, but said that hospices 

would need lead time to prepare 

systems to track and report at the 

patient level. One suggested that we 

specify what cost structure drug charges 

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should be based upon, such as average 

wholesale price plus a percentage. 

In summary, commenters were largely 

supportive of our suggestions to collect 

additional visit and NPI data on claims. 

Many suggested collecting data on DME, 

supplies, and drugs from the cost 

reports, rather than at the patient level. 

Several commenters reminded us that 

their primary focus is patient care, and 

were concerned about the cost of such 

data collection. We appreciate the 

comments submitted, and will consider 

this input as we move forward towards 

implementing any new data collection 

for hospices. We expect to issue a 

change request detailing the upcoming 

data collection this spring or summer. 

Section 3132(a)(1)(C) of the 

Affordable Care Act also authorizes us 

to collect more data on hospice cost 

reports. The revisions to the hospice 

cost report and its associated 

instructions will be described in detail 

in a revision to the information 

collection request currently approved 

under OMB control number 0938–0758. 

As required by the Paperwork 

Reduction Act, we will publish the both 

60-day and 30-day notices with 

comment periods in the Federal 

Register in the near future. Comments 

related to cost report revisions should 

be submitted as instructed in 60-day 

and 30-day notices that publish in the 

Federal Register. 

E. Technical and Clarifying Regulations 

Text Change 

We are proposing to incorporate the 

following technical change to correct an 

erroneous cross reference in our 

regulations text. 

Administrative Appeals (§ 418.311) 

A hospice that does not believe its 

payments have been properly 

determined may request a review from 

the intermediary or from the Provider 

Reimbursement Review Board (PRRB), 

depending on the amount in 

controversy. Section 418.311 details the 

procedures for appealing a payment 

decision and also refers to 42 CFR part 

405, subpart R. The rationale for this 

appeals process was explained in the 

August 22, 1983 Hospice proposed rule 

(48 FR 38146) and finalized in the 

December 16, 1983 Hospice final rule 

(48 FR 56008). Hospices are permitted 

to appeal computation of the payment 

limit or the amount due to the hospice 

to the PRRB if the amount in 

controversy is $10,000 or more. 

We propose to make a technical 

correction in § 418.311 to correct an 

erroneous reference to § 405.1874. The 

published reference to § 405.1874 does 

not exist and was a typographic error. 

We are correcting this error by changing 

the referenced § 405.1874 to 

§ 405.1875—Administrator review. 

Section 405.1875 allows for the 

Administrator, at his or her discretion, 

to immediately review any decision of 

the Board as described in the August 22, 

1983 proposed and December 16, 1983 

final rules (48 FR 38159, and 48 FR 

56019, respectively). 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. We are soliciting 

public comment on each of these issues 

for this section of this document that 

contains information collection 

requirements (ICRs). 

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

requires that each hospice submit data 

to the Secretary on quality measures 

specified by the Secretary. Such data 

must be submitted in a form and 

manner, and at a time specified by the 

Secretary. Under section 

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

Secretary must publish selected 

measures that will be applicable with 

respect to FY 2014 not later than 

October 1, 2012. In implementing the 

Hospice quality reporting program, we 

seek to collect measure information 

with as little burden to the providers as 

possible and which reflects the full 

spectrum of quality performance. 

We propose to implement a Hospice 

Experience of Care Survey to reflect the 

patients’ families’ and friends’ 

perspectives of care in hospices. The 60- 

day notice for the field test of the survey 

was published on April 4, 2013 (78 FR 

20323) under CMS–10475 (OCN 0938- 

New). While we set out the 

requirements and burden estimates for 

the field study, it is too early to set out 

the requirements and burden estimates 

for the national implementation of the 

survey. We anticipate having the final 

survey instrument in 2014 and setting 

out the collection of information 

requirements and burden estimates in 

the proposed rule for CY 2015. We 

propose implementation of the survey 

in 2015. 

In the August 4, 2011 FY 2012 

Hospice Wage Index final rule (76 FR 

47302, 47320), to meet the quality 

reporting requirements for hospices for 

the FY 2014 payment determination as 

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

we finalized the requirement that 

hospices report two measures: (1) An 

NQF-endorsed measure that is related to 

pain management, NQF #0209; and (2) 

a structural measure that is not 

endorsed by NQF: Participation in a 

Quality Assessment and Performance 

Improvement (QAPI) program that 

includes at least three quality indicators 

related to patient care. In this rule, we 

propose that the structural measure 

related to QAPI indicators and the NQF 

#0209 pain measure not be required for 

the hospice quality reporting program 

beyond data submission for the FY 2015 

payment determination. 

We are not proposing to adopt any 

new measures in this proposed rule. 

However, we are proposing to 

implement a hospice patient-level data 

set to be used by all hospices to collect 

and submit standardized data about 

each patient admitted to hospice. This 

Hospice Item Set will be used to support 

the standardized collection and 

calculation of quality measures, 

collection of the requisite data elements. 

Hospices would be required to complete 

and submit an admission HIS and a 

discharge HIS on all patients admitted 

to hospice starting July 1, 2014 for FY 

2016 APU determination. The 

admission and discharge HIS will 

collect the standardized data elements 

needed to calculate 7 NQF endorsed 

measures for hospice. 

Using 2011 Medicare claims data we 

have estimated that there will be 

approximately 1,089,719 admissions 

across all hospices per year and 

therefore, we would expect that there 

should be 1,089,719 Hospice Item Sets 

(consisting of one admission and one 

discharge assessment per patient), 

submitted across all hospices yearly. 

There were 3,742 certified hospices in 

the U.S. as of October 1, 2012; we 

estimate that each individual hospice 

will submit on average 291 Hospice 

Item Sets annually or 24 Hospice Items 

Sets per month. 

The Hospice Item Set consists of both 

an admission assessment and a 

discharge assessment. As noted above, 

we estimate that there will be 1,089,719 

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5 14 minutes of time by a Registered Nurse at 

$33.23/60 minutes per hour = $0.56; $0.56 per one 

minute × 5 minutes = $7.75. 

6 5 minutes of time by a Medical Data Entry Clerk 

at $15.59/60 minutes per hour = $0.265; $0.265 per 

one minute × 5 minutes = $1.30. 

hospice admissions across all hospices 

per year. Therefore, we expect there to 

be 2,179,438 Hospice Item Set 

submissions, (both admission and 

discharge assessment) submitted across 

all hospices annually or 181,620 across 

all hospices monthly. We further 

estimate that there will be 582 Hospice 

Item Set submissions by each hospice 

annually or 49 submissions monthly. 

For the Admission Hospice Item Set, 

we estimate that it will take 14 minutes 

of time by a clinician such as a 

Registered Nurse at an hourly wage of 

$33.23 to abstract data for Admission 

Hospice Item Set. This would cost the 

facility approximately $7.75 for each 

admission assessment.5 We further 

estimate that it will take 5 minutes of 

time by clerical or administrative staff 

person such as a medical data entry 

clerk or medical secretary at an hourly 

wage of $15.59 to upload the Hospice 

Item Set data into the CMS system. This 

would cost the facility approximately 

$1.30 per assessment.6 For the 

Discharge Hospice Item Set, we estimate 

that it will take 5 minutes of time by a 

clinician such as a nurse at an hourly 

wage of $33.23 to abstract data for 

Discharge Hospice Item Set. This would 

cost the facility approximately $2.77. 

We further estimate that it will take 5 

minutes of time by clerical or 

administrative staff such as a medical 

data entry clerk or medical secretary at 

an hourly wage of $15.59 to upload data 

into the CMS system. This would cost 

the facility approximately $1.30. 

We estimate that the total nursing 

time required for completion of both the 

admission and discharge assessments is 

19 minutes at a rate of $33.23 per hour. 

The annualized cost across all Hospices 

for the nursing/clinical time required to 

complete both the admission and 

discharge Hospice Item sets is estimated 

to be $11,458,528 and the cost to each 

individual Hospice is estimated to be 

$3,062.14. The estimated time burden to 

hospices for a medical data entry clerk 

to complete the admission and 

discharge Hospice Item Set assessments 

is 10 minutes at a rate of $15.59 per 

hour. The cost for completion of the 

both the admission and discharge 

Hospice Item sets by a medical data 

entry clerk is estimated to be $2,829,401 

across all Hospices and $756.12 to each 

Hospice. 

The total combined time burden for 

completion of the Admission and 

Discharge Hospice Data Item Sets is 

estimated to be 29 minutes. The total 

annualized cost across all hospices is 

estimated to be $14,287,929. For each 

individual hospice, this annualized cost 

is estimated to be $3,818.26. The 

estimated cost for each individual 

Hospice Item Set submission is $13.11. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, [CMS– 

1449–P] 

Fax: (202) 395 6974; or 

Email: 

OIRA_submission@omb.eop.gov 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule follows 

§ 418.306(c) which requires annual 

issuance, in the Federal Register, of the 

hospice wage index based on the most 

current available CMS hospital wage 

data, including any changes to the 

definitions of Metropolitan Statistical 

Areas (MSAs). This rule proposes 

updates to the hospice payment rates for 

FY 2014. In addition, this proposed rule 

provides background on hospice care, 

clarifies diagnosis coding on hospice 

claims, updates the public on the status 

of hospice payment reform, proposes a 

technical and clarifying regulatory text 

change, and proposes changes to the 

hospice quality reporting program. 

B. Overall Impact 

The overall impact of this proposed 

rule is an estimated net increase in 

Federal payments to hospices of $180 

million, or 1.1 percent, for FY 2014. 

This estimated impact on hospices is a 

result of the proposed hospice payment 

update percentage for FY 2014 of 1.8 

percent and changes to the FY 2014 

hospice wage index, including a 

reduction to the BNAF by an additional 

15 percent, for a total BNAF reduction 

of 70 percent (10 percent in FY 2010, 

and 15 percent per year for FY 2011 

through FY 2014). A 70 percent reduced 

BNAF is computed to be 0.018449 (or 

1.8449 percent). The BNAF reduction is 

part of a 7-year BNAF phase-out that 

was finalized in in the August 6, 2009 

FY 2010 Hospice Wage Index final rule 

(74 FR 39384), and is not a policy 

change. 

1. Detailed Economic Analysis 

Column 4 of Table 9 shows the 

combined effects of the updated wage 

data (the 2012 pre-floor, pre-reclassified 

hospital wage index) and of the 

additional 15 percent reduction in the 

BNAF (for a total BNAF reduction of 70 

percent), comparing estimated payments 

for FY 2013 to estimated payments for 

FY 2014. The FY 2013 payments used 

for comparison have a 55 percent 

reduced BNAF applied. We estimate 

that the total hospice payments for FY 

2014 would decrease by 0.7 percent. 

This 0.7 percent is the result of a 0.1 

percent reduction due to the use of 

updated wage data ($¥20 million), and 

a 0.6 percent reduction due to the 

additional 15 percent reduction in the 

BNAF ($¥100 million). This estimate 

does not take into account the proposed 

hospice payment update percentage of 

1.8 percent (+$300 million) for FY 2014. 

Column 5 of Table 9 shows the 

combined effects of the updated wage 

data (the 2012 pre-floor, pre-reclassified 

hospital wage index), the additional 15 

percent reduction in the BNAF (for a 

total BNAF reduction of 70 percent), 

and the proposed hospice payment 

update percentage of 1.8 percent. The 

proposed 1.8 percent hospice payment 

update percentage is based on a 2.5 

percent estimated inpatient hospital 

market basket update for FY 2014 

reduced by a 0.4 percentage point 

productivity adjustment and by 0.3 

percentage point as mandated by the 

Affordable Care Act. The estimated 

effect of the 1.8 percent proposed 

hospice payment update percentage is 

an increase in payments to hospices of 

approximately $300 million. Taking into 

account the 1.8 percent proposed 

hospice payment update percentage 

(+$300 million), the use of updated 

wage data ($¥20 million), and the 

additional 15 percent reduction in the 

BNAF ($¥100 million), it is estimated 

that hospice payments would increase 

by $180 million in FY 2014 ($300 

million¥$20 million ¥$100 million = 

$180 million) or 1.1 percent in FY 2014. 

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a. Effects on Hospices 

This section discusses the impact of 

the projected effects of the hospice wage 

index and the effects of a proposed 1.8 

percent hospice payment update 

percentage for FY 2014. This proposed 

rule continues to use the CBSA-based 

pre-floor, pre-reclassified hospital wage 

index as a basis for the hospice wage 

index and continues to use the same 

policies for treatment of areas (rural and 

urban) without hospital wage data. The 

proposed FY 2014 hospice wage index 

is based upon the 2012 pre-floor, prereclassified hospital wage index and the 

most complete claims data available (FY 

2012) with an additional 15 percent 

reduction in the BNAF (for a total BNAF 

reduction of 70 percent). 

For the purposes of our impacts, our 

baseline is estimated FY 2013 payments 

with a 55 percent BNAF reduction, 

using the 2011 pre-floor, pre-reclassified 

hospital wage index. Our first 

comparison (column 3 of Table 9) 

compares our baseline to estimated FY 

2014 payments (holding payment rates 

constant) using the updated wage data 

(2012 pre-floor, pre-reclassified hospital 

wage index). Consequently, the 

estimated effects illustrated in column 3 

of Table 9 show the distributional 

effects of the updated wage data only. 

The effects of using the updated wage 

data combined with the additional 15 

percent reduction in the BNAF are 

illustrated in column 4 of Table 9. 

We have included a comparison of the 

combined effects of the additional 15 

percent BNAF reduction, the updated 

wage data, and the proposed 1.8 percent 

hospice payment update percentage for 

FY 2014 (Table 9, column 5). Presenting 

these data gives the hospice industry a 

more complete picture of the effects on 

their total revenue based on changes to 

the hospice wage index and the BNAF 

phase-out as discussed in this proposed 

rule and the proposed FY 2014 hospice 

payment update percentage. Certain 

events may limit the scope or accuracy 

of our impact analysis, because such an 

analysis is susceptible to forecasting 

errors due to other changes in the 

forecasted impact time period. The 

nature of the Medicare program is such 

that the changes may interact, and the 

complexity of the interaction of these 

changes could make it difficult to 

predict accurately the full scope of the 

impact upon hospices. 

TABLE 9—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

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

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 70 PERCENT) AND APPLYING A 1.8 PERCENT HOSPICE PAYMENT

UPDATE PERCENTAGE, COMPARED TO THE FY 2013 HOSPICE WAGE INDEX WITH A 55 PERCENT BNAF REDUCTION

Number of 

hospices 

Number of 

routine home 

care days in 

thousands 

Percent 

change in hospice payments 

due to FY2014 

wage index 

change 

Percent change in 

hospice payments 

due to wage index 

change, additional 

15% reduction in 

budget neutrality 

adjustment 

Percent change in 

hospice payments 

due to wage index 

change, additional 

15% reduction in 

budget neutrality 

adjustment and 

market basket 

update 

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

ALL HOSPICES ....................................................... 3,545 85,390 ¥0.1 ¥0.7 1.1 

URBAN HOSPICES .......................................... 2,575 74,784 ¥0.1 ¥0.7 1.1 

RURAL HOSPICES .......................................... 970 10,606 ¥0.2 ¥0.6 1.2 

BY REGION—URBAN: 

NEW ENGLAND ............................................... 129 2,780 1.0 0.4 2.2 

MIDDLE ATLANTIC .......................................... 247 8,018 0.0 ¥0.6 1.2 

SOUTH ATLANTIC ........................................... 376 16,441 ¥0.7 ¥1.3 0.5 

EAST NORTH CENTRAL ................................. 334 11,435 0.0 ¥0.6 1.2 

EAST SOUTH CENTRAL ................................. 154 4,332 ¥0.5 ¥1.0 0.8 

WEST NORTH CENTRAL ................................ 195 4,627 0.4 ¥0.2 1.6 

WEST SOUTH CENTRAL ................................ 514 9,894 ¥0.4 ¥1.0 0.8 

MOUNTAIN ....................................................... 260 6,545 ¥0.8 ¥1.4 0.4 

PACIFIC ............................................................ 331 9,432 0.9 0.3 2.1 

OUTLYING ........................................................ 35 1,280 0.3 0.3 2.1 

BY REGION—RURAL: 

NEW ENGLAND ............................................... 24 232 ¥0.7 ¥1.4 0.4 

MIDDLE ATLANTIC .......................................... 42 563 ¥0.1 ¥0.7 1.1 

SOUTH ATLANTIC ........................................... 135 2,358 ¥0.3 ¥0.6 1.2 

EAST NORTH CENTRAL ................................. 137 1,708 0.4 ¥0.2 1.6 

EAST SOUTH CENTRAL ................................. 132 1,814 0.1 0.0 1.8 

WEST NORTH CENTRAL ................................ 182 1,240 ¥0.9 ¥1.3 0.5 

WEST SOUTH CENTRAL ................................ 175 1,537 ¥0.1 ¥0.2 1.6 

MOUNTAIN ....................................................... 95 665 0.3 ¥0.1 1.7 

PACIFIC ............................................................ 47 473 ¥2.2 ¥2.9 ¥1.1 

OUTLYING ........................................................ 1 15 0.0 0.0 1.8 

BY SIZE/DAYS: 

0–3499 DAYS (small) ....................................... 587 1,021 ¥0.4 ¥0.9 0.9 

3500–19,999 DAYS (medium) .......................... 1,711 17,331 ¥0.2 ¥0.7 1.1 

20,000+ DAYS (large) ...................................... 1,247 67,037 ¥0.1 ¥0.7 1.1 

TYPE OF OWNERSHIP: 

VOLUNTARY .................................................... 1,077 30,041 0.0 ¥0.6 1.2 

GOVERNMENT ................................................ 486 8,911 ¥0.1 ¥0.7 1.1 

PROPRIETARY ................................................ 1,982 46,438 ¥0.2 ¥0.8 1.0 

HOSPICE BASE: 

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27850 Federal Register / Vol. 78, No. 91 / Friday, May 10, 2013 / Proposed Rules 

TABLE 9—ANTICIPATED IMPACT ON MEDICARE HOSPICE PAYMENTS OF UPDATING THE PRE-FLOOR, PRE-RECLASSIFIED

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

15 PERCENT (FOR A TOTAL BNAF REDUCTION OF 70 PERCENT) AND APPLYING A 1.8 PERCENT HOSPICE PAYMENT

UPDATE PERCENTAGE, COMPARED TO THE FY 2013 HOSPICE WAGE INDEX WITH A 55 PERCENT BNAF REDUCTION—Continued 

Number of 

hospices 

Number of 

routine home 

care days in 

thousands 

Percent 

change in hospice payments 

due to FY2014 

wage index 

change 

Percent change in 

hospice payments 

due to wage index 

change, additional 

15% reduction in 

budget neutrality 

adjustment 

Percent change in 

hospice payments 

due to wage index 

change, additional 

15% reduction in 

budget neutrality 

adjustment and 

market basket 

Update 

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

FREESTANDING .............................................. 2,547 69,752 ¥0.2 ¥0.8 1.0 

HOME HEALTH AGENCY ............................... 521 9,848 0.3 ¥0.3 1.5 

HOSPITAL ........................................................ 458 5,574 0.0 ¥0.6 1.2 

SKILLED NURSING FACILITY ........................ 19 216 0.2 ¥0.5 1.3 

Source: Providers with hospice claims with dates of service between October 1, 2011 and September 30, 2012, based on the 2012 standard 

analytic file (SAF) as of December 31, 2012. 

Note: The proposed 1.8 percent hospice payment update percentage for FY 2014 is based on an estimated 2.5 percent inpatient hospital market basket update, reduced by a 0.4 percentage point productivity adjustment and by 0.3 percentage point. Starting with FY 2013 (and in subsequent fiscal years), the market basket percentage update under the hospice payment system as described in section 1814(i)(1)(C)(ii)(VII) or section 1814(i)(1)(C)(iii) of the Act will be annually reduced by changes in economy-wide productivity as set out at section 1886(b)(3)(B)(xi)(II) of the 

Act. In FY 2013 through FY 2019, the market basket percentage update under the hospice payment system will be reduced by an additional 0.3 

percentage point (although for FY 2014 to FY 2019, the potential 0.3 percentage point reduction is subject to suspension under conditions set 

out under section 1814(i)(1)(C)(v) of the Act). 

REGION KEY: 

NEW ENGLAND=Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; MIDDLE ATLANTIC=Pennsylvania, New Jersey, New York; SOUTH ATLANTIC=Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West 

Virginia; EAST NORTH CENTRAL=Illinois, Indiana, Michigan, Ohio, Wisconsin; EAST SOUTH CENTRAL=Alabama, Kentucky, Mississippi, Tennessee; WEST NORTH CENTRAL=Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; WEST SOUTH 

CENTRAL=Arkansas, Louisiana, Oklahoma, Texas; MOUNTAIN=Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; 

PACIFIC=Alaska, California, Hawaii, Oregon, Washington; OUTLYING=Guam, Puerto Rico, Virgin Islands. 

Table 9 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of December 31, 2012, which 

had also filed claims in FY 2012. In 

column 2, we indicate the number of 

routine home care days that were 

included in our analysis, although the 

analysis was performed on all types of 

hospice care. Columns 3, 4, and 5 

compare FY 2013 estimated payments 

with those estimated for FY 2014. The 

estimated FY 2013 payments 

incorporate a BNAF, which has been 

reduced by 55 percent. Column 3 shows 

the percentage change in estimated 

Medicare payments for FY 2014 due to 

the effects of the updated wage data 

only, compared with estimated FY 2013 

payments. The effect of the updated 

wage data can vary from region to region 

depending on the fluctuations in the 

wage index values of the pre-floor, prereclassified hospital wage index. 

Column 4 shows the percentage change 

in estimated hospice payments from FY 

2013 to FY 2014 due to the combined 

effects of using the updated wage data 

and reducing the BNAF by an additional 

15 percent. Column 5 shows the 

percentage change in estimated hospice 

payments from FY 2013 to FY 2014 due 

to the combined effects of using updated 

wage data, an additional 15 percent 

BNAF reduction, and the proposed 1.8 

percent hospice payment update 

percentage. 

The impact of changes in this 

proposed rule has been analyzed 

according to the type of hospice, 

geographic location, type of ownership, 

hospice base, and size. Table 9 

categorizes hospices by various 

geographic and hospice characteristics. 

The first row of data displays the 

aggregate result of the impact for all 

Medicare-certified hospices. The second 

and third rows of the table categorize 

hospices according to their geographic 

location (urban and rural). Our analysis 

indicated that there are 2,575 hospices 

located in urban areas and 970 hospices 

located in rural areas. The next two row 

groupings in the table indicate the 

number of hospices by census region, 

also broken down by urban and rural 

hospices. The next grouping shows the 

impact on hospices based on the size of 

the hospice’s program. We determined 

that the majority of hospice payments 

are made at the routine home care rate. 

Therefore, we based the size of each 

individual hospice’s program on the 

number of routine home care days 

provided in FY 2012. The next grouping 

shows the impact on hospices by type 

of ownership. The final grouping shows 

the impact on hospices defined by 

whether they are provider-based or 

freestanding. 

As indicated in column 1 of Table 9, 

there are 3,545 hospices. Approximately 

44.1 percent of Medicare-certified 

hospices are identified as voluntary 

(non-profit) or government agencies; a 

majority (55.9 percent) are proprietary 

(for-profit), with 1,563 designated as 

non-profit or government hospices, and 

1,982 as proprietary. In addition, our 

analysis shows that most hospices are in 

urban areas and provide the vast 

majority of routine home care days, 

most hospices are medium-sized, and 

the vast majority of hospices are 

freestanding. 

b. Hospice Size 

Under the Medicare hospice benefit, 

hospices can provide four different 

levels of care. The majority of the days 

provided by a hospice are routine home 

care (RHC) days, representing about 97 

percent of the services provided by a 

hospice. Therefore, the number of RHC 

days can be used as a proxy for the size 

of the hospice, that is, the more days of 

care provided, the larger the hospice. 

We currently use three size designations 

to present the impact analyses. The 

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three categories are—(1) small agencies 

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

agencies having 3,500 to 19,999 RHC 

days; and (3) large agencies having 

20,000 or more RHC days. The FY 2014 

updated wage data before any BNAF 

reduction are anticipated to decrease 

payments to large hospices by 0.1 

percent, to medium hospices by 0.2 

percent, and to small hospices by 0.4 

percent (column 3), respectively. The 

updated wage data and the additional 

15 percent BNAF reduction (for a total 

BNAF reduction of 70 percent) are 

anticipated to decrease estimated 

payments to small hospices by 0.9 

percent, to medium hospices by 0.7 

percent, and to large hospices by 0.7 

percent (column 4). Finally, the updated 

wage data, the additional 15 percent 

BNAF reduction (for a total BNAF 

reduction of 70 percent), and the 

proposed 1.8 percent hospice payment 

update percentage are projected to 

increase estimated payments by 0.9 

percent for small hospices, by 1.1 

percent for medium hospices, and by 

1.1 percent for large hospices (column 

5). 

c. Geographic Location 

Column 3 of Table 9 shows the 

estimated impact of using updated wage 

data without the BNAF reduction. 

Urban hospices are anticipated to 

experience a decrease of 0.1 percent and 

rural hospices are anticipated to 

experience a decrease of 0.2 percent in 

payments. Urban hospices can 

anticipate an increase in payments in 

New England of 1.0 percent, in the West 

North Central region of 0.4 percent, in 

the Pacific region of 0.9 percent and in 

Outlying regions of 0.3 percent. Urban 

hospices can anticipate a decrease in 

payments ranging from 0.8 percent in 

the Mountain region to 0.4 percent in 

the West South Central region. Urban 

hospices in Middle Atlantic and East 

North Central are not anticipated to be 

affected by the updated wage data. 

Rural hospices are estimated to see a 

decrease in payments in six regions, 

ranging from 2.2 percent in the Pacific 

region to 0.1 percent in the West South 

Central and Middle Atlantic regions. 

Rural hospices can anticipate an 

increase in payments in three regions 

ranging from 0.1 percent in the East 

South Central region to 0.4 percent in 

the East North Central region. There is 

no anticipated change in payments for 

Outlying regions due to the use of 

updated wage data. 

Column 4 shows the combined effect 

of the updated wage data and the 

additional 15 percent BNAF reduction 

on estimated payments, as compared to 

the FY 2013 estimated payments using 

a BNAF with a 55 percent reduction. 

Overall, hospices are anticipated to 

experience a 0.7 percent decrease in 

payments, with urban hospices 

experiencing an estimated decrease of 

0.7 percent and rural hospices 

experiencing an estimated decrease of 

0.6 percent. All urban areas other than 

Outlying, Pacific and New England 

regions are estimated to see decreases in 

payments, ranging from 1.4 percent in 

the Mountain region to 0.2 percent in 

the West North Central region. Rural 

hospices are estimated to experience a 

decrease in payments in seven regions, 

ranging from 2.9 percent in the Pacific 

region to 0.1 percent in the Mountain 

region. Payments in the Outlying and 

East South Central regions are 

anticipated to stay relatively stable. 

Column 5 shows the combined effects 

of the updated wage data, the additional 

15 percent BNAF reduction, and the 

proposed 1.8 percent hospice payment 

update percentage on estimated FY 2014 

payments as compared to estimated FY 

2013 payments. Overall, hospices are 

anticipated to experience a 1.1 percent 

increase in payments, with urban 

hospices anticipated to experience a 1.1 

percent increase in payments, and rural 

hospices anticipated to experience a 1.2 

percent increase in payments. Urban 

hospices are anticipated to experience 

an increase in estimated payments in 

every region, ranging from 0.4 percent 

in the Mountain region to 2.2 percent in 

New England. Rural hospices in every 

region but one are estimated to see an 

increase in payments ranging from 0.4 

percent in New England to 1.8 percent 

in the East South Central and Outlying 

regions. The Pacific region is estimated 

to see a decrease in payments of 1.1 

percent. 

d. Type of Ownership 

Column 3 demonstrates the effect of 

the updated wage data on FY 2014 

estimated payments, versus FY 2013 

estimated payments. We anticipate that 

using the updated wage data would 

decrease estimated payments to 

proprietary (for-profit) and Government 

hospices by 0.2 percent and 0.1 percent, 

respectively. Voluntary (non-profit) 

hospices are expected to have no change 

in payments. Column 4 demonstrates 

the combined effects of the updated 

wage data and of the additional 15 

percent BNAF reduction. Estimated 

payments to voluntary (non-profit), 

proprietary (for-profit) and government 

hospices are anticipated to decrease by 

0.6 percent, 0.8 percent and 0.7 percent, 

respectively. Column 5 shows the 

combined effects of the updated wage 

data, the additional 15 percent BNAF 

reduction (for a total BNAF reduction of 

70 percent), and the proposed 1.8 

percent hospice payment update 

percentage on estimated payments, 

comparing FY 2014 to FY 2013. 

Estimated FY 2014 payments are 

anticipated to increase for voluntary 

(non-profit) hospices, for proprietary 

(for-profit) hospices, and government 

hospices, by 1.2, 1.0, and 1.1 percent, 

respectively. 

e. Hospice Base 

Column 3 demonstrates the effect of 

using the updated wage data, comparing 

estimated payments for FY 2014 to FY 

2013. Estimated payments are 

anticipated to decrease for freestanding 

hospices by 0.2 percent. Estimated 

payments are anticipated to increase for 

Home Health Agency and Skilled 

Nursing Facility based hospices by 0.3 

percent and by 0.2 percent, respectively. 

Hospital based hospices are estimated to 

experience no change in payments. 

Column 4 shows the combined effects of 

the updated wage data and reducing the 

BNAF by an additional 15 percent, 

comparing estimated payments for FY 

2014 to FY 2013. All hospice facilities 

are anticipated to experience decrease 

in payments ranging from 0.8 percent 

for freestanding hospices to 0.3 percent 

for Home Health Agency based 

hospices. Column 5 shows the 

combined effects of the updated wage 

data, the additional 15 percent BNAF 

reduction, and the proposed 1.8 percent 

hospice payment update percentage on 

estimated payments, comparing FY 

2014 to FY 2013. Estimated payments 

are anticipated to increase for all 

hospices, ranging from 1.0 percent for 

freestanding hospices to 1.5 percent for 

Home Health Agency based hospices. 

f. Effects on Other Providers 

This proposed rule only affects 

Medicare hospices, and therefore has no 

effect on other provider types. 

g. Effects on the Medicare and Medicaid 

Programs 

This proposed rule only affects 

Medicare hospices, and therefore has no 

effect on Medicaid programs. As 

described previously, estimated 

Medicare payments to hospices in FY 

2014 are anticipated to decrease by $20 

million due to the update in the wage 

index data, and to decrease by $100 

million due to the additional 15 percent 

reduction in the BNAF (for a total 70 

percent reduction in the BNAF). 

However, the proposed hospice 

payment update percentage of 1.8 

percent is anticipated to increase 

Medicare payments by $300 million. 

Therefore, the total effect on Medicare 

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hospice payments is estimated to be a 

$180 million increase (1.1 percent). 

h. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

a004/a-4.pdf), in Table 10 below, we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with this 

proposed rule. Table 10 provides our 

best estimate of the increase in Medicare 

payments under the hospice benefit as 

a result of the changes presented in this 

proposed rule using data for 3,545 

hospices in our database. 

TABLE 10—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2013 TO FY 

2014 

[In $Millions] 

Category Transfers 

Annualized Monetized 

Transfers.

$180. 

From Whom to Whom Federal Government 

to Hospices. 

i. Conclusion 

In conclusion, the overall effect of this 

proposed rule is an estimated $180 

million increase in Federal Medicare 

payments to hospices due to the wage 

index changes (including the additional 

15 percent reduction in the BNAF) and 

the proposed hospice payment update 

percentage of 1.8 percent. Furthermore, 

the Secretary has determined that this 

will not have a significant impact on a 

substantial number of small entities, or 

have a significant effect relative to 

section 1102(b) of the Act. 

2. Regulatory Flexibility Act Analysis 

The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses if a rule has a significant 

impact on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that almost all hospices are 

small entities as that term is used in the 

RFA. The great majority of hospitals and 

most other health care providers and 

suppliers are small entities by meeting 

the Small Business Administration 

(SBA) definition of a small business (in 

the service sector, having revenues of 

less than $7.0 million to $34.5 million 

in any 1 year), or being nonprofit 

organizations. While the SBA does not 

define a size threshold in terms of 

annual revenues for hospices, it does 

define one for home health agencies 

($14 million; see http://www.sba.gov/ 

sites/default/files/files/ 

Size_Standards_Table(1).pdf). For the 

purposes of this proposed rule, because 

the hospice benefit is a home-based 

benefit, we are applying the SBA 

definition of ‘‘small’’ for home health 

agencies to hospices; we will use this 

definition of ‘‘small’’ in determining if 

this proposed rule has a significant 

impact on a substantial number of small 

entities (for example, hospices). We 

estimate that 95 percent of hospices 

have Medicare revenues below $14 

million or are nonprofit organizations 

and therefore are considered small 

entities. 

HHS’s practice in interpreting the 

RFA is to consider effects economically 

‘‘significant’’ only if they reach a 

threshold of 3 to 5 percent or more of 

total revenue or total costs. As noted 

above, the combined effect of the 

updated wage data, the additional 15 

percent BNAF reduction, and the 

proposed FY 2014 hospice payment 

update percentage of 1.8 percent results 

in an increase in estimated hospice 

payments of 1.1 percent for FY 2014. 

For small and medium hospices (as 

defined by routine home care days), the 

estimated effects on revenue when 

accounting for the updated wage data, 

the additional 15 percent BNAF 

reduction, and the proposed FY 2014 

hospice payment update percentage 

reflect increases in payments of 0.9 

percent and 1.1 percent, respectively. 

Therefore, the Secretary has determined 

that this proposed rule will not create a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. This proposed rule 

only affects hospices. Therefore, the 

Secretary has determined that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

3. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2013, that threshold is approximately 

$141 million. This proposed rule is not 

anticipated to have an effect on State, 

local, or tribal governments, in the 

aggregate, or on the private sector of 

$141 million or more. 

VII. Federalism Analysis and 

Regulations Text 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. We have reviewed this 

proposed 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 418 

Health Facilities, Hospice Care, 

Medicare, Reporting and record keeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR part 418 as set forth below: 

PART 418—HOSPICE CARE 

■ 1. The authority citation for part 418 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

§ 418.311 [Amended] 

■ 2. Amend § 418.311 by removing the 

reference to ‘‘§ 405.1874’’ and adding in 

its place the reference ‘‘§ 405.1875’’. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: April 23, 2013. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 25, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–10389 Filed 4–29–13; 4:15 pm] 

BILLING CODE 4120–01–P 

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