DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 409, 424, and 484 

CMS-1353-P 

RIN 0938-AQ30

Medicare Program; Home Health Prospective Payment System 

Rate Update for Calendar Year 2012 

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

HHS.

ACTION: Proposed rule. 

SUMMARY: This proposed rule would update the Home Health 

Prospective Payment System (HH PPS) rates, including: the 

national standardized 60-day episode rates, the national 

per-visit rates, the low utilization payment amount (LUPA), 

and outlier payments under the Medicare prospective payment 

system for home health agencies effective January 1, 2012. 

DATES: To be assured consideration, comments must be 

received at one of the addresses provided below, no later 

than 5 p.m. on [September 6, 2011. 

ADDRESSES: In commenting, please refer to file code 

CMS-1353-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. 
CMS-1353-P 2 

Follow the instructions under the "More Search Options" 

tab. 

 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-1353-P, 

P.O. Box 8016, 

Baltimore, MD 21244-8016. 

Please allow sufficient time for mailed comments to be 

received before the close of the comment period. 

3. By express or overnight mail. You may send 

written comments to the following address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-1353-P, 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver 

(by hand or courier) your written comments before the close 

of the comment period to either of the following addresses: 

 

a. For delivery in Washington, DC-- 
CMS-1353-P 3 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not readily available to 

persons without Federal government identification, 

commenters are encouraged to leave their comments in the 

CMS drop slots located in the main lobby of the building. 

A stamp-in clock is available for persons wishing to retain 

a proof of filing by stamping in and retaining an extra 

copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

If you intend to deliver your comments to the 

Baltimore address, please call (410) 786-7195 in advance to 

schedule your arrival with one of our staff members. 

 Comments mailed to the addresses indicated as 

appropriate for hand or courier delivery may be delayed and 

received after the comment period. 

For information on viewing public comments, see the 
CMS-1353-P 4 

beginning of the "SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Goldstein, (410) 786-6665, for CAHPS issues. 

Mary Pratt, (410) 786-6867, for quality issues. 

Randy Throndset, (410)786-0131 (overall HH PPS). 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All comments received 

before the close of the comment period are available for 

viewing by the public, including any personally 

identifiable or confidential business information that is 

included in a comment. We post all comments received 

before the close of the comment period on the following 

website as soon as possible after they have been received: 

http://www.regulations.gov. Follow the search instructions 

on that Web site to view public comments. 

 Comments received timely will also be available for 

public inspection as they are received, generally beginning 

approximately 3 weeks after publication of a document, at 

the headquarters of the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, Baltimore, Maryland 

21244, Monday through Friday of each week from 8:30 a.m. to 

4 p.m. EST. To schedule an appointment to view public 

comments, phone 1-800-743-3951. 

Table of Contents 

I. Background 
CMS-1353-P 5 

A. Statutory Background 

B. System for Payment of Home Health Services 

C. Updates to the HH PPS 

II. Provisions of the Proposed Rule 

A. Case-Mix Measurement 

1. Independent review of the models to assess nominal 

case-mix growth 

2. Revised version of our models to assess nominal 

case-mix growth 

B. Case-Mix Revision to the Case-Mix Weights 

1. Hypertension Diagnosis Coding Under the HH PPS 

2. Proposal for Revision of Case-Mix Weights 

C. Outlier Policy 

1. Background 

2. Regulatory Update 

3. Statutory Update 

4. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) 

Ratio 

5. Outlier Relationship to the HH Payment Study 

D. CY 2012 Rate Update 

1. Home Health Market Basket Update 

2. Home Health Care Quality Improvement 

a. Background and Quality Reporting Requirements 

b. OASIS Data 
CMS-1353-P 6 

c. Claims Data, Proposed Requirements and Outcome 

Measure Change 

d. Home Health Care CAHPS Survey (HHCAHPS) 

3. Home Health Wage Index 

4. Proposed CY 2012 Annual Payment Update 

a. National Standardized 60-Day Episode Rate 

b. Proposed Updated CY 2012 National Standardized 60-

Day Episode Payment Rate 

c. National Per-Visit Rates Used to Pay LUPAs and 

Compute Imputed Costs Used in Outlier Calculations 

d. LUPA Add-on Payment Amount Update 

e. Nonroutine Medical Supply Conversion Factor Update 

5. Rural Add-on 

E. Therapy Corrections and Clarification 

F. Home Health Face-to-face Encounter 

G. Payment Reform: Home Health Study and Report 

H. International Classification of Diseases 10th

Edition (ICD-10) Coding 

I. Clarification to Benefit Policy Manual Language on 

“Confined to the Home” Definition 

III. Collection of Information Requirements 

IV. Response to Comments 

V. Regulatory Impact Analysis 

VI. Federalism Analysis 

Regulations Text 
CMS-1353-P 7 

Acronyms 

In addition, because of the many terms to which we 

refer by abbreviation in this proposed rule, we are listing 

these abbreviations and their corresponding terms in 

alphabetical order below: 

ACH LOS Acute Care Hospital Length of Stay 

ADL Activities of Daily Living 

APU Annual Payment Update 

BBA Balanced Budget Act of 1997, Pub. L. 105-33 

BBRA Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999, Pub. L. 106-113 

CAD Coronary Artery Disease 

CAH Critical Access Hospital 

CBSA Core-Based Statistical Area 

CHF Congestive Heart Failure 

CMI Case-Mix Index 

CMS Centers for Medicare and Medicaid Services 

CoPs Conditions of Participation 

COPD Chronic Obstructive Pulmonary Disease 

CVD Cardiovascular Disease 

DM Diabetes Mellitus 

DRA Deficit Reduction Act of 2005, Pub. L. 109-171, 

enacted February 8, 2006 

FDL Fixed Dollar Loss 

FI Fiscal Intermediaries 
CMS-1353-P 8 

FR Federal Register 

FY Fiscal Year 

HCC Hierarchical Condition Categories 

HCIS Health Care Information System 

HHCAHPS Home Health Care Consumer Assessment of 

Healthcare Providers and Systems Survey 

HH PPS Home Health Prospective Payment System 

HHAs Home Health Agencies 

HHRG Home Health Resource Group 

HIPPS Health Insurance Prospective Payment System 

IH Inpatient Hospitalization 

IRF Inpatient Rehabilitation Facility 

LTCH Long-Term Care Hospital 

LUPA Low Utilization Payment Amount 

MEPS Medical Expenditures Panel Survey 

MMA Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003, Pub. L. 108-173, 

enacted December 8, 2003 

MSA Metropolitan Statistical Areas 

MSS Medical Social Services 

NRS Non-Routine Supplies 

OBRA Omnibus Reconciliation Act of 1981, Pub. L. 97-

35, enacted August 13, 1981 

OCESAA Omnibus Consolidated and Emergency Supplemental 

Appropriations Act, Pub. L. 105-277, enacted 
CMS-1353-P 9 

October 21, 1998 

OES Occupational Employment Statistics 

OIG Office of Inspector General 

OT Occupational Therapy 

OMB Office of Management and Budget 

PAC-PRD Post-Acute Care Payment Reform Demonstration 

PEP Partial Episode Payment Adjustment 

PT Physical Therapy 

QAP Quality Assurance Plan 

PRRB Provider Reimbursement Review Board 

RAP Request for Anticipated Payment 

RF Renal Failure 

RFA Regulatory Flexibility Act, Pub. L. 96—354 

RHHIs Regional Home Health Intermediaries 

RIA Regulatory Impact Analysis 

SLP Speech Language Pathology Therapy 

SNF Skilled Nursing Facility 

UMRA Unfunded Mandates Reform Act of 1995I. 

I. Background 

A. Statutory Background

 The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, 

enacted August 5, 1997), significantly changed the way 

Medicare pays for Medicare home health (HH) services. 

Section 4603 of the BBA mandated the development of the 

home health prospective payment system (HH PPS). Until the 
CMS-1353-P 10 

implementation of a HH PPS on October 1, 2000, home health 

agencies (HHAs) received payment under a retrospective 

reimbursement system. 

 Section 4603(a) of the BBA mandated the development of 

a HH PPS for all Medicare-covered HH services provided 

under a plan of care (POC) that were paid on a reasonable 

cost basis by adding section 1895 of the Social Security 

Act (the Act), entitled "Prospective Payment For Home 

Health Services". Section 1895(b)(1) of the Act requires 

the Secretary to establish a HH PPS for all costs of HH 

services paid under Medicare. 

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

following: (1) the computation of a standard prospective 

payment amount include all costs for HH services covered 

and paid for on a reasonable cost basis and that such 

amounts be initially based on the most recent audited cost 

report data available to the Secretary; and (2) the 

standardized prospective payment amount be adjusted to 

account for the effects of case-mix and wage levels among 

HHAs. 

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

update to the standard prospective payment amounts by the 

HH applicable percentage increase. Section 1895(b)(4) of 

the Act governs the payment computation. Sections 

1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act require the 
CMS-1353-P 11 

standard prospective payment amount to be adjusted for 

case-mix and geographic differences in wage levels. 

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

of an appropriate case-mix change adjustment factor for 

significant variation in costs among different units of 

services. 

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

the establishment of wage adjustment factors that reflect 

the relative level of wages, and wage-related costs 

applicable to HH services furnished in a geographic area 

compared to the applicable national average level. Under 

section 1895(b)(4)(c) of the Act, the wage-adjustment 

factors used by the Secretary may be the factors used under 

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

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

option to make additions or adjustments to the payment 

amount otherwise paid in the case of outliers because of 

unusual variations in the type or amount of medically 

necessary care. Section 3131(b) of the Patient Protection 

and Affordable Care Act of 2010 (the Affordable Care Act) 

(Pub. L. 111-148, enacted March 23, 2010) revised section 

1895(b)(5) of the Act so that total outlier payments in a 

given fiscal year (FY) or year may not exceed 2.5 percent 

of total payments projected or estimated. The provision 
CMS-1353-P 12 

also makes permanent a 10 percent agency level outlier 

payment cap. 

 In accordance with the statute, as amended by the BBA, 

we published a final rule in the July 3, 2000 Federal 

Register (65 FR 41128) to implement the HH PPS legislation. 

The July 2000 final rule established requirements for the 

new HH PPS for HH services as required by section 4603 of 

the BBA, as subsequently amended by section 5101 of the 

Omnibus Consolidated and Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal Year 1999, (Pub. L. 

105-277, enacted October 21, 1998); and by sections 302, 

305, and 306 of the Medicare, Medicaid, and SCHIP Balanced 

Budget Refinement Act (BBRA) of 1999, (Pub. L. 106-113, 

enacted November 29, 1999). The requirements include the 

implementation of a HH PPS for HH services, consolidated 

billing requirements, and a number of other related 

changes. The HH PPS described in that rule replaced the 

retrospective reasonable cost-based system that was used by 

Medicare for the payment of HH services under Part A and 

Part B. For a complete and full description of the HH PPS 

as required by the BBA, see the July 2000 HH PPS final rule 

(65 FR 41128 through 41214). 

 Section 5201(c) of the Deficit Reduction Act of 2005 

(DRA) (Pub. L. 109-171, enacted February 8, 2006) added new 

section 1895(b)(3)(B)(v) to the Act, requiring HHAs to 
CMS-1353-P 13 

submit data for purposes of measuring health care quality, 

and links the quality data submission to the annual 

applicable percentage increase. This data submission 

requirement is applicable for CY 2007 and each subsequent 

year. If an HHA does not submit quality data, the HH 

market basket percentage increase is reduced 2 percentage 

points. In the November 9, 2006 Federal Register

(71 FR 65884, 65935), we published a final rule to 

implement the pay-for-reporting requirement of the DRA, 

which was codified at §484.225(h) and (i) in accordance 

with the statute. 

 Section 421(a) of the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 

108-173, enacted December 8, 2003) provides an increase of 

3 percent of the payment amount otherwise made under 

section 1886(d)(2)(D) of the Act for HH services furnished 

in a rural area with respect to episodes and visits ending 

on or after April 1, 2010, and before January 1, 2016. 

B. System for Payment of Home Health Services

 Generally, Medicare makes payment under the HH PPS on 

the basis of a national standardized 60-day episode payment 

rate that is adjusted for the applicable case-mix and wage 

index. The national standardized 60-day episode rate 

includes the six HH disciplines (skilled nursing, HH aide, 

physical therapy, speech-language pathology, occupational 
CMS-1353-P 14 

therapy, and medical social services). Payment for nonroutine medical supplies (NRS), is no longer part of the 

national standardized 60-day episode rate and is computed 

by multiplying the relative weight for a particular NRS 

severity level by the NRS conversion factor (See section 

II.D.4.e). Payment for durable medical equipment covered 

under the HH benefit is made outside the HH PPS payment 

system. To adjust for case-mix, the HH PPS uses a 

153-category case-mix classification to assign patients to 

a home health resource group (HHRG). The clinical severity 

level, functional severity level, and service utilization 

are computed from responses to selected data elements in 

the OASIS assessment instrument and are used to place the 

patient in a particular HHRG. Each HHRG has an associated 

case-mix weight which is used in calculating the payment 

for an episode. 

 For episodes with four or fewer visits, Medicare pays 

based on a national per-visit rate, adjusted by the 

discipline(s) providing the services; an episode consisting 

of four or fewer visits within a 60-day period receives 

what is referred to as a low utilization payment adjustment 

(LUPA). Medicare also adjusts the national standardized 

60-day episode payment rate for certain intervening events 

that are subject to a partial episode payment adjustment 

(PEP adjustment). For certain cases that exceed a specific 
CMS-1353-P 15 

cost threshold, an outlier adjustment may also be 

available. 

C. Updates to the HH PPS

As required by section 1895(b)(3)(B) of the Act, we 

have historically updated the HH PPS rates annually in the

Federal Register. The August 29, 2007 final rule with 

comment period set forth an update to the 60-day national 

episode rates and the national per-visit rates under the 

Medicare prospective payment system for HHAs for CY 2008. 

The CY 2008 rule included an analysis performed on CY 2005 

HH claims data, which indicated a 12.78 percent increase in 

the observed case-mix since 2000. The case-mix represented 

the variations in conditions of the patient population 

served by the HHAs. Subsequently, a more detailed analysis 

was performed on the 12.78 percent increase in case-mix to 

evaluate if any portion of the increase was associated with 

a change in the actual clinical condition of HH patients. 

We examined data on demographics, family severity, and nonHH Part A Medicare expenditures to predict the average 

case-mix weight for 2005. We identified 8.03 percent of 

the total case-mix change as real and decreased the 12.78 

percent of total case-mix change by 8.03 percent to get a 

final nominal case-mix increase measure of 11.75 percent 

(0.1278 * (1 – 0.0803) = 0.1175). 
CMS-1353-P 16 

To account for the changes in case-mix that were not 

related to an underlying change in patient health status, 

we implemented a reduction over 4 years in the national 

standardized 60-day episode payment rates and the NRS 

conversion factor. That reduction was to be 2.75 percent 

per year for 3 years beginning in CY 2008 and 2.71 percent 

for the fourth year in CY 2011. 

 For CY 2011, we published the November 17, 2010 final 

rule (75 FR 70372) (hereinafter referred to as the CY 2011 

HH PPS final rule) that set forth the update to the 60-day 

national episode rates and the national per-visit rates 

under the Medicare prospective payment system for HH 

services. 

As discussed in the CY 2011 rule, our analysis 

indicated that there was a 19.40 percent increase in 

overall case-mix from 2000 to 2008 and that only 10.07 

percent of that overall observed case-mix percentage 

increase was due to real case-mix change. As a result of 

our analysis, we identified a 17.45 percent nominal 

increase in case-mix. To fully account for the 17.45 

percent nominal case-mix growth which was identified from 

2000 to 2008, we proposed 3.79 percent payment reductions 

in both CY 2011 and CY 2012. However, we deferred 

finalizing a payment reduction for CY 2012 until a further 

study of the case-mix data was completed. Independent 
CMS-1353-P 17 

review of the case-mix model has been conducted and the 

results are discussed in section II.A. of this proposed 

rule. 

II. Provisions of the Proposed Rule 

A. Case-Mix Measurement

 Every year, since the HH PPS CY 2008 proposed rule, we 

have stated in HH PPS rulemaking that we would continue to 

monitor case-mix changes in the HH PPS and to update our 

analysis to measure change in case-mix, both real changes 

in case-mix and changes which are unrelated to changes in 

patient acuity (nominal). We have continued to monitor 

case-mix changes, and our latest analysis continues to 

support the need to make payment adjustments to account for 

nominal case-mix growth. 

 Before measuring nominal case-mix growth, we examined 

the total case-mix growth every year from 2000 to 2009. 

Our latest analysis indicates that there was a large 1-year 

increase, 2.6 percent, in the average case-mix weight from 

2008 to 2009. Specifically, the 2008 average case-mix was 

1.3095 and the 2009 average case-mix was 1.3435. It should 

be noted that the average case-mix for 2008 is slightly 

different than the average case-mix for 2008 that was 

reported in the CY 2011 HH PPS final rule. The difference 

in case-mix is due to the increased availability of data 

and inclusion of more episodes in the 2008 sample. As we 
CMS-1353-P 18 

did last year, we sought to describe how much of the 1-year 

change was due to a change in the distribution of episodes 

according to the number of therapy visits and how much was 

due to a change in the average case-mix weight at each 

level of therapy visits. 

 The method we used first holds the average case-mix 

weight constant (at the 2008 values) at each level of 

therapy visits, and measures the effect of the shift to the 

new distribution of therapy visits. The method then holds 

the distribution of therapy visits constant (at the 2008 

distribution) and measures the effect of the change in 

average case-mix weight at each level of therapy visits. 

The results were that 0.0254 or about 75 percent 

(0.0254/0.0340 = 0.75) of the total change in average casemix weights from 2008 to 2009 was due to the shift in the 

distribution of therapy visits per episode. The remaining 

0.0086 or about 25 percent (0.0086/0.0340 = 0.25) in 

overall average case-mix weight from 2008 to 2009 was due 

to an increase in the average case-mix weight at each level 

of therapy visits per episode. 

 The decomposition suggests that agencies in 2009 were 

still responding to the 2008 refinements in terms of both 

coding practices and the definition of therapy treatment 

plans for patients. This analysis by itself, however, does 

not isolate real case-mix change within total case-mix 
CMS-1353-P 19 

change. We discuss our latest analysis of real and nominal 

case-mix change in the remainder of this section. 

 Section 1895(b)(3)(B)(iv) of the Act gives CMS the 

authority to implement payment reductions for nominal casemix growth, changes in case-mix that are not related to 

actual changes in patient characteristics over time. 

Nominal case-mix growth was assessed and reported in CY 

2008 and CY 2011 rulemaking, and payment reductions to the 

base rate were implemented to account for the nominal casemix growth observed. 

 In CY 2008 rulemaking, to assess nominal case-mix 

growth, we first estimated real case-mix growth, changes in 

case-mix which are related to changes in patient 

characteristics, using a regression-based, predictive model 

of individual case-mix weights. The predictive model 

contained measures of patients’ demographic 

characteristics, clinical status, inpatient history, and 

Part A Medicare costs in the time period leading up to 

their home health episodes. The regression coefficients 

for the predictive model were developed using 2000 as a 

base year and were applied to episodes from 2005, allowing 

estimation of the change in real case-mix. We then 

determined the nominal case-mix growth from 2000 to 2005 

using the regression model-predicted real case-mix change 
CMS-1353-P 20 

and the total case-mix change for the time period of 

interest. 

 In 2000, the average case-mix was 1.0960 and in 2005, 

the average case-mix was 1.2361. As such, the total 

measure of case-mix change from 2000 to 2005 was 12.78 

percent ((1.2361-1.0960)/1.0960 = 0.1278). Using the 

regression-based predictive model, we identified 8.03 

percent of the total case-mix change as real case-mix 

change from 2000 to 2005, and we adjusted the 12.78 percent 

of total change in case-mix, downward, by 8.03 percent to 

get a final nominal case-mix change measure of 11.75 

percent (0.1278 * (1 – 0.0803) = 0.1175). To account for 

the 11.75 percent increase in nominal case-mix, we 

implemented a payment reduction of 2.75 percent each year 

for 3 years, beginning in 2008, and we planned to implement 

a payment reduction of 2.71 in CY 2011. 

 Since the HH PPS CY 2008 proposed rule, we have 

continued to monitor case-mix changes in the HH PPS, and in 

CY 2011 rulemaking we updated our analysis to measure 

change in real and nominal case-mix. In CY 2011 

rulemaking, we developed two regression-based models to 

assess nominal case-mix growth from 2000 to 2008. One 

model was developed using 2000 as a base year and the 80 

grouper case-mix system. The regression coefficients in 

the model were applied to 2007 data to determine the change 
CMS-1353-P 21 

in real case-mix from 2000 to 2007. The second model was 

developed using 2008 as a base year and the 153 grouper 

case-mix system. The regression coefficients in the model 

were applied to 2007 data to determine the change in real 

case-mix from 2007 to 2008. The data from both of the 

models were then used to calculate the overall real and 

nominal case-mix change from 2000 to 2008. Our analysis 

indicated that there was a 19.40 percent increase in 

overall case-mix from 2000 to 2008 and 10.07 percent of 

that overall observed case-mix change was identified as 

real case-mix change. Consequently, as a result of our 

analysis, we identified a 17.45 percent nominal increase in 

case-mix (0.1940 * (1 – 0.1007) = 0.1745) from 2000 to 

2008. In other words, there was a growth in case-mix of 

17.45 percent that was unrelated to differences in patient 

characteristics and reflects changes in coding procedures 

and documentation rather than the treatment of more 

resource-intensive patients. This 17.45 percent increase 

was larger than expected. Previously, there was about 1 

percent annual case-mix growth from 2000 to 2007. Between 

2007 and 2008, we observed a 4 percent overall case-mix 

growth. As a result of our analysis, in CY 2011, we 

proposed an increase to the planned 2.71 percent payment 

reduction in 2011 to a 3.79 percent payment reduction and 

we proposed another 3.79 percent payment reduction in 2012 
CMS-1353-P 22 

to fully account for the 17.45 percent nominal case-mix 

growth which was identified from 2000 to 2008. 

 We received many comments on our CY 2011 HH PPS 

proposed rule that criticized our methodology for assessing 

real case-mix change. The criticisms from commenters 

centered on the idea that we underestimated the percentage 

of case-mix growth that was real. Multiple commenters 

stated that our model for assessing real case-mix change 

relies too heavily on hospital discharge data. Commenters 

stated that we should include more variables which capture 

the severity of patients entering home health from the 

community since more than half of Medicare home health 

patients are admitted to home health from a setting other 

than a hospital. Also, commenters suggested that the acute 

care hospital APR-DRG and other prior use variables in our 

models may not be relevant for patients with more than one 

home health episode. Another criticism was that our model 

should consider that there are shorter hospital stays, and 

therefore, the patients who are discharged from the 

hospital into home health may have a higher level of 

severity of illness than the model recognizes. Moreover, 

commenters stated that all of the HHAs were being penalized 

for the actions of a few HHAs and that the nominal case-mix 

change reductions should be limited to certain types of 

agencies (such as by region or for-profit/non-profit status 

or by case-mix index [CMI]). Furthermore, one commenter 
CMS-1353-P 23 

stated that a recent study by Dr. Partha Deb of Hunter 

College used data from a nationally representative survey 

(the Medical Expenditures Panel Survey-MEPS) and found that 

the health status of Medicare beneficiaries worsened, 

suggesting a possible increase in real case-mix in the 

Medicare population from 2000 through 2007 (the study by 

Partha Deb can be found at 

http://www.aha.org/aha/content/2010/pdf/100715-

CMItrends.pdf). Commenters inferred that the change in 

real case-mix was larger than the change we measured for 

the home health population, and therefore, commenters 

doubted whether our model accounted for the entire real 

case-mix change in the home health population. The study 

by Dr. Deb constructed a case-mix measure from medical 

expenditures and diagnosis-related data and compared 

results for 2000 and 2007. 

 In the CY 2011 HH PPS final rule, we implemented the 

proposed payment reduction of 3.79 percent to the national 

standardized episode rate in CY 2011. However, due to the 

extensive comments we received, we deferred finalizing a 

payment reduction for CY 2012 until further study of the 

case-mix data and methodology was completed. 

1. Independent review of the models to assess nominal 

case-mix growth 

To assess the validity of the criticisms we received 
CMS-1353-P 24 

about our models to measure real and nominal case-mix 

change, we procured an independent review of our 

methodology by a team at Harvard University led by Dr. 

David Grabowski. The review included an examination of the 

predictive regression models and data used in CY 2011 

rulemaking, and further analysis consisting of extensions 

of the model to allow a closer look at nominal case-mix 

growth by categorizing the growth according to provider 

types and subgroups of patients. The extensions showed a 

similar rate of nominal case-mix growth from 2000 to 2008 

(Table 1A) for the various categories and subgroups. 

Below, we discuss these results in terms of the criticisms 

we received. 

TABLE 1A: Models for Assessing Real Case-Mix Change 

MODEL

Nominal Case-mix 

Percent Increase 

from 2000 to 2008

ALL) Total Nominal growth using Full Data Set 

 (Replication) 17.45

ALL) Full Data Set using MEDIAN ACH LOS 

 (Replication) 17.38

ALL) Full Data Set using Q3 ACH LOS 

 (Replication) 17.47

1a) Pre-HHA: With IH in prior 14 days 21.16

1b) Pre-HHA: With IH in prior 15 - 120 days 16.81

2a) Pre-HHA: Without IH in prior 14 days 15.85

2b) Pre-HHA: Without IH in prior 15 - 120 days 18.19

3a) Pre-HHA: With IRF/SNF/LTCH in prior 14 days 13.90

3b) Pre-HHA: With IRF/SNF/LTCH in prior 15- 120 

 Days 14.11

4a) Pre-HHA: Without IRF/SNF/LTCH in prior 14 days 18.51

4b) Pre-HHA: Without IRF/SNF/LTCH in prior 15- 120 

 Days 18.33

5a) Pre-HHA: With IH/IRF/SNF/LTCH in prior 14 days 18.97

5b) Pre-HHA: With IH/IRF/SNF/LTCH in prior 15- 120 

 Days 16.74

6a) Pre-HHA: Without IH/IRF/SNF/LTCH in prior 14 

 Days 16.95

6b) Pre-HHA: Without IH/IRF/SNF/LTCH in prior 15- 18.29
CMS-1353-P 25 

MODEL

Nominal Case-mix 

Percent Increase 

from 2000 to 2008

 120 days

7a) AGENCY-LEVEL: Owner: Non-Profit 14.49

7b) AGENCY-LEVEL: Owner: For-Profit 18.63

7c) AGENCY-LEVEL: Owner: Government 15.22

8a) AGENCY-LEVEL: Facility-Based HHA 14.17

8b) AGENCY-LEVEL: Free-Standing HHA 17.86

9a) AGENCY-LEVEL: West Region 17.51

9b) AGENCY-LEVEL: Midwest Region 16.76

9c) AGENCY-LEVEL: South Region 18.01

9d) AGENCY-LEVEL: Northeast Region 14.81

10a) AGENCY-LEVEL: Large Agency 17.21

10b) AGENCY-LEVEL: Small Agency 17.53

11a) AGENCY-LEVEL: Urban HHA 17.75

11b) AGENCY-LEVEL: Rural HHA 15.36

12a) AGENCY-LEVEL: Treats predominantly post-acute 

 patients 16.67

12b) AGENCY-LEVEL: Treats predominantly community 

 patients 18.87

13) First Episode Only 19.06

HHA = home health agency; IH = Inpatient hospitalization; IRF = inpatient rehabilitation facility; 

SNF = skilled nursing facility; LTCH = long-term care hospital, ACH LOS= acute care hospital 

length of stay 

 

To address the concern about our current models’ 

robustness when there is no prior inpatient or post-acute 

care setting (when patients are admitted from the 

community), the Harvard team re-ran our models for separate 

subgroups; in most cases, subgroups were defined by the 

prior hospital and post-acute care use measures present on 

the data file. Specifically, they defined prior 

inpatient/post-acute care use in six different ways (shown 

in lines 1a through 6b of Table 1A): any hospital use over 

the past 14 days (yes/no); any post-acute use over the 

prior 14 days (yes/no); any hospital use over the past 15-

120 days (yes/no); any post-acute care use over the past 
CMS-1353-P 26 

15-120 days (yes/no); any hospital or post-acute care use 

in the preceding 14 days (yes/no); and any hospital or 

post-acute care use in the preceding 15-120 days (yes/no). 

As another test, the team separated agencies according to 

whether they treated predominantly post-acute patients or 

not. To calculate this measure, the Harvard team split 

agencies above/below the median based on their percentage 

of home health episodes in 2007 with an inpatient hospital 

stay in the preceding 14 days. 

Across all models, there was evidence of significant 

and similar nominal case-mix growth, suggesting that high 

rates of nominal case-mix growth exist regardless of 

whether there was a preceding inpatient or post-acute stay. 

Agencies classified as serving predominantly community 

patients had a slightly higher nominal case-mix percentage 

increase compared to agencies classified as serving 

predominately post-acute patients (as shown in lines 12a 

and 12b in Table 1A). (For a full description of the 

Harvard team’s analysis and results, please see the L&M 

final report located at http://www.cms.gov/center/hha.asp). 

Also, to evaluate the validity of the comment that the 

acute care hospital APR-DRG and other prior use variables in 

our model may not be relevant for patients with more than 

one home health episode, the Harvard team re-ran our current 

predictive models using only the first home health episode 

for each patient (shown in line 13 of Table 1A). Once 
CMS-1353-P 27 

again, results based on this first episode were similar to 

the overall results of our current model, suggesting that 

the model is relatively stable across home health episodes. 

The results show that the inclusion of the later episodes 

does not dramatically alter the primary finding of 

significant nominal case-mix growth. 

To evaluate the comment that our models should take 

into account the fact that there are shorter hospital stays 

and therefore, the patients who are discharged from the 

hospital into home health may have a higher level of 

severity of illness than the model recognizes, our 

predictions were calculated assuming there was a different 

average length of stay than the actual average length of 

stay found for the LOS predictor variables in the 2007 and 

2008 follow-up years. Harvard developed predictions of 

real and nominal case-mix growth using the median acute 

care hospitalization length of stay, instead of the mean 

length of stay which is used in our current model. The 

median is lower than the mean acute care hospitalization 

length of stay. Harvard also developed predictions of real 

and nominal case-mix growth using the third quartile acute 

care hospitalization length of stay, which is longer than 

the mean. The results were very similar to the overall 

nominal case-mix percentage increase and therefore, the 

analysis suggests that our methodology is not particularly 

limited in capturing length of stay effects, because acute 
CMS-1353-P 28 

care hospitalization length of stay does not play a big 

role in determining average patient severity. 

To evaluate the suggestion that we should limit 

nominal case-mix change reductions to certain types of 

agencies (such as by region or for-profit/non-profit status 

or by CMI), the Harvard team re-ran our model based on 

ownership type (non-profit, government, for-profit), agency 

type (facility-based, freestanding), region of the country 

(Northeast, South, Midwest, West), urban vs. rural status, 

and agency size (large vs. small; based on the number of 

initial episodes), shown in lines 7a through 11b in Table 

1A. As noted earlier, the team also examined case-mix 

growth by whether the agency had a particular focus on 

post-acute vs. community patients. Across all these 

different categories (ownership, agency type, region, urban 

vs. rural status, agency size, agency focus), nominal casemix growth was present. As expected, nominal case-mix 

growth was larger for some sub-groups. For example, 

nominal case-mix growth was higher for for-profit agencies 

(18.63 percent) than non-profit (14.49 percent) and 

government agencies (15.22 percent); however, these latter 

ownership types still exhibited high rates of nominal casemix growth. As such, the Harvard team asserted that 

similar high rates of nominal case-mix growth exist for all 

types of HHAs. 
CMS-1353-P 29 

To address the comment that a study which used MEPS 

data showed a higher rate of real case-mix growth in the 

entire Medicare population than our model estimated for 

Medicare home health patients, a more detailed analysis of 

the MEPS data was performed. The trends in health status 

of four different populations from 2000 to 2008 were 

analyzed. The data for the analysis were obtained from the 

MEPS 2000 and 2008 Full Year Consolidated Data files. The 

four populations that were analyzed were: (1) the full 

MEPS sample; (2) all Medicare beneficiaries, defined as all 

respondents ever having Medicare in a given year; (3) all 

home health patients, defined as having at least one home 

health provider day in a given year; and (4) all home 

health Medicare beneficiaries, defined as all respondents 

with any Medicare home health charges. Two measures of 

self-reported health status and one measure derived from 

patient information that screened for activities of daily 

living (ADL) limitations were used to determine the trends 

in health status. These types of measures have been shown 

to be highly correlated with actual health (Ware and 

Sherbourne, 1992; McHorney, Ware, and Raczek, 1993). The 

three measures which were analyzed for each of the 

populations were: (1) whether the respondent indicated 

perceived health status of “poor” or “fair” as opposed to 

those indicating health status as “good”, “very good”, or 
CMS-1353-P 30 

“excellent”; (2) whether the respondent indicated if pain 

limited normal work (including work in the home) in the 

past 4 weeks “extremely” or “quite a bit” as opposed to 

those indicating pain limited work “moderately”, “a little 

bit”, or “not at all”; and (3) whether respondents had a 

positive screen for needing assistance with ADL. In all 

cases, responses such as “refused”, “don’t know”, or “not 

ascertained” were omitted from the analysis. The Medicare 

analysis samples consisted of 3,371 and 4,144 beneficiaries 

in 2000 and 2008, respectively. The Medicare home health 

subsamples consisted of 174 and 289 beneficiaries in 2000 

and 2008, respectively. The survey responses were then 

weighted using pre-constructed MEPS survey weights to 

estimate nationally representative changes in the three 

health status variables. 

All three measures indicated a slight increase in the 

overall health status of the Medicare home health 

population. Two of these results were not statistically 

significant, but the percent of home health Medicare 

beneficiaries experiencing “extreme” or “quite a bit” of 

work-limiting pain decreased substantially, from 56.6 

percent in 2000 to 45.4 percent in 2008 (p=0.039). Unlike 

Dr. Deb’s original study, the new MEPS analysis focuses 

specifically on Medicare home health users (as opposed to 

the entire Medicare population), and it is not reliant on 
CMS-1353-P 31 

expenditure data. A limitation of the Debs case-mix 

measure, which relies on expenditure data, is that it could 

reflect large increases in expenditures, such as drug 

expenditures, but any relationship to actual increases in 

impairments and other reasons for using home health 

resources is unclear. A possible limitation of the new 

MEPS analysis is that the sample of Medicare home health 

respondents is relatively small, notwithstanding that the 

result of one of the three measures was statistically 

significant. Also, the ADL screening item may not capture 

a change in the frequency of very severe ADL limitations 

since the measure may be insensitive to changes at high 

levels of disability. However, the Harvard team asserted 

that the methods of the new MEPS analysis are more 

appropriate for assessing whether there are increases in 

the severity of illness burden that would specifically 

indicate a need for more resources in the Medicare home 

health population. Based on the two kinds of evidence, and 

a recognition of the limitations of both, we conclude that 

the MEPS data provide no evidence of an increase in patient 

severity from 2000 to 2008. 

Based on the findings from the extensions of the 

current model that were tested, including the finding that 

the two nominal case-mix percentage increases for the postacute and community patients are similar (Table 1A), and 
CMS-1353-P 32 

the results of the MEPS analysis which do not provide 

evidence to suggest that the Medicare home health 

population has experienced a decrease in their health 

status over time, the Harvard team concluded that the 

current model adequately measures real case-mix growth for 

home health patients, including patients admitted to home 

health from the community. 

When reviewing the model, the Harvard team found that 

overall, our models are robust. However, one area of 

potential refinement to our models that the Harvard team 

suggested was to incorporate variables derived from 

Hierarchical Condition Categories (HCC) data, which is used 

by CMS to risk-adjust payments to managed care 

organizations in the Medicare program. Currently, the HCC 

model includes 70 HCCs, each of which is defined based on 

the presence of particular ICD-9-CM codes identified from 

Medicare claims data (inpatient and outpatient hospital 

claims and Part B Physician Claims). Some of the HCCs 

reflect hierarchies among related conditions, but, for 

unrelated diseases, each HCC is separately defined. The 

HCC model also includes demographic items related to 

gender, age, Medicaid enrollment, and whether Medicare 

eligibility was originally based on disabled status. We 

have augmented our modeling data with HCC information, as 

described in the next section. 
CMS-1353-P 33 

2. Revised version of our models to assess nominal casemix growth 

In the past, we have considered using HCC data to 

assess real and nominal case-mix change; however, we have 

yet to implement a change to our models which would 

incorporate the HCC data. Based on Dr. Grabowski and his 

team’s recommendation and our previous consideration to 

incorporate HCC data in our models to assess real case-mix 

change, we explored the effects of adding the managed care 

data to our models. To incorporate HCC data into our 

models, we augmented our analytic files used to measure 

real case-mix change. We obtained HCC data on all home 

health users for 2004-2009. There were several different 

types of HCC variables that could be added to our models to 

assess real case-mix. Some of the variables we considered 

are the HCC risk score, binary variables for each of the 

HCCs, demographic variables, and disease indicators. 

In the HCC model used for managed care risk 

adjustment, each HCC has an associated regression 

coefficient. Regression coefficients for each 

beneficiary's HCCs, along with the regression coefficients 

for their demographic and enrollment characteristics, are 

summed to calculate predicted expenditures. A risk score 

for each record can then be calculated based on expected 

expenditures for the patient divided by the mean 

expenditures for all patients. The HCC data include 
CMS-1353-P 34 

several risk score measures, including the HCC community 

risk score, the institutional risk score, and the risk 

score for new Medicare enrollees. Because home health 

patients live in the community, the community risk score 

seemed more appropriate than the institutional risk score. 

An alternative to using the HCC risk score was to include 

binary variables for each of the 70 HCCs, which may better 

capture a patient’s severity. Along with the HCC risk 

score and the individual HCCs, we considered other elements 

of the HCC data such as the demographic variables, whether 

disability was the original reason for Medicare 

entitlement, and an indicator for whether the individual is 

a Medicaid beneficiary. Furthermore, we examined 

interactions involving a number of disease conditions that 

are included with the HCC data, such as congestive heart 

failure (CHF), diabetes mellitus (DM), chronic obstructive 

pulmonary disease (COPD), cardiovascular disease (CVD), 

renal failure (RF), and coronary artery disease (CAD). 

 To test the usefulness of these different HCC 

variables, we developed several models to examine real 

case-mix and which contained different types of HCC data. 

We examined models in which we added the HCC community 

score to our CY 2005 data so that the HCC score was 

included with the APR-DRG variables in an equation 

explaining 2005 case-mix weights. We also examined models 
CMS-1353-P 35 

which incorporated individual HCCs, instead of the HCC risk 

score. Furthermore, we examined models in which either the 

HCC risk score or individual HCCs were added to our model 

along with demographic and disease indicator variables. 

Moreover, we examined models which did not include APRDRGs, but rather the HCC risk score or individual HCCs 

replaced the APR-DRGs in the model. When we replaced the 

APR-DRGs in the models with the HCC risk score, there was a 

low R-squared value, lower than any of the other models we 

examined. When we replaced the APR-DRG variables in our 

models with the individual HCC indicators, we observed a 

negative change in real case-mix. This negative change in 

real case-mix would indicate that the health status of the 

Medicare home health population has improved over time and 

that all of the change in case-mix from 2000-2009 would be 

nominal case-mix change. As a result of the findings from 

the various models, we decided to augment our current model 

with the HCC variables rather than replace our APR-DRG 

variables with HCC variables. 

 It should be noted that in addition to examining which 

HCC variables we should include in our models, we also 

examined which year of HCC data we should use in our 

models. There is a 1 year look-back period with HCC data 

in that the HCC data are based on the previous calendar 

year’s claims history for an individual. Therefore, when 
CMS-1353-P 36 

developing our models, we assessed whether we should use 

HCC data from the previous year or HCC data in the same 

year as when the home health episode occurred (the home 

health episode is the unit of observation in our models). 

Our concern was that if we used HCC data in the same year 

as the episode, the HCC data may partially reflect diseases 

and conditions identified after a home health episode. 

However, we decided to use HCC data in the same year as the 

episode since we thought it best reflected the health 

status of the patients in that year. 

 For this year’s analysis, we used a similar approach 

to our previous methods. The basic method is to estimate a 

prediction model and use coefficients from that model along 

with predictor variables from a different year to predict 

the average case-mix for that year. It should be noted 

that we chose to enhance our models with HCC data starting 

in 2005 due to the availability of HCC data in our analytic 

files. Therefore, we analyzed real case-mix change for 

three different periods, from 2000 to 2005, from 2005 to 

2007, and from 2007 to 2009. The real case-mix change in 

the period from 2005 to 2007 and the period from 2007 to 

2009 were assessed using enhanced models, which included 

HCC data. The real case-mix change from 2000 to 2005 was 

assessed using the same variables used in the model 

described in last year’s regulation (75 FR 43238), a 
CMS-1353-P 37 

variable list consisting of measures of patients’ 

demographic characteristics, clinical status, inpatient 

history, and Part A Medicare costs in the time period 

leading up to their home health episodes. The regression 

coefficients from the model without HCC variables were 

applied to episodes from 2005, allowing us to estimate how 

much of the change in observed case-mix was attributable to 

changes in patient characteristics between the IPS period 

and 2005. 

 We added HCC variables for the 2005 to 2007 period, 

estimating the model using data from 2005. The enhanced 

model includes HCC community scores, HCC demographic 

variables, and disease indicator variables for 2005 and 

later. We chose this version of the HCC-enhanced case-mix 

change model largely based on its ability to predict higher 

real case-mix change relative to the other HCC enhanced 

models. We applied the regression coefficients to means 

from 2007, allowing estimation of real case-mix change 

between 2005 and 2007. 

For the 2007 to 2009 period, we used the 153 HHRG 

case-mix weights and data from 2009 to estimate the same 

set of models as we did for 2005. Using the backwards 

prediction method that we used in CY 2011 rulemaking, the 

coefficients from this model were developed using 2009 data 

and were applied to episodes from 2007. This procedure 
CMS-1353-P 38 

allows us to estimate how much of the 2007 through 2009 

change (based on the HHRG153 case-mix for both periods) was 

associated with changes in patient characteristics between 

2007 and 2009. 

 From 2000 to 2009, we identified a total change in 

case-mix of 0.2476 (1.3435-1.0959 = 0.2476), which results 

in a case-mix growth of 22.59 percent ((1.3435-

1.0959)/1.0959 = 0.2259). We then estimated the real and 

nominal change in case-mix for each of the three periods. 

The change in real case-mix from 2000 to 2005 was 0.0207 

case-mix units. The change in real case-mix from 2005 to 

2007 was 0.0061 case-mix units. The change in real casemix from 2007 to 2009 was 0.0122 case-mix units. After 

adding together the estimated real case-mix change in casemix units for the three periods, the total estimated change 

in real case-mix from 2000 to 2009 was 0.0390 (0.0207 + 

0.0061 + 0.0122 = 0.0390). Therefore, we estimate that 

15.76 percent of the total percentage change in the 

national average case-mix weight since the IPS baseline 

through 2009 is due to change in real case-mix 

(0.0390/0.2476 = ~0.1576). It should be noted that due to 

rounding, there is a 0.01 percentage point difference 

between the calculated and actual value. When taking into 

account the total measure of case-mix change (22.59 

percent) and the 15.76 percent of total case-mix change 
CMS-1353-P 39 

estimated as real from 2000 to 2009, we obtained a final 

nominal case-mix change measure of 19.03 percent from 2000 

to 2009 (0.2259 * (1-0.1576) = 0.1903). Please see Table 

1B for additional information about the calculations used 

to make the real and nominal case-mix change estimates from 

2000 to 2009. 

Our estimates of real and nominal case-mix change are 

consistent with past results. Most of the case-mix change 

has been due to improved coding, coding practice changes, 

and other behavioral responses to the prospective payment 

system, such as increased use of high therapy treatment 

plans. 

Table 1B: Summary of Real and Nominal Case-mix Change 

Estimates: 2000-2009 

Measure Model 

Actual case-mix: 2000 1.0959 

Actual case-mix: 2009 1.3435 

Total change in case-mix 0.2476 

Total percentage change 22.59% 

 

Estimated real change in case-mix 0.0390 

Percent of total change estimated as real 15.76% 

Percent of total change estimated as nominal 

(creep) 84.24% 

Real case-mix percent increase 3.56% 

Nominal case-mix percent increase 19.03% 

 As we described earlier in this proposed rule, our CY 

2008 HH PPS final rule finalized a reduction over 4 years 

in the national standardized 60-day episode payment rates 

to account for a large increase in case-mix from 2000 to 

2005 which we determined was not related to treatment of 
CMS-1353-P 40 

more intense patients. We implemented a 2.75 percent 

reduction each year for 2008, 2009, and 2010 and planned to 

reduce payments by 2.71 percent in 2011. In CY 2011 

rulemaking, we updated our analysis of nominal case-mix 

growth through 2008 and determined that there was 17.45 

percent nominal case-mix growth from 2000 to 2008. 

Therefore, we proposed and finalized an increase in the 

planned 2.71 percent reduction to 3.79 percent for CY 2011. 

Also, in the CY 2011 proposed rule, we stated that if we 

were to identify further increases in nominal case-mix as 

more current data becomes available, it would be our intent 

to account fully for those increases when they are 

identified, rather than continuing to phase in the 

reductions over more than 1 year. For the CY 2012 proposed 

rule, after updating our models to incorporate HCC data, we 

have determined that there was a 19.03 percent nominal 

case-mix change from 2000 to 2009. To account for the 

remainder of the 19.03 percent residual increase in nominal 

case-mix beyond that which has been accounted for in 

previous payment reductions, we estimate that the 

percentage reduction to the national standardized 60-day 

episode rates for nominal case-mix change for CY 2012 will 

be 5.06 percent. Therefore, for CY 2012, we propose to 

implement a 5.06 percent payment reduction to the national 

standardized 60-day episode rates to fully account for 
CMS-1353-P 41 

growth in nominal case-mix from the inception of HH PPS 

through 2009. 

B. Case-Mix Revision to the Case-Mix Weights

1. Hypertension Diagnosis Coding Under the HH PPS

In CY 2011 rulemaking, we proposed to remove ICD-9-CM 

code 401.1, Benign Essential Hypertension, and ICD-9-CM 

code 401.9, Unspecified Essential Hypertension, from the HH 

PPS case-mix model’s hypertension group. Beginning with 

the HH PPS refinements in 2008, hypertension was included 

in the HH PPS system because data suggested it was 

associated with elevated resource use. As a result, the 

diagnoses Unspecified Essential Hypertension and Benign 

Essential Hypertension were associated with additional 

points from the four-equation model and subsequently, 

potentially higher case-mix weights in the HH PPS case-mix 

system. When examining the trends in reporting of 

hypertension codes from 2000 to 2008, our analysis showed a 

large increase in the reporting of codes 401.1 and 401.9 in 

2008. However, when looking at 2008 claims data, the 

average number of visits for claims with code 401.9 was 

slightly lower than the average for claims not reporting 

these hypertension codes. In last year’s proposed rule, we 

proposed to remove codes 401.1 and 401.9 from our case-mix 

model based on preliminary analysis of the trends in coding 

and resource use of patients with these codes. We 
CMS-1353-P 42 

suspected that the 2008 refinements, which newly awarded 

points for the diagnosis codes 401.1 and 401.9, led to an 

increase in reporting of these codes and that this 

reporting was a key driver of the high 2008 growth in 

nominal case-mix. In response to this proposed policy 

change, we received numerous comments, many of which stated 

that additional analysis was needed to substantiate the 

rationale for removing hypertension codes 401.1 and 401.9. 

In the CY 2011 HH PPS final rule, we withdrew our proposal 

to eliminate 401.1 and 401.9 from our model and described 

our plans to do a more comprehensive analysis of the 

resource use of patients with these two hypertension codes. 

We have since completed a more thorough analysis. Based on 

the results of our latest analyses, we propose to remove 

codes 401.1 and 401.9 from the HH PPS case-mix system. 

We performed several analyses of the resource use and 

prevalence of patients with Benign Essential Hypertension 

and Unspecified Essential Hypertension (codes 401.1 and 

401.9) to assess the appropriateness of these codes in our 

case-mix model. We looked at the HH PPS episode data using 

two samples to more accurately assess the trends in 

hypertension prevalence over time. In one sample, we 

excluded episodes from providers in areas exhibiting 

suspect billing practices. For the other sample, we 

excluded outlier episodes. In all of the analyses that 
CMS-1353-P 43 

follow, we report the results from the sample that excludes 

outliers because results from the alternate analysis were 

highly similar. Also, the sample that excludes outliers is 

more appropriate than one that includes outliers because 

our case-mix research has been conducted on samples without 

outliers. 

One of our analyses looked at the prevalence of 

various hypertension codes over time. We compared the 

change in prevalence of 401.1 and 401.9 diagnoses to the 

prevalence of other diagnoses in the hypertension group--

401.0 (malignant essential hypertension), 402 (hypertensive 

heart disease), 403 (hypertensive chronic kidney disease), 

404 (hypertensive heart and chronic kidney disease), and 

405 (secondary hypertension)--from 2005 to 2009 (Table 2). 

Our analysis shows that the prevalence of episodes with a 

401.9 diagnosis continued to increase in 2009, from 50.58 

percent of episodes in 2008 to 55.52 percent in 2009, and 

more than doubled between 2005 and 2009. The prevalence of 

episodes with a 401.1 diagnosis decreased from 2008 to 2009 

but the prevalence remained slightly higher than the 

prevalence in 2005. 

TABLE 2: Prevalence of Hypertension--2005-2009 

Diagnosis 2005 2006 2007 2008 2009

Any hypertension 33.32% 40.22% 46.26% 60.37% 65.65%

401.0 Malignant essential 

hypertension 

0.56% 0.54% 0.53% 0.56% 0.47%

401.1 Benign essential 

hypertension 

2.89% 3.36% 3.44% 3.79% 2.95%
CMS-1353-P 44 

Diagnosis 2005 2006 2007 2008 2009

401.9 Essential hypertension, 

unspecified 

27.23% 33.22% 38.74% 50.58% 55.52%

402 Hypertensive heart disease 2.19% 2.38% 2.49% 2.99% 2.76%

403 Hypertensive renal disease 0.31% 0.56% 0.92% 2.24% 3.66%

404 Hypertensive heart and 

renal disease 

0.14% 0.17% 0.20% 0.31% 0.39%

405 Secondary hypertension 0.04% 0.04% 0.03% 0.03% 0.04%

Outlier episodes are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file for 2005-2009. 

 We also examined the prevalence of hypertension coding 

by various agency characteristics, such as agency type, 

region, and provider size, in 2005 versus 2009 (Tables 3 

and 4). We compared the 2005 data (Table 3) to more 

current data (Table 4) because the 2005 data were used to 

simulate the 2008 refinements for the CY 2008 HH PPS final 

rule implementing the 153-group case-mix system (72 FR 

49762 through 49945). Based on our analysis, except for 

government-owned agencies and agencies in a few regions, 

agencies (regardless of type) had a similar prevalence of 

episodes with a 401.9 diagnosis across the board in 2009 

(Table 4). Also, agencies had a relatively similar 

prevalence of episodes with a 401.1 diagnosis across the 

board in 2009, except for West South Central, which had a 

high prevalence of 6.68 percent (Table 4)-— about 9 times 

the region’s prevalence in 2005. In addition, small 

facilities with less than 19 home health episodes in a year 

in the 20 percent sample of the Home Health Datalink file 

had a high prevalence of diagnosis 401.1; 8.30 percent of 
CMS-1353-P 45 

their episodes had a 401.1 diagnosis. All categories of 

agencies appear to have a significant increase in the 

reporting of a 401.9 diagnosis when comparing 2005 HH PPS 

claims and OASIS data to 2009 HH PPS claims and OASIS data. 

The reporting of a 401.9 diagnosis in 2009 was typically 

1.8 to 2.1 times the reporting of a 401.9 diagnosis in 

2005, with the exception of the East North and the West 

North Central regions which had an increase of around 1.7 

and 1.5 fold respectively. Also, it should be noted that 

the Mid Atlantic region had around a 2.4 fold increase in 

the reporting of a 401.9 diagnosis between 2005 and 2009 

and the West South Central region had almost a threefold 

increase in the reporting of a 401.9 diagnosis between 2005 

and 2009. Furthermore, many categories had an increase in 

the reporting of a 401.1 diagnosis when comparing 2005 data 

to 2009. 

TABLE 3: Prevalence of Hypertension by Various Agency 

Characteristics—2005 

 Any 401.0 401.1 401.9 402 403 404 405 

All Agencies 33.59% 0.56% 2.96% 27.34% 2.26% 0.32% 0.15% 0.04%

Type of Facility: 

FreeStanding/Other 

Vol/NP 

27.50% 0.21% 0.63% 25.49% 0.83% 0.30% 0.06% 0.01%

FreeStanding/Other 

Prop. 

39.35% 0.86% 4.86% 29.63% 3.48% 0.30% 0.19% 0.06%

FreeStanding/Other 

Govt. 

29.01% 0.41% 1.35% 25.36% 1.51% 0.22% 0.17% 0.04%

Hospital-Based 

Vol/NP 

25.11% 0.17% 0.68% 23.33% 0.51% 0.35% 0.09% 0.01%
CMS-1353-P 46 

Hospital-Based 

Prop. 

29.79% 0.30% 0.68% 27.50% 0.83% 0.37% 0.16% 0.01%

Agency-Based 

Govt. 

30.94% 0.80% 3.04% 24.46% 1.92% 0.53% 0.23% 0.02%

Facility Location: 

New England 39.36% 1.06% 5.25% 27.83% 4.63% 0.37% 0.30% 0.01%

Mid Atlantic 26.09% 0.22% 0.81% 23.79% 0.65% 0.24% 0.09% 0.01%

South Atlantic 36.87% 0.81% 5.93% 27.41% 2.21% 0.30% 0.14% 0.09%

East South 

Central 

31.97% 0.42% 0.90% 29.15% 1.26% 0.24% 0.07% 0.01%

West South 

Central 

21.15% 0.25% 0.74% 19.57% 0.32% 0.19% 0.09% 0.01%

East North 

Central 

36.54% 0.20% 0.62% 34.59% 0.47% 0.62% 0.06% 0.02%

West North 

Central 

37.81% 0.56% 1.46% 32.10% 3.17% 0.35% 0.21% 0.01%

Mountain 29.95% 0.45% 1.58% 24.74% 2.70% 0.35% 0.16% 0.03%

Pacific 25.33% 0.32% 1.81% 22.17% 0.76% 0.21% 0.07% 0.02%

Other 36.33% 0.46% 2.46% 28.89% 4.30% 0.16% 0.12% 0.01%

Facility Size: 

< 19 episodes 36.71% 0.79% 3.86% 28.75% 2.53% 0.52% 0.19% 0.10%

20 to 49 36.11% 0.74% 4.42% 27.39% 2.98% 0.38% 0.17% 0.04%

50 to 99 35.98% 0.80% 4.06% 27.97% 2.73% 0.31% 0.11% 0.02%

100 to 199 36.78% 0.73% 4.11% 28.60% 2.81% 0.33% 0.16% 0.07%

200+ 32.86% 0.53% 2.72% 27.06% 2.09% 0.31% 0.14% 0.03%

Outlier episodes are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file. 

TABLE 4: Prevalence of Hypertension by Various Agency 

Characteristics—2009 

 Any 401.0 401.1 401.9 402 403 404 405

All Agencies 65.95% 0.48% 3.17% 55.36% 3.00% 3.64% 0.40% 0.04%

Type of Facility: 

FreeStanding/Other 

Vol/NP 

60.11% 0.17% 0.94% 53.06% 0.71% 5.05% 0.24% 0.01%

FreeStanding/Other 

Prop. 

69.42% 0.62% 3.86% 57.81% 3.74% 3.07% 0.44% 0.05%

FreeStanding/Other 

Govt. 

54.60% 0.45% 3.13% 44.98% 2.00% 3.41% 0.72% 0.02%

Hospital-Based 56.82% 0.16% 1.22% 49.49% 0.78% 4.93% 0.32% 0.02%
CMS-1353-P 47 

Vol/NP 

Hospital-Based 

Prop. 

61.41% 0.21% 1.45% 54.61% 1.83% 3.31% 0.16% 0.01%

Agency-Based 

Govt. 

54.89% 0.48% 2.29% 46.53% 1.68% 3.57% 0.48% 0.03%

Facility Location: 

New England 58.71% 0.10% 0.54% 53.96% 0.43% 3.50% 0.23% 0.02%

Mid Atlantic 62.45% 0.12% 0.65% 56.04% 0.58% 4.98% 0.16% 0.01%

South Atlantic 64.09% 0.28% 1.74% 56.80% 1.49% 3.46% 0.31% 0.08%

East South 

Central 

69.52% 0.22% 2.13% 59.69% 3.27% 3.73% 0.61% 0.01%

West South 

Central 

73.22% 0.92% 6.68% 57.28% 4.47% 3.53% 0.50% 0.05%

East North 

Central 

67.01% 0.52% 2.16% 57.42% 3.04% 3.68% 0.34% 0.02%

West North 

Central 

55.97% 0.46% 1.84% 48.00% 1.12% 4.15% 0.46% 0.06%

Mountain 56.02% 0.52% 2.21% 49.13% 1.29% 2.51% 0.32% 0.10%

Pacific 57.42% 0.52% 3.00% 45.06% 5.50% 3.02% 0.51% 0.03%

Other 63.20% 0.33% 1.58% 55.53% 1.52% 4.00% 0.35% 0.00%

Facility Size: 

< 19 episodes 71.19% 1.77% 8.30% 51.27% 7.35% 2.01% 0.71% 0.08%

20 to 49 68.39% 1.35% 6.13% 53.07% 5.63% 2.04% 0.44% 0.04%

50 to 99 67.67% 0.66% 4.27% 54.27% 5.26% 2.82% 0.52% 0.07%

100 to 199 65.99% 0.52% 4.03% 54.90% 3.12% 3.07% 0.41% 0.08%

200+ 64.37% 0.21% 1.52% 56.61% 1.38% 4.38% 0.33% 0.02%

Outlier episodes are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file. 

In last year’s final regulation, we received a comment 

stating that a multivariate analysis of the costliness of 

hypertension is advisable to strengthen the evidence for 

the proposal to eliminate the 401.1 and 401.9 diagnoses 

from the case-mix model. In response to this comment, we 

estimated a set of multivariate regression models to 

examine the resources associated with the 401.1 and 401.9 

diagnoses while adjusting for other factors in the case-mix 

system (Tables 5 and 6). The multivariate regression 
CMS-1353-P 48 

models used 2008 HH PPS claims and OASIS data which 

excluded PEP, LUPA, and outlier episodes. Model 1 included 

variables for the number of therapy visits, the clinical 

score, the functional score, and indicators for whether a 

401.1 or 401.9 diagnosis was present. In this model, both 

the 401.1 and 401.9 diagnoses were associated with 

significantly lower costs (-19 and -18 resource units, 

respectively). This model indicates that an episode with a 

401.1 or 401.9 code has less resource costs than an episode 

without a 401.1 or 401.9 code, when the amount of therapy, 

clinical score, and functional score are held constant. 

Model 2 included variables for the payment weight and the 

401.1 and 401.9 indicators. In this model, both 401.1 and 

401.9 were associated with lower costs and these impacts 

were statistically significant. The diagnosis code 401.1 

was associated with significantly lower costs (-22 resource 

units) while the 401.9 indicator was associated with about 

-2 resource units. This model most accurately shows the 

impact of codes 401.1 and 401.9 on resource use within the 

payment system, because it directly controls for the 

payment weight, which represents in a summary variable all 

the other conditions paid for in the case-mix algorithm. 

Both models provide strong evidence for removing the 401.1 

diagnosis from the case-mix model, since it is associated 

with significantly lower resource costs. The models also 
CMS-1353-P 49 

provide strong evidence for removing the 401.9 diagnosis, 

since they do not indicate that this condition is 

responsible for additional resource costs beyond what is 

already accounted for in the case-mix model. 

In addition, it should be noted that when we estimated 

the multivariate regression models when excluding episodes 

from providers in areas exhibiting suspect billing 

practices, ICD-9-CM diagnosis code 401.9 was associated 

with slightly lower costs and ICD-9-CM diagnosis code 401.1 

was associated with a slight increase in resource costs 

(about +3 resource units). However, we believe that 

relying on analyses that include outliers, as this sample 

does, is problematic. In 2008 and 2009, outliers reached a 

historically high rate per 100 episodes in home health, and 

the abuse of the PPS outlier policy was subsequently 

recognized as a significant problem. In a 10 percent 

random beneficiary sample, there is a strong association 

between the reporting of code 401.1 and outliers, and this 

association could be contributing to the higher resource 

costs for episodes with the 401.1 code in the regression 

that excludes episodes from suspect areas. Although it is 

not certain whether the use of this code in outlier cases 

is related to abusive outlier utilization, we are cautious 

about relying on data that include outliers. In addition, 

even absent any concerns about suspect billing practices, 
CMS-1353-P 50 

the increase in resource costs associated with a 401.1 

diagnosis is not large enough to warrant awarding 

additional points in our case-mix system for the diagnosis. 

TABLE 5: Regression Results: Resources Associated with a 

401.1 or 401.9 Diagnosis: Model 1 (2008) 

Variable Parameter T value 

Estimate 

Standard Error 

 

Pr > |t| 

Intercept 171.1183 0.74992 228.18 <.0001 

Number of therapy 

visits 

34.72435 0.0371 936.03 <.0001 

Clinical score 8.7105 0.03774 230.8 <.0001 

Functional score 8.63246 0.08876 97.26 <.0001 

ICD9 401.1 present -18.72875 1.38201 -13.55 <.0001 

ICD9 401.9 present -18.19412 0.53904 -33.75 <.0001 

PEP, LUPA and outlier episodes are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file for 2008.

TABLE 6: Regression Results: Resources Associated with a 

401.1 or 401.9 Diagnosis: Model 2 (2008) 

Variable Parameter T value 

Estimate 

Standard Error 

 

Pr > |t| 

Intercept -35.5089 0.68637 -51.73 <.0001 

Payment weight 530.9656 0.51853 1023.98 <.0001 

ICD9 401.1 present -21.96335 1.43741 -15.28 <.0001 

ICD9 401.9 present -1.73284 0.55998 -3.09 0.002

PEP, LUPA and outlier episodes are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file for 2008.

We also examined whether there were any subsets of 

patients with a 401.1 or 401.9 diagnosis who had higher 

resource costs. Potentially such information could lead to 

adding interaction variables involving the two hypertension 

diagnoses to the case-mix model. The model currently 

includes several interactions (for example, 

gastrointestinal disorders and ostomy). There was 

speculation that patients who required respiratory 
CMS-1353-P 51 

treatments may have higher than expected resource costs in 

the presence of either of the two hypertension codes—for 

example, patients who are smokers. We therefore examined 

the resource costs for patients with a 401.1 or a 401.9 

diagnosis and different types of respiratory treatments 

(Tables 7 and 8). The results showed that there was a 

decrease in resource costs for episodes with patients with 

a 401.1 diagnosis and who received respiratory treatments 

(Table 7). In addition, it can be noted that there was a 

decrease in resource costs for episodes with patients with 

a 401.1 diagnosis and no respiratory treatment. Table 8 

shows that there was a decrease in average cost for 

episodes with patients with a 401.9 diagnosis and who were 

on oxygen or receiving continuous positive airway 

treatment. There was also an increase in resource costs 

for episodes with 401.9 compared to those without 401.9 for 

patients on ventilators. However, this increase in 

resource costs associated with the presence of a 401.9 

diagnosis is not statistically significant. Overall, the 

results from Tables 7 and 8 show that there is little 

support for keeping 401.1 and 401.9 codes for patients 

receiving respiratory treatments. 
CMS-1353-P 52 

TABLE 7: Resource Costs for Patients with a 401.1 

Diagnosis and Respiratory Treatment (2008) 

401.1 Present 

 

No Yes Difference 

% 

Difference 

Oxygen $575.79 $567.52 ($8.27) -1.44%

Ventilator $662.71 $612.24 ($50.47) -7.62%

Continuous positive airway 

pressure 

$587.05 $530.93 ($56.12) -9.56%

None $567.88 $554.61 ($13.27) -2.34%

Outliers are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file for 2008.

TABLE 8: Resource Costs for Patients with a 401.9 

Diagnosis and Respiratory Treatment (2008) 

401.9 Present 

 

No Yes Difference 

% 

Difference 

Oxygen $581.66 $568.46 ($13.20) -2.27%

Ventilator $648.94 $683.77 $34.83 5.37%

Continuous positive airway 

pressure 

$599.69 $572.08 ($27.61) -4.60%

None $568.42 $566.75 ($1.67) -0.29%

Outliers are excluded. 

Source: Abt Associates analysis of 20 percent sample of Home Health Datalink file for 2008.

We also looked at the average resource cost of 

episodes for patients categorized by primary diagnosis, 

with and without a 401.9 diagnosis code, to determine 

whether there are other sub-categories of patients 

diagnosed with 401.9 who are more resource intensive 

(Table 9). Many primary diagnoses had a lower average cost 

when code 401.9 was present. Heart disease was among the 

primary diagnoses in which the average resource cost for 

episodes with a 401.9 diagnosis was less than the average 
CMS-1353-P 53 

cost without a 401.9 diagnosis. For six primary diagnoses, 

there was an increase in resource cost when a 401.9 

diagnosis was present. However, the increases in resource 

costs for four of the six diagnoses were not statistically 

significant. It should be noted that while there was a 

large increase in resource costs for patients with 

blindness/low vision when a 401.9 diagnosis was present, 

the results were not statistically significant. There are 

few patients with a primary diagnosis of blindness/low 

vision. The two diagnoses which resulted in a significant 

increase in resource cost when a 401.9 diagnosis was 

present were stroke and gait abnormality (Table 9). 

When further examining the data, we questioned the 

hypertension coding for the episodes with stroke as a 

primary diagnosis. For the 28,923 episodes with a primary 

diagnosis of stroke, only 18,063 episodes had a 401.9 

diagnosis present. Furthermore, of those 28,923 episodes, 

only 71 percent of the episodes had a hypertension 

diagnosis. Because stroke is so strongly associated with 

hypertension, we would expect more episodes with a primary 

diagnosis of stroke to also have a hypertension diagnosis. 

Therefore, we believe that the data in the table 

corresponding to the episodes with stroke as a primary 

diagnosis is affected by incomplete coding. Also, if 

stroke almost always should be listed followed by 
CMS-1353-P 54 

hypertension, there would be no reason for an interaction 

term in the model involving stroke and hypertension. An 

interaction in the model — identifying a subset of patients 

with a condition who have another condition that changes 

the patient’s resource cost utilization — cannot apply in 

this case. 

TABLE 9: Total Resource Costs by Primary Diagnosis and 

Whether 401.9 is Present (2008) 

Primary 

Diagnosis 

N N with 

401.9 

present

401.9 

not 

present 

401.9 

present 

Difference % 

Difference

Blindness/low 

vision 392 213 $392.95 $415.11 $22.16 5.64%

Stroke 28,923 18,063 $742.54 $768.66 $26.12 3.52%

Gait 

Abnormality 22,946 11,567 $641.28 $656.97 $15.69 2.45%

Hypertension 13,446 202 $406.91 $414.20 $7.29 1.79%

Neurological 14,869 6,583 $622.88 $628.27 $5.39 0.86%

Blood disorders 14,985 7,264 $367.44 $369.81 $2.37 0.65%

Orthopedic 33,468 17,757 $529.46 $529.46 $0.00 0.00%

Cystostomy Care 2,469 915 $436.92 $433.80 ($3.12) -0.71%

Cancer 20,885 9,298 $459.59 $452.73 ($6.86) -1.49%

Diabetes 96,018 54,461 $462.55 $450.32 ($12.23) -2.64%

Gastrointestinal 14,496 7,170 $457.55 $445.29 ($12.26) -2.68%

Traumatic 

wounds 27,855 13,849 $554.73 $539.44 ($15.29) -2.76%

Heart disease 68,297 36,040 $484.49 $469.11 ($15.37) -3.17%

MS 4,206 1,329 $651.37 $620.30 ($31.07) -4.77%

Dysphagia 1,430 595 $651.95 $598.26 ($53.69) -8.24%

Tracheostomy 414 176 $598.77 $508.91 ($89.86) -15.01%

Outlier episodes are excluded. 

Source: Abt Associates analysis of 20% sample of Home Health Datalink file for 

2008. 

To further investigate the increase in average 

resource cost when 401.9 was present in patients with gait 

abnormality, we looked at average resources and average 

visits for joint replacement patients, which are patient 

groups strongly associated with a diagnosis of gait 
CMS-1353-P 55 

abnormality. We chose to look at patients with joint, hip, 

and knee replacements since they would be the sorts of 

patients in home health that would have a skilled need as a 

result of gait abnormality and they would typically have 

high therapy and resource costs. We also examined the 

subgroups of these patients who were reported on the OASIS 

to have a diagnosis of gait abnormality (Table 10). For 

patients with joint, hip, and knee replacements that had a 

401.9 diagnosis, resource costs and visits differed little 

compared to such patients who did not have the 401.9 

diagnosis. None of the differences were statistically 

significant. In addition, we saw that for the episodes 

with gait abnormality as a primary diagnosis, there were no 

statistically significant differences between the resource 

costs or number of visits for joint, hip, and knee 

replacement patients when a 401.9 diagnosis was present. 

These results indicate that there is no significant 

difference in resource cost for patients with joint 

replacements when a 401.9 diagnosis is present. 

It should also be noted that when examining the 

increase in average resources for episodes with patients 

with a primary diagnosis of stroke or gait abnormality when 

a 401.9 diagnosis is present, we could not determine 

whether the increase in resource cost was due to the 401.9 

diagnosis or due to a third confounding variable. As 
CMS-1353-P 56 

described earlier, we estimated a set of multivariate 

regression models to determine the relationship between a 

401.9 diagnosis and resource cost, when controlling for 

other variables in the case-mix model. 

TABLE 10: Total Resource Costs and Visits by Type of Joint 

Replacement and Whether 401.9 is Present for All Patients 

with Joint Replacements and the Subset of Patients with 

Gait Abnormality (2008) 

 Costs Visits 

Diagnosis N 

401.9 

not 

present 

401.9 

present 

Differ 

ence 

% 

Differ 

ence 

401.9 

not 

present 

401.9 

present 

Diffe

rence 

% 

Differ 

ence 

Joint 

replacement 

45,689 $566.41 $559.88 ($6.53) -1.15% 15.71 15.86 0.15 0.95%

Hip 

replacement 

13,658 $563.95 $564.50 $0.55 0.10% 16.37 16.43 0.06 0.37%

Knee 

replacement 

21,580 $542.12 $539.63 ($2.49) -0.46% 14.9 15.04 0.14 0.94%

Episodes with gait abnormality as primary diagnosis 

Joint 

replacement 

632 $553.68 $562.41 $8.73 1.58% 15.58 16.23 0.65 4.17%

Hip 

replacement 

315 $587.44 $609.34 $21.90 3.73% 16.83 17.99 1.16 6.89%

Knee 

replacement 

382 $554.78 $529.23 ($25.55) -4.61% 14.98 14.57 (0.41) -2.74%

Outlier episodes are excluded. 

Source: Abt Associates’ analysis of 20 percent sample of Home Health Datalink file for 2008. 

Some of our analysis was performed to further 

investigate issues raised in comments we received on last 

year’s proposed rule. In response to last year’s rule, one 

commenter stated that we should keep the diagnosis code 

401.9 in the case-mix system, stating that very often 

clinically complex patients, such as hypertensive heart 

disease patients, will be diagnosed with this code while 

waiting for proper documentation that is required by ICD-9-
CMS-1353-P 57 

CM to report a more specific diagnosis code. To 

investigate the extent to which a 401.9 diagnosis might be 

coded on an initial assessment while waiting for necessary 

documentation for other hypertension codes, we looked at 

the hypertension prevalence for start-of-care episodes 

(defined as those with segment number equal to one) and 

recertification episodes (defined as those with segment 

number greater than one) for various subgroups of related 

episodes (Table 11). Related episodes are episodes without 

a gap of more than 60 days in between them. In past 

rulemaking, we have referred to these as episodes as part 

of a sequence of adjacent episodes. In those rules, we 

defined episodes as adjacent if they were separated by no 

more than a 60-day period between episodes. Some of the 

subgroups we examined in our analysis were ones in which: 

(1) the initial episode had a 401.9 code; (2) the 2nd

episode in a sequence of adjacent episodes had a 402, 403, 

404, or 405 code; (3) codes 402, 403, 404, and 405 were not 

present on the initial episode, but were present on the 

second episode in the sequence of adjacent episodes. Table 

11 shows that, of the sequence of adjacent episodes where a 

401.9 code is reported on the initial episode, very few 

subsequent episodes had a diagnosis of 402, 403, 404, or 

405, and most subsequent episodes continued to have a 401.9 

diagnosis. Also, for those sequences of adjacent episodes 
CMS-1353-P 58 

where a 402, 403, 404, or 405 code exists on the second 

episode, many (over 60 percent) had the same code reported 

for the initial episode. For patients that had a 402, 403, 

404, or 405 diagnosis on their second episode but not their 

initial episode, many had a 401.9 diagnosis on their 

initial episode. However, there were only a small number 

of episodes with this pattern and it is not clear if this 

pattern is related to the comment about coding 401.9 while 

waiting for documentation or if this occurs due to the 

random fluctuation in hypertension coding patterns. In 

summary, the results of this analysis do not provide 

support for keeping 401.9 as a diagnosis in the case-mix 

model based on the reason that it is used as a placeholder 

while waiting for documentation to support another ICD-9-CM 

hypertension code. 

TABLE 11: Hypertension Prevalence by Segment and Type of 

Hypertension Reported on Segment 1 or Segment 2 (2009) 

Diagnosis N 401.9 401.1 402 403 404 405

401.1 Benign Essential hypertension, unspecified (segment 1)

Segment 1 10,859 0.04% 100.00% 0.19% 0.12% 0.06% 0.00%

Segment 2 3,463 12.21% 75.69% 1.70% 0.78% 0.20% 0.03%

Segment 3 1,734 17.42% 68.86% 2.42% 0.69% 0.23% 0.06%

Segment 4 997 19.76% 64.79% 3.21% 0.80% 0.30% 0.10%

401.9 Essential hypertension, unspecified (segment 1)

Segment 1 305,530 100.00% 0.00% 0.08% 0.06% 0.01% 0.00%

Segment 2 70,493 87.63% 0.44% 0.74% 1.41% 0.11% 0.00%

Segment 3 29,235 84.76% 0.73% 1.14% 1.82% 0.15% 0.01%

Segment 4 14,255 82.94% 0.98% 1.35% 2.13% 0.18% 0.01%

402 Hypertensive heart disease (segment 1)

Segment 1 8,777 2.83% 0.24% 100.00% 0.24% 0.09% 0.01%

Segment 2 3,165 14.00% 1.07% 79.05% 1.23% 0.73% 0.00%

Segment 3 1,563 20.47% 1.66% 70.12% 1.15% 1.02% 0.06%
CMS-1353-P 59 

Segment 4 859 23.40% 1.40% 65.19% 0.70% 1.28% 0.00%

403 Hypertensive renal disease (segment 1)

Segment 1 18,740 1.02% 0.07% 0.11% 100.00% 0.03% 0.01%

Segment 2 4,497 9.12% 0.18% 0.51% 79.25% 0.78% 0.04%

Segment 3 1,806 11.46% 0.39% 0.44% 73.75% 1.33% 0.06%

Segment 4 843 12.81% 0.47% 0.59% 72.00% 1.66% 0.00%

404 Hypertensive heart and renal disease (segment 1)

Segment 1 1,331 2.93% 0.45% 0.60% 0.38% 100.00% 0.00%

Segment 2 404 8.66% 1.98% 2.23% 6.44% 73.51% 0.00%

Segment 3 191 12.57% 1.57% 2.62% 7.33% 67.54% 0.00%

Segment 4 101 12.87% 1.98% 0.99% 10.89% 67.33% 0.00%

405 Secondary hypertension (segment 1)

Segment 1 192 1.04% 0.00% 0.52% 0.52% 0.00% 100.00%

Segment 2 56 8.93% 0.00% 0.00% 1.79% 1.79% 75.00%

Segment 3 29 6.90% 0.00% 0.00% 6.90% 0.00% 58.62%

Segment 4 13 23.08% 0.00% 0.00% 0.00% 0.00% 61.54%

401.1 Secondary hypertension (segment 2)

Segment 1 3,269 9.51% 80.18% 1.04% 0.24% 0.24% 0.00%

Segment 2 3,269 0.06% 100.00% 0.28% 0.12% 0.15% 0.00%

Segment 3 1,548 9.95% 80.68% 1.68% 0.32% 0.06% 0.00%

Segment 4 987 15.40% 72.10% 3.00% 0.20% 0.20% 0.00%

401.9 essential hypertension, unspecified (segment 2)

Segment 1 70,616 87.48% 0.60% 0.63% 0.58% 0.05% 0.01%

Segment 2 70,616 100.00% 0.00% 0.12% 0.08% 0.02% 0.00%

Segment 3 27,347 89.83% 0.41% 0.74% 1.02% 0.10% 0.01%

Segment 4 13622 86.46% 0.70% 0.99% 1.50% 0.10% 0.01%

402 Hypertensive heart disease (segment 2)

Segment 1 3,298 15.92% 1.79% 75.86% 0.70% 0.27% 0.00%

Segment 2 3,298 2.67% 0.27% 100.00% 0.27% 0.06% 0.00%

Segment 3 1,478 13.94% 0.88% 81.33% 0.68% 0.74% 0.00%

Segment 4 788 17.51% 1.02% 74.62% 0.51% 1.27% 0.00%

403 Hypertensive renal disease (segment 2)

Segment 1 5,192 19.11% 0.52% 0.75% 68.64% 0.50% 0.00%

Segment 2 5,192 1.02% 0.08% 0.17% 100.00% 0.00% 0.00%

Segment 3 1,861 6.45% 0.27% 0.21% 84.09% 0.59% 0.00%

Segment 4 837 7.89% 0.36% 0.36% 81.84% 0.96% 0.00%

404 Hypertensive heart and renal disease (segment 2)

Segment 1 478 15.69% 1.46% 4.81% 7.32% 62.13% 0.21%

Segment 2 478 3.14% 1.05% 0.42% 0.00% 100.00% 0.00%

Segment 3 201 7.46% 1.99% 1.49% 5.47% 78.61% 0.00%

Segment 4 106 8.49% 0.94% 0.94% 10.38% 72.64% 0.00%
CMS-1353-P 60 

405 Secondary hypertension (on segment 2)

Segment 1 51 5.88% 1.96% 0.00% 3.92% 0.00% 82.35%

Segment 2 51 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%

Segment 3 21 0.00% 0.00% 0.00% 4.76% 0.00% 95.24%

Segment 4 11 18.18% 0.00% 0.00% 0.00% 0.00% 81.82%

402 Hypertensive heart disease (not present on segment 1 but present on segment 2)

Segment 1 796 58.67% 6.53% 0.00% 72.01% 0.88% 0.00%

Segment 2 796 3.27% 0.25% 100.00% 64.58% 0.00% 0.00%

Segment 3 318 18.55% 1.89% 72.01% 2.14% 0.94% 0.00%

Segment 4 144 22.22% 1.39% 64.58% 0.38% 2.08% 0.00%

403 Hypertensive renal disease (not present on segment 1 but present on segment 2)

Segment 1 1,628 59.28% 1.41% 1.97% 0.00% 1.54% 0.06%

Segment 2 1,628 1.47% 0.00% 0.12% 100.00% 0.00% 0.00%

Segment 3 552 9.42% 0.18% 0.36% 76.27% 0.72% 0.00%

Segment 4 231 11.69% 0.43% 0.43% 72.73% 1.30% 0.00%

404 Hypertensive heart disease (not present on segment 1 but present on segment 2)

Segment 1 181 39.23% 2.21% 10.50% 19.34% 0.00% 0.55%

Segment 2 181 4.97% 0.55% 0.55% 0.00% 100.00% 0.00%

Segment 3 66 10.61% 3.03% 1.52% 9.09% 68.18% 0.00%

Segment 4 36 13.89% 0.00% 0.00% 8.33% 63.89% 0.00%

405 Secondary Hypertension (not present on segment 1 but present on segment 2)

Segment 1 9 33.33% 11.11% 0.00% 22.22% 0.00% 0.00%

Segment 2 9 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%

Segment 3 4 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%

Segment 4 2 0.00% 0.00% 0.00% 0.00% 0.00% 100.00%

Outlier episodes are excluded. 

Source: Abt Associates’ analysis of 20 percent sample of Home Health Datalink file for 2009. 

To further investigate the issue whether 401.9 is used 

as a placeholder while waiting for documentation to support 

coding of other more complex hypertension codes, we looked 

at the average resource cost for the initial episode, 

categorized by hypertension diagnosis, for all of the 

episodes with a hypertension diagnosis of 402, 403, or 404 

in their second episode (Table 12). We compared the 
CMS-1353-P 61 

average cost of an initial episode when there was a 401.9 

diagnosis to the average cost of an initial episode when 

both the initial and second episode had the same diagnosis 

(both the initial and second episode had either a 402, 403, 

or 404 code). For example, for all 2nd episodes, in a 

sequence of adjacent episodes, with a 402 diagnosis, we 

compared the average cost of an initial episode when there 

was a 401.9 diagnosis to the average cost of an initial 

episode when there was a 402 diagnosis. Considering the 

comment that a 401.9 is coded while waiting for 

documentation for a more complex diagnosis like 402 

(hypertensive heart disease), one would expect the average 

resource cost for an initial episode with a 401.9 code to 

be the same as an initial episode with a 402 code when 

looking at all of the sequences which have a 402 diagnosis 

in the second episode. Based on our analysis, the average 

resource cost for initial episodes with a 401.9 diagnosis 

is lower than the average resource cost for initial 

episodes with a 402, 403, and 404 diagnosis, given that a 

402, 403, or 404 diagnosis exists on the second episode 

respectively. It should be noted that the average resource 

cost for initial episodes with a 401.9 diagnosis is only 

slightly lower than the average resource cost for initial 

episodes with a 404 diagnosis, given a 404 diagnosis on the 

second episode. However, the samples for this comparison 
CMS-1353-P 62 

are small (N=69 and N=293). In general, the overall 

pattern of results of this analysis does not support 

keeping 401.9 as a diagnosis in the case-mix model based on 

the reason that 401.9 is coded while waiting for 

documentation for another ICD-9 code. 

TABLE 12: Resource Costs for Segment 1by Hypertension 

Diagnoses on Segment 1 Given a Hypertension Diagnosis 

Reported on Segment 2 (2009) 

Hypertension Diagnosis (Segment 2) 

 402 403 404 

Hypertension 

Diagnosis 

(Segment 1) N 

Mean 

Resource 

Cost for 

Initial 

Episode N 

Mean 

Resource 

Cost for 

Initial 

Episode N 

Mean 

Resource 

Cost for 

Initial 

Episode 

None 254 $765.28 585 $725.84 54 $798.17

401.9 467 $651.24 962 $660.99 69 $683.99 

402 2502 $692.79 39 $565.74 23 $624.20 

403 17 $769.40 3557 $741.52 34 $650.24 

404 7 $756.36 25 $619.69 293 $689.01 

Outlier episodes are excluded. 

Source: Abt Associates’ analysis of 20 percent sample of Home Health Datalink file for 2009. 

In summary, we propose to remove ICD-9-CM code 401.1, 

Benign Essential Hypertension, and ICD-9-CM code 401.9, 

Unspecified Essential Hypertension, from the HH PPS casemix model’s hypertension group. Based on our analysis, 

there continues to be an increase in the prevalence of ICD9-CM code 401.9 from 2008 to 2009. In addition, agencies 

(regardless of type) typically had a twofold or higher 

increase in the prevalence of a 401.9 diagnosis from 2005 

to 2009, with the exception of the East North and the West 
CMS-1353-P 63 

North Central regions which had an increase of about 1.7 

and 1.5 fold respectively. Furthermore, many categories 

had an increase in the reporting of a 401.1 diagnosis when 

comparing 2005 data to 2009. Most compelling, current data 

indicates that these diagnoses are not predictors of higher 

home health patient resource costs. Rather, current data 

indicates a lower cost associated with home health patients 

when these codes are reported. The results from the two 

regression models provide strong support for removing the 

401.1 and 401.9 diagnoses from the case-mix system, showing 

that the presence of these diagnoses is associated with 

lower costs, when controlling for other case-mix related 

factors. Therefore, we propose to remove codes 401.1 and 

401.9 to more accurately align payment with resource use. 

In the CY 2011 HH PPS final rule, in response to 

comments, we described that if we were to finalize removing 

these codes from our case-mix system, we would do so in 

such a way that we would revise our case-mix weights to 

ensure that the removal of the codes would result in the 

same projected aggregate expenditures. Therefore, we also 

propose to revise the HH PPS case-mix weights as we 

describe in detail in the following section. The revisions 

of the case-mix weights would redistribute HH PPS payments 

among the case-mix groups such that removal of these 

hypertension codes would not result in lower aggregate 
CMS-1353-P 64 

payments. Rather, the change would be effectuated in a 

budget neutral way. 

2. Proposal for Revision of Case-Mix Weights 

As we described in section II.B.1 of this preamble, we 

propose to revise our HH PPS case-mix weights to remove two 

hypertension codes from our case-mix system while 

maintaining budget neutrality. We also believe that 

additional revisions to the case-mix weights are needed. 

Our review of HH PPS utilization data shows a shift to 

an increased share of episodes with very high numbers of 

therapy visits. This shift was first observed in 2008 and 

it continued in 2009. Table 13 shows the percentage 

distribution of episodes according to number of therapy 

visits for 2001 through 2009. 

TABLE 13: Distribution of Home Health Episodes According 

to Number of Therapy Visits (2001-2009) 

Number of 

therapy visits 2001 2002 2003 2004 2005 2006 2007 2008 2009 

None 54% 52% 51% 50% 50% 50% 50% 49% 48% 

1 to 5 14% 15% 15% 15% 15% 15% 14% 14% 14% 

6 3% 3% 3% 3% 3% 3% 3% 3% 3% 

7 to 9 6% 6% 6% 6% 6% 6% 6% 9% 9% 

10 to 13 10% 11% 13% 14% 14% 15% 15% 10% 10% 

14+ 12% 12% 12% 12% 12% 12% 12% 15% 16% 

Note: Based on a 10 percent random beneficiary sample. 

The 2009 distribution of episodes by number of therapy 

visits resembles the 2008 distribution with some important 

differences. In last year’s regulation, we described an 
CMS-1353-P 65 

increase of 25 percent in the share of episodes with 14 or 

more therapy visits. In the 2009 sample, the share with 14 

or more therapy visits continued to increase while the 

share of episodes with no therapy visits continued to 

decrease. The frequencies also indicate that the share of 

episodes with 20 or more therapy visits was 6 percent in 

2009 (data not shown). This is a 50 percent increase from 

the share of episodes of 2007, when episodes with at least 

20 therapy visits accounted for only 4 percent of episodes. 

In their 2010 and 2011 Reports to Congress, MedPAC 

suggests that the HH PPS contains incentives which likely 

result in agencies providing more therapy than is needed to 

maximize their Medicare payments. In their March 2010 

Report to the Congress, MedPAC stated that “therapy 

episodes appear to be overpaid relative to others and that 

the amount of therapy changed significantly in response to 

the 2008 revisions to the payment system.” In support of 

this statement, MedPAC showed that there was a quick 

episode volume shift to the new therapy thresholds, which 

suggests inappropriate therapy utilization. In their March 

2011 Report to the Congress, MedPAC stated, “The volume 

data for 2009 indicate that the shifts that occurred in 

2008 are continuing ... Episodes with 14 or more therapy 

visits increased by more than 20 percent, and those with 20 

or more therapy visits increased by 30 percent.” 
CMS-1353-P 66 

Also, in their March 2011 Report to Congress, MedPAC 

suggested that the current HH PPS may “overvalue therapy 

services and undervalue nontherapy services.” In this 

report, MedPAC describes that HHA margins average 17.7 

percent, with 20 percent of agencies achieving margins of 

37 percent. MedPAC further states that their analysis of 

high-margin and low-margin agencies suggests that the HH 

PPS overpays for episodes with high case-mix values and 

underpays for episodes with low-case-mix values. 

Furthermore, MedPAC reports that home health agencies with 

high margins had high case-mix values which were 

attributable to the agencies providing more therapy 

episodes (MedPAC, March 2011 Report to Congress). MedPAC 

went on to assert that “unless the case-mix system is 

revised, agencies will continue to have significant 

incentives to favor therapy patients, avoid high-cost 

nontherapy patients, and base the number of therapy visits 

on payment incentives instead of patient characteristics.” 

We concur that the therapy utilization shifts and the 

correlation between high agency margins and high volumes of 

therapy episodes strongly suggest that the costs which the 

HH PPS assigns to therapy services when deriving the 

relative payment weights are higher than actual costs 

incurred by agencies for therapy services. We believe that 

one factor which contributes to this overpayment for 
CMS-1353-P 67 

therapy services is the growing use of therapy assistants, 

instead of qualified therapists, to provide home health 

therapy services. Current data suggest that the percentage 

of therapy assistants which is reflected in the therapywage weighted minutes used in the calculations of HH PPS 

relative resource costs is too low. For our 2008 

refinements, to construct the relative resource costs for 

episodes, we used the labor mix percentages reported in the 

Occupational Employment Statistics (OES) data by the Bureau 

of Labor Statistics. In 2005, which is the year of data 

that was used to develop the HH PPS refinements, the OES 

data showed that 15 percent of physical therapy was 

provided by therapy assistants and that 11 percent of 

occupational therapy was provided by therapy assistants. 

This data was then used to develop the resource costs for 

episodes which were used to develop the current HH PPS 

payment weights. In 2008, the OES data showed that 19 

percent of physical therapy was provided by therapy 

assistants and that 13 percent of occupational therapy was 

provided by therapy assistants. In addition, by 2010, OES 

data has shown that the percentage of physical therapy 

provided by therapy assistants was 20 percent and the 

percentage of occupational therapy provided by therapy 

assistants was 14 percent. We note that these statistics 

reflect the mix for all home health providers. Also, 
CMS-1353-P 68 

preliminary analysis of resource use data collected during 

Medicare’s Post-Acute Care Demonstration (PAC-PRD) shows a 

somewhat higher prevalence of assistants providing therapy 

for patients receiving Medicare’s home health benefit than 

the OES data. We note that in CY 2011, we began collecting 

data on HH PPS claims which will enable us to quantify the 

percentage of therapy assistants who are providing therapy 

and to assess how the percentages vary relative to the 

quantity of therapy provided and the type of provider. 

We believe that MedPAC has provided strong evidence 

that our reimbursement for episodes with high therapy is 

too high. Also, based on MedPAC’s analysis and our own 

findings, we believe that the resource costs reflected in 

our current case-mix weights for therapy episodes, in 

particular for those episodes with high amounts of therapy, 

are higher than current actual resource costs and that an 

adjustment to the HH PPS therapy case-mix weights is 

warranted. We note that fully addressing MedPAC’s concerns 

with the way the HH PPS factors therapy visits into the 

case-mix system will be a complex process which will 

require more comprehensive structural changes to the HH 

PPS. While we plan to address their concerns in a more 

comprehensive way in future years, for CY 2012 we propose 

to revise the current case-mix weights by lowering the 

relative weights for episodes with high therapy and 
CMS-1353-P 69 

increasing the weights for episodes with little or no 

therapy. It should be noted that we propose to revise the 

case-mix weights in a budget neutral way. In other words, 

this proposal would redistribute some HH PPS dollars from 

high therapy payment groups to other HH PPS case-mix 

groups, such as the groups with little or no therapy. We 

believe this proposed revision to the payment weights would 

result in more accurate HH PPS payments for targeted casemix groups while addressing MedPAC concerns that our 

reimbursement for therapy episodes is too high and our 

reimbursement for non-therapy episodes is too low. Also, 

we believe our proposed revision of the payment weights 

will discourage the provision of unnecessary therapy 

services and will slow the growth of nominal case-mix. Our 

detailed approach, analysis, and case-mix revision 

methodology which support this proposal are described 

below. 

During the 2008 HH PPS refinements, in addition to 

implementing a change from an 80 group case-mix system to a 

153 group case-mix system, we developed new payment weights 

for the HH PPS case-mix system. To derive these payment 

weights, we developed a four-equation model which estimated 

an equation explaining an episode’s resource use, as 

measured in units corresponding to wage-weighted minutes 

(the dependent variable), in terms of therapy visits and 
CMS-1353-P 70 

clinical and functional variables (the independent, or 

explanatory, variables). Each equation was created from a 

different subset of episodes (for example, early episodes 

with 13 or fewer therapy visits). The results from the 

four-equation model were then used to develop the severity 

levels for the clinical and functional dimensions. 

Specifically, the coefficients of the four-equation model 

were divided by 10 and rounded to the nearest integer to 

create points which correspond to the impact of the 

variable on the total resource cost of the episode. These 

points are reported in Table 2a of the CY 2008 HH PPS final 

rule. For each episode in the sample, the sum of clinical 

variable points and the sum of functional variable points 

were calculated. Within each of the four equations, the 

clinical or functional severity levels were then defined in 

terms of intervals of the total clinical or functional 

points in such a way as to create a relatively even 

distribution of episodes amongst the severity levels. 

Also, the single 10-therapy visit threshold was changed to 

three therapy thresholds at 6, 14, and 20 visits to promote 

appropriate therapy utilization. Graduated steps between 

each of the three thresholds were also defined to provide 

an equitable increase in payment that would not otherwise 

occur between the three threshold levels. After defining 

the severity levels and thresholds and graduated steps 
CMS-1353-P 71 

between thresholds, we estimated a payment regression. The 

payment regression quantifies the relationship between an 

episode’s resource use as measured in dollars corresponding 

to wage weighted minutes (the dependent variable) and the 

episode’s clinical severity indicator variables (low, 

medium, or high), functional severity indicator variables 

(low, medium, or high), four-equation indicator variables 

(which indicate whether an episode is early/late and has 

low/high therapy), and therapy visit indicator variables. 

The therapy visit indicator variables were defined based on 

the graduated steps between the therapy thresholds. The 

raw payment weights for the 153 case-mix groups were then 

derived from the payment regression model coefficients. 

Note that in the process of developing the weights for 

episodes with therapy, we decelerated the increase in 

payment within each grouping of additional therapy visits 

(that is, we decelerated the increase in payment for each 

graduated therapy step). Finally, the weights were altered 

to achieve budget neutrality to 2005. 

Initially, for this proposed rule, during the process 

of revising the case-mix weights, we re-estimated the 

payment regression model on 2008 data using the same 

dependent and independent variables we defined for the 

payment regression model which we used for the HH PPS 

refinements. We then compared the results to the current 
CMS-1353-P 72 

payment regression, which was based on 2005 data. We saw 

that the coefficients for the clinical and functional 

severity indicators were typically smaller in 2008 compared 

to 2005. This finding implies that if we were to use 2008 

data to revise our payment weights, the clinical and 

functional severity levels would be associated with lower 

relative resource costs compared to our current payment 

regression model, and would result in lower raw payment 

weights for episodes with little or no therapy when 

compared to our current case-mix weights. These results 

would not achieve our intended goals as we describe in more 

detail below. 

As a result of our re-estimation of the payment 

regression using 2008 data, we decided not to use data from 

2008 or later to develop the revised case-mix weights. 

Instead, we propose to use pre-2008 data, which is before 

the implementation of the HH PPS refinements and the 

behavioral and coding changes we described in our 

discussion of the 2008 therapy utilization and case-mix 

data in last year’s proposed and final regulations (75 FR 

43238 through 43244 and 75 FR 70384). In last year’s 

proposed and final rules we presented several analyses that 

described indications of a large change in coding practices 

between 2007 and 2008, the first year of the 153-group, 

refined system. Our initial analysis indicated that if we 
CMS-1353-P 73 

were to use the 2008 data in our payment regression to 

develop the revised weights, the regression would assign a 

higher relative resource cost to high therapy episodes and 

would assign a lower relative resource cost to episodes 

with little or no therapy than was assigned when deriving 

the current weights. As we described earlier in this 

section, we believe the data strongly suggest that our 

current weights over-value high therapy episodes and undervalue non-therapy episodes and has strongly influenced the 

utilization shifts to more episodes in the 14 and 20 

therapy groups and fewer non-therapy episodes beginning in 

2008. Therefore, we believe that using 2008 or later data 

in our payment regression to revise the case-mix weights 

would be inadvisable. The evidence strongly suggests that 

the utilization shifts are influenced by agencies’ attempts 

to maximize Medicare payments. As such, we propose to use 

pre-2008 data in the payment regression to revise our casemix weights. We believe this data is more reflective of 

costs associated with patients’ actual clinical needs than 

the 2008 and later data. We note that using pre-2008 data 

to derive relative resource costs and to revise our casemix weights does not hinder our ability to achieve budget 

neutrality. We will describe our approach to ensure budget 

neutrality later in this section. 
CMS-1353-P 74 

We explored numerous methods for revising our case-mix 

weights which were similar to the method we previously used 

for the 2008 refinements. We note that when developing the 

case-mix weights for the 2008 refinements, we were 

concerned that since there was an increase in payment 

weight as additional therapy visits were provided, there 

may be incentives to provide more therapy than clinically 

needed. To discourage this, when developing our current 

weights, we incrementally decreased the marginal payment 

for each grouping of therapy visits as the number of 

therapy visits grew. When exploring ways to revise our 

current case-mix weights, we initially applied a more 

aggressive deceleration to the weights for each of the 

incremental therapy visit steps similar to the approach we 

took for the current weights. We saw that when we applied 

more deceleration for each incremental therapy visit step, 

the payment weight for episodes with high numbers of 

therapy visits, when taking into account the clinical and 

functional score, was often the same as or larger than the 

current weight. Also, we saw inversions in the payment 

weights. For example, we saw that the payment weight for 

an episode with a clinical severity level of 1, functional 

severity level of 1, and 14 therapy visits had a smaller 

weight than for an episode with a clinical severity level 

of 1, a functional severity level of 1, and 13 therapy 
CMS-1353-P 75 

visits. Because of these observations, we decided against 

using the same type of approach we originally used when 

developing our current case-mix therapy weights. Instead, 

we developed a different approach to revise the case-mix 

payment weights. 

Before we can describe this new approach, we must 

first explain the changes we made to the four-equation 

model to remove the hypertension diagnoses ICD-9-CM code 

401.1, Benign Essential Hypertension, and ICD-9-CM code 

401.9, Unspecified Essential Hypertension from our case-mix 

system, as we have proposed to do. As we indicated in the 

CY 2011 HH PPS final rule, our intention would be to revise 

the system in a manner that redistributes all the resources 

in the system after removing the two hypertension codes 

from our case-mix system. Our method of redistributing the 

resources starts with changes to the four-equation model, 

which is the foundation for the subsequent revised payment 

regression and creation of revised case-mix weights. The 

changes to the four-equation model are described below. 

To examine the effects of removing the two 

hypertension codes 401.1 and 401.9 from the case-mix system 

and determine whether the thresholds for the clinical 

severity indicators need to be changed if 401.1 and 401.9 

are removed from the case-mix system, we estimated the 

four-equation model with and without codes 401.1 and 401.9 
CMS-1353-P 76 

in the hypertension group. We used 2005 data for this 

estimation. We note that the adjusted R-squared value for 

the four-equation model without codes 401.1 and 401.9 

derived from 2005 data was 0.4621. We also note that we 

used 2005 data to develop an accurate comparison of the 

current four-equation model with the revised four-equation 

model without the two hypertension codes because our 

current four-equation model was built using 2005 data. In 

addition, we estimated the coefficients for the variables 

in the four-equation model using 2005 data to maintain the 

same variables we developed for our current four-equation 

model and minimize changes to our current model. We then 

used the coefficients from the four-equation model without 

codes 401.1 and 401.9 to determine the points which would 

be associated with all the clinical and functional 

variables found in our current four-equation model, as 

described on Table 2a of the CY 2008 HH PPS final rule 

(Table 14A). 

When comparing the four-equation model with the two 

hypertension diagnoses (which is equivalent to our current 

model) to the four equation model without the two 

hypertension diagnoses, there were some differences in the 

points assigned to variables. Specifically, there was a 

different number of points for 58 of the 224 variables in 

the four-equation model. However, the difference between 
CMS-1353-P 77 

the two models was at most 1 point. Also, of the 58 

variables which had a different number of points, 33 were 

clinical and functional variables. (The remaining 

variables were therapy-visit and early/later episode 

indicator variables used in the four-equation model 

estimation procedure.) For 13 of the 33 clinical and 

functional variables, there was an extra point assigned 

when the two hypertension codes are excluded, and for 20 of 

the 33 clinical and functional variables, there was one 

less point assigned compared to the current model (Table 

14B). 

TABLE 14A: Points Associated with the Updated 4-Equation 

Model without hypertension codes 401.1 and 401.9 

Case-Mix Adjustment Variables and Scores 

(Note: 4-Equation Model was Estimated on Episodes from 2005 where 401.1 and 401.9 were not counted in the 

Hypertension Diagnosis Group)

 Episode number within sequence of adjacent 

episodes

1 or 2 1 or 2 3+ 3+ 

 Therapy visits 0-13 14+ 0-13 14+ 

 EQUATION: 1 2 3 4 

CLINICAL DIMENSION 

1 Primary or Other Diagnosis = Blindness/Low 

Vision 3 3 3 3 

2 Primary or Other Diagnosis = Blood disorders 2 5 

3 Primary or Other Diagnosis = Cancer, selected 

benign neoplasms 3 8 3 10 

4 Primary Diagnosis = Diabetes 5 13 1 8 

5 Other Diagnosis = Diabetes 3 5 1 5 

Primary or Other Diagnosis = Dysphagia 

AND 2 

6 

Primary or Other Diagnosis = Neuro 3 – Stroke 

6 6 

7 Primary or Other Diagnosis = Dysphagia 6 
CMS-1353-P 78 

AND 

M0250 (Therapy at home) = 3 (Enteral) 

8 Primary or Other Diagnosis = Gastrointestinal 

disorders 2 6 1 5 

Primary or Other Diagnosis = Gastrointestinal 

disorders 

AND 

9 

M0550 (ostomy)= 1 or 2 

2 

Primary or Other Diagnosis = Gastrointestinal 

disorders 

AND 

10 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis, OR Neuro 2 - Peripheral 

neurological disorders, OR Neuro 3 - Stroke, OR 

Neuro 4 - Multiple Sclerosis 

 

 2 

11 Primary or Other Diagnosis = Heart Disease OR 

Hypertension 3 6 1 7 

12 Primary Diagnosis = Neuro 1 - Brain disorders and 

paralysis 3 8 5 8 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis 

AND 

13 

M0680 (Toileting) = 2 or more 

3 10 3 10 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis OR Neuro 2 - Peripheral 

neurological disorders 1 4 1 2 

AND 

14 

M0650 or M0660 (Dressing upper or lower body)= 

1, 2, or 3 

15 Primary or Other Diagnosis = Neuro 3 - Stroke 2 

Primary or Other Diagnosis = Neuro 3 - Stroke 

AND 

16 

M0650 or M0660 (Dressing upper or lower body)= 

1, 2, or 3 

1 3 2 8 

Primary or Other Diagnosis = Neuro 3 - Stroke 

AND 

17 

M0700 (Ambulation) = 3 or more 

1 5 
CMS-1353-P 79 

Primary or Other Diagnosis = Neuro 4 - Multiple 

Sclerosis AND AT LEAST ONE OF THE 

FOLLOWING:

M0670 (bathing) = 2 or more 

OR 

M0680 (Toileting) = 2 or more 

OR 

M0690 (Transferring) = 2 or more 

OR 

18 

M0700 (Ambulation) = 3 or more 

3 3 12 18 

Primary or Other Diagnosis = Ortho 1 - Leg 

Disorders or Gait Disorders 

AND 

19 

M0460 (most problematic pressure ulcer stage)= 1, 

2, 3 or 4 

2 

Primary or Other Diagnosis = Ortho 1 - Leg OR 

Ortho 2 - Other orthopedic disorders 

AND 

20 

M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 

5 5 

21 Primary or Other Diagnosis = Psych 1 – Affective 

and other psychoses, depression 4 6 2 6 

22 Primary or Other Diagnosis = Psych 2 - 

Degenerative and other organic psychiatric 

disorders 

1 3 3 

23 Primary or Other Diagnosis = Pulmonary disorders 1 5 1 5 

Primary or Other Diagnosis = Pulmonary disorders 1 

AND 

24 

M0700 (Ambulation) = 1 or more 

 

25 Primary Diagnosis = Skin 1 -Traumatic wounds, 

burns, and post-operative complications 10 20 8 20 

26 Other Diagnosis = Skin 1 - Traumatic wounds, 

burns, post-operative complications 6 6 4 4 

Primary or Other Diagnosis = Skin 1 -Traumatic 

wounds, burns, and post-operative complications 

OR Skin 2 – Ulcers and other skin conditions 

AND 

27 

M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 

2 2 

28 Primary or Other Diagnosis = Skin 2 - Ulcers and 

other skin conditions 6 12 5 12 
CMS-1353-P 80 

29 Primary or Other Diagnosis = Tracheostomy 4 4 4 

30 Primary or Other Diagnosis = 

Urostomy/Cystostomy 6 22 4 22 

31 M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 8 15 5 11 

32 M0250 (Therapy at home) = 3 (Enteral) 4 11 11 

33 M0390 (Vision) = 1 or more 1 2 

34 M0420 (Pain)= 2 or 3 1 

35 M0450 = Two or more pressure ulcers at stage 3 or 

4 3 3 5 5 

36 M0460 (Most problematic pressure ulcer stage)= 1 

or 2 5 11 5 11 

37 M0460 (Most problematic pressure ulcer stage)= 3 

or 4 16 26 12 22 

38 M0476 (Stasis ulcer status)= 2 7 7 7 7 

39 M0476 (Stasis ulcer status)= 3 11 11 11 11 

40 M0488 (Surgical wound status)= 2 2 3 

41 M0488 (Surgical wound status)= 3 4 4 4 4 

42 M0490 (Dyspnea) = 2, 3, or 4 2 2 

43 M0540 (Bowel Incontinence) = 2 to 5 1 2 1 

44 M0550 (Ostomy)= 1 or 2 5 9 3 9 

45 M0800 (Injectable Drug Use) = 0, 1, or 2 0 1 2 3 

FUNCTIONAL DIMENSION 

46 M0650 or M0660 (Dressing upper or lower body)= 

1, 2, or 3 2 4 2 2 

47 M0670 (Bathing) = 2 or more 3 3 6 6 

48 M0680 (Toileting) = 2 or more 2 3 2 

49 M0690 (Transferring) = 2 or more 1 

50 M0700 (Ambulation) = 1 or 2 1 1 

51 M0700 (Ambulation) = 3 or more 3 3 4 5 

 Notes: The data for the regression equations come from a 20 percent random sample of episodes from CY 

2005. The sample excludes LUPA episodes, outlier episodes, and episodes with SCIC or PEP adjustments. 

 Points are additive, however, points may not be given for the same line item in the table more than once. 

 Please see Medicare Home Health Diagnosis Coding guidance at 

http://www.cms.hhs.gov/HomeHealthPPS/03_coding&billing.asp for definitions of primary and secondary 

diagnoses. 
CMS-1353-P 81 

Table 14B: The Difference in Points between the Current and 

Proposed Case-mix Adjustment Scores 

 Episode number within sequence of adjacent 

episodes

1 or 2 1 or 2 3+ 3+ 

 Therapy visits 0-13 14+ 0-13 14+ 

 EQUATION: 1 2 3 4 

CLINICAL DIMENSION 

1 Primary or Other Diagnosis = Blindness/Low 

Vision 0 0 0 0 

2 Primary or Other Diagnosis = Blood disorders 

0 0 

3 Primary or Other Diagnosis = Cancer, selected 

benign neoplasms -1 1 0 0 

4 Primary Diagnosis = Diabetes 0 1 0 0 

5 Other Diagnosis = Diabetes 1 1 0 1 

Primary or Other Diagnosis = Dysphagia 

AND 0 

6 

Primary or Other Diagnosis = Neuro 3 - Stroke 

0 0 

Primary or Other Diagnosis = Dysphagia 

AND 

7 

M0250 (Therapy at home) = 3 (Enteral) 

0 

8 Primary or Other Diagnosis = Gastrointestinal 

disorders 0 0 0 1 

Primary or Other Diagnosis = Gastrointestinal 

disorders 

AND 

9 

M0550 (ostomy)= 1 or 2 

-1 

Primary or Other Diagnosis = Gastrointestinal 

disorders 

10 

AND 

 0 
CMS-1353-P 82 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis, OR Neuro 2 - Peripheral 

neurological disorders, OR Neuro 3 - Stroke, OR 

Neuro 4 - Multiple Sclerosis 

11 Primary or Other Diagnosis = Heart Disease OR 

Hypertension 0 -1 0 -1 

12 Primary Diagnosis = Neuro 1 - Brain disorders 

and paralysis 0 0 0 0 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis 

AND 

13 

M0680 (Toileting) = 2 or more 

0 0 0 0 

Primary or Other Diagnosis = Neuro 1 - Brain 

disorders and paralysis OR Neuro 2 - Peripheral 

neurological disorders 

AND 

-1 0 -1 0 

14 

M0650 or M0660 (Dressing upper or lower 

body)= 1, 2, or 3 

15 Primary or Other Diagnosis = Neuro 3 - Stroke 

 1 

Primary or Other Diagnosis = Neuro 3 - Stroke 

AND 

16 

M0650 or M0660 (Dressing upper or lower 

body)= 1, 2, or 3 

0 0 0 0 

Primary or Other Diagnosis = Neuro 3 - Stroke 

AND 

17 

M0700 (Ambulation) = 3 or more 

0 0 

Primary or Other Diagnosis = Neuro 4 - Multiple 

Sclerosis AND AT LEAST ONE OF THE 

FOLLOWING:

M0670 (bathing) = 2 or more 

OR 

18 

M0680 (Toileting) = 2 or more 

0 0 0 0 
CMS-1353-P 83 

OR 

M0690 (Transferring) = 2 or more 

OR 

M0700 (Ambulation) = 3 or more 

Primary or Other Diagnosis = Ortho 1 - Leg 

Disorders or Gait Disorders 

AND 

19 

M0460 (most problematic pressure ulcer stage)= 

1, 2, 3 or 4 

0 

Primary or Other Diagnosis = Ortho 1 - Leg OR 

Ortho 2 - Other orthopedic disorders 

AND 

20 

M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 

0 0 

21 Primary or Other Diagnosis = Psych 1 – Affective 

and other psychoses, depression 1 1 0 1 

22 Primary or Other Diagnosis = Psych 2 - 

Degenerative and other organic psychiatric 

disorders 

0 1 1 

23 Primary or Other Diagnosis = Pulmonary 

disorders 0 0 0 0 

Primary or Other Diagnosis = Pulmonary 

disorders 

AND 

 0 

24 

M0700 (Ambulation) = 1 or more 

 

25 Primary Diagnosis = Skin 1 -Traumatic wounds, 

burns, and post-operative complications 0 0 0 0 

26 Other Diagnosis = Skin 1 - Traumatic wounds, 

burns, post-operative complications 0 0 0 0 

Primary or Other Diagnosis = Skin 1 -Traumatic 

wounds, burns, and post-operative complications 

OR Skin 2 – Ulcers and other skin conditions 

27 

AND 

0 0 
CMS-1353-P 84 

M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 

28 Primary or Other Diagnosis = Skin 2 - Ulcers and 

other skin conditions 0 0 0 0 

29 Primary or Other Diagnosis = Tracheostomy 0 0 0 

30 Primary or Other Diagnosis = 

Urostomy/Cystostomy 0 -1 0 -1 

31 M0250 (Therapy at home) = 1 (IV/Infusion) or 2 

(Parenteral) 0 0 0 -1 

32 M0250 (Therapy at home) = 3 (Enteral) 0 -1 -1 

33 M0390 (Vision) = 1 or more 0 1 

34 M0420 (Pain)= 2 or 3 0 

35 M0450 = Two or more pressure ulcers at stage 3 

or 4 0 0 0 0 

36 M0460 (Most problematic pressure ulcer stage)= 

1 or 2 0 0 0 0 

37 M0460 (Most problematic pressure ulcer stage)= 

3 or 4 0 0 0 -1 

38 M0476 (Stasis ulcer status)= 2 -1 -1 -1 -1 

39 M0476 (Stasis ulcer status)= 3 0 0 0 0 

40 M0488 (Surgical wound status)= 2 0 0 

41 M0488 (Surgical wound status)= 3 0 0 0 0 

42 M0490 (Dyspnea) = 2, 3, or 4 0 0 

43 M0540 (Bowel Incontinence) = 2 to 5 0 0 0 

44 M0550 (Ostomy)= 1 or 2 0 0 0 0 

45 M0800 (Injectable Drug Use) = 0, 1, or 2 -1 0 0 -1 

FUNCTIONAL DIMENSION 

46 M0650 or M0660 (Dressing upper or lower 

body)= 1, 2, or 3 0 0 0 0 

47 M0670 (Bathing) = 2 or more 

0 0 0 0 

48 M0680 (Toileting) = 2 or more 

0 0 0 
CMS-1353-P 85 

49 M0690 (Transferring) = 2 or more 

 -1 

50 M0700 (Ambulation) = 1 or 2 

0 0 

51 M0700 (Ambulation) = 3 or more 

0 -1 0 0 

 Notes: The data for the regression equations come from a 20 percent random sample of episodes from CY 2005. 

The sample excludes LUPA episodes, outlier episodes, and episodes with SCIC or PEP adjustments. 

 Points are additive, however points may not be given for the same line item in the table more than once. 

 Please see Medicare Home Health Diagnosis Coding guidance at 

http://www.cms.hhs.gov/HomeHealthPPS/03_coding&billing.asp for definitions of primary and secondary 

diagnoses. 

We also examined how episodes in the sample changed 

clinical severity groups when going from a four-equation 

model that includes 401.1 and 401.9 to a four-equation 

model that does not include 401.1 and 401.9. It should be 

noted that a small number of episodes also changed 

functional groups. In our analysis, we looked at the 

distribution of episodes in each clinical severity level 

(low, medium, high) by the four-equation model indicators 

(early/late episodes and low/high therapy episodes). When 

comparing the distribution of episodes using the fourequation model without the 401.1 and 401.9 hypertension 

codes to the distribution of episodes using the fourequation model with the hypertension codes (our current 

four-equation model), there was a similar distribution of 

episodes between the low, medium and high clinical levels, 

for each of the four-equation model indicators. We also 
CMS-1353-P 86 

looked at the distribution of episodes in each functional 

severity level by the four-equation model indicator. There 

was also a very similar distribution of episodes for the 

three functional severity levels using the four-equation 

model without the two hypertension codes compared to the 

distribution of episodes using the current four-equation 

model, for each of the four-equation model indicators. 

Since the four-equation model without the hypertension 

codes 401.1 and 401.9 had similar clinical and functional 

distributions of episodes as the current model, we decided 

that it was not necessary to change the thresholds for the 

clinical and functional severity levels. 

When developing the new payment regression model, we 

used scores from the four-equation model without 

hypertension codes 401.1 and 401.9 to identify the clinical 

and functional severity levels to be used as payment 

regression variables. In addition, as we described 

earlier, we decided to implement a revision of the weights 

using a new method of decelerating therapy resources with 

higher numbers of therapy visits. The new method involved 

the removal of the therapy visit step indicators from the 

payment regression model. This approach has the advantage 

of staging the introduction of clinical and functional 

severity levels into the model as a separate step, to avoid 

influence on the clinical and functional scores from 
CMS-1353-P 87 

numerous therapy step variables that would otherwise be 

simultaneously entered into the regression. In other 

words, we eliminated the therapy visit step indicators from 

the payment regression model to ensure that more of the 

resource use would be captured by clinical and functional 

variables, rather than therapy variables. Later, we 

implement a method to account for the resource use for the 

therapy step variables. The new payment regression model 

that was developed estimated the relationship between an 

episode’s total resource (as measured in dollars 

corresponding to wage weighted minutes) and the clinical 

score indicators, functional score indicators, and fourequation indicators (early/late episodes and low/high 

therapy services). 

It should be noted that for the payment regression 

model, we used data from 2007, which is the most recent 

data available before the implementation of the HH PPS 

refinements. The coefficients for the payment regression 

model using 2007 data can be found at Table 15. The 

adjusted R-squared value for the payment regression model 

using 2007 data is 0.3769. 

Table 15: Proposed Payment Regression Model 

Variable Name Variable Description 

New Payment 

Regression 

Coefficients 

clin_grp2_1 Step 1, Clinical Score 5 to 8 $6.55

clin_grp3_1 Step1, Clinical Score 9 or More $37.72

func_grp2_1 Step 1, Functional Score = 6 $88.99
CMS-1353-P 88 

func_grp3_1 Step1, Functional Score 7 or More $129.81

clin_grp2_21 Step 2.1, Clinical Score 7 to 14 $87.49

clin_grp3_21 Step 2.1, Clinical Score 15 or More $191.74

func_grp2_21 Step 2.1, Functional Score = 7 $43.63

func_grp3_21 Step 2.1, Functional Score 8 or More $65.49

clin_grp2_22 Step 2.2, Clinical Score 9 to 16 $76.41

clin_grp3_22 Step 2.2, Clinical Score 17+ $177.93

func_grp2_22 Step 2.2, Functional Score = 8 $36.55

func_grp3_22 Step 2.2, Functional Score 9 or More $109.94

clin_grp2_3 Step 3, Clinical Score 3 to 5 $28.53

clin_grp3_3 Step 3, Clinical Score 6 or More $112.15

func_grp2_3 Step 3, Functional Score = 9 $73.68

func_grp3_3 Step 3, Functional Score 10 or More $113.33

clin_grp2_4 Step 4, Clinical Score 8 to 14 $84.62

clin_grp3_4 Step 4, Clinical Score 15 or More $213.78

func_grp2_4 Step 4, Functional Score = 7 $73.13

func_grp3_4 Step 4, Functional Score 8 or More $133.71

step2_1 Step 2.1, 1st and 2nd Episodes, 14 to 19 Therapy Visits $386.71

step2_2 Step 2.2, 3rd+ Episodes, 14 to 19 Therapy Visits $413.85

step3 Step 3, 3rd+ Episodes, 0-13 Therapy Visits -$63.66

step4 Step 4, All Episodes, 20+ Therapy Visits $700.20

_cons Intercept $348.74

Note: The data for the payment regression model come from a 20 percent random sample of episodes from 

CY 2007. 

The raw weights for each of the 153 groups were then 

calculated based on the payment regression model. It 

should be noted that the raw weights do not change across 

the graduated therapy steps between the therapy thresholds. 

In the next step of weight revision, the weights associated 

with 0 to 5 therapy visits were increased by 7.5 percent. 

Also, the weights associated with 14-15 therapy visits were 

decreased by 5 percent and the weights associated with 20+ 

therapy visits were decreased by 10 percent. These 

adjustments were made to discourage inappropriate use of 

therapy while addressing concerns that non-therapy services 

are undervalued. The larger reduction factor for 20 or 
CMS-1353-P 89 

more therapy visits (10 percent) compared to the reduction 

factor for 14 to 15 therapy visits (5 percent) implements a 

more aggressive deceleration than we used in the current 

weights. Currently, there is a high payment weight 

associated with the 20 or more therapy visit threshold to 

capture the costs associated with providing 20 therapy 

visits, as well as numbers of therapy visits well beyond 20 

therapy visits. As a result, there is a large increase in 

the payment weight between the 18-19 therapy visit step and 

the 20 or more therapy visit threshold. This large 

increase in the payment weight may create incentives for 

agencies to provide unnecessary therapy visits up to and 

including 20 visits, and may explain MedPAC’s observation 

that there was a larger increase in the number of episodes 

in the 20 or more therapy visit group than the 14 or more 

therapy visit group. By implementing a larger reduction at 

the 20 or more therapy visits, we will provide a 

disincentive for agencies to pad episodes just to 20 visits 

or slightly more, to be able to realize a large margin from 

that threshold, which was designed to pay for not only 

episodes involving 20 or just above 20 therapy visits, but 

also episodes involving considerably more than 20 therapy 

visits. 

After the adjustments were applied to the raw weights, 

the weights were further adjusted to create an increase in 
CMS-1353-P 90 

the payment weights for the therapy visit steps between the 

therapy thresholds. Weights with the same clinical 

severity level, functional severity level, and early/later 

episode status were grouped together. Then within those 

groups, the weights for each therapy step between 

thresholds were gradually increased. We did this by 

interpolating between the main thresholds on the model 

(from 0-5 to 14-15 therapy visits, and from 14-15 to 20+ 

therapy visits). We used a linear model to implement the 

interpolation so the payment weight increase for each step 

between the thresholds (such as the increase between 0-5 

therapy visits and 6 therapy visits and the increase 

between 6 therapy visits and 7-9 therapy visits) was 

constant. The interpolated weights were then adjusted so 

that the average case-mix for the weights was equal to 1. 

 When developing our model, we considered a number of 

different sets of adjustments. We further explored two 

sets of adjustments because the adjustments were in line 

with our goals to address therapy incentives. The two sets 

of adjustments are shown in Table 16. We looked at the 

payment to cost ratios for various subgroups, where the 

payment was defined as the predicted resource use and the 

cost was defined as the wage weighted minutes in dollars. 

After looking at the payment to cost ratios, we decided to 

propose the less aggressive set of adjustments (option 2) 
CMS-1353-P 91 

to address therapy incentives while maintaining our target 

payment to cost ratios for groups. Specifically, when 

examining the payment to cost ratios by number of therapy 

visits, it appears that currently, episodes with three to 

five therapy visits are underpaid and episodes with 20 or 

just over 20 therapy visits are overpaid. When using our 

proposed payment weights, the episodes with three to five 

therapy visits have a higher payment to cost ratio and 

would receive higher payments. Also, episodes with around 

20 therapy visits have more reasonable payment to cost 

ratios when using the proposed weights compared to ratios 

with the current weights. (Please see the Abt technical 

report located at http://www.cms.gov/center/hha.asp for the 

payment to cost ratio tables and more information). 

Table 16: Adjustments to the Raw Weights 

Therapy step Group Option 1: 

Most Aggressive 

Direct Adjustments 

Option 2: 

Less Aggressive 

Direct Adjustments 

0 to 5 Therapy Visits 1.15 1.075 

14 to 15 Therapy Visits 0.9 0.95 

20+ Therapy Visits 0.8 0.9 

After applying the adjustments in Table 16 to the raw 

weights, applying the interpolation between the therapy 

thresholds, and adjusting the weights so that the average 

case-mix for the weights was equal to 1, we applied a 

budget neutrality factor (1.2847) to the weights to ensure 
CMS-1353-P 92 

that the final proposed weights result in aggregate 

expenditures in 2009 approximately equal to expenditures 

using the current payment weights. It is important to note 

that our authority allows us to reduce home health payments 

only as described in section 1895(b)(3)(B)(iv) of the Act. 

As such, we must revise our payment weights in a budget 

neutral manner. Therefore, after deriving revised relative 

case-mix weights, we increased the weights to achieve 

budget neutrality to the most current, complete data 

available, which is 2009. We show the final set of new 

payment weights for the 153 groups that we are proposing in 

Table 17. The R-squared value when we ran a regression of 

the episode’s total resources (dependent variable) using our 

proposed weights (independent variable) is 0.5384. It 

should be noted that we will continue to evaluate and 

potentially refine the payment weights as new data and 

analysis becomes available. 

It also should be noted that as we described in 

section A of this proposed rule, we also are proposing to 

reduce payments under our authority in section 

1895(b)(3)(B)(iv) of the Act to reduce the home health base 

episode payment to account for nominal case-mix growth 

through 2009. 
CMS-1353-P 93 

TABLE 17: Final Proposed Payment Weights (2007) 

Payment 

Group 

Step 

(Episode and/or Therapy Visit 

Ranges) 

Clinical and 

Functional 

Levels 

(1 = Low; 

2 = Medium; 

3 = High) 

Final Weights

(2007 

Recalibration) 

10111 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C1F1 0.8468 

10112 1st and 2nd Episodes, 6 Therapy Visits C1F1 0.9931 

10113 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C1F1 1.1394 

10114 1st and 2nd Episodes, 10 Therapy Visits C1F1 1.2857 

10115 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C1F1 1.4320 

10121 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C1F2 1.0630 

10122 1st and 2nd Episodes, 6 Therapy Visits C1F2 1.1847 

10123 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C1F2 1.3065 

10124 1st and 2nd Episodes, 10 Therapy Visits C1F2 1.4283 

10125 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C1F2 1.5501 

10131 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C1F3 1.1621 

10132 1st and 2nd Episodes, 6 Therapy Visits C1F3 1.2734 

10133 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C1F3 1.3847 

10134 1st and 2nd Episodes, 10 Therapy Visits C1F3 1.4961 

10135 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C1F3 1.6074 

10211 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C2F1 0.8627 

10212 1st and 2nd Episodes, 6 Therapy Visits C2F1 1.0434 

10213 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C2F1 1.2240 

10214 1st and 2nd Episodes, 10 Therapy Visits C2F1 1.4047 

10215 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C2F1 1.5853 

10221 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C2F2 1.0788 

10222 1st and 2nd Episodes, 6 Therapy Visits C2F2 1.2350 

10223 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C2F2 1.3912 

10224 1st and 2nd Episodes, 10 Therapy Visits C2F2 1.5473 

10225 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C2F2 1.7035 
CMS-1353-P 94 

Payment 

Group 

Step 

(Episode and/or Therapy Visit 

Ranges) 

Clinical and 

Functional 

Levels 

(1 = Low; 

2 = Medium; 

3 = High) 

Final Weights

(2007 

Recalibration) 

10231 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C2F3 1.1780 

10232 1st and 2nd Episodes, 6 Therapy Visits C2F3 1.3237 

10233 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C2F3 1.4694 

10234 1st and 2nd Episodes, 10 Therapy Visits C2F3 1.6151 

10235 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C2F3 1.7608 

10311 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C3F1 0.9384 

10312 1st and 2nd Episodes, 6 Therapy Visits C3F1 1.1487 

10313 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C3F1 1.3589 

10314 1st and 2nd Episodes, 10 Therapy Visits C3F1 1.5692 

10315 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C3F1 1.7794 

10321 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C3F2 1.1545 

10322 1st and 2nd Episodes, 6 Therapy Visits C3F2 1.3403 

10323 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C3F2 1.5261 

10324 1st and 2nd Episodes, 10 Therapy Visits C3F2 1.7118 

10325 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C3F2 1.8976 

10331 1st and 2nd Episodes, 0 to 5 Therapy 

Visits C3F3 1.2537 

10332 1st and 2nd Episodes, 6 Therapy Visits C3F3 1.4290 

10333 1st and 2nd Episodes, 7 to 9 Therapy 

Visits C3F3 1.6043 

10334 1st and 2nd Episodes, 10 Therapy Visits C3F3 1.7796 

10335 1st and 2nd Episodes, 11 to 13 Therapy 

Visits C3F3 1.9549 

21111 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C1F1 1.5782 

21112 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C1F1 1.7630 

21113 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C1F1 1.9478 

21121 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C1F2 1.6719 

21122 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C1F2 1.8750 
CMS-1353-P 95 

Payment 

Group 

Step 

(Episode and/or Therapy Visit 

Ranges) 

Clinical and 

Functional 

Levels 

(1 = Low; 

2 = Medium; 

3 = High) 

Final Weights

(2007 

Recalibration) 

21123 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C1F2 2.0781 

21131 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C1F3 1.7188 

21132 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C1F3 1.9473 

21133 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C1F3 2.1758 

21211 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C2F1 1.7660 

21212 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C2F1 1.9455 

21213 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C2F1 2.1250 

21221 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C2F2 1.8596 

21222 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C2F2 2.0575 

21223 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C2F2 2.2553 

21231 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C2F3 1.9065 

21232 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C2F3 2.1298 

21233 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C2F3 2.3531 

21311 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C3F1 1.9897 

21312 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C3F1 2.1822 

21313 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C3F1 2.3747 

21321 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C3F2 2.0833 

21322 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C3F2 2.2941 

21323 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C3F2 2.5050 

21331 1st and 2nd Episodes, 14 to 15 Therapy 

Visits C3F3 2.1302 

21332 1st and 2nd Episodes, 16 to 17 Therapy 

Visits C3F3 2.3665 
CMS-1353-P 96 

Payment 

Group 

Step 

(Episode and/or Therapy Visit 

Ranges) 

Clinical and 

Functional 

Levels 

(1 = Low; 

2 = Medium; 

3 = High) 

Final Weights

(2007 

Recalibration) 

21333 1st and 2nd Episodes, 18 to 19 Therapy 

Visits C3F3 2.6027 

22111 3rd+ Episodes, 14 to 15 Therapy Visits C1F1 1.6365 

22112 3rd+ Episodes, 16 to 17 Therapy Visits C1F1 1.8018 

22113 3rd+ Episodes, 18 to 19 Therapy Visits C1F1 1.9672 

22121 3rd+ Episodes, 14 to 15 Therapy Visits C1F2 1.7149 

22122 3rd+ Episodes, 16 to 17 Therapy Visits C1F2 1.9037 

22123 3rd+ Episodes, 18 to 19 Therapy Visits C1F2 2.0924 

22131 3rd+ Episodes, 14 to 15 Therapy Visits C1F3 1.8724 

22132 3rd+ Episodes, 16 to 17 Therapy Visits C1F3 2.0497 

22133 3rd+ Episodes, 18 to 19 Therapy Visits C1F3 2.2270 

22211 3rd+ Episodes, 14 to 15 Therapy Visits C2F1 1.8004 

22212 3rd+ Episodes, 16 to 17 Therapy Visits C2F1 1.9685 

22213 3rd+ Episodes, 18 to 19 Therapy Visits C2F1 2.1365 

22221 3rd+ Episodes, 14 to 15 Therapy Visits C2F2 1.8789 

22222 3rd+ Episodes, 16 to 17 Therapy Visits C2F2 2.0703 

22223 3rd+ Episodes, 18 to 19 Therapy Visits C2F2 2.2618 

22231 3rd+ Episodes, 14 to 15 Therapy Visits C2F3 2.0364 

22232 3rd+ Episodes, 16 to 17 Therapy Visits C2F3 2.2164 

22233 3rd+ Episodes, 18 to 19 Therapy Visits C2F3 2.3964 

22311 3rd+ Episodes, 14 to 15 Therapy Visits C3F1 2.0183 

22312 3rd+ Episodes, 16 to 17 Therapy Visits C3F1 2.2013 

22313 3rd+ Episodes, 18 to 19 Therapy Visits C3F1 2.3842 

22321 3rd+ Episodes, 14 to 15 Therapy Visits C3F2 2.0967 

22322 3rd+ Episodes, 16 to 17 Therapy Visits C3F2 2.3031 

22323 3rd+ Episodes, 18 to 19 Therapy Visits C3F2 2.5094 

22331 3rd+ Episodes, 14 to 15 Therapy Visits C3F3 2.2542 

22332 3rd+ Episodes, 16 to 17 Therapy Visits C3F3 2.4492 

22333 3rd+ Episodes, 18 to 19 Therapy Visits C3F3 2.6441 

30111 3rd+ Episodes, 0 to 5 Therapy Visits C1F1 0.6923 

30112 3rd+ Episodes, 6 Therapy Visits C1F1 0.8811 

30113 3rd+ Episodes, 7 to 9 Therapy Visits C1F1 1.0699 

30114 3rd+ Episodes, 10 Therapy Visits C1F1 1.2588 

30115 3rd+ Episodes, 11 to 13 Therapy Visits C1F1 1.4476 

30121 3rd+ Episodes, 0 to 5 Therapy Visits C1F2 0.8712 

30122 3rd+ Episodes, 6 Therapy Visits C1F2 1.0399 

30123 3rd+ Episodes, 7 to 9 Therapy Visits C1F2 1.2087 

30124 3rd+ Episodes, 10 Therapy Visits C1F2 1.3774 

30125 3rd+ Episodes, 11 to 13 Therapy Visits C1F2 1.5462 

30131 3rd+ Episodes, 0 to 5 Therapy Visits C1F3 0.9675 

30132 3rd+ Episodes, 6 Therapy Visits C1F3 1.1485 

30133 3rd+ Episodes, 7 to 9 Therapy Visits C1F3 1.3294 
CMS-1353-P 97 

Payment 

Group 

Step 

(Episode and/or Therapy Visit 

Ranges) 

Clinical and 

Functional 

Levels 

(1 = Low; 

2 = Medium; 

3 = High) 

Final Weights

(2007 

Recalibration) 

30134 3rd+ Episodes, 10 Therapy Visits C1F3 1.5104 

30135 3rd+ Episodes, 11 to 13 Therapy Visits C1F3 1.6914 

30211 3rd+ Episodes, 0 to 5 Therapy Visits C2F1 0.7615 

30212 3rd+ Episodes, 6 Therapy Visits C2F1 0.9693 

30213 3rd+ Episodes, 7 to 9 Therapy Visits C2F1 1.1771 

30214 3rd+ Episodes, 10 Therapy Visits C2F1 1.3849 

30215 3rd+ Episodes, 11 to 13 Therapy Visits C2F1 1.5927 

30221 3rd+ Episodes, 0 to 5 Therapy Visits C2F2 0.9405 

30222 3rd+ Episodes, 6 Therapy Visits C2F2 1.1281 

30223 3rd+ Episodes, 7 to 9 Therapy Visits C2F2 1.3158 

30224 3rd+ Episodes, 10 Therapy Visits C2F2 1.5035 

30225 3rd+ Episodes, 11 to 13 Therapy Visits C2F2 1.6912 

30231 3rd+ Episodes, 0 to 5 Therapy Visits C2F3 1.0367 

30232 3rd+ Episodes, 6 Therapy Visits C2F3 1.2367 

30233 3rd+ Episodes, 7 to 9 Therapy Visits C2F3 1.4366 

30234 3rd+ Episodes, 10 Therapy Visits C2F3 1.6365 

30235 3rd+ Episodes, 11 to 13 Therapy Visits C2F3 1.8364 

30311 3rd+ Episodes, 0 to 5 Therapy Visits C3F1 0.9646 

30312 3rd+ Episodes, 6 Therapy Visits C3F1 1.1753 

30313 3rd+ Episodes, 7 to 9 Therapy Visits C3F1 1.3861 

30314 3rd+ Episodes, 10 Therapy Visits C3F1 1.5968 

30315 3rd+ Episodes, 11 to 13 Therapy Visits C3F1 1.8076 

30321 3rd+ Episodes, 0 to 5 Therapy Visits C3F2 1.1435 

30322 3rd+ Episodes, 6 Therapy Visits C3F2 1.3342 

30323 3rd+ Episodes, 7 to 9 Therapy Visits C3F2 1.5248 

30324 3rd+ Episodes, 10 Therapy Visits C3F2 1.7155 

30325 3rd+ Episodes, 11 to 13 Therapy Visits C3F2 1.9061 

30331 3rd+ Episodes, 0 to 5 Therapy Visits C3F3 1.2398 

30332 3rd+ Episodes, 6 Therapy Visits C3F3 1.4427 

30333 3rd+ Episodes, 7 to 9 Therapy Visits C3F3 1.6456 

30334 3rd+ Episodes, 10 Therapy Visits C3F3 1.8485 

30335 3rd+ Episodes, 11 to 13 Therapy Visits C3F3 2.0514 

40111 All Episodes, 20+ Therapy Visits C1F1 2.1325 

40121 All Episodes, 20+ Therapy Visits C1F2 2.2812 

40131 All Episodes, 20+ Therapy Visits C1F3 2.4043 

40211 All Episodes, 20+ Therapy Visits C2F1 2.3046 

40221 All Episodes, 20+ Therapy Visits C2F2 2.4532 

40231 All Episodes, 20+ Therapy Visits C2F3 2.5764 

40311 All Episodes, 20+ Therapy Visits C3F1 2.5671 

40321 All Episodes, 20+ Therapy Visits C3F2 2.7158 

40331 All Episodes, 20+ Therapy Visits C3F3 2.8390 
CMS-1353-P 98 

C. Outlier Policy

1. Background 

Section 1895(b)(5) of the Act allows for the provision 

of an addition or adjustment to the national standardized 

60-day case-mix and wage-adjusted episode payment amounts 

in the case of episodes that incur unusually high costs due 

to patient home health (HH) care needs. Prior to the 

enactment of the Affordable Care Act in March 2010, this 

section of the Act stipulated that total outlier payments 

could not exceed 5 percent of total projected or estimated 

HH payments in a given year. In the July 2000 final rule 

(65 FR 41188 through 41190), we described the method for 

determining outlier payments. Under this system, outlier 

payments are made for episodes whose estimated costs exceed 

a threshold amount for each Home Health Resource Group 

(HHRG). The episode’s estimated cost is the sum of the 

national wage-adjusted per-visit payment amounts for all 

visits delivered during the episode. The outlier threshold 

for each case-mix group or partial episode payment (PEP) 

adjustment is defined as the 60-day episode payment or PEP 

adjustment for that group plus a fixed dollar loss (FDL) 

amount. The outlier payment is defined to be a proportion 

of the wage-adjusted estimated cost beyond the wageadjusted threshold. The threshold amount is the sum of the 

wage and case-mix adjusted PPS episode amount and wage-
CMS-1353-P 99 

adjusted fixed dollar loss amount. The proportion of 

additional costs paid as outlier payments is referred to as 

the loss-sharing ratio. 

2. Regulatory Update 

 In the CY 2010 HH PPS final rule (74 FR 58080 through 

58087), we discussed excessive growth in outlier payments, 

primarily the result of unusually high outlier payments in 

a few areas of the country. Despite program integrity 

efforts associated with excessive outlier payments in 

targeted areas of the country, we discovered that outlier 

expenditures exceeded the 5 percent statutory limit. 

Consequently, we assessed the appropriateness of taking 

action to curb outlier abuse. To mitigate possible billing 

vulnerabilities associated with excessive outlier payments 

and adhere to our statutory limit on outlier payments, we 

adopted an outlier policy that included a 10 percent agency 

level cap on outlier payments. This cap was done in 

concert with a reduced fixed dollar loss (FDL) ratio of 

0.67. These policies resulted in a projected target 

outlier pool of approximately 2.5 percent. (The previous 

outlier pool was 5 percent of total HH expenditures.) 

For CY 2010, we first returned 5 percent of these 

dollars back into the national standardized 60-day episode 

rates, the national per-visit rates, the low utilization 

payment adjustment (LUPA) add-on payment amount, and the 
CMS-1353-P 100 

non-routine supplies (NRS) conversion factor. Then, we 

reduced the CY 2010 rates by 2.5 percent to account for the 

new outlier pool of 2.5 percent. This outlier policy was 

adopted for CY 2010 only. 

3. Statutory Update 

As outlined in the CY 2011 HH PPS final rule (75 FR 

70397 through 70399), sections 3131(b)(1) and 3131(b)(2) of 

the Affordable Care Act amended sections 1895(b)(3)(C) and 

1895(b)(5) of the Act. Specifically, section 3131(b)(2) of 

the Affordable Care Act amended section 1895(b)(5) of the 

Act by redesignating the existing language as section 

1895(b)(5)(A) of the Act, and revising it to state that the 

Secretary, “may provide for an addition or adjustment to 

the payment amount otherwise made in the case of outliers 

because of unusual variations in the type or amount of 

medically necessary care. The total amount of the 

additional payments or payment adjustments made under this 

paragraph with respect to a fiscal year or year may not 

exceed 2.5 percent of the total payments projected or 

estimated to be made based on the prospective payment 

system under this subsection in that year.” 

 The result of these revisions was that, beginning in 

CY 2011, we reduced payment rates by 5 percent, targeted up 

to 2.5 percent of estimated total payments to be paid as 

outlier payments, and applied a 10 percent agency-level 
CMS-1353-P 101 

outlier cap. 

4. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) Ratio 

 For a given level of outlier payments, there is a 

trade-off between the values selected for the FDL ratio and 

the loss-sharing ratio. A high FDL ratio reduces the 

number of episodes that can receive outlier payments, but 

makes it possible to select a higher loss-sharing ratio 

and, therefore, increase outlier payments for outlier 

episodes. Alternatively, a lower FDL ratio means that more 

episodes can qualify for outlier payments, but outlier 

payments per episode must then be lower. 

 The FDL ratio and the loss-sharing ratio must be 

selected so that the estimated total outlier payments do 

not exceed the 2.5 percent aggregate level (as required by 

section 1895(b)(5)(A) of the Act). In the past, we have 

used a value of 0.80 for the loss-sharing ratio, which is 

relatively high, but preserves incentives for agencies to 

attempt to provide care efficiently for outlier cases. 

With a loss-sharing ratio of 0.80, Medicare pays 80 percent 

of the additional costs above the wage-adjusted outlier 

threshold amount. In the CY 2011 HH PPS final rule (75 FR 

70398), in targeting total outlier payments as 2.5 percent 

of total HH PPS payments, we implemented an FDL ratio of 

0.67. 

A preliminary look at partial CY 2010 Health Care 
CMS-1353-P 102 

Information System (HCIS) data indicates that, because the 

total outlier payments comprise approximately 2 percent of 

total payments, we would maintain the current FDL ratio of 

0.67. However, in the final rule, we will update our 

estimate of the FDL ratio using the most current and 

complete year of HH PPS data available. 

Table 18 shows outlier payment history as a percentage 

of total HH PPS payments between calendar years 2004 and 

2009. Preliminary data for CY 2010 is also provided; 

however, this data represents only a portion of the data 

available and is current only through part of the third 

quarter. 

TABLE 18: Outlier Payment History - 

CY 2004 through CY 2010 

Year Outlier Payment Total HH PPS 

Payment 

Outlier Payment 

Percentage 

2004 $309,198,604 $11,500,462,624 2.69% 

2005 $527,096,653 $12,885,434,951 4.09% 

2006 $701,945,386 $14,041,853,560 5.00% 

2007 $996,316,407 $15,677,329,001 6.36% 

2008 $1,127,162,152 $17,114,906,875 6.59% 

2009 $1,204,246,569 $18,895,476,901 6.37% 

2010 $233,274,303 $13,878,411,396 1.68%* 

*This CY 2010 outlier payment projection is based only on claims reported through part of the third 

quarter. 

5. Outlier Relationship to the HH Payment Study 

As we discuss later in this proposed rule, section 

3131(d) of the Affordable Care Act requires CMS to conduct 

a study and report on developing HH payment revisions that 

will ensure access to care and payment for HH patients with 
CMS-1353-P 103 

high severity of illness. Our Report to Congress 

containing this study's recommendations is due no later 

than March 1, 2014. Section 3131(d)(1)(A)(iii) of the 

Affordable Care Act, in particular, states that this study 

may include analysis of potential revisions to outlier 

payments to better reflect costs of treating Medicare 

beneficiaries with high levels of severity of illness. 

D. CY 2012 Rate Update

1. Home Health Market Basket Update 

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

standard prospective payment amounts for CY 2012 be 

increased by a factor equal to the applicable home health 

market basket update for those HHAs that submit quality 

data as required by the Secretary. Section 3401(e) of the 

Affordable Care Act amended section 1895(b)(3)(B) of the 

Act by adding a new clause (vi) which states, “After 

determining the home health market basket percentage 

increase ... the Secretary shall reduce such percentage ... for 

each of 2011, 2012, and 2013, by 1 percentage point. The 

application of this clause may result in the home health 

market basket percentage increase under clause (iii) being 

less than 0.0 for a year, and may result in payment rates 

under the system under this subsection for a year being 

less than such payment rates for the preceding year.” 

 The proposed HH PPS market basket update for CY 2012 
CMS-1353-P 104 

is 2.5 percent. This is based on Global Insight Inc.’s 

first quarter 2011 forecast, utilizing historical data 

through the fourth quarter of 2010. A detailed description 

of how we derive the HHA market basket is available in the 

CY 2008 HH PPS proposed rule (72 FR 25356, 25435). Due to 

the requirement in section 1895(b)(3)(B)(vi) of the Act, 

the proposed CY 2012 market basket update of 2.5 percent 

must be reduced by 1 percentage point to 1.5 percent. In 

effect, the proposed CY 2012 market basket update becomes 

1.5 percent. 

2. Home Health Care Quality Reporting Program 

a. Background and Quality Reporting Requirements 

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

“each home health agency shall submit to the Secretary such 

data that the Secretary determines are appropriate for the 

measurement of health care quality. Such data shall be 

submitted in a form and manner, and at a time, specified by 

the Secretary for purposes of this clause.” In addition, 

section 1895(b)(3)(B)(v)(I) of the Act dictates that “for 

2007 and each subsequent year, in the case of a HHA that 

does not submit data to the Secretary in accordance with 

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

basket percentage increase applicable under such clause for 

such year shall be reduced by 2 percentage points.” This 

requirement has been codified in regulations at 
CMS-1353-P 105 

§484.225(i). HHAs that meet the quality data reporting 

requirements would be eligible for the full home health 

market basket percentage increase. HHAs that do not meet 

the reporting requirements would be subject to a 2 percent 

reduction to the home health market basket increase. 

b. OASIS Data 

Accordingly, for CY 2012, we propose to continue to 

use a HHA’s submission of OASIS data as one form of quality 

data to meet the requirement that the HHA submit data 

appropriate for the measurement of health care quality. We 

are proposing for CY 2012 to consider OASIS assessments 

submitted by HHAs to CMS in compliance with HHA Conditions 

of Participation and Conditions for Payment for episodes 

beginning on or after July 1, 2010 and before July 1, 2011 

as fulfilling one portion of the quality reporting 

requirement for CY 2012. This time period would allow 12 

full months of data collection and would provide us the 

time necessary to analyze and make any necessary payment 

adjustments to the payment rates for CY 2012. We propose 

to reconcile the OASIS submissions with claims data to 

verify full compliance with the OASIS portion of the 

quality reporting requirements in CY 2012 and each year 

thereafter on an annual cycle July 1 through June 30 as 

described above. 

As set forth in the CY 2008 final rule, agencies do 
CMS-1353-P 106 

not need to submit OASIS data for those patients who are 

excluded from the OASIS submission requirements under the 

Home Health Conditions of Participation (CoPs) §484.1 - 

§484.265, as well as those excluded, as described at 

70 FR 76202: 

● Those patients receiving only nonskilled services; 

● Those patients for whom neither Medicare nor 

Medicaid is paying for home health care (patients receiving 

care under a Medicare or Medicaid Managed Care Plan are not 

excluded from the OASIS reporting requirement); 

● Those patients receiving pre- or post-partum 

services; or 

● Those patients under the age of 18 years. 

As set forth in the CY 2008 HH PPS final rule (72 FR 

49863), agencies that become Medicare-certified on or after 

May 31 of the preceding year (2011 for payments in 2012) 

are excluded from any payment penalty for quality reporting 

purposes for the following CY. Therefore, HHAs that are 

certified on or after May 1, 2011 are excluded from the 

quality reporting requirement for CY 2012 payments. These 

exclusions only affect quality reporting requirements and 

do not affect the HHA’s reporting responsibilities under 

the Conditions of Participation and Conditions of Payment. 

(1) OASIS Data and Annual Payment Update 

HHAs that submit OASIS data as specified above are 
CMS-1353-P 107 

considered to have met one portion of the quality data 

reporting requirements. Additional portions of the quality 

data reporting requirements are discussed below under 

sections D.2.c and D.2.d of this preamble. 

(2) OASIS Data and Public Reporting 

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

states that “[t]he Secretary shall establish procedures for 

making data submitted under sub clause (II) available to 

the public. Such procedures shall ensure that a home 

health agency has the opportunity to review the data that 

is to be made public with respect to the agency prior to 

such data being made public.” 

To meet the requirement for making such data public, 

we propose to continue using a subset of OASIS data that is 

utilized for quality measure development and reported on 

the Home Health Compare website. Currently, the Home 

Health Compare web site lists 23 quality measures from the 

OASIS data set as described below. The Home Health Compare 

web site, which was redesigned in October 2010, is located 

at http://www.medicare.gov/HHCompare/Home.asp. Each HHA 

currently has pre-publication access, through the CMS 

contractor, to its own quality data that the contractor 

updates periodically. We propose to continue this process, 

to enable each agency to view its quality measures before 

public posting of data on Home Health Compare. 
CMS-1353-P 108 

The following 13 OASIS-C process measures have been 

publicly reported on Home Health Compare since October 

2010: 

● Timely initiation of care. 

● Influenza immunization received for current flu 

season. 

● Pneumococcal polysaccharide vaccine ever received. 

● Heart failure symptoms addressed during short-term 

episodes. 

● Diabetic foot care and patient education 

implemented during short-term episodes of care. 

● Pain assessment conducted. 

● Pain interventions implemented during short-term 

episodes. 

● Depression assessment conducted. 

● Drug education on all medications provided to 

patient/caregiver during short-term episodes. 

● Falls risk assessment for patients 65 and older. 

● Pressure ulcer prevention plans implemented. 

● Pressure ulcer risk assessment conducted. 

● Pressure ulcer prevention included in the plan of 

care. 

We published information about these new process 

measures in the Federal Register in the CY 2010 HH PPS 

proposed and final rules (74 FR 40960 and 74 FR 58096, 
CMS-1353-P 109 

respectively), and in the CY 2011 HH PPS proposed and final 

rules (75 FR 43250 and 75 FR 70401, respectively). We 

proposed and finalized the decision to update Home Health 

Compare in October 2010 to reflect the addition of the 

process measures. 

We propose to continue publicly reporting these 13 

process measures and consider them as measures of home 

health quality. 

 The following 10 OASIS-C outcome measures are 

currently listed on Home Health Compare : 

● Improvement in ambulation/locomotion. 

● Improvement in bathing. 

● Improvement in bed transferring. 

● Improvement in management of oral medications. 

● Improvement in pain interfering with activity. 

● Acute care hospitalization. 

● Emergency Department Use Without Hospitalization. 

● Improvement in dyspnea. 

● Improvement in status of surgical wounds. 

● Increase in number of pressure ulcers. 

As proposed and finalized in the CY 2011 HH PPS final rule 

(75 FR 70401), these OASIS-C outcome measure calculations 

will be publicly reported for the first time in July 2011. 

(3) Transition from OASIS-B1 to OASIS-C 

The implementation of OASIS-C on January 1, 2010 
CMS-1353-P 110 

impacted the schedule of quality measure reporting for CY 

2010 and CY 2011. Although sufficient OASIS-C data were 

collected during CY 2010 and early CY 2011 and risk models 

were in development, the outcome reports (found on Home 

Health Compare and the contractor outcome reports used for 

HHA’s performance improvement activities) remained static 

with OASIS-B1 data. The last available OASIS-B1 reports 

remained in the system and on the Home Health Compare site 

until they could be replaced with OASIS-C reports. 

Sufficient numbers of patient episodes were needed to 

report measures based on new OASIS-C data. This is 

important because measures based on patient sample sizes 

taken over short periods of time can be inaccurate and 

misleading due to issues like seasonal variation and underrepresentation of long-stay home health patients. Once 

sufficient OASIS-C data were collected and submitted to 

CMS’s national repository, we could begin producing new 

reports based on OASIS-C. 

December 2009 was the last month for which outcome 

data were calculated for OASIS-B1 data and OASIS-B1 CASPER 

outcome reports continued to be available after March 2010. 

OASIS-C process measures were made available to preview in 

September 2010 and were publicly reported in October 2010. 

OASIS-C outcome measures will be available to preview in 

June 2011 and will be publicly reported in July 2011. 
CMS-1353-P 111 

c. Claims Data, Proposed Requirements and Outcome Measure 

Change 

 We propose to continue to use the aforementioned 

specified measures derived from the OASIS-C data for 

purposes of measuring home health care quality. We propose 

to also use measures derived from Medicare claims data to 

measure home health quality. This would also ensure that 

providers would not have an additional burden of reporting 

quality of care measures through a separate mechanism, and 

that the costs associated with the development and testing 

of a new reporting mechanism would be avoided. 

The change to OASIS-C brought about modifications to 

the OASIS-B1 measure “Emergent Care,” and resulted in the 

following change to that measure: 

● Emergency Department Use without Hospitalization: 

This measure replaces the previously reported measure: 

Emergent care. It excludes emergency department visits 

that result in a hospital admission because those visits 

are already captured in the acute care hospitalization 

measure. 

Upon review of actual claims data for emergency 

department visits and responses to OASIS-C data item M2300, 

we determined that the claims data are a more robust source 

of data for this measure, therefore the OASIS-based measure 

“Emergency Department Use Without Hospitalization” will not 
CMS-1353-P 112 

be publicly reported in July 2011. The ED Use Without 

Hospitalization measure will be recalculated from claims 

data and we propose that public reporting of the claimsbased measure would begin January 2012. 

We invite comment on the proposed use of claims data in the 

calculation of home health quality measures and as an 

additional measurement of home health quality. 

To summarize, we propose that the following 13 process 

and 9 outcome measures, which comprise measurement of home 

health care quality, would continue to be publicly reported 

in July 2011 and quarterly thereafter: 

● Timely initiation of care. 

● Influenza immunization received for current flu 

season. 

● Pneumococcal polysaccharide vaccine ever received. 

● Heart failure symptoms addressed during short-term 

episodes. 

● Diabetic foot care and patient education 

implemented during short-term episodes of care. 

● Pain assessment conducted, 

● Pain interventions implemented during short-term 

episodes. 

● Depression assessment conducted. 

● Drug education on all medications provided to 

patient/caregiver during short-term episodes. 
CMS-1353-P 113 

● Falls risk assessment for patients 65 and older. 

● Pressure ulcer prevention plans implemented. 

● Pressure ulcer risk assessment conducted. 

● Pressure ulcer prevention included in the plan of 

care. 

● Improvement in ambulation/locomotion. 

● Improvement in bathing. 

● Improvement in bed transferring. 

● Improvement in management of oral medications. 

● Improvement in pain interfering with activity. 

● Acute care hospitalization. 

● Improvement in dyspnea. 

● Improvement in status of surgical wounds. 

● Increase in number of pressure ulcers. 

We propose that the claims-based measure “Emergency 

Department Use without Hospitalization” would be publicly 

reported in January 2012. 

d. Home Health Care CAHPS Survey (HHCAHPS) 

In the HH PPS Rate Update for CY 2011 final rule 

(75 FR 70404 et seq.), we stated that the expansion of the 

HH quality measures reporting requirements for Medicarecertified agencies will include the CAHPS® Home Health Care 

(HHCAHPS) Survey for the CY 2012 annual payment update 

(APU). We are maintaining our existing policy as issued in 

the CY 2011 HH PPS Rate Update, and are moving forward with 
CMS-1353-P 114 

our plans for HHCAHPS linkage to the pay-for-reporting 

(P4R) requirements affecting the HH PPS rate update for CY 

2012. 

(1) Background and Description of HHCAHPS 

As part of the U.S. Department of Health and Human 

Services’ (DHHS) Transparency Initiative, we have 

implemented a process to measure and publicly report 

patient experiences with home health care using a survey 

developed by the Agency for Healthcare Research and 

Quality’s (AHRQ’s) Consumer Assessment of Healthcare 

Providers and Systems (CAHPS®) program, and endorsed by the 

National Quality Forum (NQF). The HHCAHPS survey is part 

of a family of CAHPS® surveys that asks patients to report 

on and rate their experiences with health care. The Home 

Health Care CAHPS (HHCAHPS) survey presents home health 

patients with a set of standardized questions about their 

home health care providers and about the quality of their 

home health care. Prior to this survey, there was no 

national standard for collecting information about patient 

experiences that would enable valid comparisons across all 

HHAs. The history of the HHCAHPS has been given in 

previous rules, but it also available on our web site at 

https://homehealthcahps.org and also, in the HHCAHPS 

Protocols and Guidelines Manual, which is downloadable from 

our web site. 
CMS-1353-P 115 

For public reporting purposes, we will present five 

measures -- three composite measures and two global ratings 

of care from the questions on the HHCAHPS survey. The 

publicly reported data will be adjusted for differences in 

patient mix across home health agencies. Each composite 

measure consists of four or more questions regarding one of 

the following related topics: 

● Patient care (Q9, Q16, Q19, and Q24); 

● Communications between providers and patients (Q2, 

Q15, Q17, Q18, Q22, and Q23); 

● Specific care issues on medications, home safety, 

and pain (Q3, Q4, Q5, Q10, Q12, Q13, and Q14); 

The two global ratings are the overall rating of care 

given by the HHA’s care providers, and the patient’s 

willingness to recommend the HHA to family and friends. 

The HHCAHPS survey is currently available in six 

languages. At the time of the CY 2010 HH PPS final rule, 

HHCAHPS was only available in English and Spanish 

translations. In the proposed rule for CY 2010, we stated 

that we would provide additional translations of the survey 

over time in response to suggestions for any additional 

language translations. We now offer HHCAHPS in English, 

Spanish, Mandarin (Simplified) Chinese, Cantonese 

(Classical) Chinese, Russian, and Vietnamese languages. We 

will continue to consider additional translations of the 
CMS-1353-P 116 

HHCAHPS in response to the needs of the home health patient 

population. 

All of the requirements about eligibility for HHCAHPS 

and conversely, which home health patients are ineligible 

for HHCAHPS are delineated and detailed in the HHCAHPS 

Protocols and Guidelines Manual which is downloadable from 

the official Home Health Care CAHPS website 

https://homehealthcahps.org. To be eligible, home health 

patients must have received at least two skilled home 

health visits in the past 2 months, paid for by Medicare or 

Medicaid. HHCAHPS surveys will not be taken from patients 

who are: 

● Under the age of 18; 

● Deceased; 

● Receiving hospice care; 

● Receiving routine maternity care only; 

● Living in a State that restricts the release of 

patient information for a specific condition or illness 

that the patient has; or are 

● Requesting that their names not be released to 

anyone. 

We stated in previous rules that Medicare-certified 

agencies are required to contract with an approved HHCAHPS 

survey vendor. Beginning in summer 2009, interested 

vendors applied to become approved HHCAHPS survey vendors. 
CMS-1353-P 117 

HHCAHPS survey vendors are required to attend introductory 

and all update trainings conducted by CMS and the HHCAHPS 

Survey Coordination Team, as well as to pass a posttraining certification test. We now have approximately 40 

approved HHCAHPS survey vendors. The list of approved 

vendors is available at https://homehealthcahps.org. 

(2) HHCAHPS Requirements for CY 2012 

In the CY 2010 HH PPS final rule (74 FR 58078 et 

seq.), we stated that HHCAHPS would not be required for the 

APU for CY 2011. We did this so that HHAs would have more 

time to prepare for the implementation of HHCAHPS. 

Therefore, in the CY 2010 HH PPS final rule, we stated that 

data collection should take place beginning in the third 

quarter of CY 2010 to meet the HHCAHPS reporting 

requirements for the CY 2012 APU. In the CY 2010 HH PPS 

final rule, and in the CY 2011 HH PPS final rule, we stated 

that Medicare-certified agencies would be required to 

participate in a dry run for at least 1 month in third 

quarter of 2010 (July, August, and/or September), and to 

begin continuous monthly data collection in October 2010 

through March 2011, for the CY 2012 APU. The dry run data 

were due to the Home Health CAHPS® Data Center by 11:59 

p.m., eastern standard time (e.s.t.) on January 21, 2011. 

The dry run data will not be publicly reported on the CMS 

Home Health Compare web site. The purpose of the dry run 
CMS-1353-P 118 

was to provide an opportunity for vendors and HHAs to 

acquire first-hand experience with data collection, 

including sampling and data submission to the Home Health 

Care CAHPS® Data Center. 

In the CY 2011 HH PPS final rule, it was stated that 

the mandatory period of data collection for the CY 2012 APU 

would include the dry run data in the third quarter 2010, 

data from each month in the fourth quarter of 2010 

(October, November and December 2010), and data from each 

month in the first quarter 2011 (January, February and 

March 2011). We previously stated that all Medicarecertified HHAs should continuously collect HHCAHPS survey 

data for every month in every quarter beginning October 

2010, and submit these data for the fourth quarter of 2010 

to the Home Health CAHPS® Data Center by 11:59 p.m., 

eastern daylight time (e.d.t) on April 21, 2011. In the CY 

2011 HH PPS final rule, we stated that the data collected 

for the 3 months of the first quarter 2011 would have to be 

submitted to the Home Health CAHPS® Data Center by 11:59 

p.m., e.d.t. on July 21, 2011. We also stated that these 

data submission deadlines would be firm (that is, no late 

submissions would be accepted). 

These periods (a dry run in third quarter 2010, and 6 

months of data from October 2010 through March 2011) were 

deliberately chosen to comprise the HHCAHPS reporting 
CMS-1353-P 119 

requirements for the CY 2012 APU because they coincided 

with the OASIS-C reporting requirements that would already 

have been due on June 30, 2011 for the CY 2012 APU. We 

would also exempt Medicare-certified agencies from the 

HHCAHPS reporting requirements if they had fewer than 60 

HHCAHPS-eligible unique patients from April 1, 2009 through 

March 31, 2010. In the CY 2011 HH PPS final rule, we 

stated that by January 21, 2011 HHAs would need to provide 

CMS with patient counts for the period of April 1, 2009 

through March 31, 2010. We have posted a form on 

https://homehealthcahps.org that the HHAs would need to use 

to submit their patient counts. This patient counts 

reporting requirement would pertain only to Medicarecertified HHAs with fewer than 60 HHCAHPS eligible, 

unduplicated or unique patients for that time period. The 

aforementioned agencies would be exempt from conducting the 

HHCAHPS survey for the APU in CY 2012. 

We stated in the CY 2010 HH PPS final rule 

(74 FR 58078) and in the CY 2011 HH PPS final rule that we 

would exempt newly Medicare-certified HHAs. We realize 

that if an HHA became Medicare-certified April 1, 2010 and 

after, then they would be exempt from participating in 

HHCAHPS. 

For CY 2012, we propose to maintain our policy that 

all HHAs, unless covered by specific exclusions, must meet 
CMS-1353-P 120 

the quality reporting requirements or be subject to a two 

(2) percentage point reduction in the HH market basket 

percentage increase, in accordance with section 

1895(b)(3)(B)(v)(I) of the Act. 

(3) HHCAHPS Reconsiderations and Appeals Process 

We stated in the CY 2011 HH PPS final rule that we 

would propose a reconsiderations and appeals process for 

HHAs not meeting the HHCAHPS reporting requirements for CY 

2012. We are therefore now proposing a reconsiderations 

and appeals process for HHAs that fail to meet the HHCAHPS 

data collection requirements. We are proposing that HHAs 

that are not compliant with OASIS-C and/or HHCAHPS 

requirements for the CY 2012 APU requirements will be 

notified after a process is followed to confirm that they 

were noncompliant with CY 2012 quality reporting 

requirements. We are proposing to issue a Joint Signature 

Memorandum to RHHIs/MACs with a list of HHAs not compliant 

with OASIS and/or HHCAHPS. We are proposing that the 

September Memorandum include language regarding evidence 

required for the reconsideration process. We are proposing 

that the language in the transmittal include information to 

the HHAs about how to prepare a request for reconsideration 

of the CMS decision, and these HHAs will have 30 days to 

file their requests for reconsiderations to CMS. We are 

proposing that we examine each request and make a 
CMS-1353-P 121 

determination about whether we plan to uphold our original 

decision. We are proposing that HHAs receive 

CMS’reconsideration decision by December 31, 2011. We are 

proposing that HHAs have a right to appeal under 42 CFR 

405, subpart R, to the Provider Reimbursement Review Board 

(PRRB) if they were not satisfied with the CMS 

reconsideration determination. 

We are proposing that this Memorandum be a CMS 

transmittal that would be sent out the first week of 

September 2011 from the CMS Manual System, Medicare Claims 

Processing. We are proposing that this CMS transmittal be 

sent to Fiscal Intermediaries (FIs), Regional Home Health 

Intermediaries (RHHIs) and/or Carriers. We propose that 

the RHHIs/MACs verify the claims submissions for the 

identified timeframe for the 2012 APU period, to confirm 

that the claims match the HHAs we identified as 

noncompliant with OASIS and HHCAHPS. In late 

September/early October, the appropriate staff within CMS 

would review your submission. If necessary, the RHHIs/MACs 

would identify and notify the HHAs that they could lose 2 

percent of their 2012 APU, and provide them with 

instructions on how to request reconsideration. In early 

November 2011, the RHHIs/MACS would forward the HHAs 

reconsiderations to CMS on a flow basis so that we could 

review and prepare recommendations for cross component 
CMS-1353-P 122 

review within CMS throughout the month of November. We 

propose to have CMS finish this process in December, and 

about mid-December to circulate the recommendations for 

clearance and final determinations by CMS senior 

leadership. We propose that the HHAs would be informed 

about CMS’ final decisions by December 31, 2011. 

(4) HHCAHPS Oversight Activities 

We stated in the CY 2011 HH PPS final rule that 

vendors and HHAs would be required to participate in 

HHCAHPS oversight activities to ensure compliance with 

HHCAHPS protocols, guidelines, and survey requirements. 

The purpose of the oversight activities is to ensure that 

HHAs and approved survey vendors follow the HHCAHPS 

Protocols and Guidelines Manual. As stated, all approved 

survey vendors must develop a Quality Assurance Plan (QAP) 

for survey administration in accordance with the HHCAHPS 

Protocols and Guidelines Manual. The first QAP must be 

submitted within 6 weeks of the data submission deadline 

after the vendor’s first quarterly data submission. The 

QAP must be updated and submitted annually thereafter and 

at any time that changes occur in staff or vendor 

capabilities or systems. A model QAP is included in the 

HHCAHPS Protocols and Guidelines Manual. The QAP should 

include the following: 

● Organizational Background and Staff Experience. 
CMS-1353-P 123 

● Work Plan. 

● Sampling Plan. 

● Survey Implementation Plan. 

● Data Security, Confidentiality and Privacy Plan. 

● Questionnaire Attachments. 

As part of the oversight activities, the HHCAHPS 

Survey Coordination Team conducts on-site visits to the 

HHCAHPS vendors. The purpose of the site visits is to 

allow the HHCAHPS Coordination Team to observe the entire 

Home Health Care CAHPS Survey implementation process, from 

the sampling stage through file preparation and submission, 

as well as to assess how the HHCAHPS data are stored. The 

HHCAHPS Survey Coordination Team reviews the survey 

vendor’s survey systems, and assesses administration 

protocols based on the HHCAHPS Protocols and Guidelines 

Manual posted at https://homehealthcahps.org. The HHCAHPS 

Survey Coordination Team includes the CMS staff assigned to 

work on HHCAHPS, and the Federal contractor for the HHCAHPS 

implementation. HHCAHPS survey vendors are not part of the 

HHCAHPS Survey Coordination Team. The systems and program 

review include, but are not limited, to the following: 

● Survey management and data systems; 

● Printing and mailing materials facilities; 

● Telephone call center facilities; 

● Data receipt, entry and storage facilities; and 
CMS-1353-P 124 

● Written documentation of survey processes. 

After the site visits, vendors are given a defined 

time period in which to correct any identified issues and 

provide follow-up documentation of corrections for review. 

In general, we propose that the defined time periods will 

be between 2 weeks to 1 month after these issues are stated 

in the HHCAHPS Coordination Team’s site visit report to the 

survey vendor. It is proposed that survey vendors will be 

subject to follow-up site visits as needed. 

(5) HHCAHPS Requirements for CY 2013 

 For the CY 2013 APU, we propose to require HHCAHPS 

data collection and reporting for four quarters. The data 

collection period will include second quarter 2011 through 

first quarter 2012. We propose that HHAs will be required 

to submit their HHCAHPS data files to the Home Health CAHPS 

Data Center the third Thursday of the month (in the months 

of October, January, April and July). HHAs will be 

required to submit their HHCAHPS data files to the Home 

Health CAHPS Data Center for CY 2013 as follows: the data 

for the second quarter 2011 by 11:59 p.m., e.d.t. on 

October 20, 2011; the data for the third quarter 2011 by 

11:59 p.m., e.s.t. on January 19, 2012; the data for the 

fourth quarter 2011 by 11:59 p.m., e.d.t. on April 19, 

2012; and the data for the first quarter 2012 by 11:59 

p.m., e.d.t. on July 19, 2012. 
CMS-1353-P 125 

 We propose to require that all HHAs that have fewer 

than 60 HHCAHPS-eligible unduplicated or unique patients in 

the period of April 1, 2010 through March 31, 2011 will be 

exempt from the HHCAHPS data collection and submission 

requirements for the CY 2013 APU. For the CY 2013 APU, 

agencies with fewer than 60 HHCAHPS-eligible, unduplicated 

or unique patients would be required to submit their counts 

on the Participation Exemption Request form posted at 

https://homehealthcahps.org by 11:59 p.m., e.d.t. on April 

19, 2012. This deadline is firm, as are all of the 

quarterly data submission deadlines. 

We propose to exempt HHAs receiving Medicare 

certification on or after April 1, 2011 from the full 

HHCAHPS reporting requirement for the CY 2013 APU, because 

these HHAs were not Medicare-certified in the period of 

April 1, 2010 and March 31, 2011. 

(6) HHCAHPS Codified Criteria 

The following codified criteria stay the same as 

issued in the CY 2011 HH PPS final rule (75 FR 70465). We 

stated in §484.250(b) that “An HHA that has less than 60 

eligible unique HHCAHPS patients annually must submit to 

CMS their total HHCAHPS patient count to CMS to be exempt 

from the HHCAHPS reporting requirements.” In §484.250(c), 

we stated that “An HHA must contract with an approved, 
CMS-1353-P 126 

independent HHCAHPS survey vendor to administer the HHCAHPS 

on its behalf.” 

In §484.250(c)(1), we stated that “CMS approves an 

HHCAHPS survey vendor if such applicant has been in 

business for a minimum of 3 years and has conducted surveys 

of individuals and samples for at least 2 years. For 

HHCAHPS, a “survey of individuals” is defined as the 

collection of data from at least 600 individuals selected 

by statistical sampling methods and the data collected are 

used for statistical purposes. All applicants that meet 

these requirements will be approved by CMS.” 

In §484.250(c)(2) we stated that “No organization, 

firm, or business that owns, operates, or provides staffing 

for a HHA is permitted to administer its own Home Health 

Care CAHPS (HHCAHPS) Survey or administer the survey on 

behalf of any other HHA in the capacity as an HHCAHPS 

survey vendor. Such organizations will not be approved by 

CMS as HHCAHPS survey vendors.” 

 The following criteria from the CY 2011 HH PPS final 

rule are proposed to be revised so that the requirements 

for OASIS and Home Health CAHPS are clearly delineated in 

the regulations. In the CY 2011 HH PPS final rule (75 FR 

70465), we stated for §484.250, Patient Assessment Data, 

that “An HHA must submit to CMS the OASIS-C data described 

at §484.55(b)(1) and Home Health Care CAHPS data for CMS to 
CMS-1353-P 127 

administer the payment rate methodologies described in 

§484.215, §484.230, and §484.235 of this subpart, and meet 

the quality reporting requirements of section 

1895(b)(3)(B)(v) of the Act.” 

 We propose to revise this section to clarify that 

HHCAHPS is associated with the APU described at §484.225(i) 

and the quality reporting requirements, and not with other 

payment requirements. 

(7) HHCAHPS Requirements for CY 2014 

For the CY 2014 APU, we propose to require HHCAHPS 

data collection and reporting for four quarters. The data 

collection period would include second quarter 2012 through 

first quarter 2013. It is proposed that HHAs will be 

required to submit their HHCAHPS data files to the Home 

Health CAHPS Data Center the third Thursday of the month 

for the months of October, January, April and July. It is 

proposed that HHAs will be required to submit their HHCAHPS 

data files to the Home Health CAHPS Data Center for CY 2014 

as follows: for the second quarter 2012 by 11:59 p.m., 

e.d.t. on October 18, 2012; for the third quarter 2012 by 

11:59 p.m., e.s.t. on January 17, 2013; for the fourth 

quarter 2012 by 11:59 p.m., e.d.t. on April 18, 2013; and 

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

July 18, 2013. 
CMS-1353-P 128 

As noted, we exempt HHAs receiving Medicare 

certification on or after April 1, 2012 from the full 

HHCAHPS reporting requirement for the CY 2014 APU, as data 

submission and analysis will not be possible for an agency 

that late in the reporting period for the CY 2014 APU 

requirements. 

 As noted, we require that all HHAs that have fewer 

than 60 HHCAHPS-eligible unduplicated or unique patients in 

the period of April 1, 2011 through March 31, 2012 will be 

exempt from the HHCAHPS data collection and submission 

requirements for the CY 2014 APU. For the CY 2014 APU, 

agencies with fewer than 60 HHCAHPS-eligible, unduplicated 

or unique patients would be required to submit their counts 

on the Participation Exemption Request form posted on 

https://homehealthcahps.org by 11:59 p.m., e.d.t. on April 

18, 2013. This deadline is firm, as are all of the 

quarterly data submission deadlines. 

(8) For Further Information on the HHCAHPS Survey 

We encourage HHAs interested in learning about the 

survey to view the HHCAHPS Survey web site at the official 

web site for the HHCAHPS at https://homehealthcahps.org. 

Home health agencies can also send an email to the HHCAHPS 

Survey Coordination Team at HHCAHPS@rti.org, or telephone 

toll-free (1-866-354-0985) for more information about 

HHCAHPS. 
CMS-1353-P 129 

3. Home Health Wage Index 

 Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act 

require the Secretary to provide appropriate adjustments to 

the proportion of the payment amount under the HH PPS to 

account for area wage differences, using adjustment factors 

that reflect the relative level of wages and wage-related 

costs applicable to the furnishing of home health services. 

We apply the appropriate wage index value to the labor 

portion of the HH PPS rates based on the site of service 

for the beneficiary (defined by section 1861(m) of the Act 

as the beneficiary’s place of residence). Previously, we 

determined each HHA’s labor market area based on 

definitions of Metropolitan Statistical Areas (MSAs) issued 

by the Office of Management and Budget (OMB). We have 

consistently used the pre-floor, pre-reclassified hospital 

wage index data to adjust the labor portion of the HH PPS 

rates. We believe the use of the pre-floor, prereclassified hospital wage index data results in an 

appropriate adjustment to the labor portion of the costs, 

as required by statute. 

 In the CY 2006 HH PPS final rule for (70 FR 68132), we 

began adopting revised labor market area definitions as 

discussed in the Office of Management and Budget (OMB) 

Bulletin No. 03-04 (June 6, 2003). This bulletin announced 

revised definitions for Metropolitan Statistical Areas 
CMS-1353-P 130 

(MSAs) and the creation of Micropolitan Statistical Areas 

and Core-Based Statistical Areas (CBSAs). The bulletin is 

available online at www.whitehouse.gov/omb/bulletins/b03-

04.html. In addition, OMB published subsequent bulletins 

regarding CBSA changes, including changes in CBSA numbers 

and titles. This rule incorporates the CBSA changes 

published in the most recent OMB bulletin. The OMB 

bulletins are available at 

http://www.whitehouse.gov/omb/bulletins/index.html. 

 Finally, we continue to use the methodology discussed 

in the CY 2007 HH PPS final rule for (71 FR 65884) to 

address those geographic areas in which there are no IPPS 

hospitals and, thus, no hospital wage data on which to base 

the calculation of the HH PPS wage index. For rural areas 

that do not have IPPS hospitals and, therefore, lack 

hospital wage data on which to base a wage index, we use 

the average wage index from all contiguous CBSAs as a 

reasonable proxy. Since CY 2007, this methodology was used 

to calculate the wage index for rural Massachusetts. 

However, we now have wage data from an IPPS hospital in 

rural Massachusetts. The hospital was formerly a critical 

access hospital (CAH), but converted to an IPPS hospital in 

2008, the base year for the 2012 wage index. Therefore, it 

is no longer necessary to apply this methodology to rural 

Massachusetts for CY 2012. 
CMS-1353-P 131 

 For rural Puerto Rico, we do not apply this 

methodology due to the distinct economic circumstances that 

exist there, but instead continue using the most recent 

wage index previously available for that area (from CY 

2005). 

 For urban areas without IPPS hospitals, we use the 

average wage index of all urban areas within the State as a 

reasonable proxy for the wage index for that CBSA. For CY 

2012, there is an additional urban area (Yuba City, CA) 

without hospital wage data. Therefore, for CY 2012, the 

two urban areas without hospital wage data are HinesvilleFort Stewart, Georgia (CBSA 25980) and Yuba City, CA (CBSA 

49700). 

The wage index values for rural areas and the CBSAs 

and their associated wage index values are available via 

the Internet at: 

http://www.cms.gov/HomeHealthPPS/HHPPSRN/list.asp. 

4. Proposed CY 2012 Payment Update 

a. National Standardized 60-Day Episode Rate 

 The Medicare HH PPS has been in effect since 

October 1, 2000. As set forth in the July 3, 2000 final 

rule (65 FR 41128), the base unit of payment under the 

Medicare HH PPS is a national standardized 60-day episode 

rate. As set forth in §484.220, we adjust the national 

standardized 60-day episode rate by a case-mix relative 
CMS-1353-P 132 

weight and a wage index value based on the site of service 

for the beneficiary. 

 In the CY 2008 HH PPS final rule with comment period, 

we refined the case-mix methodology and also rebased and 

revised the home health market basket. To provide 

appropriate adjustments to the proportion of the payment 

amount under the HH PPS to account for area wage 

difference, we apply the appropriate wage index value to 

the labor portion of the HH PPS rates. The labor-related 

share of the case-mix adjusted 60-day episode rate is 

77.082 percent and the non-labor-related share is 22.918 

percent. The proposed CY 2012 HH PPS rates use the same 

case-mix methodology and application of the wage index 

adjustment to the labor portion of the HH PPS rates as set 

forth in the CY 2008 HH PPS final rule with comment period. 

Following are the steps we take to compute the case-mix and 

wage adjusted 60-day episode rate: 

(1) Multiply the national 60-day episode rate by the 

patient’s applicable case-mix weight. 

(2) Divide the case-mix adjusted amount into a labor 

(77.082 percent) and a non-labor portion (22.918 percent). 

(3) Multiply the labor portion by the applicable wage 

index based on the site of service of the beneficiary. 

(4) Add the wage-adjusted portion to the non-labor 

portion, yielding the case-mix and wage adjusted 60-day 
CMS-1353-P 133 

episode rate, subject to any additional applicable 

adjustments. 

 In accordance with section 1895(b)(3)(B) of the Act, 

this document constitutes the annual update of the HH PPS 

rates. The HH PPS regulations at §484.225 set forth the 

specific annual percentage update methodology. In 

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

home health quality data, as specified by the Secretary, 

the unadjusted national prospective 60-day episode rate is 

equal to the rate for the previous calendar year increased 

by the applicable home health market basket index amount 

minus two percentage points. Any reduction of the 

percentage change will apply only to the calendar year 

involved and will not be considered in computing the 

prospective payment amount for a subsequent calendar year. 

 For CY 2012, we are proposing to base the wage index 

adjustment to the labor portion of the HH PPS rates on the 

most recent pre-floor and pre-reclassified hospital wage 

index. As discussed in the July 3, 2000 HH PPS final rule, 

for episodes with four or fewer visits, Medicare pays the 

national per-visit amount by discipline, referred to as a 

LUPA. We propose to update the national per-visit rates by 

discipline annually by the applicable home health market 

basket percentage. We propose to adjust the national pervisit rate by the appropriate wage index based on the site 
CMS-1353-P 134 

of service for the beneficiary, as set forth in §484.230. 

We propose to adjust the labor portion of the updated 

national per-visit rates used to calculate LUPAs by the 

most recent pre-floor and pre-reclassified hospital wage 

index. We are also proposing to update the LUPA add-on 

payment amount and the NRS conversion factor by the 

applicable home health market basket update of 1.5 percent 

for CY 2012. 

 Medicare pays the 60-day case-mix and wage-adjusted 

episode payment on a split percentage payment approach. 

The split percentage payment approach includes an initial 

percentage payment and a final percentage payment as set 

forth in §484.205(b)(1) and §484.205(b)(2). We may base 

the initial percentage payment on the submission of a 

request for anticipated payment (RAP) and the final 

percentage payment on the submission of the claim for the 

episode, as discussed in §409.43. The claim for the 

episode that the HHA submits for the final percentage 

payment determines the total payment amount for the episode 

and whether we make an applicable adjustment to the 60-day 

case-mix and wage-adjusted episode payment. The end date 

of the 60-day episode as reported on the claim determines 

which calendar year rates Medicare would use to pay the 

claim. 
CMS-1353-P 135 

 We may also adjust the 60-day case-mix and wageadjusted episode payment based on the information submitted 

on the claim to reflect the following: 

● A low utilization payment provided on a per-visit 

basis as set forth in §484.205(c) and §484.230. 

● A partial episode payment adjustment as set forth 

in §484.205(d) and §484.235. 

● An outlier payment as set forth in §484.205(e) and 

§484.240. 

b. Proposed Updated CY 2012 National Standardized 60-Day 

Episode Payment Rate 

 In calculating the annual update for the CY 2012 

national standardized 60-day episode payment rates, we 

first look at the CY 2011 rates as a starting point. The 

CY 2011 national standardized 60-day episode payment rate 

is $2,192.07. 

 Next, we update the payment amount by the proposed CY 

2012 home health market basket update of 1.5 percent. 

 As previously discussed in section II.A. (“Case-Mix 

Measurement”) of this proposed rule, our updated analysis 

of the change in case-mix that is not due to an underlying 

change in patient health status reveals an additional 

increase in nominal change in case-mix. Therefore, we 

propose to reduce rates by 5.06 percent in CY 2012, 

resulting in a proposed CY 2012 national standardized 60-
CMS-1353-P 136 

day episode payment rate of $2,112.37. The proposed CY 

2012 national standardized 60-day episode payment rate for 

an HHA that submits the required quality data is shown in 

Table 19. The proposed CY 2012 national standardized 60-

day episode payment rate for an HHA that does not submit 

the required quality data is updated by the proposed CY 

2012 home health market basket update (1.5 percent) minus 2 

percentage points and is shown in Table 20. 

TABLE 19: Proposed CY 2012 National 60-Day Episode Payment 

Amount Updated by the Proposed Home Health Market Basket 

Update, Before Case-Mix Adjustment and Wage Adjustment 

Based on the Site of Service for the Beneficiary 

CY 2011 National 

Standardized 60-Day 

Episode Payment Rate 

Multiply by the 

proposed CY 2012 home 

health market basket 

update of 1.5 percent 

Reduce by 5.06 

percent for 

nominal change 

in case-mix 

Proposed CY 2012 

National Standardized 

60-Day Episode Payment 

Rate. 

$2,192.07 X 1.015 X 0.9494 $2,112.37 

TABLE 20: For HHAs that Do Not Submit the Quality 

Data – Proposed CY 2012 National 60-Day Episode Payment 

Amount Updated by the Proposed Home Health Market Basket 

Update Before Case-Mix Adjustment and Wage Adjustment Based 

on the Site of Service for the Beneficiary 

CY 2011 National 

Standardized 60-Day 

Episode Payment 

Rate 

Multiply by the proposed CY 

2012 home health market 

basket update of 1.5 percent 

minus 2 percentage points (-

0.5 percent) 

Reduce by 5.06 

percent for 

nominal change 

in case-mix 

Proposed CY 2012 

National Standardized 

60-Day Episode 

Payment Rate. 

$2,192.07 X 0.995 X 0.9494 $2070.75 

c. National Per-Visit Rates Used To Pay LUPAs and Compute 

Imputed Costs Used in Outlier Calculations 
CMS-1353-P 137 

 In calculating the CY 2012 national per-visit rates 

used to calculate payments for LUPA episodes and to compute 

the imputed costs in outlier calculations, the CY 2011 

national per-visit rates for each discipline are updated by 

the proposed CY 2012 home health market basket update of 

1.5 percent. National per-visit rates are not subject to 

the 5.06 percent reduction related to the nominal increase 

in case-mix. The CY 2012 national per-visit rates per 

discipline are shown in Table 21. The six home health 

disciplines are as follows: 

● Home Health Aide (HH aide); 

● Medical Social Services (MSS); 

● Occupational Therapy (OT); 

● Physical Therapy (PT); 

● Skilled Nursing (SN); and 

● Speech Language Pathology Therapy (SLP). 
CMS-1353-P 138 

TABLE 21: Proposed CY 2012 National Per-Visit Amounts for 

LUPAs (Not including the LUPA Add-On Amount for a 

Beneficiary’s Only Episode or the Initial Episode in a 

Sequence of Adjacent Episodes) and Outlier Calculations 

Updated by the Proposed Health Market Basket Update, Before 

Wage Index Adjustment 

d. LUPA Add-on Payment Amount Update 

Beginning in CY 2008, LUPA episodes that occur as the 

only episode or initial episode in a sequence of adjacent 

episodes are adjusted by adding an additional amount to the 

LUPA payment before adjusting for area wage differences. 

We update the LUPA payment amount by the proposed CY 2012 

home health market basket update percentage of 1.5 percent. 

The LUPA add-on payment amount is not subject to the 5.06 

percent reduction related to the nominal increase in casemix. For CY 2012, we propose that the add-on to the LUPA 

payment to HHAs that submit the required quality data be 

updated by the proposed CY 2012 home health market basket 

update of 1.5 percent. The proposed CY 2012 LUPA add-on 

 For HHAs that DO submit the 

required quality data 

For HHAs that DO NOT 

submit the required quality 

data 

Home 

Health 

Discipline 

Type 

CY 2011 

Per-Visit 

Amounts 

Per 60-

Day 

Episode 

Multiply by 

the 

proposed 

CY 2012 

market 

basket 

update of 

1.5 percent 

Proposed CY 

2012 per-visit 

payment 

Multiply by 

the proposed 

CY 2012 

market 

basket update 

of 1.5 percent 

minus 2 

percentage 

points 

(-0.5 percent) 

Proposed CY 

2012 

per-visit 

payment 

HH Aide $50.42 X 1.015 $51.18 X 0.995 $50.17 

MSS $178.46 X 1.015 $181.14 X 0.995 $177.57 

OT $122.54 X 1.015 $124.38 X 0.995 $121.93 

PT $121.73 X 1.015 $123.56 X 0.995 $121.12 

SN $111.32 X 1.015 $112.99 X 0.995 $110.76 

SLP $132.27 X 1.015 $134.25 X 0.995 $131.61 
CMS-1353-P 139 

payment amount is shown in Table 22. We propose that the 

add-on to the LUPA payment to HHAs that do not submit the 

required quality data would be updated by the proposed CY 

2012 home health market basket update (1.5 percent) minus 

two percentage points. 

TABLE 22: Proposed CY 2012 LUPA Add-On Amounts

 For HHAs that DO 

submit the required 

quality data 

For HHAs that DO NOT 

submit the required 

quality data 

CY 2011 LUPA Add-On Amount Multiply 

by the 

proposed 

CY 2012 

market 

basket 

update of 

1.5 

percent 

Proposed 

CY 2012 

LUPA 

Add-On 

Amount 

Multiply by 

the proposed 

CY 2012 

market basket 

update of 1.5 

percent minus 

2 percentage 

points 

(-0.5 percent) 

Proposed 

CY 2012 

LUPA 

Add-On 

Amount 

$93.31 X 1.015 $94.71 X 0.995 $92.84 

e. Nonroutine Medical Supply Conversion Factor Update 

 Payments for nonroutine medical supplies (NRS) are 

computed by multiplying the relative weight for a 

particular severity level by the NRS conversion factor. We 

first increase CY 2010 NRS conversion factor ($52.54) by 

the proposed market basket of 1.5 percent. Then we reduce 

that amount by 5.06 percent to account for the increase in 

nominal case-mix. The final updated CY 2012 NRS conversion 

factor for 2012 appears in Table 23. For CY 2012, the NRS 

conversion factor is $53.33. 
CMS-1353-P 140 

TABLE 23: Proposed CY 2012 NRS Conversion Factor for HHAs 

that DO Submit the Required Quality Data

CY 2011 NRS 

Conversion Factor 

Multiply by the proposed CY 2012 market 

basket update of 1.5 percent 

Proposed CY 2011 NRS 

Conversion Factor 

$52.54 X 1.015 $53.33 

Using the NRS conversion factor ($53.33) for CY 2012, 

the payment amounts for the various severity levels are 

shown in Table 24. 

TABLE 24 Proposed CY 2012 NRS Payment Amounts for 

HHAs that DO Submit the Required Quality Data 

Severity 

Level Points (Scoring) 

Relative 

Weight 

Proposed CY 

2012 NRS 

Payment Amount 

1 0 0.2698 $14.39 

2 1 to 14 0.9742 $51.95 

3 15 to 27 2.6712 $142.46 

4 28 to 48 3.9686 $211.65 

5 49 to 98 6.1198 $326.37 

6 99+ 10.5254 $561.32 

For HHAs that do not submit the required quality data, 

we again begin with the CY 2011 NRS conversion factor. We 

first increase the CY 2011 NRS conversion factor ($52.54) 

by the proposed CY 2012 home health market basket update 

percentage of 1.5 percent minus 2 percentage points. The 

CY 2011 NRS conversion factor for HHAs that do not submit 

quality data is shown in Table 25. 

TABLE 25: Proposed CY 2012 NRS Conversion Factor for 

HHAs that DO NOT Submit the Required Quality Data

CY 2011 NRS 

Conversion Factor 

Multiply by the proposed CY 2012 market basket 

update of 1.5 percent minus 2 percentage points (-

0.5 percent)

Proposed CY 2012 NRS 

Conversion Factor 

$52.54 X 0.995 $52.28 
CMS-1353-P 141 

The payment amounts for the various severity levels 

based on the updated conversion factor for HHAs that do not 

submit quality data are calculated in Table 26. 

TABLE 26: Proposed CY 2012 NRS Payment Amounts for 

HHAs that DO NOT Submit the Required Quality Data 

Severity 

Level Points (Scoring) 

Relative 

Weight 

Proposed 

NRS Payment 

Amount 

1 0 0.2698 $14.11 

2 1 to 14 0.9742 $50.93 

3 15 to 27 2.6712 $139.65 

4 28 to 48 3.9686 $207.48 

5 49 to 98 6.1198 $319.94 

6 99+ 10.5254 $550.27 

5. Rural Add-On 

Section 421(a) of the Medicare Prescription Drug, 

Improvement, and Modernization Act (MMA) of 2003 

(Pub. L. 108-173, enacted on December 8, 2003 and as 

amended by section 3131(c) of the Affordable Care Act) 

provides an increase of 3 percent of the payment amount 

otherwise made under section 1895 of the Act for home 

health services furnished in a rural area (as defined in 

section 1886(d)(2)(D) of the Act), for episodes and visits 

ending on or after April 1, 2010 and before January 1, 

2016. The statute waives budget neutrality related to this 

provision, as the statute specifically states that the 

Secretary shall not reduce the standard prospective payment 

amount (or amounts) under section 1895 of the Act 

applicable to home health services furnished during a 
CMS-1353-P 142 

period to offset the increase in payments resulting in the 

application of this section of the statute. 

The 3 percent rural add-on is applied to the national 

standardized 60-day episode rate, national per-visit rates, 

LUPA add-on payment, and NRS conversion factor when home 

health services are provided in rural (non-CBSA) areas. 

Refer to Tables 27 thru 31 for these payment rates. 

TABLE 27: Proposed CY 2012 Payment Amounts for 60-Day 

Episodes for Services Provided in a Rural Area Before CaseMix and Wage Index Adjustment

For HHAs that DO Submit Quality Data For HHAs that DO NOT Submit Quality Data

Proposed CY 

2012 National 

Standardized 

60-Day Episode 

Payment Rate

Multiply 

by the 3 

Percent 

Rural 

Add-On

Proposed Rural 

CY 2012 

National 

Standardized 

60-Day Episode 

Payment Rate

Proposed CY 

2012 National 

Standardized 

60-Day Episode 

Payment Rate

Multiply 

by the 3 

Percent 

Rural 

Add-On

Proposed Rural 

CY 2012 

National 

Standardized 

60-Day Episode 

Payment Rate

$2,112.37 X 1.03 $2,175.74 $2,070.75 X 1.03 $2,132.87

TABLE 28: Proposed CY 2012 Per-Visit Amounts for Services 

Provided in a Rural Area, Before Wage Index Adjustment

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

quality data 

Home 

Health 

Discipline 

Type 

Proposed 

CY 2012 

per-visit 

rate 

Multiply 

by the 3 

Percent 

Rural 

Add-On 

Proposed 

Rural CY 

2012 pervisit rate 

Proposed 

CY 2012 

per-visit 

rate 

Multiply 

by the 3 

Percent 

Rural 

Add-On 

Proposed 

Rural CY 

2012 pervisit rate 

HH Aide $51.18 X 1.03 $52.72 $50.17 X 1.03 $51.68 

MSS $181.14 X 1.03 $186.57 $177.57 X 1.03 $182.90 

OT $124.38 X 1.03 $128.11 $121.93 X 1.03 $125.59 

PT $123.56 X 1.03 $127.27 $121.12 X 1.03 $124.75 

SN $112.99 X 1.03 $116.38 $110.76 X 1.03 $114.08 

SLP $134.25 X 1.03 $138.28 $131.61 X 1.03 $135.56 
CMS-1353-P 143 

TABLE 29: Proposed CY 2012 LUPA Add-On Amounts for 

Services Provided in Rural Areas 

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

Proposed CY 

2012 LUPA 

Add-On 

Amount 

Multiply by 

the 3 Percent 

Rural AddOn 

Proposed 

Rural CY 2012 

LUPA Add-On 

Amount 

Proposed CY 

2012 LUPA 

Add-On 

Amount 

Multiply by 

the 3 Percent 

Rural AddOn 

Proposed 

Rural CY 2012 

LUPA Add-On 

Amount 

$94.71 X 1.03 $97.55 $92.84 X 1.03 $95.63 

TABLE 30: Proposed CY 2012 NRS Conversion Factor for 

Services Provided in Rural Areas 

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

Proposed CY 

2011 

Conversion 

Factor 

Multiply by 

the 3 

Percent 

Rural AddOn 

Proposed 

Rural CY 2012 

Conversion 

Factor 

Proposed CY 

2012 

Conversion 

Factor 

Multiply by 

the 3 

Percent 

Rural AddOn 

Proposed CY 

Rural 2012 

Conversion 

Factor 

$53.33 X 1.03 $54.93 $52.28 X 1.03 $53.85 

TABLE 31: Proposed CY 2012 NRS Payment Amounts for 

Services Provided in Rural Areas

 

For HHAs that DO submit 

quality data (NRS 

Conversion Factor=$54.93) 

For HHAs that DO NOT

submit quality data (NRS 

Conversion Factor=$53.85) 

Severity 

Level 

Points 

(Scoring) 

Relative 

Weight 

Total NRS 

Payment 

Amount for 

Rural Areas 

Relative 

Weight 

Total NRS 

Payment 

Amount for 

Rural Areas 

1 0 0.2698 $14.82 0.2698 $14.53

2 1 to 14 0.9742 $53.51 0.9742 $52.46

3 15 to 27 2.6712 $146.73 2.6712 $143.84

4 28 to 48 3.9686 $218.00 3.9686 $213.71

5 49 to 98 6.1198 $336.16 6.1198 $329.55

6 99+ 10.5254 $578.16 10.5254 $566.79

E. Therapy Corrections and Clarifications 

1. Therapy Technical Correction to Regulation Text

As part of our “Home Health Prospective Payment System Rate 

Update for Calendar Year 2011,” (75 FR 70389 through 

70461), we clarified policies related to how therapy 

services are to be provided and documented. 

Specifically, the clarifications included that: (1) 
CMS-1353-P 144 

measurable treatment goals be described in the plan of care 

and that the patient’s clinical record demonstrate that the 

method used to assess a patient’s function include 

objective measurement and successive comparison of 

measurements, thus enabling objective measurement of 

progress toward goals and/or therapy effectiveness; (2) a 

qualified therapist (instead of an assistant) perform the 

needed therapy service, assess the patient, measure 

progress, and document progress toward goals at least once 

every 30 days during a therapy patient’s course of 

treatment; and (3) for those patients needing 13 or 19 

therapy visits, we require that a qualified therapist 

(instead of an assistant) perform the therapy service 

required at the 13th and 19th visits, assess the patient, 

and measure and document the effectiveness of the therapy. 

As a result of comments received on the CY 2011 

proposed rule, we finalized flexibility for the 13th and 

19th visit requirements in cases when: (1) the patient 

resides in a rural area; (2) documented exceptional 

circumstances prevent the therapist from making the 

required visit; and (3) patients receive more than one type 

of therapy. The CY 2011 HH PPS final rule preamble 

discussions clearly described that even with the 

flexibility which we finalized, for those patients who 

require 13 and 19 therapy visits, the qualified therapist’s 
CMS-1353-P 145 

visit, assessment, and documentation must occur no later 

than the 13th and 19th visits. 

However, regulation text associated with these changes 

at §409.44(c)(2)(i)(D)(2) reads, “Where more than one 

discipline of therapy is being provided, the qualified 

therapist from each discipline must provide the therapy 

service and functionally reassess the patient in accordance 

with §409.44(c)(2)(i)(A) during the visit which would occur 

close to but before the 19th visit per the plan of care.“ 

Therefore, to better align our regulations with our 

described final policies, we propose to correct the 

regulation text at §409.44(c)(2)(i)(D)(2) to read “Where 

more than one discipline of therapy is being provided, the 

qualified therapist from each discipline must provide the 

therapy service and functionally reassess the patient in 

accordance with §409.44(c)(2)(i)(A) during the visit which 

would occur close to but no later than the 19th visit per 

the plan of care.” 

2. Occupational Therapy Policy Clarifications 

 We are proposing to clarify when occupational 

therapy is considered a dependent service versus when 

it is considered a qualifying service under the 

Medicare home health benefit. Section 1861(m)(2) of 

the Act established occupational therapy as a home 

health service. Section 1814(2)(C) of the Act 
CMS-1353-P 146 

provided that to qualify for the benefit, a physician 

must certify that such services are or were required 

because the individual needs or needed skilled nursing 

care (other than solely venipuncture for the purpose of 

obtaining a blood sample) on an intermittent basis or 

physical or speech therapy or, in the case of an 

individual who has been furnished home health services 

based on such a need and who no longer has such a need 

for such care or therapy, continues or continued to 

need occupational therapy. We codified the 

requirement for skilled services in the Medicare home 

health benefit at §409.42(c). This section further 

delineates beneficiary qualifications for home health, 

including what is meant by, “in need of skilled 

services”. Following this detailed explanation, 

skilled services, in §409.42(c)(2) through (c)(4) 

include physical therapy services and speech-language 

pathology services that meet the requirements of 

§409.44(c), and continuing occupational therapy 

services that meet the requirements of §409.44(c) if 

the beneficiary’s eligibility for home health services 

has been established by virtue of a prior need for 

intermittent skilled nursing care, speech-language 

pathology services, or physical therapy in the current 

or prior certification period. 
CMS-1353-P 147 

In addition to the above-mentioned designation and 

treatment of occupational therapy as a qualifying home 

health service, occupational therapy is also described 

as a dependent service, as currently specified in 

§409.45(d) where we state occupational therapy 

services that are not qualifying services under 

§409.44(c) are nevertheless covered as dependent 

services if the requirements of §409.44(c)(2)(i) 

through (iv), as to reasonableness and necessity, are 

met. 

To clarify the status of when occupational therapy becomes 

a qualifying service, we propose to change the abovementioned regulation text at §409.42(c)(4) to establish 

exactly when occupational therapy becomes a qualifying 

service. That is, we propose to amend this regulatory text 

to demonstrate when a continuing need for occupational 

therapy allows for its continued eligibility even though it 

becomes the sole skilled service being provided. 

Specifically, we propose to amend §409.42(c)(4) to state 

occupational therapy services that meet the requirements of 

§409.44(c) initially qualify for home health coverage as a 

dependent service as defined in §409.45(d) if the 

beneficiary's eligibility for home health services has been 

established by virtue of a prior need for intermittent 

skilled nursing care, speech-language pathology services, 
CMS-1353-P 148 

or physical therapy in the current or prior certification 

period. Subsequent to an initial covered occupational 

therapy service, continuing occupational therapy services 

which meet the requirements of §409.44(c) are considered to 

be qualifying services. 

We also propose a change to §409.44(c)to include a 

technical correction to this regulation text. 

Specifically, the current regulation text states “(c) 

Physical therapy, speech-language pathology services, and 

occupational therapy. To be covered, physical therapy, 

speech-language pathology services, and occupational 

therapy must satisfy the criteria in paragraphs (c)(1) 

through (4) of this section.” We propose to correct 

“(c)(1) through (4)” to, “(c)(1) and (2),” which is the 

correct reference. 

F. Home Health Face-to-Face Encounter 

As described in the CY 2011 HH PPS final rule (70 FR 

70427), section 6407(a) of the Patient Protection and 

Affordable Care Act, as amended by section 10605 of the 

Health Care and Education Reconciliation Act of 2010 (Pub. 

L. 111-152), amended the requirements for physician 

certification of home health services contained in sections 

1814(a)(2)(C) and 1835(a)(2)(A) of the Act by requiring 

that, as a condition for payment, prior to certifying a 

patient’s eligibility for the home health benefit, the 

physician must document that the physician himself or 
CMS-1353-P 149 

herself or a permitted nonphysician practitioner (NPP) has 

had a face-to-face encounter with the patient. 

The statute describes NPPs who may perform this faceto-face patient encounter as a nurse practitioner or 

clinical nurse specialist, as those terms are defined in 

section 1861(aa)(5) of the Act, who is working in 

collaboration with the physician in accordance with State 

law, or a certified nurse-midwife (as defined in section 

1861(gg) of the Act, as authorized by State law), or a 

physician assistant (as defined in section 1861(aa)(5) of 

the Act), under the supervision of the physician. 

The statutory provision allows the permitted NPPs to 

perform the face-to-face encounter and inform the certifying 

physician, who documents the encounter as part of the 

certification of eligibility. 

Stakeholder feedback received during the CY 2011 

rulemaking comment period urged CMS to also allow, in 

addition to an NPP, the physician who attended to the 

patient during a recent hospital or post-acute stay to 

inform the certifying physician regarding their encounters 

with the patient, as an NPP is allowed to do presently to 

satisfy the face-to-face encounter requirement. Typically, 

it is the patient’s primary care physician who certifies a 

patient’s eligibility for the home health benefit and 

oversees the patient’s home health care plan. As finalized 

in the CY 2011 HH PPS final rule, a hospital or post-acute 

attending physician’s encounter with the home health patient 

satisfies the face-to-face encounter requirement only when 

the attending physician certifies the patient’s home health 
CMS-1353-P 150 

eligibility. 

Stakeholders stated to CMS that many hospital attending 

physicians may order home health services upon discharge, 

but do not want the burden associated with certifying home 

health eligibility and establishing a patient’s plan of 

care. Stakeholders further stated that because NPPs can 

perform the encounter and inform the certifying physician, 

it makes no sense to preclude the physician who attended to 

the patient in the hospital from informing the certifying 

physician about the patient for the purpose of satisfying 

the face-to-face encounter. Further, they argued that for 

patients admitted to home health following a hospital or 

post-acute discharge, such a policy would be consistent with 

the goal of the provision, which is increased physician 

involvement in a patient’s home health certification of 

eligibility. 

Fifty percent of home health patients are admitted to 

home health immediately following a hospital discharge. As 

such, the physician who attended to these patients in the 

hospital has the sort of involvement with the patient and 

knowledge about the patient’s need for home care which was 

the intent of the provision. Similarly, for patients 

admitted to home health from a post-acute setting, the 

physician who attended to the patient during the post-acute 

stay would also have the involvement with and knowledge of 

the patient as was the intent of the provision. 

We believe that the statute does not preclude a 

patient’s acute or post-acute attending physician from 

informing the certifying physician regarding their 
CMS-1353-P 151 

experience with the patient for the purpose of the face-toface encounter requirement, as an NPP can. Instead, we 

believe that for patients admitted to home health following 

discharge from an acute or post-acute stay, the statutory 

language contains an unintentional gap in that it does not 

explicitly include language which allows the acute or postacute attending physician to inform the certifying physician 

regarding his or her face-to-face encounters with the 

patient. 

Therefore, for patients admitted to home health upon 

discharge from a hospital or post-acute setting, we propose 

to allow the physician who attended to the patient in the 

hospital or post-acute setting to inform the certifying 

physician regarding their encounters with the patient to 

satisfy the face-to-face encounter requirement, much like an 

NPP currently can. 

In addition to meeting the goals of the face-to-face 

encounter provision, we believe this proposed policy change 

will result in enhanced communication between the attending 

and certifying physicians. We believe this enhanced 

communication will result in an improved transition of care 

from the hospital or post-acute setting to the home health 

setting. Improving a patient’s transition from one 

healthcare setting to another is widely regarded to be 

directly related to improved patient care and improved 

patient outcomes. We believe that this policy change 

encourages the attending acute or post-acute physician who 

is best informed of the patient’s most current clinical 

condition to collaboratively communicate the patient’s need 
CMS-1353-P 152 

for home health services to the certifying physician. 

Because a standard protocol of communication or 

documentation is not mandated between the acute or postacute physician and a patient’s community physician, we 

believe the additional flexibility with the face-to-face 

encounter will encourage increased communication between the 

physicians and better care coordination for the patient. 

Increased physician communication regarding the patient’s 

clinical condition fits within the framework of Congress’ 

goals associated with the face-to-face encounter 

requirement. 

We propose to revise §424.22(a)(1)(v) so that the certifying 

physician’s documentation of the face-to-face encounter 

clearly states that either the certifying physician himself 

or herself, the permitted NPP, or, for patients admitted to 

home health immediately after an acute or post-acute stay, 

the attending acute or post-acute physician, has had a faceto-face encounter with the patient. We propose that the 

attending acute or post-acute physician must communicate the 

clinical findings of the face-to-face encounters with the 

patient to the certifying physician, so that the certifying 

physician could document the face-to-face encounter 

accordingly, as part of the signed certification. Further, 

we are proposing to simplify the regulation text at 

§424.22(a)(1)(v)(A) as some found the current regulation 

text confusing as it relates to the need for NPPs to 

document their encounters with the patient. Some confused 

this documentation, which is required of all practitioners 

who see Medicare patients, with the face-to-face encounter 
CMS-1353-P 153 

documentation which is part of the certification. 

Therefore, we propose to revise in §424.22(a)(1)(v)(A) that 

the nonphysician practitioner or the attending acute or 

post-acute physician performing the face-to-face encounter 

must communicate the clinical findings of that face-to-face 

patient encounter to the certifying physician. 

We propose implementing the above face-to-face 

encounter provision for starts of care beginning January 1, 

2012 and later. 

G. Payment Reform: Home Health Study and Report

Section 3131(d) of the Affordable Care Act requires 

the Secretary to conduct a study on home health agency 

costs of providing access to care to low-income Medicare 

beneficiaries or beneficiaries in medically underserved 

areas, and in treating beneficiaries with varying levels of 

severity of illness (specifically, patients with “high 

levels of severity of illness”). As part of the study, we 

may analyze methods to revise the current Home Health 

Prospective Payment System (HH PPS) to ensure access to 

care and better account for costs for these patients. 

The study may analyze the need for payment adjustments 

for services that involve either more or fewer resources 

than are reflected in the current HH PPS; changes to 

reflect resources involved with providing home health 

services to low-income Medicare beneficiaries or Medicare 

beneficiaries residing in medically underserved areas, and 
CMS-1353-P 154 

ways outlier payments could be revised to reflect costs of 

treating Medicare beneficiaries with high levels of 

severity of illness. Section 3131(d) of the Affordable 

Care Act also allows for the study to investigate other 

issues with the payment system as the Secretary determines 

appropriate. We plan for the study to evaluate the current 

HH PPS and develop payment reform options which might 

minimize vulnerabilities and more accurately align payment 

with patient resource costs. No later than March 1, 2014, 

we must deliver a Report to Congress regarding the study, 

which may include potential recommendations for revisions 

to the HH PPS, recommendations for legislation and 

administrative action and recommendations for whether 

additional research is needed. 

The Affordable Care Act study provision was enacted to 

address concerns that some beneficiaries are at risk of not 

having access to Medicare home health services and that the 

current HH PPS encourages providers to adopt selective 

admission patterns to achieve higher margins. 

Congress also provided CMS with the authority to 

conduct a separate demonstration project to test 

recommended payment system changes resulting from this 

study. 

To accomplish these goals, in the fall of 2010 we 

awarded a contract to set the foundation for the study and 
CMS-1353-P 155 

develop a study analytic approach. Progress to date 

includes: (1) reviewing research relevant to the goals of 

the study; (2) establishing and convening a technical 

expert panel comprised of home health industry 

stakeholders, subject matter experts, and researchers to 

obtain input regarding the study analytic plan 

(specifically, we solicited input from the panel regarding 

approaches to define and study these vulnerable populations 

which may experience difficulties accessing home health 

care); (3) hosting Open Door Forums to solicit additional 

input on the study analytic design from HHAs, providers, 

and trade associations; and (4) currently performing 

investigatory data analysis and finishing the analytic 

design. Materials related to the contractor’s findings are 

available at 

http://www.cms.gov/HomeHealthPPS/Downloads/HHPPS_Literature

Review.pdf. 

This summer, we plan to award another contract that 

will build upon the foundation established. Specifically, 

this contract will refine the analytic plan, perform the 

detailed analysis and ultimately recommend payment model 

options. We will provide updates regarding our progress in 

future rulemaking and open door forums. 

H. International Classification of Diseases 10th Edition 

(ICD-10) Coding 
CMS-1353-P 156 

Effective March 17, 2009, CMS finalized its policies 

for the HIPAA Administrative Simplification: Modifications 

to the Medical Data Code Set Standards to Adopt ICD-10-CM 

and ICD-10-PCS (74 FR 3328). The March 17, 2009 final rule 

modifies the standard medical data code sets for coding 

diagnoses by adopting the International Classification of 

Disease, 10th Revision, Clinical Modification (ICD-10-CM) 

for diagnosis coding, including the Official ICD-10-CM 

Guidelines for Coding and Reporting. These new codes 

replace the International Classification of Diseases, 9th 

Revision, Clinical Modification, Volumes 1 and 2, including 

the Official ICD-9-CM Guidelines for Coding and Reporting. 

Entities are required to have implemented the adopted 

policies by October 1, 2013. On October 1, 2013, the ICD-9 

code sets used to report medical diagnoses will be replaced 

by the ICD-10 code sets. In preparation for the transition 

to the use of ICD-10-CM codes, CMS is currently undergoing 

extensive efforts to update the Medicare payment systems. 

One of the key activities identified under this 

transition to ICD-10-CM codes is the need for CMS to review 

and update the payment systems which currently use ICD-9-CM 

codes. Home Health Agencies report ICD-9-CM codes for 

their patients through OASIS-C. HHAs enter data (including 

the ICD-9-CM codes) collected from their patients’ OASIS 

assessments into a data collection software tool. For 
CMS-1353-P 157 

Medicare patients, the data collection software invokes HH 

PPS Grouper software to assign a Health Insurance 

Prospective Payment System (HIPPS) code on the Medicare HH 

PPS bill, ultimately enabling CMS’ claims processing system 

to reimburse the HHA for services provided to patients 

receiving Medicare’s home health benefit. The HH PPS 

Grouper currently utilizes ICD-9-CM codes to calculate the 

HIPPS code. Effective October 1, 2013, the HH PPS Grouper 

will utilize the ICD-10-CM codes to calculate the HIPPS 

code. 

 We have been working with the HHRG maintenance 

contractor to revise the HHRG to accommodate ICD-10-CM 

codes, as well as identify the appropriate ICD-10-CM codes 

to be included in each diagnosis group within the HHRG. In 

addition, we have also contracted with Abt Associates to 

assist with resolving the transition of certain codes that 

may be mapped to more than one diagnosis code under ICD-10-

CM. 

 To assist home health agencies and their vendors in 

preparing for this transition, the Agency is committed to 

providing information for transitioning the HHRG to 

accommodate ICD-10-CM codes effective October 1, 2013. The 

Agency will update providers and vendors through the ICD10-CM National Provider outreach calls on our conversion 

plans. Additional detail concerning teleconference 
CMS-1353-P 158 

registration is available at 

http://www.cms.gov/ICD10/Tel10/list.asp?intNumPerPage=20&su

bmit=Go. Further details pertaining to our plans will be 

announced through the National Provider outreach calls. 

 We will provide a proposed list of ICD-10-CM codes for 

the HHRG through the ICD-10 section of the web site. 

Specific dates will be announced through the National 

Provider outreach calls. The preliminary plans include 

publishing the proposed list of ICD-10-CM codes for the 

HHRG by October, 1, 2011, for industry review, as well as 

describing our testing approach for the HHRG to accommodate 

and process ICD-10-CM codes through the ICD-10 section of 

the CMS Web site. The objective of the ICD-10-CM HHRG 

testing is to verify that all properly formatted input data 

containing ICD-10-CM diagnosis codes will produce the 

expected output. The HHRG maintenance contractor will 

convert current OASIS-C records to their translated ICD-10-

CM codes to determine that appropriate outputs are 

achieved. CMS and the HHRG maintenance contractor will 

review the results of the testing to determine if 

additional testing is required. 

 In addition, in April 2013, we plan to share the ICD10-CM HHRG software with those vendors and home health 

agencies that have agreed to serve as Beta Testers and get 

their feedback regarding the software’s functionality. 
CMS-1353-P 159 

Issues and concerns noted by the Beta Testers will be 

reviewed and addressed by the HHRG Maintenance Contractor 

in consultation with CMS. 

 CMS plans to release the final version of the ICD-10-

CM HHRG in July 2013 to permit HHAs and their vendors 

sufficient time to install the software. 

I. Clarification to Benefit Policy Manual Language on 

“Confined to the Home” Definition 

To address the recommended changes of the Office of 

Inspector General (OIG) to the home health benefit policy 

manual, CMS is proposing to clarify its “confined to the 

home” definition to more accurately reflect the definition 

as articulated in the Act. Further clarification of the 

“confined to the home” definition will not only ensure 

statutory compatibility, but will also strengthen the 

position of the Government in applicable court cases. We 

propose to realign the existing manual criteria with the 

statute to create a clearer and more accurate “confined to 

the home” definition. We believe that such changes will 

strengthen our manual’s definition of “confined to the 

home”, providing more definitive guidance to home health 

agencies for compliance with this requirement. 

We propose to move the requirement that the patient 

need supportive devices, transportation, etc., to the 

beginning of section 30.1.1 of the Chapter 7 Home Health 
CMS-1353-P 160 

Benefit Policy Manual as a necessary requirement to be 

considered “confined to the home.” Further, we propose to 

remove vague terms from section 30.1.1, such as “generally 

speaking,” to ensure clear and specific requirements for 

the definition. These changes more closely align our 

policy manual with the Act to prevent confusion or 

distortion of requirements and promote a clearer 

enforcement of the statute. As such, we propose that 

section 30.1.1 begin with the following, revised language: 

“30.1.1 - Patient Confined to the Home 

For a patient to be eligible to receive covered home 

health services under both Part A and Part B, the statute 

requires that a physician certify in all cases that the 

patient is confined to his/her home. For purposes of the 

statute, an individual shall be considered “confined to the 

home” (that is, homebound) if the following exist: 

(1) The individual has a condition due to an illness 

or injury that restricts his or her ability to leave their 

place of residence except with: the aid of supportive 

devices such as crutches, canes, wheelchairs, and walkers; 

the use of special transportation; or the assistance of 

another person; or if leaving home is medically 

contraindicated. 

(2) The individual does not have to be bedridden to be 

considered “confined to the home”. However, the condition 
CMS-1353-P 161 

of the patient should be such that there exists a normal 

inability to leave home and, consequently, leaving home 

would require a considerable and taxing effort. 

If the patient does in fact leave the home, the 

patient may nevertheless be considered homebound if the 

absences from the home are infrequent or for periods of 

relatively short duration, or are attributable to the need 

to receive health care treatment. Absences attributable to 

the need to receive health care treatment include, but are 

not limited to: 

● Attendance at adult day centers, licensed or 

certified by a State or accredited to furnish adult daycare services in the State, to receive therapeutic, 

psychological, or medical treatment; 

● Ongoing receipt of outpatient kidney dialysis; or 

● The receipt of outpatient chemotherapy or radiation 

therapy. 

Any absence of an individual from the home 

attributable to the need to receive health care treatment, 

including regular absences for the purpose of participating 

in therapeutic, psychosocial, or medical treatment in an 

adult day-care program that is licensed or certified by a 

State, or accredited to furnish adult day-care services in 

a State, shall not disqualify an individual from being 

considered to be confined to his home. Any other absence 
CMS-1353-P 162 

of an individual from the home shall not so disqualify an 

individual if the absence is of an infrequent or of 

relatively short duration. For purposes of the preceding 

sentence, any absence for the purpose of attending a 

religious service shall be deemed to be an absence of 

infrequent or short duration. It is expected that in most 

instances, absences from the home that occur will be for 

the purpose of receiving health care treatment. However, 

occasional absences from the home for nonmedical purposes, 

for example, an occasional trip to the barber, a walk 

around the block or a drive, attendance at a family 

reunion, funeral, graduation, or other infrequent or unique 

event would not necessitate a finding that the patient is 

not homebound if the absences are undertaken on an 

infrequent basis or are of relatively short duration and do 

not indicate that the patient has the capacity to obtain 

the health care provided outside rather than in the home. 

 Some examples of homebound patients that 

illustrate the factors used to determine whether a 

homebound condition exists would be:...” 

III. Collection of Information Requirements 

This document does not impose any new information 

collection and recordkeeping requirements. The information 

collection requirements discussed in proposed §424.22 are 

currently approved under OMB control number 0938-1083. The 
CMS-1353-P 163 

information collection requirements discussed in proposed 

§484.250, the OASIS-C and Home Health Care CAHPS, are 

currently approved under OMB control numbers 0938-0760 and 

0938-1066, respectively. Consequently, it need not be 

reviewed by the Office of Management and Budget under the 

authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 

Chapter 35). 

IV. 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. 

V. Regulatory Impact Analysis 

A. Introduction

We have examined the impact of this rule as required 

by Executive Order 12866 on Regulatory Planning and Review 

(September 30, 1993), Executive Order 13563 on Improving 

Regulation and Regulatory Review (January 18, 2011), the 

Regulatory Flexibility Act (RFA) (September 19, 1980, 

Pub. L. 96-354), section 1102(b) of the Act, section 202 of 

the Unfunded Mandates Reform Act of 1995 (March 22, 1995; 

Pub. L. 104-4), and the Congressional Review Act 
CMS-1353-P 164 

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

Executive Orders 12866 and 13563 direct agencies to 

assess all costs and benefits of available regulatory 

alternatives and, if regulation is necessary, to select 

regulatory approaches that maximize net benefits (including 

potential economic, environmental, public health and safety 

effects, distributive impacts, and equity). Executive 

Order 13563 emphasizes the importance of quantifying both 

costs and benefits, of reducing costs, of harmonizing 

rules, and of promoting flexibility. A regulatory impact 

analysis (RIA) must be prepared for major rules with 

economically significant effects ($100 million or more in 

any 1 year). This proposed rule has been designated an 

“economically significant” rule under section 3(f)(1) of 

Executive Order 12866. Accordingly, the rule has been 

reviewed by the Office of Management and Budget. 

B. Statement of Need

 This proposed rule adheres to the following statutory 

requirements. Section 4603(a) of the BBA mandated the 

development of a HH PPS for all Medicare-covered HH 

services provided under a plan of care (POC) that were paid 

on a reasonable cost basis by adding section 1895 of the 

Act, entitled “Prospective Payment For Home Health 

Services”. Section 1895(b)(1) of the Act requires the 

Secretary to establish a HH PPS for all costs of HH 
CMS-1353-P 165 

services paid under Medicare. In addition, section 

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

standard prospective payment amount include all costs for 

HH services covered and paid for on a reasonable cost basis 

and that such amounts be initially based on the most recent 

audited cost report data available to the Secretary, and 

(2) the standardized prospective payment amount be adjusted 

to account for the effects of case-mix and wage levels 

among HHAs. Section 1895(b)(3)(B) of the Act addresses the 

annual update to the standard prospective payment amounts 

by the HH applicable percentage increase. Section 

1895(b)(4) of the Act governs the payment computation. 

Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 

require the standard prospective payment amount to be 

adjusted for case-mix and geographic differences in wage 

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

establishment of appropriate case-mix adjustment factors 

for significant variation in costs among different units of 

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

requires the establishment of wage adjustment factors that 

reflect the relative level of wages, and wage-related costs 

applicable to HH services furnished in a geographic area 

compared to the applicable national average level. 

 Section 1895(b)(5) of the Act, as amended by section 

3131 of the Affordable Care Act, gives the Secretary the 
CMS-1353-P 166 

option to make changes to the payment amount otherwise paid 

in the case of outliers because of unusual variations in 

the type or amount of medically necessary care. Section 

1895(b)(3)(B)(v) of the Act requires HHAs to submit data 

for purposes of measuring health care quality, and links 

the quality data submission to the annual applicable 

percentage increase. Also, section 3131 of the Affordable 

Care Act requires that HH services furnished in a rural 

area (as defined in section 1886(d)(2)(D) of the Act) with 

respect to episodes and visits ending on or after April 1, 

2010, and before January 1, 2016, receive an increase of 3 

percent the payment amount otherwise made under section 

1895 of the Act. 

C. Overall Impact

 The update set forth in this proposed rule applies to 

Medicare payments under HH PPS in CY 2012. Accordingly, 

the following analysis describes the impact in CY 2012 

only. We estimate that the net impact of the proposals in 

this rule is approximately $640 million in CY 2012 savings. 

The $640 million impact due to the proposed CY 2012 HH PPS 

rule reflects the distributional effects of an updated wage 

index ($20 million increase) plus the 1.5 percent HH market 

basket update ($290 million increase), for a total increase 

of $310 million. The 5.06 percent case-mix adjustment 

applicable to the national standardized 60-day episode 
CMS-1353-P 167 

rates ($950 million decrease) plus the combined wage index 

and market basket ($310 million increase) results in a 

total savings of $640 million in CY 2012. The $640 million 

in savings is reflected in the first row of column 3 of 

Table 32 as a 3.35 percent decrease in expenditures when 

comparing the current CY 2011 HH PPS to the proposed 

CY 2012 HH PPS. 

The RFA requires agencies to analyze options for 

regulatory relief of small entities, if a rule has a 

significant impact on a substantial number of small 

entities. For purposes of the RFA, small entities include 

small businesses, nonprofit organizations, and small 

governmental jurisdictions. Most hospitals and most other 

providers and suppliers are small entities, either by 

nonprofit status or by having revenues of less than $7.0 

million to $34.5 million in any 1 year. For the purposes 

of the RFA, our updated data show that approximately 98 

percent of HHAs are considered to be small businesses 

according to the Small Business Administration’s size 

standards with total revenues of $13.5 million or less in 

any 1 year. Individuals and States are not included in the 

definition of a small entity. The Secretary has determined 

that this proposed rule would have a significant economic 

impact on a substantial number of small entities. We 

define small HHAs as those with total revenues of $13.5 
CMS-1353-P 168 

million or less in any 1 year. Analysis of Medicare cost 

report data reveals a 3.63 percent decrease in estimated 

payments to small HHAs in CY 2012. 

A discussion on the alternatives considered is 

presented in section V.E. below. The following analysis, 

with the rest of the preamble, constitutes our initial RFA 

analysis. We solicit comment on the RFA analysis provided. 

In this proposed rule, we have stated that our 

analysis reveals that nominal case-mix continues to grow 

under the HH PPS. Specifically, nominal case-mix has grown 

from the 17.45 percent growth identified in our analysis 

for CY 2011 rulemaking to 19.03 percent for this year’s 

rulemaking (see further discussion in sections II.A. and 

II.B.). Because we have not yet accounted for all of the 

increase in nominal case-mix, that is case-mix that is not 

real (real being related to treatment of more resource 

intense patients), case-mix reductions are necessary. As 

such, we believe it is appropriate to reduce the HH PPS 

rates now, so as to move towards more accurate payment for 

the delivery of home health services. Our analysis shows 

that smaller HHAs are impacted slightly more than are 

larger HHAs by the proposed provisions of this rule. 

In addition, section 1102(b) of the Act requires us to 

prepare a regulatory impact analysis if a rule may have a 

significant impact on the operations of a substantial 
CMS-1353-P 169 

number of small rural hospitals. This analysis must 

conform to the provisions of section 603 of RFA. For 

purposes of section 1102(b) of the Act, we define a small 

rural hospital as a hospital that is located outside of a 

metropolitan statistical area and has fewer than 100 beds. 

This proposed rule applies to HHAs. Therefore, the 

Secretary has determined that this proposed rule would not 

have a significant economic impact on the operations of 

small rural hospitals. 

Section 202 of the Unfunded Mandates Reform Act of 

1995 (UMRA) also requires that agencies assess anticipated 

costs and benefits before issuing any rule whose mandates 

require spending in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. In 2011, that 

threshold is approximately $136 million. This proposed 

rule is not anticipated to have an effect on State, local, 

or tribal governments in the aggregate, or by the private 

sector, of $136 million or more. 

D. Detailed Economic Analysis

This proposed rule sets forth updates to the HH PPS 

rates contained in the CY 2011 HH PPS final rule. The 

impact analysis of this proposed rule presents the 

estimated expenditure effects of policy changes proposed in 

this rule. We use the latest data and best analysis 
CMS-1353-P 170 

available, but we do not make adjustments for future 

changes in such variables as number of visits or case-mix. 

This analysis incorporates the latest estimates of 

growth in service use and payments under the Medicare home 

health benefit, based on Medicare claims from 2009. We 

note that certain events may combine to limit the scope or 

accuracy of our impact analysis, because such an analysis 

is future-oriented and, thus, susceptible to errors 

resulting from other changes in the impact time period 

assessed. Some examples of such possible events are newlylegislated general Medicare program funding changes made by 

the Congress, or changes specifically related to HHAs. In 

addition, changes to the Medicare program may continue to 

be made as a result of the Affordable Care Act, or new 

statutory provisions. Although these changes may not be 

specific to the HH PPS, the nature of the Medicare program 

is such that the changes may interact, and the complexity 

of the interaction of these changes could make it difficult 

to predict accurately the full scope of the impact upon 

HHAs. 

Table 32 represents how HHA revenues are likely to be 

affected by the policy changes proposed in this rule. For 

this analysis, we used linked home health claims and OASIS 

assessments; the claims represented a 20-percent sample of 

60-day episodes occurring in CY 2009. The first column of 
CMS-1353-P 171 

Table 32 classifies HHAs according to a number of 

characteristics including provider type, geographic region, 

and urban and rural locations. The second column shows the 

payment effects of the wage index only. The third column 

shows the payment effects of all the proposed policies 

outlined earlier in this rule. For CY 2012, the average 

impact for all HHAs due to the effects of the wage index is 

a 0.10 percent increase in payments. The overall impact 

for all HHAs, in estimated total payments from CY 2011 to 

CY 2012, is a decrease of approximately 3.35 percent. 

 As shown in Table 32, the combined effects of all of 

the changes vary by specific types of providers and by 

location. Rural and voluntary non-profit agencies fare 

considerably better than urban and proprietary agencies as 

a result of the proposed provisions of this rule. We 

believe this is due mainly to the distributional effects of 

the recalibration of the case-mix weights as described in 

section II.A of the proposed rule. Essentially, these 

impacts suggest that under the current case-mix system, 

rural and voluntary non-profit agencies bill less for high 

therapy episodes than do urban and proprietary agencies. 
CMS-1353-P 172 

TABLE 32: Proposed Home Health Agency Policy Impacts for 

CY 2012, by Facility Type and Area of the Country

 Comparisons 

Group 

Percent change due to 

the effects of the 

updated wage index 

Impact 

of all 

CY 

2012 

Policies1

All Agencies 0.10% -3.35% 

Type of Facility 

Free-Standing/Other Vol/NP 0.29% -0.49% 

Free-Standing/Other Proprietary 0.08% -4.68% 

Free-Standing/Other Government -0.13% -2.13% 

Facility-Based Vol/NP -0.03% 0.17% 

Facility-Based Proprietary 0.03% -3.02% 

Facility-Based Government -0.06% -0.59% 

Subtotal: Freestanding 0.12% -3.82% 

Subtotal: Facility-based -0.03% -0.21% 

Subtotal: Vol/NP 0.17% -0.24% 

Subtotal: Proprietary 0.08% -4.65% 

Subtotal: Government -0.10% -1.38% 

Type of Facility (Rural * Only) 

Free-Standing/Other Vol/NP 1.88% 0.94% 

Free-Standing/Other Proprietary 0.25% -3.74% 

Free-Standing/Other Government -0.21% -1.39% 

Facility-Based Vol/NP -0.20% 0.20% 

Facility-Based Proprietary -0.30% -2.12% 

Facility-Based Government -0.05% -0.27% 

Type of Facility (Urban * Only) 

Free-Standing/Other Vol/NP 0.05% -0.70% 

Free-Standing/Other Proprietary 0.06% -4.83% 

Free-Standing/Other Government -0.02% -3.13% 

Facility-Based Vol/NP 0.02% 0.16% 

Facility-Based Proprietary 0.25% -3.65% 

Facility-Based Government -0.09% -0.99% 

Type of Facility (Urban* or Rural*) 

Rural 0.35% -2.15% 

Urban 0.05% -3.57% 

Facility Location: Region* 

North 0.68% 0.71% 

South -0.08% -4.97% 

Midwest -0.09% -3.91% 

West 0.36% -0.82% 

Outlying 0.43% -3.05% 

Facility Location: Area of the Country 

New England 1.35% 0.69% 

Mid Atlantic 0.30% 0.71% 

South Atlantic -0.49% -5.77% 
CMS-1353-P 173 

 Comparisons 

Group 

Percent change due to 

the effects of the 

updated wage index 

Impact 

of all 

CY 

2012 

Policies1

East South Central -0.66% -6.28% 

West South Central 0.51% -3.76% 

East North Central -0.22% -4.41% 

West North Central 0.49% -1.63% 

Mountain 0.32% -4.22% 

Pacific 0.37% 0.68% 

Outlying 0.43% -3.05% 

Facility Size: (Number of First Episodes) 

< 19 0.32% -3.05% 

20 to 49 0.32% -3.41% 

50 to 99 0.33% -3.57% 

100 to 199 0.16% -3.81% 

200 or More -0.02% -3.15% 

Facility Size: (estimated total revenue) 

Small (estimated total revenue <= $13.5 million) 0.13% -3.63% 

Large (estimated total revenue > $13.5 million) -0.02% -2.10% 

 Note: Based on a 20 percent sample of CY 2009 claims linked to OASIS assessments. 

*Urban / rural status, for the purposes of these simulations, is based on the wage index on which episode 

payment is based. The wage index is based on the site of service of the beneficiary. 

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 1 Percent change due to the effects of the updated wage index, the 1.5 percent proposed market basket 

update, the 5.06 percent case-mix adjustment, and the 3 percent rural add-on. 

E. Alternatives Considered

As described in section V.C. above, if we implement 

the case-mix adjustment for CY 2012 along with the market 

basket update and the updated wage index, the aggregate 

impact would be a net decrease of $640 million in payments 

to HHAs, resulting from a $310 million increase due to the 

updated wage index and the market basket update and a $950 
CMS-1353-P 174 

million reduction from the 5.06 percent case-mix 

adjustment. If we were to not implement the case-mix 

adjustment for CY 2012, Medicare would pay an estimated 

$950 million more to HHAs in CY 2012, for a net increase in 

payments to HHAs in CY 2012 of $310 million (market basket 

update and updated wage index). We believe that not 

implementing a case-mix adjustment, and paying out an 

additional $950 million to HHAs when those additional 

payments are not reflective of HHAs treating sicker 

patients, would not be in line with the intent of the HH 

PPS, which is to pay accurately and appropriately for the 

delivery of home health services to Medicare beneficiaries. 

Section 1895(b)(3)(B)(iv) of the Act gives CMS the 

authority to implement payment reductions for nominal casemix growth, changes in case-mix that are unrelated to 

actual changes in patient health status. We are committed 

to monitoring the accuracy of payments to HHAs, which 

includes the measurement of the increase in nominal casemix, which is an increase in case-mix that is not due to 

patient acuity. As discussed in section II.A. of this 

rule, we have determined that there is a 19.03 percent 

nominal case-mix change from 2000 to 2009. To account for 

the remainder of the 19.03 percent residual increase in 

nominal case-mix beyond that which was has been accounted 

for in previous payment reductions (2.75 percent in CY 2008 
CMS-1353-P 175 

through CY 2010 and 3.79 percent in CY 2011), we have 

estimated that the percentage reduction to the national 

standardized 60-day episode rates for nominal case-mix 

change for CY 2012 would be 5.06 percent. 

We believe that the alternative of not implementing a 

case-mix adjustment to the payment system in CY 2012 to 

account for the increase in case-mix that is not real would 

be detrimental to the integrity of the PPS. As discussed 

in section II.A. of this rule, because nominal case-mix 

continues to grow (about 1 percent each year in 2006 and 

2007, 4 percent in 2008, and 2 percent in 2009), and thus 

to date we have not accounted for all the increase in 

nominal case-mix growth, we believe it is appropriate to 

reduce HH PPS rates now, thereby paying more accurately for 

the delivery of home health services under the Medicare 

home health benefit. The other reduction to HH PPS 

payments, a 1.0 percentage point reduction to the proposed 

CY 2012 home health market basket update, is discussed in 

this rule and is not discretionary as it is a requirement 

in section 1895(b)(3)(B)(vi) of the Act (as amended by the 

Affordable Care Act). 

 We solicit comment on the alternatives considered in 

this analysis. 

F. Accounting Statement and Table

 As required by OMB Circular A-4 (available at 
CMS-1353-P 176 

http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 

16 below, we have prepared an accounting statement showing 

the classification of the transfers associated with the 

provisions of this proposed rule. This table provides our 

best estimate of the decrease in Medicare payments under 

the HH PPS as a result of the changes presented in this 

proposed rule. 

TABLE 33: Accounting Statement: Classification of 

Estimated Transfers, from the CY 2011 HH PPS to the CY 2012 

HH PPS 

Category Transfers 

Annualized Monetized Transfers -$640 million 

From Whom to Whom? Federal Government to HH providers 

G. Conclusion 

In conclusion, we estimate that the net impact of the 

proposals in this rule is approximately $640 million in CY 

2012 savings. The $640 million impact to the proposed CY 

2012 HH PPS reflects the distributional effects of an 

updated wage index ($20 million increase), the 1.5 percent 

home health market basket update ($290 million increase), 

and the 5.06 percent case-mix adjustment applicable to the 

national standardized 60-day episode rates ($950 million 

decrease). This analysis, together with the remainder of 

this preamble, provides a Regulatory Impact Analysis. 

VI. Federalism Analysis 

 Executive Order 13132 on Federalism (August 4, 1999) 

establishes certain requirements that an agency must meet 
CMS-1353-P 177 

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 would not have substantial direct effects on the rights, 

roles, and responsibilities of States, local or tribal 

governments. 
CMS-1353-P TLP 6/28/11 178

List of Subjects 

42 CFR Part 409

Health facilities, Medicare 

42 CFR Part 424

Emergency medical services, Health facilities, Health 

professions, Medicare, Reporting and recordkeeping 

requirements 

42 CFR Part 484

Health facilities, Health professions, Medicare, 

Reporting and recordkeeping requirements 
CMS-1353-P TLP 6/28/11 179

For the reasons set forth in the preamble, the Centers 

for Medicare & Medicaid Services proposed to amend 42 CFR 

chapter IV as set forth below: 

PART 409--HOSPITAL INSURANCE BENEFITS 

1. The authority citation for part 409 continues to 

read as follows: 

Authority: Secs. 1102 and 1871 of the Social Security 

Act (42 U.S.C. 1302 and 1395hh). 

Subpart C--Posthospital SNF Care 

2. Section 409.42 is amended by revising paragraph 

(c)(4) to read as follows: 

§409.42 Beneficiary qualifications for coverage of 

services. 

* * * * * 

(c) * * * 

(4) Occupational therapy services that meet the 

requirements of §409.44(c) of this subpart initially 

qualify for home health coverage as a dependent service as 

defined in §409.45(d) of this subpart if the beneficiary's 

eligibility for home health services has been established 

by virtue of a prior need for intermittent skilled nursing 

care, speech-language pathology services, or physical 

therapy in the current or prior certification period. 

Subsequent to an initial covered occupational therapy 

service, continuing occupational therapy services which 
CMS-1353-P TLP 6/28/11 180

meet the requirements of §409.44(c) of this subpart are 

considered to be qualifying services. 

* * * * * 

3. Section 409.44 is amended by-- 

A. Revising the introductory text of paragraph (c). 

B. Revising paragraph (c)(2)(i)(D)(2). 

The revisions read as follows: 

§409.44 Skilled services requirements. 

* * * * * 

(c) Physical therapy, speech-language pathology 

services, and occupational therapy. To be covered, 

physical therapy, speech-language pathology services, and 

occupational therapy must satisfy the criteria in 

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

* * * * * 

(2) * * * 

(i) * * * 

(D) * * * 

(2) Where more than one discipline of therapy is being 

provided, the qualified therapist from each discipline must 

provide the therapy service and functionally reassess the 

patient in accordance with §409.44(c)(2)(i)(A) of this 

section during the visit which would occur close to but no 

later than the 19th visit per the plan of care. 

* * * * * 
CMS-1353-P TLP 6/28/11 181

PART 424-CONDITIONS FOR MEDICARE PAYMENT 

4. The authority citation for part 424 continues to 

read as follows: 

Authority: Secs. 1102 and 1871 of the Social Security 

Act (42 U.S.C. 1302 and 1395hh). 

Subpart B--Certification and Plan Requirements 

5. Section 424.22 is amended by-- 

A. Revising the introductory text of paragraph 

(a)(1)(v). 

B. Revising paragraph (a)(1)(v)(A). 

The revisions read as follows: 

§424.22 Requirements for home health services. 

* * * * * 

(a) * * * 

(1) * * * 

(v) The physician responsible for performing the 

initial certification must document that the face-to-face 

patient encounter, which is related to the primary reason 

the patient requires home health services, has occurred no 

more than 90 days prior to the home health start of care 

date or within 30 days of the start of the home health care 

by including the date of the encounter, and including an 

explanation of why the clinical findings of such encounter 

support that the patient is homebound and in need of either 

intermittent skilled nursing services or therapy services 

as defined in §409.42(a) and (c) of this subpart, 
CMS-1353-P TLP 6/28/11 182

respectively. Under sections 1814(a)(2)(C) and 

1835(a)(2)(A) of the Act, the face-to-face encounter must 

be performed by the certifying physician himself or 

herself, by the nurse practitioner, a clinical nurse 

specialist (as those terms are defined in section 

1861(aa)(5) of the Act) who is working in collaboration 

with the physician in accordance with State law, a 

certified nurse midwife (as defined in section 1861(gg)of 

the Act) as authorized by State law, a physician assistant 

(as defined in section 1861(aa)(5) of the Act) under the 

supervision of the physician, or, for patients admitted to 

home health immediately after an acute or post-acute stay, 

the attending acute or post-acute physician. The 

documentation of the face-to-face patient encounter must be 

a separate and distinct section of, or an addendum to, the 

certification, and must be clearly titled, dated and signed 

by the certifying physician. 

(A) The nonphysician practitioner or the attending 

acute or post-acute physician performing the face-to-face 

encounter must communicate the clinical findings of that 

face-to-face patient encounter to the certifying physician. 

* * * * * 

PART 484—HOME HEALTH SERVICES

6. The authority citation for part 484 continues to 

read as follows: 
CMS-1353-P TLP 6/28/11 183

Authority: Secs. 1102 and 1871 of the Social Security 

Act (42 U.S.C.1302 and 1395(hh)).

Subpart E – Prospective Payment System for Home Health 

Agencies 

7. Section 484.250 is revised to read as follows: 

§ 484.250 Patient assessment data. 

(a) Data submission. The following data must be 

submitted to CMS: 

(1) An HHA must submit the OASIS-C data described at 

§484.55(b)(1) of this part for CMS to administer the 

payment rate methodologies described in §484.215, §484.230, 

and §484.235 of this subpart, and meet the quality 

reporting requirements of section 1895(b)(3)(B)(v) of the 

Act. 

(2) An HHA must submit the Home Health Care CAHPS 

survey data for CMS to administer the payment rate 

methodologies described in §484.225(i) of this subpart, and 

meet the quality reporting requirements of section 

1895(b)(3)(B)(v) of the Act. 

(b) Patient count. An HHA that has less than 60 

eligible unique HHCAHPS patients annually must annually 

submit to CMS their total HHCAHPS patient count to CMS to 

be exempt from the HHCAHPS reporting requirements for a 

calendar year period. 
CMS-1353-P TLP 6/28/11 184

(c) Survey requirements. An HHA must contract with an 

approved, independent HHCAHPS survey vendor to administer 

the HHCAHPS Survey on its behalf. 

(1) CMS approves an HHCAHPS survey vendor if such 

applicant has been in business for a minimum of 3 years and 

has conducted surveys of individuals and samples for at 

least 2 years. 

(i) For HHCAHPS, a “survey of individuals” is defined 

as the collection of data from at least 600 individuals 

selected by statistical sampling methods and the data 

collected are used for statistical purposes. 

(ii) All applicants that meet these requirements will 

be approved by CMS. 

(2) No organization, firm, or business that owns, 

operates, or provides staffing for a HHA is permitted to 

administer its own Home Health Care CAHPS (HHCAHPS) Survey 

or administer the survey on behalf of any other HHA in the 

capacity as an HHCAHPS survey vendor. Such organizations 

will not be approved by CMS as HHCAHPS survey vendors. 
CMS-1510-F 

Authority: (Catalog of Federal Domestic Assistance Program 

No. 93.773, Medicare--Hospital Insurance; and Program 

No. 93.774, Medicare--Supplementary Medical Insurance 

Program) 

Dated: June 10, 2011. 

 _______________________________ 

Donald M. Berwick, 

Administrator, 

Centers for Medicare & 

Medicaid Services. 

Approved: June 24, 2011. 

 

_____________________________ 

Kathleen Sebelius, 

Secretary,

Department of Health and 

Human Services. 

BILLING CODE 4120-01-P 
CMS-1353-P TLP 6/28/11 186

[FR Doc. 2011-16938 Filed 07/05/2011 at 4:15 pm; 

Publication Date: 07/12/2011]