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[Federal Register Volume 75, Number 140 (Thursday, July 22, 2010)]
[Notices]
[Pages 42944-42979]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-17622]

[[Page 42943]]

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Part IV

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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Medicare Program; Hospice Wage Index for Fiscal Year 2011; Notice

Federal Register / Vol. 75 , No. 140 / Thursday, July 22, 2010 / 
Notices

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1523-NC]
RIN 0938-AP84

Medicare Program; Hospice Wage Index for Fiscal Year 2011

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

ACTION: Notice with comment period.

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SUMMARY: This notice with comment period announces the annual update to 
the hospice wage index for fiscal year 2011 and continues the phase out 
of the wage index budget neutrality adjustment factor (BNAF), with an 
additional 15 percent BNAF reduction, for a total BNAF reduction in FY 
2011 of 25 percent. The BNAF phase-out will continue with successive 15 
percent reductions from FY 2012 through FY 2016.

DATES: Effective Date: These regulations are effective on October 1, 
2010.
    Comment Date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on September 20, 2010.

ADDRESSES: In commenting, please refer to file code CMS-1523-NC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the 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-1523-NC, P.O. Box 8012, 
Baltimore, MD 21244-1850.

    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-1523-NC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Randy Throndset, (410) 786-0131 or 
Katie Lucas (410) 786-7723.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on issues 
set forth in section III.B of this notice to assist us in fully 
considering issues and developing policies. You can assist us by 
referencing the file code CMS-1523-NC and the specific ``issue 
identifier'' that precedes the section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Table of Contents

I. Background
    A. General
    1. Hospice Care
    2. Medicare Payment for Hospice Care
    B. Hospice Wage Index
    1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified, Hospital 
Wage Index)
    2. Changes to Core-Based Statistical Area (CBSA) Designations
    3. Definition of Rural and Urban Areas
    4. Areas Without Hospital Wage Data
    5. CBSA Nomenclature Changes
    6. Wage Data for Multi-Campus Hospitals
    7. Hospice Payment Rates
II. Provisions of the Notice With Comment Period
    A. FY 2011 Hospice Wage Index
    1. Background
    2. Areas Without Hospital Wage Data
    3. FY 2011 Wage Index With an Additional 15 Percent Reduced 
Budget Neutrality Adjustment Factor (BNAF)
    4. Effects of Phasing out the BNAF
III. Solicitation of Comments and Information on Issues Not Proposed
    A. Changes to Hospice Certification and Recertification 
Requirements
    B. Solicitation of Comments on the Hospice Aggregate Cap
IV. Waiver of Proposed Rulemaking
V. Collection of Information Requirements
VI. Response to Comments
VII. Regulatory Impact Analysis

I. Background

A. General

1. Hospice Care
    Hospice care is an approach to treatment that recognizes that the 
impending death of an individual warrants a change in the focus from 
curative care to palliative care for relief of pain and for symptom 
management. The goal of hospice care is to help terminally ill 
individuals continue life with minimal disruption to normal activities 
while remaining primarily in the home environment. A hospice uses an 
interdisciplinary approach to deliver medical, nursing, social, 
psychological, emotional, and spiritual services through use of a broad 
spectrum of professional and other caregivers, with the goal of making 
the individual as physically and emotionally comfortable as possible. 
Counseling services and inpatient respite services are available to the 
family of the hospice patient. Hospice programs consider both the 
patient and the family as a unit of care.

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    Section 1861(dd) of the Social Security Act (the Act) provides for 
coverage of hospice care for terminally ill Medicare beneficiaries who 
elect to receive care from a participating hospice. Section 1814(i) of 
the Act provides payment for Medicare participating hospices.
2. Medicare Payment for Hospice Care
    Our regulations at 42 CFR part 418 establish eligibility 
requirements, payment standards and procedures, define covered 
services, and delineate the conditions a hospice must meet to be 
approved for participation in the Medicare program. Part 418 subpart G 
provides for payment in one of four prospectively-determined rate 
categories (routine home care, continuous home care, inpatient respite 
care, and general inpatient care) to hospices based on each day a 
qualified Medicare beneficiary is under a hospice election.

B. Hospice Wage Index

    Our regulations at Sec.  418.306(c) require each hospice's labor 
market to be established using the most current hospital wage data 
available, including any changes by OMB to the Metropolitan Statistical 
Areas (MSAs) definitions. OMB revised the MSA definitions beginning in 
2003 with new designations called the Core Based Statistical Areas 
(CBSAs). For the purposes of the hospice benefit, the term ``MSA-
based'' refers to wage index values and designations based on the 
previous MSA designations before 2003. Conversely, the term ``CBSA-
based'' refers to wage index values and designations based on the OMB 
revised MSA designations in 2003, which now include CBSAs. In the 
August 11, 2004 IPPS final rule (69 FR 48916, 49026), revised labor 
market area definitions were adopted at Sec.  412.64(b), which were 
effective October 1, 2004 for acute care hospitals. We also revised the 
labor market areas for hospices using the new OMB standards that 
included CBSAs. In the FY 2006 hospice wage index final rule (70 FR 
45130), we implemented a 1-year transition policy using a 50/50 blend 
of the CBSA-based wage index values and the Metropolitan Statistical 
Area (MSA)-based wage index values for FY 2006. The one-year transition 
policy ended on September 30, 2006. For FY 2007 through FY 2010 we used 
wage index values based on CBSA designations.
    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels. The original hospice wage index was based on the 1981 
Bureau of Labor Statistics hospital data and had not been updated since 
1983. In 1994, because of disparity in wages from one geographical 
location to another, a committee was formulated to negotiate a wage 
index methodology that could be accepted by the industry and the 
government. This committee, functioning under a process established by 
the Negotiated Rulemaking Act of 1990, was comprised of national 
hospice associations; rural, urban, large and small hospices; multi-
site hospices; consumer groups; and a government representative. On 
April 13, 1995, the Hospice Wage Index Negotiated Rulemaking Committee 
signed an agreement for the methodology to be used for updating the 
hospice wage index.
    In the August 8, 1997 Federal Register (62 FR 42860), we published 
a final rule implementing a new methodology for calculating the hospice 
wage index based on the recommendations of the negotiated rulemaking 
committee. The committee statement was included in the appendix of that 
final rule (62 FR 42883).
    The reduction in overall Medicare payments if a new wage index were 
adopted was noted in the November 29, 1995 notice transmitting the 
recommendations of the negotiated rulemaking committee (60 FR 61264). 
Therefore, the Committee also decided that for each year in updating 
the hospice wage index, aggregate Medicare payments to hospices would 
remain budget neutral to payments as if the 1983 wage index had been 
used.
    As decided upon by the Committee, budget neutrality means that, in 
a given year, estimated aggregate payments for Medicare hospice 
services using the updated hospice values will equal estimated payments 
that would have been made for these services if the 1983 hospice wage 
index values had remained in effect. Although payments to individual 
hospice programs may change each year, the total payments each year to 
hospices would not be affected by using the updated hospice wage index 
because total payments would be budget neutral as if the 1983 wage 
index had been used. To implement this policy, a BNAF would be computed 
and applied annually to the pre-floor, pre-reclassified hospital wage 
index, when deriving the hospice wage index.
    The BNAF is calculated by computing estimated payments using the 
most recent completed year of hospice claims data. The units (days or 
hours) from those claims are multiplied by the updated hospice payment 
rates to calculate estimated payments. For the FY 2010 Hospice Wage 
Index Final Rule, that meant estimating payments for FY 2010 using FY 
2008 hospice claims data, and applying the FY 2010 hospice payment 
rates (updating the FY 2009 rates by the FY 2010 hospital market basket 
update). The FY 2010 hospice wage index values are then applied to the 
labor portion of the payment rates only. The procedure is repeated 
using the same claims data and payment rates, but using the 1983 BLS-
based wage index instead of the updated raw pre-floor, pre-reclassified 
hospital wage index (note that both wage indices include their 
respective floor adjustments). The total payments are then compared, 
and the adjustment required to make total payments equal is computed; 
that adjustment factor is the BNAF.
    The August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 
46464) implemented a phase-out of the hospice BNAF over 3 years, 
beginning with a 25 percent reduction in the BNAF in FY 2009, an 
additional 50 percent reduction for a total of 75 percent in FY 2010, 
and complete phase out of the BNAF in FY 2011. However, subsequent to 
the publication of the above rule, the American Recovery and 
Reinvestment Act of 2009 (Pub. L. 111-5) (ARRA) eliminated the BNAF 
phase-out for FY 2009. Specifically, division B, section 4301(a) of 
ARRA prohibited the Secretary from phasing out or eliminating the BNAF 
in the Medicare hospice wage index before October 1, 2009, and 
instructed the Secretary to recompute and apply the final Medicare 
hospice wage index for FY 2009 as if there had been no reduction in the 
BNAF. While ARRA eliminated the BNAF phase-out for FY 2009, it neither 
changed the 75 percent reduction in the BNAF for FY 2010, nor 
prohibited the elimination of the BNAF in FY 2011 that were previously 
implemented in the August 8, 2008 Hospice Wage Index final rule.
    In 2009 rulemaking for FY 2010, we accepted comments on the BNAF 
phase-out previously promulgated in 2008 rulemaking. As a result of 
those comments, a more gradual phase-out was promulgated in the FY 2010 
final rule. Specifically, in the Hospice Wage Index for FY 2010 Final 
Rule, published on August 6, 2009 (74 FR 39384), we implemented a 7-
year phase-out the BNAF, with a 10 percent reduction in FY 2010, an 
additional 15 percent reduction for a total of 25 percent in FY 2011, 
an additional 15 percent reduction for a total of 40 percent in FY 
2012, an additional 15 percent reduction for a total of 55 percent in 
FY 2013, an additional 15 percent

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reduction for a total of 70 percent in FY 2014, an additional 15 
percent reduction for a total of 85 percent in FY 2015, and an 
additional 15 percent reduction for complete elimination in FY 2016.
    The hospice wage index is updated annually. Our most recent annual 
hospice wage index final rule, published in the Federal Register (74 FR 
39384) on August 6, 2009, set forth updates to the hospice wage index 
for FY 2010. As noted previously, that update also finalized a 
provision for a 7-year phase-out of the BNAF, which was applied to the 
wage index values. The BNAF was reduced by 10 percent in FY 2010, and 
will be reduced by an additional 15 percent in each of the next 6 
years, for complete phase out in 2016.
1. Raw Wage Index Values (Pre-Floor, Pre-Reclassified Hospital Wage 
Index)
    As described in the August 8, 1997 hospice wage index final rule 
(62 FR 42860), the pre-floor and pre-reclassified hospital wage index 
is used as the raw wage index for the hospice benefit. These raw wage 
index values are then subject to either a budget neutrality adjustment 
or application of the hospice floor to compute the hospice wage index 
used to determine payments to hospices.
    Pre-floor, pre-reclassified hospital wage index values of 0.8 or 
greater are currently adjusted by a reduced BNAF. Pre-floor, pre-
reclassified hospital wage index values below 0.8 are adjusted by the 
greater of: (1) The hospice BNAF, reduced by 10 percent for FY 2010; or 
(2) the hospice floor (which is a 15 percent increase) subject to a 
maximum wage index value of 0.8. For example, if County A has a pre-
floor, pre-reclassified hospital wage index (raw wage index) value of 
0.4000, we would perform the following calculations using the budget 
neutrality factor (which for this example is 0.061775 less 10 percent, 
or 0.055598) and the hospice floor to determine County A's hospice wage 
index:
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the 10 percent reduced BNAF: (0.4000 x 1.055598 = 0.4222)
    Pre-floor, pre-reclassified hospital wage index value below 0.8 
multiplied by the hospice floor: (0.4000 x 1.15 = 0.4600)
    Based on these calculations, County A's hospice wage index would be 
0.4600.
    The BNAF has been computed and applied annually, in full or in 
reduced form, to the labor portion of the hospice payment. Currently, 
the labor portion of the payment rates is as follows: For Routine Home 
Care, 68.71 percent; for Continuous Home Care, 68.71 percent; for 
General Inpatient Care, 64.01 percent; and for Respite Care, 54.13 
percent. The non-labor portion is equal to 100 percent minus the labor 
portion for each level of care. Therefore the non-labor portion of the 
payment rates is as follows: For Routine Home Care, 31.29 percent; for 
Continuous Home Care, 31.29 percent; for General Inpatient Care, 35.99 
percent; and for Respite Care, 45.87 percent.
2. Changes to Core Based Statistical Area (CBSA) Designations
    The annual update to the hospice wage index is published in the 
Federal Register and is based on the most current available hospital 
wage data, as well as any changes by the Office of Management and 
Budget (OMB) to the definitions of MSAs, which now include CBSA 
designations. The August 4, 2005 final rule (70 FR 45130) set forth the 
adoption of the changes discussed in the OMB Bulletin No. 03-04 (June 
6, 2003), which announced revised definitions for Micropolitan 
Statistical Areas and the creation of MSAs and Combined Statistical 
Areas. In adopting the OMB CBSA geographic designations, we provided 
for a 1-year transition with a blended hospice wage index for all 
hospices for FY 2006. For FY 2006, the hospice wage index for each 
provider consisted of a blend of 50 percent of the FY 2006 MSA-based 
hospice wage index and 50 percent of the FY 2006 CBSA based hospice 
wage index. Subsequent fiscal years have used the full CBSA-based 
hospice wage index.
3. Definition of Rural and Urban Areas
    Each hospice's labor market is determined based on definitions of 
MSAs issued by OMB. In general, an urban area is defined as an MSA or 
New England County Metropolitan Area (NECMA) as defined by OMB. Under 
Sec.  412.64(b)(1)(ii)(C), a rural area is defined as any area outside 
of the urban area. The urban and rural area geographic classifications 
are defined in Sec.  412.64(b)(1)(ii)(A) through (C), and have been 
used for the Medicare hospice benefit since implementation.
    In the August 22, 2007 FY 2008 Inpatient Prospective Payment System 
(IPPS) final rule with comment period (72 FR 47130), Sec.  
412.64(b)(1)(ii)(B) was revised such that the two ``New England deemed 
Counties'' that had been considered rural under the OMB definitions 
(Litchfield County, CT and Merrimack County, NH) but deemed urban, were 
no longer considered urban effective for discharges occurring on or 
after October 1, 2007. Therefore, these two counties are now considered 
rural in accordance with Sec.  412.64(b)(1)(ii)(C).
    The requirement to adjust payments to reflect local differences in 
wages is codified in Sec.  418.306(c) of our regulations; however there 
had been no explicit reference to Sec.  412.64 in Sec.  418.306(c) 
before implementation of the August 8, 2008 FY 2009 Hospice Wage Index 
final rule. Although Sec.  412.64 had not been explicitly referred to, 
the hospice program has used the definition of ``urban'' in Sec.  
412.64(b)(1)(ii)(A) and (b)(1)(ii)(B), and the definition of ``rural'' 
as any area outside of an urban area in Sec.  412.64(b)(1)(ii)(C). With 
the implementation of the August 8, 2008 FY 2009 Wage Index final rule, 
we now explicitly refer to those provisions in Sec.  412.64 to make it 
absolutely clear how we define ``urban'' and ``rural'' for purposes of 
the hospice wage index.
    When the raw pre-floor, pre-reclassified hospital wage index was 
adopted for use in deriving the hospice wage index, it was decided not 
to take into account IPPS geographic reclassifications. This policy of 
following OMB designations of rural or urban, rather than considering 
some Counties to be ``deemed'' urban, is consistent with our policy of 
not taking into account IPPS geographic reclassifications in 
determining payments under the hospice wage index.
4. Areas Without Hospital Wage Data
    When adopting OMB's new labor market designations in FY 2006, we 
identified some geographic areas where there were no hospitals, and 
thus, no hospital wage index data on which to base the calculation of 
the hospice wage index. Beginning in FY 2006, we adopted a policy to 
use the FY 2005 pre-floor, pre-reclassified hospital wage index value 
for rural areas when no hospital wage data were available. We also 
adopted the policy that for urban labor markets without a hospital from 
which hospital wage index data could be derived, all of the CBSAs 
within the State would be used to calculate a statewide urban average 
pre-floor, pre-reclassified hospital wage index value to use as a 
reasonable proxy for these areas. Consequently, in subsequent fiscal 
years, we applied the average pre-floor, pre-reclassified hospital wage 
index data from all urban areas in that state, to urban areas without a 
hospital. From FY 2007 to FY 2010, the only such CBSA was 25980, 
Hinesville-Fort Stewart, Georgia.
    Under the CBSA labor market areas, there are no hospitals in rural 
locations

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in Massachusetts and Puerto Rico. Since there was no rural proxy for 
more recent rural data within those areas, in the FY 2006 hospice wage 
index proposed rule (70 FR 22394, 22398), we proposed applying the FY 
2005 pre-floor, pre-reclassified hospital wage index value to rural 
areas where no hospital wage data were available. In the FY 2006 final 
rule and in the FY 2007 update notice, we applied the FY 2005 pre-
floor, pre-reclassified hospital wage index data for areas lacking 
hospital wage data in both FY 2006 and FY 2007 for rural Massachusetts 
and rural Puerto Rico.
    In the FY 2008 final rule (72 FR 50214, 50217) we considered 
alternatives to our methodology to update the pre-floor, pre-
reclassified hospital wage index for rural areas without hospital wage 
data. We indicated that we believed that the best imputed proxy for 
rural areas, would: (1) Use pre-floor, pre-reclassified hospital data; 
(2) use the most local data available to impute a rural pre-floor, pre-
reclassified hospital wage index; (3) be easy to evaluate; and, (4) be 
easy to update from year-to-year.
    Therefore, in FY 2008 through FY 2010, in cases where there was a 
rural area without rural hospital wage data, we used the average pre-
floor, pre-reclassified hospital wage index data from all contiguous 
CBSAs to represent a reasonable proxy for the rural area. This approach 
does not use rural data; however, the approach uses pre-floor, pre-
reclassified hospital wage data, is easy to evaluate, is easy to update 
from year-to-year, and uses the most local data available. In the FY 
2008 rule (72 FR at 50217), we noted that in determining an imputed 
rural pre-floor, pre-reclassified hospital wage index, we interpret the 
term ``contiguous'' to mean sharing a border. For example, in the case 
of Massachusetts, the entire rural area consists of Dukes and Nantucket 
counties. We determined that the borders of Dukes and Nantucket 
counties are contiguous with Barnstable and Bristol counties. Under the 
adopted methodology, the pre-floor, pre-reclassified hospital wage 
index values for the counties of Barnstable (CBSA 12700, Barnstable 
Town, MA) and Bristol (CBSA 39300, Providence-New Bedford-Fall River, 
RI-MA) would be averaged resulting in an imputed pre-floor, pre-
reclassified rural hospital wage index for FY 2008. We noted in the FY 
2008 final hospice wage index rule that while we believe that this 
policy could be readily applied to other rural areas that lack hospital 
wage data (possibly due to hospitals converting to a different provider 
type, such as a Critical Access Hospital, that does not submit the 
appropriate wage data), if a similar situation arose in the future, we 
would re-examine this policy.
    We also noted that we do not believe that this policy would be 
appropriate for Puerto Rico, as there are sufficient economic 
differences between hospitals in the United States and those in Puerto 
Rico, including the payment of hospitals in Puerto Rico using blended 
Federal/Commonwealth-specific rates. Therefore we believe that a 
separate and distinct policy for Puerto Rico is necessary. Any 
alternative methodology for imputing a pre-floor, pre-reclassified 
hospital wage index for rural Puerto Rico would need to take into 
account the economic differences between hospitals in the United States 
and those in Puerto Rico. Our policy of imputing a rural pre-floor, 
pre-reclassified hospital wage index based on the pre-floor, pre-
reclassified hospital wage index(es) of CBSAs contiguous to the rural 
area in question does not recognize the unique circumstances of Puerto 
Rico. While we have not yet identified an alternative methodology for 
imputing a pre-floor, pre-reclassified hospital wage index for rural 
Puerto Rico, we will continue to evaluate the feasibility of using 
existing hospital wage data and, possibly, wage data from other 
sources. For FY 2008 through FY 2010, we have used the most recent pre-
floor, pre-reclassified hospital wage index available for Puerto Rico, 
which is 0.4047.
5. CBSA Nomenclature Changes
    The Office of Management and Budget (OMB) regularly publishes a 
bulletin that updates the titles of certain CBSAs. In the FY 2008 Final 
Rule (72 FR 50218) we noted that the FY 2008 rule and all subsequent 
hospice wage index rules and notices would incorporate CBSA changes 
from the most recent OMB bulletins. The OMB bulletins may be accessed 
at http://www.whitehouse.gov/omb/bulletins/index.html.
6. Wage Data From Multi-Campus Hospitals
    Historically, under the Medicare hospice benefit, we have 
established hospice wage index values calculated from the raw pre-
floor, pre-reclassified hospital wage data (also called the IPPS wage 
index) without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. The wage adjustment 
established under the Medicare hospice benefit is based on the location 
where services are furnished without any reclassification.
    For FY 2010, the data collected from cost reports submitted by 
hospitals for cost reporting periods beginning during FY 2005 were used 
to compute the 2009 raw pre-floor, pre-reclassified hospital wage index 
data without taking into account geographic reclassification under 
sections 1886(d)(8) and (d)(10) of the Act. This 2009 raw pre-floor, 
pre-reclassified hospital wage index was used to derive the applicable 
wage index values for the hospice wage index because these data (FY 
2005) are the most recent complete cost data.
    Beginning in FY 2008, the IPPS apportioned the wage data for multi-
campus hospitals located in different labor market areas (CBSAs) to 
each CBSA where the campuses were located (see the FY 2008 IPPS final 
rule with comment period 72 FR 47317 through 47320)). We are continuing 
to use the raw pre-floor, pre-reclassified hospital wage data as a 
basis to determine the hospice wage index values because hospitals and 
hospices both compete in the same labor markets, and therefore, 
experience similar wage-related costs. We note that the use of raw pre-
floor, pre-reclassified hospital (IPPS) wage data, used to derive the 
FY 2011 hospice wage index values, reflects the application of our 
policy to use that data to establish the hospice wage index. The FY 
2011 hospice wage index values presented in this notice with comment 
period were computed consistent with our raw pre-floor, pre-
reclassified hospital (IPPS) wage index policy (that is, our historical 
policy of not taking into account IPPS geographic reclassifications in 
determining payments for hospice). As implemented in the August 8, 2008 
FY 2009 Hospice Wage Index final rule, for the FY 2009 Medicare hospice 
benefit, the hospice wage index was computed from IPPS wage data 
(submitted by hospitals for cost reporting periods beginning in FY 2004 
(as was the FY 2008 IPPS wage index)), which allocated salaries and 
hours to the campuses of two multi-campus hospitals with campuses that 
are located in different labor areas, one in Massachusetts and another 
in Illinois. Thus, in FY 2009 and subsequent fiscal years, hospice wage 
index values for the following CBSAs have been affected by this policy: 
Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-Falls River, RI-
MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 16974), and Lake 
County-Kenosha County, IL-WI (CBSA 29404).
7. Hospice Payment Rates
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice 
rates for FYs 1998 through 2002. Hospice rates were to be updated by a 
factor equal to the market basket index, minus 1

[[Page 42948]]

percentage point. Payment rates for FYs since 2002 have been updated 
according to section 1814(i)(1)(C)(ii)(VII) of the Act, which states 
that the update to the payment rates for subsequent fiscal years will 
be the market basket percentage for the fiscal year. It has been 
longstanding practice to use the inpatient hospital market basket as a 
proxy for a hospice market basket.
    Historically, the rate update has been published through a separate 
administrative instruction issued annually in the summer to provide 
adequate time to implement system change requirements. Providers 
determine their payments by applying the hospice wage index in this 
notice with comment period to the labor portion of the published 
hospice rates.

II. Provisions of the Notice With Comment Period

A. FY 2011 Hospice Wage Index

1. Background
    The hospice final rule published in the Federal Register on 
December 16, 1983 (48 FR 56008) provided for adjustment to hospice 
payment rates to reflect differences in area wage levels. We apply the 
appropriate hospice wage index value to the labor portion of the 
hospice payment rates based on the geographic area where hospice care 
was furnished. As noted earlier, each hospice's labor market area is 
based on definitions of MSAs issued by the OMB. For this notice with 
comment period, we used the pre-floor, pre-reclassified hospital wage 
index, based solely on the CBSA designations, as the basis for 
determining wage index values for the FY 2011 hospice wage index.
    As noted above, our hospice payment rules utilize the wage 
adjustment factors used by the Secretary for purposes of section 
1886(d)(3)(E) of the Act for hospital wage adjustments. We are again 
using the pre-floor and pre-reclassified hospital wage index data as 
the basis to determine the hospice wage index, which is then used to 
adjust the labor portion of the hospice payment rates based on the 
geographic area where the beneficiary receives hospice care. We believe 
the use of the pre-floor, pre-reclassified hospital wage index data, as 
a basis for the hospice wage index, results in the appropriate 
adjustment to the labor portion of the costs. For the FY 2011 update to 
the hospice wage index, we are continuing to use the most recent pre-
floor, pre-reclassified hospital wage index available at the time of 
publication.
2. Areas Without Hospital Wage Data
    In adopting the CBSA designations, we identified some geographic 
areas where there are no hospitals, and no hospital wage data on which 
to base the calculation of the hospice wage index. These areas are 
described in section I.B.4 of this notice with comment period. 
Beginning in FY 2006, we adopted a policy that, for urban labor markets 
without an urban hospital from which a pre-floor, pre-reclassified 
hospital wage index can be derived, all of the urban CBSA pre-floor, 
pre-reclassified hospital wage index values within the State would be 
used to calculate a statewide urban average pre-floor, pre-reclassified 
hospital wage index to use as a reasonable proxy for these areas. 
Currently, the only CBSA that would be affected by this policy is CBSA 
25980, Hinesville-Fort Stewart, Georgia. We are continuing this policy 
for FY 2011.
    Currently, the only rural areas where there are no hospitals from 
which to calculate a pre-floor, pre-reclassified hospital wage index 
are Massachusetts and Puerto Rico. In August 2007 (72 FR 50217) we 
adopted a methodology for imputing rural pre-floor, pre-reclassified 
hospital wage index values for areas where no hospital wage data are 
available as an acceptable proxy; that methodology is also described in 
section I.B.4 of this notice with comment period. In FY 2011, Dukes and 
Nantucket Counties are the only areas in rural Massachusetts which are 
affected. We are again applying this methodology for imputing a rural 
pre-floor, pre-reclassified hospital wage index for those rural areas 
without rural hospital wage data in FY 2011.
    However, as we noted in section I.B.4 of this notice with comment 
period, we do not believe that this policy is appropriate for Puerto 
Rico. For FY 2011, we again use the most recent pre-floor, pre-
reclassified hospital wage index value available for Puerto Rico, which 
is 0.4047. This pre-floor, pre-reclassified hospital wage index value 
will then be adjusted upward by the hospice 15 percent floor adjustment 
in the computing of the FY 2011 hospice wage index.
3. FY 2011 Wage Index With an Additional 15 Percent Reduced Budget 
Neutrality Adjustment Factor (BNAF)
    The hospice wage index set forth in this notice with comment period 
would be effective October 1, 2010 through September 30, 2011. We are 
not modifying the hospice wage index methodology. In accordance with 
our regulations and the agreement signed with other members of the 
Hospice Wage Index Negotiated Rulemaking Committee, we are using the 
most current hospital data available. For this notice with comment 
period, the FY 2010 hospital wage index was the most current hospital 
wage data available for calculating the FY 2011 hospice wage index 
values. We used the FY 2010 pre-floor, pre-reclassified hospital wage 
index data for this calculation.
    As noted above, for FY 2011, the hospice wage index values will be 
based solely on the adoption of the CBSA-based labor market definitions 
and the hospital wage index. We continue to use the most recent pre-
floor and pre-reclassified hospital wage index data available (based on 
FY 2006 hospital cost report wage data). A detailed description of the 
methodology used to compute the hospice wage index is contained in the 
September 4, 1996 hospice wage index proposed rule (61 FR 46579), the 
August 8, 1997 hospice wage index final rule (62 FR 42860), and the 
August 6, 2009 FY 2010 Hospice Wage Index final rule (74 FR 39384).
    The August 6, 2009 FY 2010 Hospice Wage Index final rule finalized 
a provision to phase out the BNAF over 7 years, with a 10 percent 
reduction in the BNAF in FY 2010, and an additional 15 percent 
reduction over each of the next 6 years, with complete phaseout in FY 
2016. Therefore, in accordance with the August 6, 2009 FY 2010 Hospice 
Wage Index final rule (74 FR 39384), the BNAF for FY 2011 was reduced 
by an additional 15 percent for a total BNAF reduction of 25 percent 
(10 percent from FY 2010 and 15 percent for FY 2011).
    An unreduced BNAF for FY 2011 is computed to be 0.060562 (or 6.0562 
percent). A 25 percent reduced BNAF, which is subsequently applied to 
the pre-floor, pre-reclassified hospital wage index values greater than 
or equal to 0.8, is computed to be 0.045422 (or 4.5422 percent). Pre-
floor, pre-reclassified hospital wage index values which are less than 
0.8 are subject to the hospice floor calculation; that calculation is 
described in section I.B.1.
    The hospice wage index for FY 2011 is shown in Addenda A and B. 
Specifically, Addendum A reflects the FY 2011 wage index values for 
urban areas under the CBSA designations. Addendum B reflects the FY 
2011 wage index values for rural areas under the CBSA designations.
4. Effects of Phasing Out the BNAF
    The full (unreduced) BNAF calculated for FY 2011 is 6.0562 percent. 
As implemented in the August 6, 2009 FY 2010 Hospice Wage Index final 
rule (74 FR 39384), for FY 2011 we are reducing

[[Page 42949]]

the BNAF by an additional 15 percent, for a total BNAF reduction of 25 
percent (a 10 percent reduction in FY 2010 plus a 15 percent reduction 
in FY 2011), with additional reductions of 15 percent per year in each 
of the next 5 years until the BNAF is phased out in FY 2016.
    For FY 2011, this is mathematically equivalent to taking 75 percent 
of the full BNAF value, or multiplying 0.060562 by 0.75, which equals 
0.045422 (4.5422 percent). The BNAF of 4.5422 percent reflects a 25 
percent reduction in the BNAF. The 25 percent reduced BNAF (4.5422 
percent) was applied to the pre-floor, pre-reclassified hospital wage 
index values of 0.8 or greater in the FY 2011 hospice wage index.
    The hospice floor calculation would still apply to any pre-floor, 
pre-reclassified hospital wage index values less than 0.8. Currently, 
the hospice floor calculation has 4 steps. First, pre-floor, pre-
reclassified hospital wage index values that are less than 0.8 are 
multiplied by 1.15. Second, the minimum of 0.8 or the pre-floor, pre-
reclassified hospital wage index value times 1.15 is chosen as the 
preliminary hospice wage index value. Steps 1 and 2 are referred to in 
this notice with comment period as the hospice 15 percent floor 
adjustment. Third, the pre-floor, pre-reclassified hospital wage index 
value is multiplied by the BNAF. Finally, the greater result of either 
step 2 or step 3 is the final hospice wage index value. The hospice 
floor calculation is unchanged by the BNAF reduction. We note that 
steps 3 and 4 will become unnecessary once the BNAF is eliminated.
    We examined the effects of an additional 15 percent reduction in 
the BNAF, for a total BNAF reduction of 25 percent, on the FY 2011 
hospice wage index compared to remaining with the 10 percent reduced 
BNAF which was used for the FY 2010 hospice wage index. The FY 2011 
BNAF reduction of an additional 15 percent (for a total BNAF reduction 
of 25 percent) resulted in approximately a 0.9 percent reduction in 
most hospice wage index values. The elimination of the BNAF in FY 2016 
would result in an estimated final reduction of the FY 2016 hospice 
wage index values of approximately 4.3 percent compared to FY 2011 
hospice wage index values.
    Those CBSAs whose pre-floor, pre-reclassified hospital wage index 
values had the hospice 15 percent floor adjustment applied before the 
BNAF reduction would not be affected by this phase-out of the BNAF. 
These CBSAs, which typically include rural areas, are protected by the 
hospice 15 percent floor adjustment. We have estimated that 19 CBSAs 
are already protected by the hospice 15 percent floor adjustment, and 
are therefore completely unaffected by the BNAF reduction. There are 
148 hospices in these 19 CBSAs.
    Additionally, some CBSAs with pre-floor, pre-reclassified wage 
index values less than 0.8 will become newly eligible for the hospice 
15 percent floor adjustment as a result of the additional 15 percent 
reduction in the BNAF (for a total BNAF reduction of 25 percent). Areas 
where the hospice floor calculation would have yielded a wage index 
value greater than 0.8 if the 10 percent reduction in BNAF were 
maintained, but which will have a final wage index value less than 0.8 
after the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 25 percent) is applied, will now be eligible for the 
hospice 15 percent floor adjustment. These CBSAs will see a smaller 
reduction in their hospice wage index values since the hospice 15 
percent floor adjustment will apply. We have estimated that 5 CBSAs 
will have their pre-floor, pre-reclassified hospital wage index value 
become newly protected by the hospice 15 percent floor adjustment due 
to the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 25 percent). Because of the protection given by the 
hospice 15 percent floor adjustment, these CBSAs will see smaller 
percentage decreases in their hospice wage index values than those 
CBSAs that are not eligible for the hospice 15 percent floor 
adjustment. This will affect those hospices with lower hospice wage 
index values, which are typically in rural areas. There are 196 
hospices located in these 5 CBSAs.
    Finally, the hospice wage index values only apply to the labor 
portion of the payment rates; the labor portion is described in section 
I.B.1 of this notice with comment period. Therefore the projected 
reduction in payments due solely to the additional 15 percent reduction 
of the BNAF (for a total BNAF reduction of 25 percent) is estimated to 
be 0.6 percent, as calculated from the difference in column 3 and 
column 4 of Table 1 in section VII of this notice with comment period. 
In addition, the estimated effects of the phase-out of the BNAF will be 
mitigated by any hospital market basket updates in payments. The 
hospital market basket update for FY 2011 is 2.6 percent; this 2.6 
percent does not reflect the provision in the Affordable Care Act which 
reduced the hospital market basket update by 0.25 percentage point 
since that reduction does not apply to hospices. The final update will 
be communicated through an administrative instruction. The combined 
effects of the updated wage data, an additional 15 percent reduction of 
the BNAF (for a total BNAF reduction of 25 percent), and a hospital 
market basket update of 2.6 percent for FY 2011 are an overall 
estimated increase in payments to hospices in FY 2011 of 1.8 percent 
(column 5 of Table 1 in section VII of this notice with comment 
period).

III. Information and Updates on Issues Not Proposed

A. Changes to Hospice Certification and Recertification Requirements

    On March 23, 2010, President Obama signed into law the Affordable 
Care Act (Pub. L. 111-148). Section 3132 of this law requires hospices 
to adopt some of MedPAC's hospice program eligibility recertification 
recommendations, including a requirement for a physician or nurse 
practitioner to have a face-to-face visit with patients prior to the 
180 day recertification, and to attest that such a visit took place. 
Please see the Home Health Prospective Payment System Rate Update for 
Calendar Year 2011; Changes in Certification Requirements for Home 
Health Agencies and Hospices Proposed Rule, which we expect to publish 
shortly, for a detailed discussion of the new statutory requirements, 
and for our proposals related to implementation for hospices, including 
proposed regulatory text changes of the hospice certification 
requirements. In the Home Health Prospective Payment System Rate Update 
for Calendar Year 2011; Changes in Certification Requirements for Home 
Health Agencies and Hospices Proposed Rule, we also expect to propose 
rules related to the timing of the completion of certifications and 
recertifications, to the inclusion of benefit period dates on the 
certification or recertification, and to the physician's signature and 
date requirements for the certification or recertification.
    Please do not send comments on any of these proposals to us under 
this Hospice Wage Index Notice. Instead, please follow the instructions 
in the Home Health Prospective Payment System Rate Update for Calendar 
Year 2011; Changes in Certification Requirements for Home Health 
Agencies and Hospices Proposed Rule to comment on the hospice proposals 
described in that proposed rule. We will respond to those comments in 
the Home Health Prospective Payment System Rate Update for Calendar 
Year 2011; Changes in Certification Requirements for Home Health 
Agencies and Hospices Final Rule.

[[Page 42950]]

B. Solicitation of Comments on the Hospice Aggregate Cap

    In the FY 2010 hospice wage index proposed rule, at 74 FR 18920-
18922, we solicited comments on the current methodology of calculating 
the aggregate hospice cap. As a result of that solicitation, we 
received a number of comments regarding the hospice cap methodology, 
with several major themes emerging. Many commenters wanted more timely 
notification of cap overpayments. Many also requested that hospices 
have access to patients' full hospice utilization history. According to 
commenters, having this information would enable hospices to better 
manage their aggregate cap, and to accurately apportion patients when 
they have been in more than 1 hospice. Some commenters asked that we 
wage-adjust the annual cap amount to account for geographic differences 
in costs. Other commenters asked that we modernize the cap, 
apportioning hospice patients over consecutive years, with some 
suggesting we allow a new cap amount for readmitted patients who 
experience a break in hospice utilization. A few encouraged us not to 
raise the cap or do away with the cap, as it is the only limitation on 
hospice spending, and curbs excesses from the minority of hospices with 
questionable admission practices.
    We noted, in FY 2010 rulemaking, that there have been some 
technological advances in our data systems which we believe might 
enable us to modernize the cap calculation process while providing 
information facilitating the ability of hospices to better manage their 
cap. For this notice with comment period, we provide additional details 
regarding policy options that we are considering for modernizing the 
cap calculation methodology. We are soliciting comments on the policy 
options we are considering, as well as comments/suggestions for other 
possible options/alternatives to modernize the cap calculation 
methodology, to be considered in possible future rulemaking.
1. Hospice Provider and Medicare Contractor Access to a National 
Database Containing Full Utilization History
    One policy option which we are considering would address industry 
concerns about the timeliness of cap-related information, and hospices' 
comments about their inability to see a patient's full hospice 
utilization history. Hospices currently have the ability to query a 
beneficiary's hospice utilization history; however, the process can be 
cumbersome and can involve multiple steps to see the complete history. 
Because the query system is linked to the Common Working File, it is 
not as easily changed to provide a more streamlined process for 
providers to get a complete beneficiary hospice utilization history.
    CMS has recently redesigned a national Provider Statistical and 
Reimbursement Report (PS&R) database; the PS&R currently accumulates 
statistical and reimbursement data from Medicare claims, and is 
normally used in preparing and settling cost reports of various 
Medicare provider types. Because the PS&R is built from claims data, it 
could theoretically include any information normally found on a claim.
    We believe this new PS&R database, if tailored to hospice needs, 
may be able to provide hospices with more streamlined information 
related to their patients' prior hospice utilization, thus enabling 
providers to better manage their aggregate cap. We are investigating 
the possibility that the PS&R report include each patient's total days 
of hospice care, with from and through dates for every hospice 
election, along with a provider identifier, for multiple years. 
Additionally, we are investigating whether this database could also 
include total payments for patients for services provided during a 
specific time period (i.e., the cap year). Specifically, we envision 
that providers could use this national PS&R data to accurately estimate 
their own cap while waiting for the ``official'' cap calculation from 
their Medicare contractor, and use their estimated information in their 
internal cap management.
    In addition to possibly enabling hospice providers to more easily 
obtain access to their patients' full hospice utilization history, we 
believe that the national database and associated improved data 
processing technologies will enable Medicare contractors to adopt a 
more efficient automation approach in calculating each provider's cap. 
This might allow contractors to send providers the results of their cap 
calculations sooner.
    The improved technology could provide an opportunity for CMS to 
consider revising the cap calculation methodology to apportion hospice 
patients with long stays over more than one year. Below, we present 
some policy options which we are considering related to calculation 
methodology, along with cap issues related to timing.
a. Option 1: Multi-Year Apportioning
    In this option, patients who received hospice care in more than 1 
cap accounting year would be apportioned across years on a patient-by-
patient basis. A multi-year apportionment on a patient-by-patient basis 
raises issues regarding the timing of cap calculations. If, for 
example, the Medicare contractor is required to wait until all of a 
hospice's Medicare beneficiaries in a given year die so that the 
contractor can calculate mathematically exact multi-year 
apportionments, the determination and notification of the cap and 
overpayment might be delayed for years; alternatively, the fiscal 
intermediary might issue a tentative determination subject to 
finalization at a later time (which would lead to significant 
uncertainty, among other things) or a ``final'' determination subject 
to potentially numerous revisions in future years (which would also 
lead to significant uncertainty, among other things). In light of these 
issues, under one possible approach, the number of years which the 
beneficiary would be apportioned in the standard cap calculation 
process would be established by the Secretary. In examining data from 
claims, we found that 99.98 percent of all Medicare hospice 
beneficiaries who died in 2007 began hospice care in 2006 or 2007. 
Similarly, we found that 96.83 percent of all Medicare hospice 
beneficiaries who died in 2008 began hospice care in 2007 or 2008. 
Therefore, the Secretary could establish that hospice patients will be 
apportioned for cap calculation purposes in the year of election plus 
one additional year. In this example, if a patient's hospice election 
spans more than the election year, the standard cap calculation 
methodology would apportion the patient over the election year and one 
subsequent year, based on the number of days the patient received 
hospice care in each of the two years, also factoring in the different 
hospices which provided care to the patient during these two years, 
with the fractional shares of the patient summing to 1.
    A number of commenters suggested we allow apportioning of hospice 
care over two or more years; this suggestion was partly due to concerns 
over a hospice admitting a patient who had received hospice care 
elsewhere in a previous year, and therefore could not be counted in the 
admitting hospice's cap calculation. As such, we are also considering a 
process where a hospice provider could request the Medicare contractor 
recalculate a provider's cap using a longer apportioning timeframe than 
that established in the standard calculation process. While any hospice 
provider could request a recalculation,

[[Page 42951]]

we would envision this process to be most beneficial for providers who 
admit patients with prior, long lengths of stay at another hospice. 
Where the recalculation involves patients served by more than one 
hospice, a re-apportionment of these patients would be required. 
Therefore, a recalculation would be necessary for each hospice which 
provided care to any patients included in the recalculation.
    As described in 42 CFR 405.1885(b) contractors may only re-open and 
revise a hospice's cap determination within 3 years of the date of 
receipt of the determination of program reimbursement letter. Counting 
beneficiaries across multiple years would be subject to re-opening 
regulations. We believe that a standard cap calculation methodology 
which adopts a multi-year apportionment (such as apportioning patients 
in the year of election and one subsequent year), coupled with the 
ability for providers to request a recalculation to include a longer 
apportionment timeframe, while also providing hospices access to their 
patients' full utilization history is responsive to commenters' 
suggestions. It is a streamlined, ``easy for hospices to replicate'' 
process that might facilitate better internal management.
b. Option 2: Deferring Major Changes to the Standard Aggregate Cap 
Calculation Methodology, While Allowing Providers To Request 
Recalculation of Their Cap to Apportion Patients Across Multiple Years
    We are considering coupling changes to the aggregate cap with 
overall hospice payment reform. As we described in last year's Hospice 
Wage Index Final Rule (74 FR 39384), we are gearing up for hospice 
payment reform. MedPAC has suggested that the current payment system 
includes financial incentives which may create program vulnerabilities, 
and recommended that we reform the hospice payment system. We have been 
collecting additional data on hospice claims to analyze hospice 
resource use with the goal of reforming the payment system in the near 
future. Therefore, we are also considering an option which would defer 
changes to the current standard cap calculation methodology until we 
deploy the reformed payment system. This option would allow us to 
analyze how spending limits should be used to mitigate misuse of the 
benefit, in the context of broader hospice payment reform. Under this 
option, we would generally continue to calculate hospice aggregate caps 
using the current methodology, but we would allow hospice providers to 
request the Medicare contractor recalculate their cap, apportioning 
patients across multiple years, as described in Option 1. This option 
also would provide hospices access to the redesigned PS&R database as 
described in Option 1, thereby providing easier access to their full 
utilization history.
    Similar to the recalculation process described in Option 1, this 
option would be subject to regulatory requirements regarding re-opening 
and revision of a previous cap determination.
2. Other Issues
a. Aligning Timeframes
    Aligning the cap year timeframe to coincide with the hospice rate 
update year would likely simplify hospice recordkeeping and better 
match the counting of beneficiaries with associated Medicare payments. 
The hospice rate update year, which also corresponds with the Federal 
fiscal year, runs from October 1st to September 30th; the inpatient and 
aggregate cap year currently runs from November 1st to October 31st; 
and the beneficiary counting timeframe for purposes of the current 
hospice aggregate cap calculation runs from September 28th to September 
27th.
    The current cap accounting year timeframe provides for process 
efficiencies given the current methodology for calculating the 
aggregate cap, while allowing for counting the beneficiary in the 
reporting period where he or she is expected to use most of the days of 
covered hospice care (48 FR 38158). If we apportion beneficiaries 
across more than one year, we believe that there would no longer be an 
advantage to defining the cap accounting year differently from the 
hospice rate update year.
    For the inpatient cap, this would mean using the October 1st to 
September 30th timeframe for counting actual total Medicare patient 
days, total Medicare GIP and respite days, allowable Medicare GIP and 
respite days, and total actual Medicare payments for inpatient care 
provided during the cap year. For the aggregate cap, this would mean 
computing the total actual Medicare payments based upon services 
provided during the October 1st to September 30th timeframe. In doing 
so, all aspects of the inpatient and aggregate cap calculations would 
focus on the hospice rate update and Federal fiscal year, rather than 
on multiple different timeframes. Note that payments are counted based 
on the date the services are provided, not based on when the payments 
are actually made.
    Shifting the cap accounting year timeframes to coincide with the 
hospice rate update year would simplify the new cap calculation 
methodology. In the year of transition, we could allow 3 extra days to 
count beneficiaries. For example, if these changes were to occur 
beginning with the 2012 cap year, we could count beneficiaries from 
September 28, 2012 to September 30, 2013, which is 12 months plus 3 
days, in that cap year's calculation. In counting payments, we could 
count the payments for services provided in October twice: Once in the 
previous cap calculation, using the original timeframes, and again in 
the transition year cap calculation, using the fiscal year timeframes. 
In each year we would still have 12 months of payments (in this 
example, November 2011 to October 2012 in the last year using the 
original timeframes, and October 2012 to September 2013 in the 
transition year), but in the transition year would have 12 months plus 
3 days of headcount in the aggregate cap calculation, which would be 
advantageous to hospices.
    If we shift the cap accounting year to match the hospice rate 
update year, it would also affect our calculation of the annual cap 
amount. Section 1814(i)(2)(B) of the Social Security Act (the Act) 
requires us to update the $6,500 cap amount by the same percentage as 
the percentage increase or decrease in the medical care expenditure 
category of the Consumer Price Index for All Urban Consumers (CPI-U) 
from March 1984 to the ``fifth month of the accounting year''. By 
changing the cap accounting year to coincide with the hospice rate 
update year and Federal fiscal year, we would use the CPI-U for 
February when updating the cap amount, instead of the current process 
which uses the March CPI-U to update the cap amount.
b. Uniform Schedule for Mailing Cap Determination Letters
    Currently we do not require contractors to mail hospice cap 
determination letters on a particular date. However, if we adopted a 
cap methodology which required adjusting prior year cap reports, we 
would likely need to require contractors to mail cap determination 
letters on a uniform schedule, to avoid problems where one contractor 
does so more quickly than another. Without a uniformly applied schedule 
for mailing the cap determination letters, hospices could receive the 
letters at various times during the year. If we were to require

[[Page 42952]]

contractors to mail cap determination letters on a specific date, 
providers would be on an equal footing with regard to their cap 
notification. Finally, adopting this option would also create an 
environment more conducive to financial and business planning, as 
providers would know when to expect the report.
    We are soliciting public comment on the above suggested changes, 
and any other suggestions for ways to streamline the cap calculation. 
Please submit your cap-related comments in accordance with the 
instructions given on pages 2-6 of this notice with comment period.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a rule take effect. We can waive this procedure, however, 
if we find good cause that notice and comment procedures are 
impracticable, unnecessary, or contrary to the public interest and we 
incorporate a statement of finding and its reasons in the notice. We 
find it is unnecessary to undertake notice and comment rulemaking for 
the update in this notice because the update does not make any 
substantive changes in policy, but merely reflects the application of 
previously established methodologies which permit no discretion on the 
part of the Secretary. Therefore, under 5 U.S.C. 553(b)(3)(B), for good 
cause, we waive notice and comment procedures.

V. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

VI. 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.

VII. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this notice with comment period as 
required by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), the Regulatory Flexibility Act (RFA) (September 
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4), Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)). We estimated the impact on 
hospices, as a result of the changes to the FY 2011 hospice wage index 
and of reducing the BNAF by an additional 15 percent, for a total BNAF 
reduction of 25 percent (10 percent in FY 2010 and 15 percent in FY 
2011). The BNAF reduction is part of a 7-year BNAF phase-out that was 
finalized in previous rulemaking (74 FR 39384, dated August 6, 2009), 
and is not a policy change put forward in this notice with comment 
period.
    As discussed previously, the methodology for computing the hospice 
wage index was determined through a negotiated rulemaking committee and 
promulgated in the August 8, 1997 hospice wage index final rule (62 FR 
42860). The BNAF, which was promulgated in the August 8, 1997 rule, is 
being phased out. This rule updates the hospice wage index in 
accordance with the August 6, 2009 FY 2010 Hospice Wage Index final 
rule (74 FR 39384), which finalized a 10 percent reduced BNAF for FY 
2010 as the first year of a 7-year phase-out of the BNAF, to be 
followed by an additional 15 percent per year reduction in the BNAF in 
each of the next 6 years. Total phase-out will be complete by FY 2016.
    Executive Order 12866 directs 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). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). We have 
determined that this is an economically significant notice with comment 
period under Executive Order 12866.
    Column 4 of Table 1 shows the combined effects of the updated wage 
data (the 2010 pre-floor, pre-reclassified hospital wage index) and of 
the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 25 percent), comparing estimated payments for FY 2011 to 
estimated payments for FY 2010. The FY 2010 payments used for 
comparison have a 10 percent reduced BNAF applied. We estimate that the 
total hospice payments for FY 2011 will decrease by $110 million as a 
result of the application of the updated wage data ($-30 million) and 
the total 25 percent reduction in the BNAF ($-80 million). This 
estimate does not take into account any hospital market basket update, 
which is 2.6 percent for FY 2011. This 2.6 percent does not reflect the 
provision in the Affordable Care Act which reduced the hospital market 
basket update by 0.25 percentage point since that reduction does not 
apply to hospices. The hospital market basket update and associated 
payment rates will be communicated through an administrative 
instruction. The effect of a 2.6 percent hospital market basket update 
on payments to hospices is approximately $330 million. Taking into 
account a 2.6 percent hospital market basket update (+$330 million), in 
addition to the updated wage data ($-30 million) and the total 25 
percent reduction in the BNAF ($-80 million), it is estimated that 
hospice payments would increase by $220 million in FY 2010 ($330 
million - $110 million = $220 million). The percent change in payments 
to hospices due to the combined effects of the updated wage data, the 
additional 15 percent reduction in the BNAF (for a total BNAF reduction 
of 25 percent), and the hospital market basket update of 2.6 percent is 
reflected in column 5 of the impact table (Table 1).
    We estimate that this notice with comment period is ``economically 
significant'' as measured by the $100 million threshold, and hence also 
a major notice with comment period under the Congressional Review Act. 
Accordingly, we have prepared a Regulatory Impact Analysis that to the 
best of our ability presents the costs and benefits of the Notice.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. For purposes of the RFA, we 
estimate that almost all hospices are small entities as that term is 
used in the RFA. The great majority of hospitals and most other health 
care providers and suppliers are small entities, either by being 
nonprofit organizations or by meeting the SBA definition of a small 
business (having revenues of less than $7.0 million to $34.5 million in 
any 1 year). While the Small Business Administration (SBA) does not 
define a size threshold in terms of annual revenues for hospices, they 
do define one for home health agencies ($13.5 million; see http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf). For the purposes of this notice with

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comment period, because the hospice benefit is a home-based benefit, we 
are applying the SBA definition of ``small'' for home health agencies 
to hospices; we will use this definition of ``small'' in determining if 
this notice with comment period has a significant impact on a 
substantial number of small entities (for example, hospices). Using 
2008 Medicare hospice claims data, we estimate that 96 percent of 
hospices have Medicare revenues below $13.5 million. As indicated in 
Table 1 below, there are 3,429 hospices with 2009 claims data as of 
February 2010. Approximately 48.0 percent of Medicare certified 
hospices are identified as voluntary or government agencies and, 
therefore, are considered small entities. Most of these and most of the 
remainder are also small hospice entities because, as noted above, 
their revenues fall below the SBA size thresholds.
    Therefore, for purposes of the RFA, approximately 96 percent of 
hospices are considered small businesses according to the Small 
Business Administration's size standards with total revenues of $13.5 
million or less in any 1 year, and 48 percent are nonprofit 
organizations.
    We note that the hospice wage index methodology was previously 
guided by consensus, through a negotiated rulemaking committee that 
included representatives of national hospice associations, rural, 
urban, large and small hospices, multi-site hospices, and consumer 
groups. Based on all of the options considered, the committee agreed on 
the methodology described in the committee statement, and after notice 
and comment, it was adopted into regulation in the August 8, 1997 final 
rule. In developing the process for updating the hospice wage index in 
the 1997 final rule, we considered the impact of this methodology on 
small hospice entities and attempted to mitigate any potential negative 
effects. Small hospice entities are more likely to be in rural areas, 
which are less affected by the BNAF reduction than entities in urban 
areas. Generally, hospices in rural areas are protected by the hospice 
floor adjustment, which lessens the effect of the BNAF reduction.
    The effects of this rule on hospices are shown in Table 1. Overall, 
Medicare payments to all hospices will decrease by an estimated 0.8 
percent, reflecting the combined effects of the updated wage data and 
the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 25 percent). The combined effects of the updated wage data 
and the additional 15 percent reduction in the BNAF (for a total BNAF 
reduction of 25 percent) on small or medium sized hospices (as defined 
by routine home care days rather than by the SBA definition), is -0.7. 
Furthermore, when including the hospital market basket update of 2.6 
percent into these estimates, the combined effects on Medicare payment 
to all hospices would result in an estimated increase of approximately 
1.8 percent. For small and medium hospices (as defined by routine home 
care days), the estimated effects on revenue when accounting for the 
updated wage data, the additional 15 percent BNAF reduction (for a 
total BNAF reduction of 25 percent), and the hospital market basket 
update are increases in payments of 1.8 percent and 1.9 percent, 
respectively. Overall average hospice revenue effects will be slightly 
less than these estimates since according to the National Hospice and 
Palliative Care Organization, about 16 percent of hospice patients are 
non-Medicare.
    HHS' practice in interpreting the RFA is to consider effects 
economically ``significant'' only if they reach a threshold of 3 to 5 
percent or more of total revenue or total costs. As noted above, the 
combined effect of only the updated wage data and the additional 15 
percent reduced BNAF (for a total BNAF reduction of 25 percent) for all 
hospices is -0.8 percent. Since, by SBA's definition of ``small'' (when 
applied to hospices), nearly all hospices are considered to be small 
entities, the combined effect of only the updated wage data and the 
additional 15 percent reduced BNAF (-0.8 percent) does not exceed HHS' 
3.0 percent minimum threshold. However, HHS' practice in determining 
``significant economic impact'' has considered either total revenue or 
total costs. Total hospice revenues include the effect of the market 
basket update. When we consider the combined effect of the updated wage 
data, the additional 15 percent BNAF reduction (for a total BNAF 
reduction of 25 percent), and the 2.6 percent 2011 market basket 
update, the overall impact is an increase in hospice payments of 1.8 
percent for FY 2011. Therefore, the Secretary has determined that this 
notice with comment period does not create a significant economic 
impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This notice with comment 
period only affects hospices. Therefore, the Secretary has determined 
that this notice with comment period will not have a significant impact 
on the operations of a substantial number 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 2010, that 
threshold is approximately $135 million. This notice with comment 
period is not anticipated to have an effect on State, local, or Tribal 
governments or on the private sector of $135 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this notice with comment period under 
the threshold criteria of Executive Order 13132, Federalism, and have 
determined that it will not have an impact on the rights, roles, and 
responsibilities of State, local, or Tribal governments.

B. Anticipated Effects

1. Effects on Hospices
    This section discusses the impact of the projected effects of the 
hospice wage index, including the effects of a 2.6 percent hospital 
market basket update that will be communicated separately through an 
administrative instruction. This notice with comment period continues 
to use the CBSA-based pre-floor, pre-reclassified hospital wage index 
as a basis for the hospice wage index and continues to use the same 
policies for treatment of areas (rural and urban) without hospital wage 
data. The final FY 2011 hospice wage index is based upon the 2010 pre-
floor, pre-reclassified hospital wage index and the most complete 
claims data available (FY 2009) with an additional 15 percent reduction 
in the BNAF (combined with the 10 percent reduction in the BNAF taken 
in FY 2010, for a total BNAF reduction of 25 percent). The BNAF 
reduction is part of a 7-year BNAF phase-out that was finalized in 
previous rulemaking (74 FR 39384, dated August 6, 2009), and is not a 
policy change put forward in this notice with comment period.

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    For the purposes of our impacts, our baseline is estimated FY 2010 
payments with a 10 percent BNAF reduction, using the 2009 pre-floor, 
pre-reclassified hospital wage index. Our first comparison (column 3, 
Table 1) compares our baseline to estimated FY 2011 payments (holding 
payment rates constant) using the updated wage data (2010 pre-floor, 
pre-reclassified hospital wage index). Consequently, the estimated 
effects illustrated in column 3 of Table 1 show the distributional 
effects of the updated wage data only. The effects of using the updated 
wage data combined with the additional 15 percent reduction in the BNAF 
(for a total BNAF reduction of 25 percent) are illustrated in column 4 
of Table 1.
    We have included a comparison of the combined effects of the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 25 
percent), the updated wage data, and a 2.6 percent hospital market 
basket increase for FY 2011 (Table 1, column 5). Presenting these data 
gives the hospice industry a more complete picture of the effects on 
their total revenue of the hospice wage index discussed in this rule, 
the BNAF phase-out, and the FY 2011 hospital market basket update. 
Certain events may limit the scope or accuracy of our impact analysis, 
because such an analysis is susceptible to forecasting errors due to 
other changes in the forecasted impact time period. The nature of the 
Medicare program is such that the changes may interact, and the 
complexity of the interaction of these changes could make it difficult 
to predict accurately the full scope of the impact upon hospices.
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    Table 1 shows the results of our analysis. In column 1, we indicate 
the number of hospices included in our analysis as of February 25, 2010 
which had also filed claims in FY 2009. In column 2, we indicate the 
number of routine home care days that were included in our analysis, 
although the analysis was performed on all types of hospice care. 
Columns 3, 4, and 5 compare FY 2011 estimated payments with those 
estimated for FY 2010. The estimated FY 2010 payments incorporate a 
BNAF which has been reduced by 10 percent. Column 3 shows the 
percentage change in estimated Medicare payments for FY 2011 due to the 
effects of the updated wage data only, compared with estimated FY 2010 
payments. The effect of the updated wage data can vary from region to 
region depending on the fluctuations in the wage index values of the 
pre-floor, pre-reclassified hospital wage index. Column 4 shows the 
percentage change in estimated hospice payments from FY 2010 to FY 2011 
due to the combined effects of using the updated wage data and reducing 
the BNAF by an additional 15 percent (for a total BNAF reduction of 25 
percent). Column 5 shows the percentage change in estimated hospice 
payments from FY 2010 to FY 2011 due to the combined effects of using 
updated wage data, an additional 15 percent BNAF reduction (for a total 
BNAF reduction of 25 percent), and a 2.6 percent hospital market basket 
update.
    Table 1 also categorizes hospices by various geographic and hospice 
characteristics. The first row of data displays the aggregate result of 
the impact for all Medicare-certified hospices. The second and third 
rows of the table categorize hospices according to their geographic 
location (urban and rural). Our analysis indicated that there are 2,380 
hospices located in urban areas and 1,049 hospices located in rural 
areas. The next two row groupings in the table indicate the number of 
hospices by census region, also broken down by urban and rural 
hospices. The next grouping shows the impact on hospices based on the 
size of the hospice's program. We determined that the majority of 
hospice payments are made at the routine home care rate. Therefore, we 
based the size of each individual hospice's program on the number of 
routine home care days provided in FY 2009. The next grouping shows the 
impact on hospices by type of ownership. The final grouping shows the 
impact on hospices defined by whether they are provider-based or 
freestanding.
    As indicated in Table 1, there are 3,429 hospices. Approximately 
48.0 percent of Medicare-certified hospices are identified as voluntary 
(non-profit) or government agencies. Because the National Hospice and 
Palliative Care Organization estimates that approximately 83.6 percent 
of hospice patients in 2007 were Medicare beneficiaries, we have not 
considered other sources of revenue in this analysis.
    As stated previously, the following discussions are limited to 
demonstrating trends rather than projected dollars. We used the pre-
floor, pre-reclassified hospital wage indexes as well as the most 
complete claims data available (FY 2009) in developing the impact 
analysis. The FY 2011 payment rates will be adjusted to reflect the 
full hospital market basket, as required by section 
1814(i)(1)(C)(ii)(VII) of the Act. As previously noted, we publish 
these rates through administrative instructions rather than in a 
proposed rule. The FY 2011 hospital market basket update is 2.6 
percent. This 2.6 percent does not reflect the provision in the 
Affordable Care Act which reduced the hospital market basket update by 
0.25 percentage points since that reduction does not apply to hospices. 
Since the inclusion of the effect of a hospital market basket increase 
provides a more complete picture of projected total hospice payments 
for FY 2011, the last column of Table 1 shows the combined impacts of 
the updated wage data, the additional 15 percent BNAF reduction (for a 
total BNAF reduction of 25 percent), and the 2.6 percent hospital 
market basket update. As discussed in the FY 2006 hospice wage index 
final rule (70 FR 45129), hospice agencies may use multiple hospice 
wage index values to compute their payments based on potentially 
different geographic locations. Before January 1, 2008, the location of 
the beneficiary was used to determine the CBSA for routine and 
continuous home care and the location of the hospice agency was used to 
determine the CBSA for respite and general inpatient care. Beginning 
January 1, 2008, the hospice wage index utilized is based on the 
location of the site of service. As the location of the beneficiary's 
home and the location of the facility may vary, there will still be 
variability in geographic location for an individual hospice. We 
anticipate that the location of the various sites will usually 
correspond with the geographic location of the hospice, and thus we 
will continue to use the location of the hospice for our analyses of 
the impact of the changes to the hospice wage index in this rule. For 
this analysis, we use payments to the hospice in the aggregate based on 
the location of the hospice.
    The impact of hospice wage index changes has been analyzed 
according to the type of hospice, geographic location, type of 
ownership, hospice base, and size. Our analysis shows that most 
hospices are in urban areas and provide the vast majority of routine 
home care days. Most hospices are medium-sized

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followed by large hospices. Hospices are almost equal in numbers by 
ownership with 1,645 designated as non-profit or government hospices 
and 1,784 as proprietary. The vast majority of hospices are 
freestanding.
2. Hospice Size
    Under the Medicare hospice benefit, hospices can provide four 
different levels of care days. The majority of the days provided by a 
hospice are routine home care (RHC) days, representing about 97 percent 
of the services provided by a hospice. Therefore, the number of RHC 
days can be used as a proxy for the size of the hospice, that is, the 
more days of care provided, the larger the hospice. As discussed in the 
August 4, 2005 final rule, we currently use three size designations to 
present the impact analyses. The three categories are: (1) Small 
agencies having 0 to 3,499 RHC days; (2) medium agencies having 3,500 
to 19,999 RHC days; and (3) large agencies having 20,000 or more RHC 
days. The FY 2011 updated wage data without any BNAF reduction are 
anticipated to decrease payments to small and large hospices by 0.2 
percent, and to decrease payments to medium hospices by 0.1 percent 
(column 3); the updated wage data and the additional 15 percent BNAF 
reduction (for a total BNAF reduction of 25 percent) are anticipated to 
decrease estimated payments to small and medium hospices by 0.7 
percent, and to large hospices by 0.8 percent (column 4); and finally, 
the updated wage data, the additional 15 percent BNAF reduction (for a 
total BNAF reduction of 25 percent), and the 2.6 percent hospital 
market basket update are projected to increase estimated payments by 
1.8 percent for small and large hospices, and by 1.9 percent for medium 
hospices (column 5).
3. Geographic Location
    Column 3 of Table 1 shows that the updated wage data without the 
BNAF reduction would result in a small reduction in estimated payments. 
Urban hospices are anticipated to experience a decrease of 0.2 percent, 
while rural hospices will experience a decrease of 0.3 percent. Urban 
hospices can anticipate an increase of 1.0 percent in the Mountain 
region, of 0.5 percent in New England, of 0.2 percent in the Pacific 
region, and of 0.1 percent in the West North Central region. The 
remaining urban regions are anticipated to experience a decrease of 0.4 
percent in the Middle Atlantic, East North Central, West South Central 
regions, and a decrease of 0.5 in the South Atlantic, East South 
Central, and Outlying regions.
    Column 3 shows that for rural hospices, Outlying regions are 
anticipated to experience no change. The Middle Atlantic and East South 
Central regions are anticipated to experience an increase of 0.1 
percent, while the Mountain region is anticipated to experience an 
increase of 0.8 percent. The remaining 6 rural regions are anticipated 
to experience a decrease ranging from 0.2 percent in the South Atlantic 
to 1.3 percent in New England.
    Column 4 shows the combined effect of the updated wage data and the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 25 
percent) on estimated payments, as compared to the FY 2010 estimated 
payments using a BNAF with a 10 percent reduction. Overall urban and 
rural hospices are both anticipated to experience a 0.8 percent 
decrease in payments. Mountain urban hospices are anticipated to see a 
payment increase of 0.4 percent. All other urban hospices are 
anticipated to experience a decrease in payment ranging from 0.1 
percent in the New England region to 1.0 percent in the Middle 
Atlantic, South Atlantic, East North Central, East South Central, and 
West South Central regions.
    Rural hospices are estimated to experience an increase in payments 
of 0.3 percent in the Mountain region, while Outlying regions are 
estimated to experience no change in payments. The remaining rural 
hospices are anticipated to experience estimated decreases in payment 
ranging from 0.2 percent in the East South Central region to 1.9 
percent in the New England region.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 25 
percent), and the 2.6 percent hospital market basket update on 
estimated payments as compared to the estimated FY 2010 payments. Note 
that the FY 2010 payments had a 10 percent BNAF reduction applied to 
them. Overall, urban and rural hospices are anticipated to experience a 
1.8 percent increase in payments. Urban hospices are anticipated to 
experience an increase in estimated payments in every region, ranging 
from a 1.5 percent increase in the South Atlantic region to a 3.0 
percent increase in the Mountain region. Rural hospices in every region 
are estimated to see an increase in payments ranging from 0.7 percent 
in the New England region to 2.9 percent in the Mountain region.
4. Type of Ownership
    Column 3 demonstrates the effect of the updated wage data on FY 
2011 estimated payments with an additional 15 percent BNAF reduction, 
for a total BNAF reduction of 25 percent, versus FY 2010 estimated 
payments which included a 10 percent BNAF reduction. We anticipate that 
using the updated wage data would decrease estimated payments to 
voluntary (non-profit) and government hospices by 0.1 percent. We 
estimate a decrease in payments for proprietary (for-profit) hospices 
of 0.3 percent.
    Column 4 demonstrates the combined effects of the updated wage data 
and of the additional 15 percent BNAF reduction (for a total BNAF 
reduction of 25 percent). Estimated payments to voluntary (non-profit) 
hospices are anticipated to decrease by 0.7 percent, while government 
hospices are anticipated to experience decreases of 0.6 percent. 
Estimated payments to proprietary (for-profit) hospices are anticipated 
to decrease by 0.8 percent.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 25 
percent), and the 2.6 percent hospital market basket update on 
estimated payments, comparing FY 2011 to FY 2010 (using a BNAF with a 
10 percent reduction). Estimated FY 2011 payments are anticipated to 
increase by 1.9 percent for voluntary (non-profit) and government 
hospices, and by 1.8 percent for proprietary (for-profit) hospices.
5. Hospice Base
    Column 3 demonstrates the effect of using the updated wage data, 
comparing estimated payments for FY 2011 to FY 2010 (using a BNAF with 
a 10 percent reduction). Estimated payments are anticipated to decrease 
by 0.1 percent for home health agency based hospices. Freestanding and 
hospital based providers are anticipated to experience a 0.2 percent 
decrease in estimated payments. Hospices based out of skilled nursing 
facilities are anticipated to experience a decrease in estimated 
payments of 0.5 percent.
    Column 4 shows the combined effects of the updated wage data and 
reducing the BNAF by an additional 15 percent (for a total BNAF 
reduction of 25 percent), comparing estimated payments for FY 2011 to 
FY 2010 (using a BNAF with a 10 percent reduction). Skilled nursing 
facility based hospices are estimated to see a 1.1 percent decrease, 
freestanding hospices are estimated to see a 0.8 percent decrease, and 
hospital

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and home health agency based hospices are each anticipated to 
experience a 0.7 percent decrease in payments.
    Column 5 shows the combined effects of the updated wage data, the 
additional 15 percent BNAF reduction (for a total BNAF reduction of 25 
percent), and the 2.6 percent hospital market basket update on 
estimated payments, comparing FY 2011 to FY 2010 (using a BNAF with a 
10 percent reduction). Estimated payments are anticipated to increase 
by 1.4 percent for skilled nursing based facilities, to increase by 1.8 
percent for freestanding and hospital-based providers, and to increase 
by 1.9 percent for home health agency based providers.
6. Effects on Other Providers
    This notice with comment period only affects Medicare hospice 
providers, and therefore has no effect on other provider types.
7. Effects on the Medicare and Medicaid Programs
    This notice with comment period only affects Medicare hospice 
providers, and therefore has no effect on Medicaid programs. As 
described previously, estimated Medicare payments to hospices in FY 
2011 are anticipated to decrease by $30 million due to the update in 
the wage index data itself, and to decrease by $80 million due to the 
total 25 percent reduction in the BNAF. However, the market basket 
update of 2.6 percent is anticipated to increase Medicare payments by 
$330 million. Therefore the total effect on Medicare hospice payments 
is estimated to be a $220 million increase. The market basket update 
and associated FY 2011 payment rates will be officially communicated 
this summer through an administrative instruction.

C. Accounting Statement and Table

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 2 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this notice with comment 
period. This table provides our best estimate of the decrease in 
Medicare payments under the hospice benefit as a result of the changes 
presented in this notice with comment period on data for 3,429 hospices 
in our database. All expenditures are classified as transfers to 
Medicare providers (that is, hospices).
[GRAPHIC] [TIFF OMITTED] TN22JY10.102

    In accordance with the provisions of Executive Order 12866, this 
notice with comment period was reviewed by the Office of Management and 
Budget.

(Catalog of Federal Domestic Assistance Program No. 93.778, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: May 18, 2010.
Marilyn Tavenner,
Principal Deputy Administrator and Chief Operating Officer, Centers for 
Medicare & Medicaid Services.

    Approved: July 14, 2010.
Kathleen Sebelius,
Secretary.
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[FR Doc. 2010-17622 Filed 7-16-10; 4:15 pm]
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