18912 Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 405 and 418 

[CMS–1420–P] 

RIN 0938–AP45 

Medicare Program; Proposed Hospice 

Wage Index for Fiscal Year 2010 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: This proposed rule would set 

forth the hospice wage index for fiscal 

year 2010. The proposed rule would 

adopt a MedPAC recommendation 

regarding a process for certification and 

recertification of terminal illness. This 

proposed rule would also continue the 

phase-out of the wage index budget 

neutrality adjustment factor (BNAF), 

which will conclude in 2011. In 

addition, we are requesting comments 

on a suggestion to require recertification 

visits by physicians or advanced 

practice nurses, and on issues of 

payment reform for use in possible 

future policy development. Finally, the 

proposed rule would make several 

technical and clarifying changes to the 

regulatory text. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on June 22, 2009. 

ADDRESSES: In commenting, please refer 

to file code CMS–1420–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the 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–1420–P, P.O. Box 8012, Baltimore, 

MD 21244–8012. 

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 (one 

original and two copies) to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1420–P, Mail Stop C4–26–05, 

7500 Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

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— 

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. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Randy Throndset (410) 786–0131. 

Katie Lucas (410) 786–7723. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 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, PreReclassified Hospital Wage Index) 

2. Changes to Core-Based Statistical Area 

(CBSA) Designations 

3. Definition of Urban and Rural Areas 

4. Areas Without Hospital Wage Data 

5. CBSA Nomenclature Changes 

6. Wage Data for Multi-Campus Hospitals 

7. Hospice Payment Rates 

II. Provisions of the Proposed Rule 

A. FY 2010 Proposed Hospice Wage Index 

1. Background 

2. Areas Without Hospital Wage Data 

3. FY 2010 Wage Index With 75% Reduced 

Budget Neutrality Adjustment Factor 

(BNAF) 

4. Effects of Phasing Out the BNAF 

B. Proposed Change to the Physician 

Certification and Recertification Process, 

§ 418.22 

C. Proposed Update of Covered Services, 

§ 418.202(f) 

D. Proposed Clarification of Payment 

Procedures for Hospice Care, § 418.302 

E. Proposed Clarification of Intermediary 

Determination and Notice of Amount of 

Program Reimbursement, § 405.1803 

F. Proposed Technical and Clarifying 

Changes 

III. Requests for Comments on Other Policy 

Issues 

A. Recertification Visits, § 418.22 

B. Hospice Aggregate Calculation 

C. Hospice Payment Reform 

IV. Update on Additional Hospice Data 

Collection 

V. Collection of Information Requirements 

VI. 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 


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an interdisciplinary approach to deliver 

medical, nursing, social, psychological, 

emotional, and spiritual services 

through use of a broad spectrum of 

professional and other caregivers, with 

the goal of making the individual as 

physically and emotionally comfortable 

as possible. Counseling services and 

inpatient respite services are available 

to the family of the hospice patient. 

Hospice programs consider both the 

patient and the family as a unit of care. 

Section 1861(dd) of the Social Security 

Act (the Act) provides for coverage of 

hospice care for terminally ill Medicare 

beneficiaries who elect to receive care 

from a participating hospice. Section 

1814(i) of the Act provides payment for 

Medicare participating hospices. 

2. Medicare Payment for Hospice Care 

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 § 418.306(c) require 

that the wage index for all labor markets 

in which Medicare-participating 

hospices do business be established 

using the most current hospital wage 

data available, including any changes by 

Office of Management and Budget 

(OMB) to the Metropolitan Statistical 

Areas (MSAs) definitions. OMB revised 

the MSA definitions beginning in 2003 

with new designations called the Core 

Based Statistical Areas (CBSAs). For the 

purposes of the hospice benefit, the 

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

values and designations based on the 

previous MSA designations before 2003. 

Conversely, the term ‘‘CBSA-based’’ 

refers to wage index values and 

designations based on the OMB revised 

MSA designations in 2003, which now 

include CBSAs. In the August 11, 2004 

IPPS final rule (69 FR 49026), the 

revised labor market area definitions 

were adopted at § 412.64(b), which were 

effective October 1, 2004 for acute care 

hospitals. We also revised the labor 

market areas for hospices using the new 

OMB standards that included CBSAs. In 

the FY 2006 hospice wage index final 

rule (70 FR 45130), we implemented a 

1-year transition policy using a 50/50 

blend of the CBSA-based wage index 

values and the MSA-based wage index 

values for FY 2006. The one-year 

transition policy ended on September 

30, 2006. For FY 2007, FY 2008, and FY 

2009, 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, using a hospital 

wage index rather than continuing to 

use the Bureau of Labor Statistics (BLS) 

data. 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 this 

proposed rule, that means estimating 

payments for FY 2010 using FY 2007 

hospice claims data, and applying the 

estimated FY 2010 hospice payment 

rates (updating the FY 2009 rates by the 

FY 2010 estimated 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 prefloor, 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 hospice wage index is updated 

annually. Our most recent update, 

published in the Federal Register (73 

FR 46464) on August 8, 2008, set forth 

updates to the hospice wage index for 

FY 2009. That update also finalized a 

provision for a 3-year phase-out of the 

BNAF, which was applied to the wage 

index values. As discussed in detail 

below, the update was later revised with 

the February 17, 2009 passage of the 

American Recovery and Reinvestment 

Act (ARRA), which eliminated the 

BNAF phase-out for FY 2009. 

1. Raw Wage Index Values (Pre-Floor, 

Pre-Reclassified Hospital Wage Index) 

As described in the August 8, 1997 

hospice wage index final rule (62 FR 

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

as the raw wage index for the hospice 

benefit. These raw wage index values 

are then subject to either a BNAF or 

application of the hospice floor 

calculation 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 

adjusted by the BNAF. Pre-floor, prereclassified hospital wage index values 

below 0.8 are adjusted by the greater of: 


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(1) The hospice BNAF; or (2) the 

hospice 15 percent floor adjustment, 

which is a 15 percent increase subject 

to a maximum wage index value of 0.8. 

For example, if County A has a prefloor, pre-reclassified hospital wage 

index (raw wage index) value of 0.4000, 

we would perform the following 

calculations using the BNAF (which for 

this example is 0.060988; we added 1 to 

simplify the calculation) 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 BNAF: (0.4000 × 1.060988 = 

0.4244) 

Pre-floor, pre-reclassified hospital 

wage index value below 0.8 multiplied 

by the hospice 15 percent floor 

adjustment: (0.4000 × 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 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. 

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. We have done so in an 

administrative instruction to our 

intermediaries, which was issued as 

Change Request (CR) #6418 (Transmittal 

#1701, dated 3/13/2009). 

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. The provision in the ARRA 

that eliminated the FY 2009 BNAF 

reduction provided the hospice industry 

additional time to prepare for the FY 

2010 75 percent BNAF reduction and 

the FY 2011 BNAF elimination. 

Therefore, in accordance with the 

August 8, 2008 FY 2009 Hospice Wage 

Index final rule, the rationale presented 

in that final rule, and consistent with 

section 4301(a) of ARRA, CMS plans to 

reduce the BNAF by 75 percent in FY 

2010 and ultimately eliminate the BNAF 

in 2011. We are accepting comments on 

the BNAF reductions. 

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 OMB to the 

definitions of MSAs, which now 

include CBSA designations. The August 

4, 2005 hospice wage index 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. Subsequent fiscal 

years have used the full CBSA-based 

hospice wage index. 

3. Definition of Rural and Urban Areas 

Each hospice’s labor market is 

determined based on definitions of 

MSAs issued by OMB. In general, an 

urban area is defined as an MSA or New 

England County Metropolitan Area 

(NECMA) as defined by OMB. Under 

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

defined as any area outside of the urban 

area. The urban and rural area 

geographic classifications are defined in 

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

have been used for the Medicare 

hospice benefit since implementation. 

In the August 22, 2007 FY 2008 

Inpatient Prospective Payment System 

(IPPS) final rule with comment period 

(72 FR 47130), § 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 considered rural in 

accordance with § 412.64(b)(1)(ii)(C). 

The recommendations to adjust 

payments to reflect local differences in 

wages are codified in § 418.306(c) of our 

regulations; however there had been no 

explicit reference to § 412.64 in 

§ 418.306(c) before implementation of 

the August 8, 2008 FY 2009 Hospice 

Wage Index final rule. Although 

§ 412.64 had not been explicitly referred 

to, the hospice program has used the 

definition of urban in 

§ 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 

§ 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 

§ 412.64 to make it absolutely clear how 

we define urban and rural for purposes 

of the hospice wage index. 

Litchfield County, CT and Merrimack 

County, NH are considered rural areas 

for hospital IPPS purposes in 

accordance with § 412.64. Effective 

October 1, 2008, Litchfield County, CT 

was no longer considered part of urban 

CBSA 25540 (Hartford-West HartfordEast Hartford, CT), and Merrimack 

County, NH was no longer considered 

part of urban CBSA 31700 (ManchesterNashua, NH). Rather, these counties are 

now considered to be rural areas within 

their respective States under the hospice 

payment system. When the raw prefloor, 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 prefloor, pre-reclassified hospital wage 

index value for rural areas when no 

hospital wage data were available. We 

also adopted the policy that for urban 

labor markets without a hospital from 


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Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Proposed Rules 18915 

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, prereclassified hospital wage index value to 

use as a reasonable proxy for these 

areas. Consequently, in subsequent 

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

index data from all urban areas in that 

state, to urban areas without a hospital. 

The only affected CBSA is 25980, 

Hinesville-Fort Stewart, Georgia. 

Under the CBSA labor market areas, 

there are no hospitals in rural locations 

in Massachusetts and Puerto Rico. Since 

there was no rural proxy for more recent 

rural data within those areas, in the FY 

2006 hospice wage index proposed rule 

(70 FR 22394, 22398), we proposed 

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

rural areas where no hospital wage data 

were available. In the FY 2006 final rule 

and in the FY 2007 update notice, we 

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

areas lacking hospital wage data in rural 

Massachusetts and rural Puerto Rico. 

In the FY 2008 hospice wage index 

final rule (72 FR 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, and again in 

FY 2009, in cases where there was a 

rural area without rural hospital wage 

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

from all contiguous CBSAs to represent 

a reasonable proxy for the rural area. 

This approach does not use rural data, 

however, the approach 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 hospice 

wage index final rule (72 FR 50217), we 

noted that in determining an imputed 

rural pre-floor, pre-reclassified hospital 

wage index, we interpret the term 

‘‘contiguous’’ to mean sharing a border. 

For example, in the case of 

Massachusetts, the entire rural area 

consists of Dukes and Nantucket 

Counties. We determined that the 

borders of Dukes and Nantucket 

Counties are contiguous with Barnstable 

and Bristol Counties. Under the adopted 

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

for the Counties of Barnstable (CBSA 

12700, Barnstable Town, MA) and 

Bristol (CBSA 39300, Providence-New 

Bedford-Fall River, RI–MA) would be 

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

wage index for FY 2008. We noted in 

the FY 2008 final hospice wage index 

rule that while we believe that this 

policy could be readily applied to other 

rural areas that lack hospital wage data 

(possibly due to hospitals converting to 

a different provider type, such as a 

Critical Access Hospital, that does not 

submit the appropriate wage data), if a 

similar situation arose in the future, we 

would re-examine this policy. 

We also noted that we do not believe 

that this policy would be appropriate for 

Puerto Rico, as there are sufficient 

economic differences between hospitals 

in the United States and those in Puerto 

Rico, including the payment of hospitals 

in Puerto Rico using blended Federal/ 

Commonwealth-specific rates. 

Therefore, we believe that a separate 

and distinct policy 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 prefloor, 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 and FY 2009, we 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 hospice wage index 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, prereclassified 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 multicampus hospitals located in different 

labor market areas (CBSAs) to each 

CBSA where the campuses are 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 for FY 2010 

because hospitals and hospices both 

compete in the same labor markets, and 

therefore, experience similar wagerelated costs. We note that the use of 

raw pre-floor, pre-reclassified hospital 

(IPPS) wage data, used to derive the FY 

2010 hospice wage index values, reflects 

the application of our policy to use that 

data to establish the hospice wage 

index. The FY 2010 hospice wage index 

values presented in this notice were 

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

wage index policy (that is, our historical 

policy of not taking into account IPPS 

geographic reclassifications in 

determining payments for hospice). As 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule, for 

the FY 2009 Medicare hospice benefit, 

the hospice wage index was computed 

from IPPS wage data (submitted by 

hospitals for cost reporting periods 

beginning in FY 2004 (as was the FY 

2008 IPPS wage index)), which 

allocated salaries and hours to the 

campuses of two multi-campus 

hospitals with campuses that are located 

in different labor areas, one in 


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Massachusetts and another in Illinois. 

Thus, the FY 2009 hospice wage index 

values for the following CBSAs were 

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 CountyKenosha 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 hospital market basket index, minus 

1 percentage point. However, neither 

the BBA nor subsequent legislation 

specified alteration to the hospital 

market basket adjustment to be used to 

compute hospice payment for fiscal 

years beyond 2002. Payment rates for 

FYs since 2002 have been updated 

according to section 1814(i)(1)(C)(ii)(VII) 

of the Act, which states that the update 

to the payment rates for subsequent 

fiscal years will be the market basket 

percentage for the fiscal year. It has been 

longstanding practice to use the 

inpatient hospital market basket as a 

proxy for a hospice market basket. 

Historically, the rate update has been 

published through a separate 

administrative instruction issued 

annually, in the summer, to provide 

adequate time to implement system 

change requirements. Hospices 

determine their payments by applying 

the hospice wage index in this proposed 

rule to the labor portion of the 

published hospice rates. 

II. Provisions of the Proposed Rule 

A. FY 2010 Proposed 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 proposed rule, we will use the 

pre-floor, pre-reclassified hospital wage 

index, based solely on the CBSA 

designations, as the basis for 

determining wage index values for the 

proposed FY 2010 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 

proposing again to use 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 2010 update to the 

hospice wage index, we propose to 

continue to use the most recent prefloor, 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 proposed rule. Beginning in 

FY 2006, we adopted a policy that, for 

urban labor markets without an urban 

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

derived, all of the urban CBSA pre-floor, 

pre-reclassified hospital wage index 

values within the State would be used 

to calculate a statewide urban average 

pre-floor, pre-reclassified hospital wage 

index to use as a reasonable proxy for 

these areas. Currently, the only CBSA 

that would be affected by this policy is 

CBSA 25980, Hinesville, Georgia. We 

propose to continue this policy for FY 

2010. 

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 proposed rule. In FY 2010, 

Dukes and Nantucket Counties are the 

only areas in rural Massachusetts which 

are affected. We are again proposing to 

apply this methodology for imputing a 

rural pre-floor, pre-reclassified hospital 

wage index for those rural areas without 

rural hospital wage data in FY 2010. 

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

of this proposed rule, we do not believe 

that this policy is appropriate for Puerto 

Rico. For FY 2010, we again propose to 

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

index value available for Puerto Rico, 

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

will then be adjusted upward by the 

hospice 15 percent floor adjustment in 

the computing of the proposed FY 2010 

hospice wage index. 

3. FY 2010 Wage Index With 75 Percent 

Reduced Budget Neutrality Adjustment 

Factor (BNAF) 

The hospice wage index set forth in 

this proposed rule would be effective 

October 1, 2009 through September 30, 

2010. We are not proposing any 

modifications to 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 

proposed rule, the FY 2009 hospital 

wage index was the most current 

hospital wage data available for 

calculating the FY 2010 hospice wage 

index values. We used the FY 2009 prefloor, pre-reclassified hospital wage 

index data for this calculation. 

As noted above, for FY 2010, the 

hospice wage index values will be based 

solely on the adoption of the CBSAbased labor market definitions and the 

hospital wage index. We continue to use 

the most recent pre-floor and prereclassified hospital wage index data 

available (based on FY 2005 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 8, 2008 FY 2009 Hospice 

Wage Index final rule (73 FR 46464). 

The August 8, 2008 FY 2009 Hospice 

Wage Index final rule finalized a 

provision to phase out the BNAF over 

3 years, with a 25 percent reduction in 

the BNAF in FY 2009, an additional 50 

percent reduction for a total of a 75 

percent reduction in FY 2010, and 

complete phase out in FY 2011. 

However, on February 17, 2009, the 

President signed ARRA (P.L. 111–5); 

Section 4301(a) of ARRA eliminated the 

BNAF phase-out for FY 2009. Therefore, 

in an administrative instruction (Change 

Request 6418, Transmittal 1701, dated 

3/13/2009) entitled ‘‘Revision of the 

Hospice Wage Index and the Hospice 

Pricer for FY 2009,’’ we instructed CMS 

contractors to use the revised FY 2009 

hospice Pricer, which included a 

revised hospice wage index to reflect a 

full (unreduced) BNAF rather than the 

25 percent reduced BNAF set forth in 


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the August 8, 2008 FY 2009 Hospice 

Wage Index final rule. 

While ARRA eliminated the BNAF 

phase-out for FY 2009, it did not change 

the 75 percent reduction in the BNAF 

for FY 2010, or the elimination of the 

BNAF in FY 2011 that was previously 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule. 

The provision in ARRA that eliminated 

the FY 2009 BNAF reduction provided 

the hospice industry additional time to 

prepare for the FY 2010 75 percent 

BNAF reduction and the FY 2011 BNAF 

elimination. Therefore, in accordance 

with the August 8, 2008 FY 2009 

Hospice Wage Index final rule (73 FR 

46464), the rationale presented in that 

final rule, and consistent with the 

section 4301(a) of ARRA, we plan to 

reduce the BNAF for FY 2010 by 75 

percent, and ultimately eliminate the 

BNAF in FY 2011. We are accepting 

comments on the BNAF reductions. 

An unreduced BNAF for FY 2010 is 

computed to be 0.067845 (or 6.7845 

percent). A 75 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 0.016961 (or 1.6961 

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 proposed hospice wage index for 

FY 2010 is shown in Addenda A and B. 

Specifically, Addendum A reflects the 

proposed FY 2010 wage index values for 

urban areas under the CBSA 

designations. Addendum B reflects the 

proposed FY 2010 wage index values for 

rural areas under the CBSA 

designations. 

4. Effects of Phasing Out the BNAF 

The full (unreduced) BNAF calculated 

for FY 2010 is 6.7845 percent. As 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule (73 

FR 46464), we are reducing the BNAF 

by 75 percent for FY 2010, and 

eliminating it altogether for FY 2011 

and beyond. 

For FY 2010, this is mathematically 

equivalent to taking 25 percent of the 

full BNAF value, or multiplying 

0.067845 by 0.25, which equals 

0.016961 (1.6961 percent). The BNAF of 

1.6961 percent reflects a 75 percent 

reduction in the BNAF. The 75 percent 

reduced BNAF (1.6961 percent) would 

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

of 0.8 or greater in the proposed FY 

2010 hospice wage index. 

The hospice floor calculation would 

still apply to any pre-floor, prereclassified hospital wage index values 

less than 0.8. Currently, the hospice 

floor calculation has 4 steps. First, prefloor, 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, prereclassified 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 proposed rule 

as the hospice 15 percent floor 

adjustment. Third, the pre-floor, prereclassified hospital wage index value is 

multiplied by the BNAF. Finally, the 

greater result of either step 2 or step 3 

is chosen as 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 a 75 

percent reduction in the BNAF versus 

using the full BNAF of 6.7845 percent 

on the proposed FY 2010 hospice wage 

index. The FY 2010 BNAF reduction of 

75 percent resulted in approximately a 

4.76 to 4.77 percent reduction in most 

hospice wage index values. The 

elimination of the BNAF in FY 2011 

would result in an estimated final 

reduction of the FY 2011 hospice wage 

index values of approximately 1.66 to 

1.67 percent compared to FY 2010 

hospice wage index values. 

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

had the hospice 15 percent floor 

adjustment applied before the BNAF 

reduction would not be affected by this 

proposed 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 17 CBSAs are already 

protected by the hospice 15 percent 

floor adjustment, and are therefore 

completely unaffected by the BNAF 

reduction. There are over 100 hospices 

in these 17 CBSAs. 

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

less than 0.8 will become newly eligible 

for the hospice 15 percent floor 

adjustment as a result of the 75 percent 

reduced BNAF. Areas where the hospice 

floor calculation would have yielded a 

wage index value greater than 0.8 if the 

full BNAF were applied, but which will 

have a final wage index value less than 

0.8 after the 75 percent reduced BNAF 

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 18 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 75 percent reduction in the 

BNAF. 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 

over 300 hospices located in these 18 

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 

proposed rule. Therefore the projected 

reduction in payments due to the 75 

percent reduction of the BNAF will be 

an estimated 3.2 percent, as described in 

column 4 of Table 1 in section VI of this 

proposed rule. In addition, the 

estimated effects of the phase-out of the 

BNAF will be mitigated by any hospital 

market basket updates in payments. We 

will not have the final market basket 

update for FY 2010 until the summer. 

However, the current estimate of the 

hospital market basket update for FY 

2010 is 2.1 percent. The final update 

will be communicated through an 

administrative instruction. The 

combined effects of a 75 percent 

reduction of the BNAF and an estimated 

hospital market basket update of 2.1 

percent for FY 2010 is an overall 

estimated decrease in payments to 

hospices in FY 2010 of 1.1 percent 

(column 5 of Table 1 in section VI of 

this proposed rule). 

B. Proposed Change to the Physician 

Certification and Recertification 

Process, § 418.22 

The Medicare Payment Advisory 

Commission (MedPAC) has noted an 

increasing proportion of hospice 

patients with stays exceeding 180 days, 

and significant variation in hospice 

length of stay. MedPAC has questioned 

whether there is sufficient 

accountability and enforcement related 

to certification and recertification of 

Medicare hospice patients. Currently, 

our policy requires the hospice medical 

director or physician member of the 

interdisciplinary group and the patient’s 

attending physician (if any) to certify 

the patient as having a terminal illness 

for the initial 90-day period of hospice 

care. Subsequent benefit periods only 

require recertification by the hospice 

medical director or by the physician 

member of the hospice interdisciplinary 

group. These certifications must 


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indicate that the patient’s life 

expectancy is 6 months or less if the 

illness runs its normal course, and must 

be signed by the physician. The medical 

record must include documentation that 

supports the terminal prognosis. 

At their November 6, 2008 public 

meeting, MedPAC presented the 

findings of an expert panel of hospice 

providers convened in October 2008; 

that panel noted that while many 

hospices comply with the Medicare 

eligibility criteria, some are enrolling 

and recertifying patients who are not 

eligible. 

The expert panel noted that there 

were several reasons for the variation in 

compliance. First, they noted that in 

some cases there was limited medical 

director engagement in the certification 

or recertification process. Physicians 

had delegated this responsibility to the 

staff involved with patients’ day-to-day 

care, and simply signed off on the 

paperwork. Second, inadequate charting 

of the patient’s condition or a lack of 

staff training had led some physicians to 

certify patients who were not truly 

eligible for Medicare’s hospice benefit. 

Finally, some panelists cited financial 

incentives associated with long-stay 

patients. The panelists mentioned 

anecdotal reports of hospices using 

questionable marketing strategies to 

recruit patients without mentioning the 

terminal illness requirement, and of 

hospices failing to discharge patients 

who had improved or enrolling patients 

who had already been discharged or 

turned away from other hospices. 

Consensus emerged among the panelists 

that more accountability and oversight 

of certification and recertification are 

needed. See, http://www.medpac.gov/ 

transcripts/ 

20081104_Hospice_final_public.pdf and 

http://www.medpac.gov/transcripts/ 

1106–1107MedPAC%20final.pdf. 

We believe that those physicians that 

are certifying a hospice patient’s 

continued eligibility can reasonably be 

expected to synthesize in a few 

sentences the clinical aspects of the 

patient’s condition that support the 

prognosis. We believe that such a 

requirement, as suggested by the expert 

panel and by MedPAC, would 

encourage greater physician engagement 

in the certification and recertification 

process by focusing attention on the 

physician’s responsibility to set out the 

clinical basis for the terminal prognosis 

indicated in the patient’s medical 

record. 

To increase accountability related to 

the physician certification and 

recertification process, we are proposing 

a change to § 418.22. Specifically, we 

propose to add a new paragraph (b)(3) 

to § 418.22 to require that physicians 

that certify or recertify hospice patients 

as being terminally ill include a brief 

narrative explanation of the clinical 

findings that support a life expectancy 

of 6 months or less. This brief narrative 

should be written or typed on the 

certification form itself. We do not 

believe that an attachment should be 

permissible because an attachment 

could easily be prepared by someone 

other than the physician. We seek 

comments on whether this proposed 

requirement would increase physician 

engagement in the certification and 

recertification process. 

C. Proposed Update of Covered Services, 

§ 418.202 

In Part 418, subpart F, we describe 

covered hospice services. In § 418.200, 

Requirements for Coverage, we note that 

covered services must be reasonable and 

necessary for the palliation or 

management of the terminal illness as 

well as related conditions. We also note 

that services provided must be 

consistent with the plan of care. The 

language at § 418.202, Covered services, 

describes specific types of hospices 

services that are covered. Section 

418.202(f) describes the coverage of 

medical appliances and supplies, 

including drugs and biologicals. The 

last sentence of § 418.202(f) states that 

covered ‘‘Medical supplies include 

those that are part of the written plan of 

care.’’ 

The updated CoPs, which were 

effective as of December 2008, require 

that hospices include all comorbidities 

in the plan of care, even if those 

comorbidities are not related to the 

terminal diagnosis. In § 418.54(c)(2) we 

refer to assessing the patient for 

complications and risk factors that affect 

care planning. Comorbidities that are 

unrelated to the terminal illness need to 

be addressed in the comprehensive 

assessment and should be on the plan 

of care, clearly marked as comorbidities 

unrelated to the terminal illness. The 

hospice is not responsible for providing 

care for the unrelated comorbidities. 

Because these unrelated comorbidities 

must be included in the plan of care, 

and the hospice is not responsible for 

providing the care for these unrelated 

comorbidities, we propose revising 

§ 418.202(f) to state that medical 

supplies covered by the Medicare 

hospice benefit include only those that 

are part of the plan of care and that are 

for the palliation or management of the 

terminal illness or related conditions. 

D. Proposed Clarification of Payment 

Procedures for Hospice Care, § 418.302 

Section 1861(dd) of the Act limits 

coverage of and payment for inpatient 

days for hospice patients. There are 

sometimes situations when a hospice 

patient receives inpatient care but is 

unable to return home, even though the 

medical situation no longer warrants 

general impatient care (GIP), or even 

though 5 days of respite have ended. In 

computing the inpatient cap, the 

hospice should only count inpatient 

days in which GIP or respite care is 

provided and billed as GIP or respite 

days. For example, assume a patient 

received 5 days of respite care while a 

caregiver was out of town, but the 

caregiver’s return was delayed for a day 

due to circumstances beyond her 

control. The patient had to remain as an 

inpatient for a 6th day, but was no 

longer eligible for respite care. 

According to § 418.302(e)(5), the 

hospice should switch from billing for 

respite care to billing for routine home 

care on the 6th day. The hospice should 

only count 5 days toward the inpatient 

cap, not 6 days, since only 5 inpatient 

days were provided and billed as respite 

days. 

Because we have received several 

inquiries about how to count inpatient 

days that are provided and billed as 

routine home care, we propose to revise 

§ 418.302(f)(2) to clarify that only 

inpatient days in which GIP or respite 

care is provided and billed are counted 

as inpatient days when computing the 

inpatient cap. 

E. Proposed Clarification of 

Intermediary Determination and Notice 

of Amount of Program Reimbursement, 

§ 405.1803 

Currently, hospices that exceed either 

the inpatient cap or the aggregate cap 

are sent a letter by their contractor 

(regional home health and hospice 

intermediary (RHHI) or fiscal 

intermediary (FI)), detailing the cap 

results, along with a demand for 

repayment. As described in an 

administrative instruction (CR 6400, 

Transmittal 1708, issued April 3, 2009) 

effective July 1, 2009, this letter of 

determination of program 

reimbursement will be sent to every 

hospice provider, regardless of whether 

or not the hospice has exceeded the cap. 

A demand for repayment will be 

included for those hospices which have 

exceeded either cap. If a hospice 

disagrees with the contractor’s cap 

calculations, the hospice has appeal 

rights which are set out at 42 CFR 

§ 418.311 and Part 405, Subpart R. The 

letter of determination of program 


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reimbursement shall include language 

describing the hospice’s appeal rights. 

We are proposing to clarify the language 

at § 405.1803(a) to note that for the 

purposes of hospice, the determination 

of program reimbursement letter sent by 

the contractors serves as the written 

notice reflecting the intermediary’s 

determination of the total amount of 

reimbursement due the hospice, which 

is commonly called a Notice of Program 

Reimbursement or NPR. Additionally, 

we are proposing to clarify 

§ 405.1803(a)(1)(i) to note that in the 

case of hospice, the reporting period 

covered by the determination of 

program reimbursement letter is the 

hospice cap year and the bases for the 

letter are the cap calculations rather 

than reasonable cost from cost report 

data. 

F. Proposed Technical and Clarifying 

Changes 

In addition to the proposals and 

solicitation of comments discussed 

above, we are proposing to make the 

following technical changes to clarify 

existing regulations text, correct errors 

that we have identified in the 

regulations, remove obsolete cross 

references, or to ensure consistent use of 

terminology in our regulations. 

1. Proposed Clarification of the 

Statutory Basis for Hospice Regulation, 

§ 418.1 

Currently, the statutory basis for the 

hospice regulations is described at 

§ 418.1, and notes that Part 418 

implements section 1861(dd) of the Act. 

The regulation describes section 

1861(dd) of the Act as specifying 

covered hospice services and the 

conditions that a hospice program must 

meet to participate in the Medicare 

program. While that is correct, section 

1861(dd) of the Act also specifies some 

limitations on coverage and payment for 

inpatient hospice care. We propose to 

clarify § 418.1 by adding a sentence 

noting that section 1861(dd) of the Act 

limits coverage and payment for 

inpatient hospice care. 

2. Proposed Update of the Scope of Part, 

§ 418.2 

The current regulations at § 418.2 

(‘‘Scope of part.’’) describe each of the 

subparts in Part 418. Some of these 

subparts have been revised or removed 

with the update of the hospice 

conditions of participation (CoPs) in 

2008. Specifically, subpart B specifies 

the eligibility and election 

requirements, along with the duration of 

benefits. Subparts C and D specify the 

Conditions of Participation, with 

subpart C now entitled ‘‘Patient Care’’ 

rather than ‘‘General Provisions and 

Administration’’, and subpart D now 

entitled ‘‘Organizational Environment’’ 

rather than ‘‘Core Services’’. Subpart E, 

which is currently described as 

specifying reimbursement methods and 

procedures, was removed and reserved 

with the update of the CoPs. Subparts F 

and G relate to payment policy, 

including covered services and hospice 

payment; currently subpart F is 

described in § 418.2 as specifying 

coinsurance amounts. Finally, subpart H 

specifies coinsurance amounts 

applicable to hospice care, rather than 

subpart F as the regulation currently 

reads. Accordingly, we propose to 

update section § 418.2 to reflect the 

current organization and scope of Part 

418. 

3. Proposed Revision of Hospice Aide 

and Homemaker Services, § 418.76 

We are proposing a technical 

correction at § 418.76(f)(1) to clarify that 

home health agencies that have been 

found out of compliance with 

paragraphs (a) or (b) of § 484.36, 

regarding home health aide 

qualifications, are prohibited from 

providing hospice aide training. The 

word ‘‘out’’ was inadvertently omitted 

from the regulation text in the June 5, 

2008 hospice final rule. 

4. Proposed Clarification of Hospice 

Multiple Location, § 418.100 

For the sake of clarity, we propose to 

delete the word ‘‘that’’ from 

§ 418.100(f)(1)(iii), regarding multiple 

locations. The revised element would 

require that the lines of authority and 

professional and administrative control 

must be clearly delineated in the 

hospice’s organizational structure and 

in practice, and must be traced to the 

location issued the certification number. 

5. Proposed Revision to Short Term 

Inpatient Care, § 418.108 

We propose to correct in 

§ 418.108(b)(1)(ii) an erroneous 

reference to § 418.110(f), Patient rooms. 

This section, which addresses facilities 

that are considered acceptable for the 

provision of respite care to hospice 

patients, was intended to reference the 

standard at § 418.110(e), Patient areas. 

The published reference to standard (f) 

was a typographic error, and we propose 

to correct it by changing the reference to 

standard (e). 

6. Proposed Clarification of the 

Requirements for Coverage, § 418.200 

Section 418.200 describes the 

requirements for coverage for Medicare 

hospice services, and references 

§ 418.58 (‘‘Conditions of Participation 

plan of care’’). This cross reference is no 

longer accurate as § 418.58 was updated 

with the publication of the new CoPs in 

2008. We propose to detail the 

requirements for coverage related to the 

plan of care rather than cross refer to the 

CoPs regulations. This revision would 

avoid the need to make updates to this 

section each time the CoPs are changed. 

The statute specifies requirements for 

hospice coverage in section 

1814(a)(7)(A) through (C) of the Act. The 

Act requires that the hospice medical 

director and the patient’s attending 

physician certify the terminal illness for 

the initial period of hospice care and 

that the medical director recertify the 

terminal illness for each subsequent 

benefit period. Additionally, the Act 

requires that a plan of care exist before 

care is provided; that the plan of care be 

reviewed periodically by the attending 

physician, the medical director, and the 

interdisciplinary group; and that care be 

provided in accordance with the plan of 

care. We propose to clarify § 418.200 to 

incorporate these requirements for 

coverage, rather than cross reference 

CoP requirements in CoP regulations. 

7. Proposed Incorporation of the Term 

‘‘Hospice Aide,’’ § 418.202, § 418.204, 

and § 418.302 

Over the last several years, we have 

worked with the industry to update the 

hospice CoPs. These efforts culminated 

in publication of a final rule in 2008, 

which was effective December 2, 2008. 

The revised CoPs redesignated the 

‘‘home health aide’’ who works in 

hospice as a ‘‘hospice aide’’. We 

propose to revise § 418.202(g), 

§ 418.204(a), and § 418.302 to include 

the new terminology. 

8. Proposed Clarification of 

Administrative Appeals, § 418.311 

A hospice that does not believe its 

payments have been properly 

determined may request a review from 

the intermediary or from the Provider 

Reimbursement Review Board (PRRB), 

depending on the amount in 

controversy. Section 418.311 details the 

procedures for appealing a payment 

decision and also refers to Part 405, 

Subpart R. 

We propose to clarify the last 

sentence of this section, which currently 

notes that ‘‘the methods and standards 

for the calculation of the payment rates 

by CMS are not subject to appeal.’’ The 

payment rates referred to are the 

national rates which are set by statute, 

and updated according to the statute 

using the hospital market basket (unless 

Congress has instructed us to update the 

rates differently). To ensure better 

understanding of what is not subject to 


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appeal, we propose to revise § 418.311 

to provide that methods and standards 

for the calculation of the statutorily 

defined payment rates by CMS are not 

subject to appeal. 

III. Request for Comments on Other 

Policy Issues 

A. Recertification Visits, § 418.22 

As noted earlier, MedPAC convened 

an expert panel from the hospice 

industry in late 2008. That panel noted 

that some hospices are enrolling and 

recertifying patients who are not eligible 

for hospice care under the Medicare 

benefit, and consensus emerged that 

greater accountability and oversight are 

needed in the certification and 

recertification process. To further 

increase accountability in the 

recertification process, several of the 

panelists suggested to MedPAC that an 

additional policy change be made to the 

recertification process. Several panelists 

supported a requirement that a hospice 

physician or advanced practice nurse 

visit the patient at the time of the 180- 

day recertification to assess continued 

eligibility, and at every certification 

thereafter. MedPAC recommended that 

the physician or advanced practice 

nurse be required to attest that the visit 

took place. See, http:// 

www.medpac.gov/transcripts/ 

20081104_Hospice_final_public.pdf and 

http://www.medpac.gov/transcripts/ 

1106-1107MedPAC%20final.pdf. 

At this time, we are not proposing any 

policy change requiring visits by 

physicians or advanced practice nurses 

in order to recertify patients. We note 

that the statute requires a physician to 

certify and recertify terminal illness for 

hospice patients, and specifically 

precludes nurse practitioners from 

doing so at 1814(a)(7)(A) of the Act. A 

recertification visit to a hospice patient 

by a nurse practitioner would not 

relieve the physician of his or her legal 

responsibility to recertify the terminal 

illness of such hospice patient. The 

physician is ultimately responsible for 

the recertification determination. 

However, the visit, if performed by a 

nurse practitioner, could potentially 

serve as an additional, objective source 

of information for the physician in the 

recertification of terminal illness 

decision. We are also considering other 

options related to a nurse practitioner 

making recertification visits. For 

example, a nurse practitioner who is 

involved in a patient’s day-to-day care 

may not be as objective in assessing 

eligibility for recertification as a nurse 

practitioner who is not caring for that 

patient regularly. One option to better 

ensure that a nurse practitioner visit 

results in additional, objective clinical 

assessment of the patient’s condition 

might be to require that such nurse 

practitioner not be involved in the 

hospice patient’s day-to-day care. Also, 

there are different possible approaches 

regarding the timeframe for making 

visits. Visits by a physician or nurse 

practitioner could be made within a 

timeframe close to the recertification 

deadline, such as the 2-week period 

centered around the recertification date, 

thereby allowing a window of time 

surrounding the recertification 

timeframe for a visit to occur. 

While we are not proposing a policy 

change regarding recertification visits at 

this time, we are soliciting comments on 

the suggestion to require physician or 

nurse practitioner visits for hospice 

recertifications at or around 180 days 

and for every benefit period thereafter. 

We are seeking comments on all aspects 

of this suggestion, including practical 

issues of implementation. We will 

analyze and consider the comments 

received in possible future policy 

development. 

B. Hospice Aggregate Cap Calculation 

As described in section 1814(i)(2)(A) 

through (C) of the Act, when the 

Medicare hospice benefit was 

implemented, the Congress included an 

aggregate cap on hospice payments. The 

hospice aggregate cap limits the total 

aggregate payment any individual 

hospice can receive in a year. The 

Congress stipulated that a ‘‘cap amount’’ 

be computed each year. The cap amount 

was set at $6,500 per beneficiary when 

first enacted in 1983 and is adjusted 

annually by the change in the medical 

care expenditure category of the 

consumer price index for urban 

consumers from March 1984 to March of 

the cap year. The cap year is defined as 

the period from November 1st to 

October 31st, and was set in place in the 

December 16, 1983 hospice final rule 

(48 FR 56022). This timeframe was 

chosen as the cap year since the 

Medicare hospice program began on 

November 1, 1983 (48 FR 56022). For 

the 2008 cap year, the cap amount was 

$22,386.15 per beneficiary. This cap 

amount is multiplied by the number of 

Medicare beneficiaries who received 

hospice care in a particular hospice 

during the year, resulting in its hospice 

aggregate cap, which is the allowable 

amount of total Medicare payments that 

hospice can receive for that cap year. A 

hospice’s total reimbursement for the 

cap year cannot exceed the hospice 

aggregate cap. If its hospice aggregate 

cap is exceeded, then the hospice must 

repay the excess back to Medicare. 

Using the most recent (2008) payment 

rates before wage adjustment, the 2008 

cap amount ($22,386.15) is roughly 

equal to the cost of providing routine 

home care for 166 days. Because the 

hospice aggregate cap is computed in 

the aggregate for the entire hospice, 

rather than on a per beneficiary basis, 

hospices that admit a mix of short-stay 

and long stay Medicare beneficiaries 

will rarely exceed the cap. On average, 

lower expenditures made on behalf of 

Medicare beneficiaries with shorter 

hospice stays offset the expenditures 

made on behalf of Medicare 

beneficiaries with longer stays such that 

in the aggregate, the majority of 

hospices do not exceed the calculated 

aggregate cap. 

Until recently, hospices rarely 

exceeded the aggregate cap. The 

Government Accountability Office 

(GAO) found that between 1999 and 

2002, less than 2 percent of hospices 

exceeded the aggregate cap [United 

States Government Accountability 

Office, ‘‘Medicare Hospice Care. 

Modifications to Payment Methodology 

May Be Warranted’’. October 2004, 

Washington, DC. p. 18]. MedPAC 

reported that the number of hospices 

that exceeded the aggregate cap has 

grown steadily between 2002 and 2005, 

but remains just under 8 percent as of 

2005 [Medicare Payment Advisory 

Commission, ‘‘Report to the Congress: 

Reforming the Delivery System’’. June 

2008. Washington, DC. p. 212.]. We do 

not believe that hospices are exceeding 

the aggregate cap due to our 

intermediaries’ method of calculating 

the aggregate cap. Rather, MedPAC’s 

analyses suggest that certain hospices 

exceed the aggregate cap due to 

‘‘significantly longer lengths of stay’’ 

than hospices that do not exceed the cap 

[MedPAC, p. 214–15]. MedPAC suggests 

that longer average lengths of stay at 

certain hospices could be due, in part, 

to a change in their patient case-mix 

that has brought in more patients with 

less predictable disease trajectories 

[MedPAC, p. 213–14]. However, patient 

case mix was not found to account for 

all of the discrepancy in length of stay 

[MedPAC, p. 214–15]. MedPAC also 

found that for-profit ownership, smaller 

patient loads, and being a freestanding 

facility were correlated with longer 

lengths of stay and the consequent 

likelihood of exceeding the aggregate 

cap [MedPAC, p. 212–215]. 

As stated above, in our current 

hospice aggregate cap calculation 

methodology, the intermediary 

calculates each hospice’s aggregate cap 

amount by multiplying the perbeneficiary cap amount by the number 

of Medicare beneficiaries counted in 


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each cap year. Patients who receive 

hospice care in more than one cap year 

are counted so that, in the aggregate, the 

‘‘number of Medicare beneficiaries’’ for 

each year is reduced to reflect the 

proportion of time patients receive in 

other years. Hospices are currently 

required to submit a report of their 

Medicare beneficiary unduplicated 

census to their intermediary within 30 

days of the end of the cap year. Our 

current methodology also apportions the 

beneficiary across multiple hospices if 

the beneficiary receives care from more 

than one hospice during the cap year, 

with the proportional shares summing 

to 1. The intermediary reduces each 

hospice’s Medicare beneficiary count by 

that fraction which represents 

proportional days of care the beneficiary 

received in another hospice during the 

year, with all the proportional shares 

summing to 1. 

In counting the Medicare beneficiaries 

for the unduplicated census report, we 

instruct hospices to use a slightly 

different timeframe from the cap year 

used to count payments. When 

determining a hospice’s expenditures 

during a cap year, the intermediary 

sums all claims submitted by the 

hospice for services performed during 

the cap year, which begins on November 

1st of each year and ends on the October 

31st of the following year. However, we 

instruct hospices to include those 

beneficiaries who elect the benefit 

between September 28th of each year 

and September 27th of the following 

year, rather than following the 

November 1st to October 31st cap year. 

CMS (then HCFA) used mean length of 

stay from demonstration project data to 

determine the point at which to include 

a beneficiary in calculating the hospice 

cap. Using half of the mean length of 

stay, or 70 days/2 = 35 days, CMS 

implemented a timeframe for counting 

beneficiaries that began less than 35 

days from the end of the cap year. 

Therefore, the timeframe for counting 

beneficiaries was set as September 28th 

through September 27th (48 FR 56022). 

This method of reducing the number of 

Medicare beneficiaries counted in a cap 

year to reflect time spent in other years 

was implemented because it allows for 

counting the beneficiary in the reporting 

period where he or she used most of the 

days of covered hospice care (48 FR 

38158). We believe that the regulation 

complies with the statutory 

requirements without being unduly 

burdensome. This approach has the 

major advantage of allowing each 

hospice to estimate its aggregate cap 

calculation within a short period of time 

after the close of a cap year. While we 

believe that the current hospice 

aggregate cap methodology equitably 

meets the statutory requirements for 

calculating the hospice aggregate cap set 

out at section 1814(i)(2) of the Act, the 

availability of more sophisticated 

databases and data systems provides us 

with an opportunity to incorporate 

efficiencies in the cap calculation 

process. The lack of sophisticated data 

systems in place in the 1980’s limited 

our options for how to efficiently 

compute the hospice aggregate cap. In 

the 1980’s access to claims data was 

very slow, and searchable claims 

databases were virtually non-existent. 

While the current system still has 

limitations, the advancement of 

technology has brought with it provider 

access to benefit period information in 

the Common Working File (CWF), 

which was created in the 1990’s, and 

faster processing speeds, which allow 

contractors and hospices easier access to 

claims information for hospice aggregate 

cap calculation purposes. Therefore, we 

are now able to consider more efficient 

approaches to calculating the aggregate 

cap. 

The time required for intermediaries 

to compute each hospice’s aggregate cap 

and send demand letters when 

overpayments exist delays our recovery 

of those overpayments and may also 

contribute to some hospices exceeding 

the cap in subsequent years. Hospices 

have described receiving demands for 

cap overpayments more than a year after 

the end of the cap year, and have 

expressed concern that they are not 

timely notified about their cap 

overpayments. Hospices which don’t 

closely monitor compliance with their 

aggregate cap may not have anticipated 

an overpayment, and the lag in 

notification may contribute to the risk of 

a hospice exceeding its aggregate cap in 

the subsequent year. More timely 

notification of overpayments would 

enable hospices to more quickly review 

their admissions practices, and make 

necessary changes to ensure that all 

their patients meet the eligibility 

requirements for hospice care. 

We are exploring a number of 

different hospice aggregate cap 

implementation methodology changes 

to address these issues, and to take 

advantage of the technological 

efficiencies available. Specifically, we 

are exploring enhancements to our 

current methodology which will 

improve the timeliness of hospices’ 

notification of cap overpayments, will 

enable such overpayments to be 

collected more quickly, and which will 

encourage hospices to be more 

proactively involved in managing their 

admissions practices such that they do 

not exceed their hospice aggregate cap. 

We are considering several changes to 

the annual hospice aggregate cap 

calculation implementation 

methodology which could help hospices 

avoid exceeding the aggregate cap. 

If a beneficiary receives hospice care 

for an extended period of time, or elects 

hospice toward the end of a cap year, he 

or she is more likely to cross into more 

than 1 cap year, or to receive care from 

more than 1 hospice. If we made a 

mathematically precise determination of 

the proportion of time each patient 

spent in each cap year at each hospice 

from which they received care, in order 

for a given cap year report to be final, 

adjustments to that cap year report 

would have to continue until the 

beneficiary actually died. Only then 

could a final determination of the 

aggregate cap be made for a given year 

for each hospice that had treated the 

beneficiary. Such an approach could be 

viewed as particularly burdensome to 

the hospice as a hospice’s financial 

system would likely need to be able to 

continually react to subsequent hospice 

aggregate cap calculations, readjusting 

payments to Medicare to account for an 

overpayment amount that is everchanging, that is, until the beneficiary 

dies. 

A variation of this approach would 

allow apportioning of beneficiaries who 

receive care in more than 1 cap period 

over 2 consecutive years. This approach 

would minimize, but not completely 

eliminate, the adjustments required to 

prior year cap calculations. This method 

still has the effect of delaying the final 

cap determination. However, it raises 

questions about scenarios where a 

beneficiary received hospice care in his 

first and second cap year, either revoked 

or was discharged from the benefit, and 

returned to a different hospice at a 

much later date, such as in the third cap 

year. We would like public input from 

hospices, patient groups, other provider 

types, academics, and members of the 

general public on how to best handle 

this or similar scenarios. 

Besides considering different 

approaches to counting beneficiaries, 

another option is to require hospices to 

compute their own hospice aggregate 

cap and submit a certified cap report to 

their contractors, along with any 

overpayment, 7 months after the end of 

the cap year. The information used for 

the hospice aggregate cap calculation 

originates with hospices, and is 

available to them through the CWF or 

through their own accounting records. 

Requiring hospices to compute and 

report their own hospice aggregate cap 

would result in hospices being proactive 

in managing their cap calculations. In 


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this approach, contractors would still 

verify the reported cap. 

We are soliciting comments on these 

and other policy options in an effort to 

gather more information on this issue, 

and any other possible underlying 

issues that may exist. 

C. Hospice Payment Reform 

Since the inception of the hospice 

benefit in 1983, the amount that the 

Medicare program has spent on this 

benefit has grown considerably. The 

number of unduplicated hospice 

Medicare beneficiaries has increased 

from 401,140 in FY 1998 to 986,435 in 

FY 2007, which represents a 146 

percent increase. Additionally, at the 

inception of the benefit, most hospice 

patients elected hospice care due to 

terminal cancer. The profile of the 

hospice patient has changed in recent 

years such that hospices now provide 

care to beneficiaries with a wide range 

of terminal conditions. In calendar year 

(CY) 1998, 54 percent of hospice 

patients had terminal cancer diagnoses. 

In CY 2007, only 28 percent of hospice 

patients had terminal cancer diagnoses. 

With the diversity of diagnoses, hospice 

stays began to increase. The national 

average length of stay for patients in 

hospice has risen from 48 days per 

patient in CY 1998 to 73 days per 

patient in CY 2006. Additionally, long 

hospice stays have grown even longer 

by about 50 percent. Between 2000 and 

2005, hospices in the 90th percentile for 

average length of stay increased their 

average length of stay from 144 to 212 

days. 

MedPAC has performed extensive 

analysis of the hospice benefit over the 

past few years, and has recommended 

that CMS reform the hospice payment 

structure to ensure greater 

accountability in the hospice benefit. 

MedPAC believes that the current 

hospice payment system contains 

incentives that make long hospice stays 

more profitable, which may result in 

misuse of the benefit. 

Medicare spending for hospice is 

rapidly growing, more than tripling 

between 2000 and 2007. In fiscal year 

(FY) 1998, expenditures for the 

Medicare hospice benefit were $2.2 

billion, while in FY 2007, expenditures 

for the Medicare hospice benefit were 

$10.6 billion, more than the Medicare 

program spends on inpatient 

rehabilitation hospitals, critical access 

hospitals, long term care hospitals, or 

psychiatric hospitals. Medicare hospice 

spending is expected to more than 

double in the next 10 years and will 

account for roughly 2.3 percent of 

overall Medicare spending in FY 2009. 

The number of hospice agencies has 

also grown by over 70 percent since 

1997. The growth is overwhelmingly in 

the for-profit category. In 1997, there 

were 1,834 hospices, about 20 percent of 

which were for-profit and 80 percent 

were non-profit. In 2008, there were 

over 3,200 hospices, and 51 percent of 

these are for-profit entities. Since 2000, 

nearly all hospices newly participating 

in Medicare are for-profit entities. 

MedPAC reports that the newly 

participating hospices have margins five 

to six times higher than more 

established hospices. MedPAC estimates 

that, on average, hospice Medicare 

margins were approximately 3.4 percent 

in 2005. However, the for-profit 

hospices are estimated to have margins 

ranging from 15.9 percent in 2003 to 

11.8 percent in 2005. 

In their analyses of the hospice 

benefit in their June 2008 ‘‘Report to the 

Congress,’’ MedPAC found that hospice 

care is more costly at the beginning and 

end of an episode of hospice care, 

because of the intensity of services 

provided during those times. Hospices 

provide more visits to a patient right 

after a patient elects hospice and in the 

time shortly before death, than they 

provide during the middle of the 

episode. In its November 6, 2008 public 

meeting, MedPAC suggested that 

payments to hospices should decline as 

the beneficiary’s length of stay 

increases, thus better reflecting intensity 

and frequency of the hospice services 

provided over the course of treatment. 

MedPAC also suggested that payment to 

hospices should increase during the 

period just prior to the patient’s death 

to reflect the higher resource usage 

during this time [see, http:// 

www.medpac.gov/transcripts/ 

20081104_Hospice_final_public.pdf and 

http://www.medpac.gov/transcripts/ 

1106-1107MedPAC%20final.pdf.]. 

MedPAC believes this payment 

structure would better reflect hospice 

patient resource usage and hospice 

costs, and would encourage hospices to 

admit patients at the time in their 

illness which provides the most benefit 

to the patient. 

We are soliciting comments regarding 

MedPAC’s suggestions on reforming the 

hospice payment system, as well as 

broader comments and suggestions 

regarding hospice payment reform. We 

note that MedPAC’s suggested payment 

reforms would require Congressional 

action to change the statute. 

IV. Update on Additional Hospice Data 

Collection 

Over the past several years MedPAC, 

the GAO, and the Office of the Inspector 

General have all recommended that 

CMS collect more comprehensive data 

in order to better evaluate trends in 

utilization of the Medicare hospice 

benefit. We have been phasing in this 

process to collect more comprehensive 

data on hospice claims. We also began 

collecting additional data on hospice 

claims beginning in January 2007 

through an administrative instruction 

(CR 5245, Transmittal 1011, issued July 

28, 2006), when we started required 

reporting of a HCPCS code on the claim 

to describe the location where services 

were provided (Phase 1). In addition, we 

issued an administrative instruction (CR 

5567, Transmittal 1494, issued April 29, 

2008) requiring Medicare hospices to 

provide detail on their claims about the 

number of physician, nurse, aide, and 

social worker visits provided to 

beneficiaries. The start date of this 

mandatory CR 5567 reporting 

requirement was July 2008 (Phase 2). 

On several occasions, industry 

representatives have communicated to 

CMS that the newly required claims 

information was not comprehensive 

enough to accurately reflect hospice 

care. A major concern was that CMS 

was not requiring reporting of the visit 

intensity. As a result of these concerns, 

we committed to working with the 

industry to expand the data collection 

requirements. In October 2008, we 

solicited comments via a posting on 

CMS’ hospice center Web site (http:// 

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

on an approach to collecting additional 

data about hospice resource use. We 

asked about data collection using 

hospice claims, along with data 

collection using hospice cost reports. 

This proposed rule provides an update 

on the additional data collection which 

is in process. 

Based on the feedback received from 

our October 2008 web posting, we have 

revised our plans for Phase 3 of the 

claims data collection. Those plans are 

currently being developed and will be 

implemented through an administrative 

instruction. 

Phase 3 will involve collecting new 

data on hospice claims. In addition to 

the existing visit reporting requirement, 

we anticipate requiring visit time 

reporting in 15 minute increments for 

nurses, social workers, and aides. We 

anticipate requiring visit and visit time 

reporting in 15 minute increments from 

physical therapists, occupational 

therapists, and speech language 

therapists. We also anticipate requiring 

reporting of some social worker phone 

calls and their associated time, within 

certain limits. Specifically, we 

anticipate requiring the reporting of 

social worker calls that are necessary for 

the palliation and management of the 


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terminal illness and related conditions 

as described in the patient’s plan of care 

(for example, counseling, speaking with 

a patient’s family, or arranging for a 

placement). Furthermore, we anticipate 

that only social worker phone calls 

related to providing and/or coordinating 

care to the patient and family, and 

documented as such in the clinical 

records, would be reported. We 

anticipate that visit and time data 

collection for respite and general 

inpatient care provided by non-hospice 

staff in contract facilities would be 

exempt from the reporting requirement. 

Finally, we anticipate that travel time, 

documentation time, and 

interdisciplinary group time would not 

be included in the time reporting. These 

changes would necessitate line-item 

billing on hospice claims. 

While other Medicare provider types 

(for example, home health agencies) 

have had to provide similar information 

on their claims, hospices have 

historically not had been required to 

provide this information. This 

additional data collection would bring 

the requirements for hospice claims 

more in line with the claim 

requirements of other Medicare benefits, 

and provide valuable information about 

services provided to Medicare 

beneficiaries. 

We also note that this additional data 

collection uses existing revenue codes 

and existing UB–04 and 837I claim 

forms. Those claims forms were 

previously approved by the OMB under 

control number #0938–0997. 

As stated above, these changes will be 

forthcoming through an administrative 

instruction, and are not to be considered 

as proposals in this rule; that instruction 

will be issued some time this spring or 

summer. 

Additionally, we are developing plans 

to revise the hospice cost reports to 

include additional sources of revenue, 

and to gather more detailed data on 

services provided by volunteers, by 

chaplains, by counselors, and by 

pharmacists. We will continue to work 

with the industry to seek out the best 

approach to these and any other changes 

we may make in order to collect useful 

information on hospice services. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

the issue for the following section of 

this document that contains information 

collection requirements. 

Section 418.22 Certification of 

terminal illness. 

Section 418.22 requires the physician 

to include on or with the certification a 

brief narrative explanation of the 

clinical findings that support a life 

expectancy of 6 months or less. 

The burden associated with this 

requirement is the time and effort put 

forth by the physician to include a brief 

narrative explanation of the clinical 

findings that support a life expectancy 

of 6 months or less. We estimate it 

would take a physician 5 minutes to 

meet this requirement. We also estimate 

that a narrative would be provided on 

1,534,388 certifications or 

recertifications annually. Therefore, the 

total annual burden associated with this 

requirement is 127,866 hours. The 

current requirements for § 418.22 are 

approved under OMB# 0938–0302 with 

an expiration date of 8/31/2009. We will 

revise the currently approved PRA 

package to reflect any changes in 

burden. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, 

Fax: (202) 395–7245; or 

E-mail: 

OIRA_submission@omb.eop.gov. 

VI. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

rule as required by Executive Order 

12866 (September 1993, Regulatory 

Planning and Review), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Social Security Act, the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), Executive Order 13132 on 

Federalism, 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 proposed FY 

2010 hospice wage index and of 

reducing the BNAF by 75 percent. 

As discussed previously, the 

methodology for computing the hospice 

wage index was determined through a 

negotiated rulemaking committee and 

implemented in the August 8, 1997 

hospice wage index final rule (62 FR 

42860). The BNAF, which was 

implemented in the August 8, 1997 rule, 

is being phased out. This rule proposes 

updates to the hospice wage index in 

accordance with the August 8, 2008 FY 

2009 Hospice Wage Index final rule (73 

FR 46464), which originally 

implemented a 75 percent reduced 

BNAF for FY 2010 as the second year 

of a 3-year phase-out of the BNAF. 

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 proposed rule 

is an economically significant rule 

under this Executive Order. 

Column 4 of Table 1 shows the 

combined effects of the 75 percent 

reduction in the BNAF and of the 

updated wage data, comparing 

estimated payments for FY 2010 to 

estimated payments for FY 2009. In 

keeping with the American Recovery 

and Reinvestment Act (ARRA) 

mentioned earlier in this proposed rule, 

the FY 2009 payments used for 

comparison have a full (unreduced) 

BNAF applied. We estimate that the 

total hospice payments for FY 2010 will 

decrease by $340 million as a result of 

the application of the 75 percent 

reduction in the BNAF and the updated 

wage data. This estimate does not take 

into account any hospital market basket 

update, which is currently estimated to 

be about 2.1 percent for FY 2010. The 

final hospital market basket update will 

not be available until sometime later 

this year and will be communicated 

through an administrative instruction. 

The effect of an estimated 2.1 percent 

hospital market basket update on 

payments to hospices is approximately 


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$240 million. Taking into account an 

estimated 2.1 percent hospital market 

basket update, in addition to the 75 

percent reduction in the BNAF and the 

updated wage data, it is estimated that 

hospice payments would decrease by 

$100 million in FY 2010 ($340 million 

¥ $240 million = $100 million). The 

percent change in payments to hospices 

due to the combined effects of the 75 

percent reduction in the BNAF, the 

updated wage data, and the estimated 

hospital market basket update of 2.1 

percent is reflected in column 5 of the 

impact table (Table 1). 

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. The majority of hospices and 

most other providers and suppliers are 

small entities, either by nonprofit status 

or by having revenues of less than $7 

million to $34.5 million in any 1 year 

(for details, see http://www.sba.gov/ 

contractingopportunities/officials/size/ 

index.html). 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 proposed rule, 

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

definition of ‘‘small’’ for home health 

agencies to hospices; we will use this 

definition of ‘‘small’’ in determining if 

this proposed rule has a significant 

impact on a substantial number of small 

entities (for example, hospices). Using 

2007 claims data, we estimate that 96 

percent of hospices have revenues 

below $13.5 million. 

As indicated in Table 1 below, there 

are 3,206 hospices as of January 29, 

2009. Approximately 49.8 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. 

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 mitigates 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 3.2 percent, reflecting 

the combined effects of the 75 percent 

reduction in the BNAF and the updated 

wage data. However, when we consider 

the combined effects of the 75 percent 

reduction to the BNAF and the updated 

wage data on small or medium sized 

hospices, as defined by routine home 

care days rather than by the SBA 

definition, the effect is –2.9 percent. 

Furthermore, when including the 

estimated hospital market basket update 

of 2.1 percent into these estimates, the 

combined effects on Medicare payment 

to all hospices would result in an 

estimated decrease of approximately 1.1 

percent. For small to medium hospices 

(as defined by routine home care days), 

the effects on revenue when accounting 

for the updated wage data, the 75 

percent BNAF reduction, and the 

estimated hospital market basket update 

are –0.8 percent and –0.9 percent, 

respectively. Overall average hospice 

revenue effects will be slightly less than 

these estimates since according 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 75 percent 

reduced BNAF for all hospices (large 

and small) is 3.2 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 75 percent reduced 

BNAF (3.2 percent) exceeds 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 75 percent 

BNAF reduction, and the estimated 2.1 

percent 2009 market basket update, the 

overall impact is a decrease in hospice 

payments of 1.1 percent for FY 2010. 

Therefore, the Secretary has determined 

that this proposed rule does not create 

a significant economic impact on a 

substantial number of small entities. 

In the August 8, 2008 FY 2009 

Hospice Wage Index final rule, we 

implemented a 3-year phase-out of the 

BNAF. The BNAF was to be reduced by 

25 percent in FY 2009, by an additional 

50 percent for a total of 75 percent in 

FY 2010, and by a final 25 percent, for 

complete elimination in FY 2011. This 

phased approach to eliminating the 

BNAF was estimated to reduce 

payments by 1.1 percent in FY 2009, an 

additional 2 percent in FY 2010, and an 

additional 1 percent in FY 2011. As 

originally implemented, the phase out 

of the BNAF would not have a 

significant economic impact on small 

entities because in any of the 3 fiscal 

years, the estimated reduction in 

payments was less than 3 percent. 

However, on February 17, 2009, ARRA 

eliminated the phase-out for FY 2009, 

but left intact the BNAF reductions 

implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule for 

FY 2010 and FY 2011. While we are still 

using a phased approach to eliminating 

the BNAF, the phase-out is now 

occurring over 2 years rather than over 

3 years. There is a greater impact on 

hospices in FY 2010 since hospices 

move from having a full (unreduced) 

BNAF in FY 2009 to a 75 percent 

reduced BNAF in FY 2010. 

The hospice floor calculation gives 

some relief to hospices with pre-floor, 

pre-reclassified wage index values less 

than 0.8. Hospices which are eligible for 

the hospice floor calculation will either 

be totally unaffected by the BNAF 

phase-out, or will be less affected by the 

phase-out. As noted in section II.A.4 of 

this proposed rule, there are just over 

100 hospices that will be totally 

unaffected by the BNAF phase-out and 

just over 300 hospices which will be 

less affected by the BNAF phase-out, 

due to the hospice floor calculation. 

Hospices do not need to take any 

action for the BNAF phase-out to be 

effective. The FY 2010 wage index 

includes the 75 percent reduced BNAF, 

and that wage index is applied to 

hospice payments automatically by the 

claims processing contractors, thereby 

relieving hospices of the responsibility 

of having to implement the change. 

We are taking a number of actions to 

provide information to hospices to help 

them prepare for the BNAF phase-out. 

First, this phase-out was originally 


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implemented in the August 8, 2008 FY 

2009 Hospice Wage Index final rule. 

With the passage of ARRA, hospices 

have been given additional time to 

prepare for the FY 2010 BNAF 

reduction, and the ultimate elimination 

of the BNAF in FY 2011. Second, we 

continue to publicize information about 

the BNAF phase-out on our hospice 

Web site. The hospice center page at 

http://www.cms.hhs.gov/center/ 

hospice.asp provides information about 

the BNAF phase-out and links to related 

documents. Third, we are publicizing 

the information about the BNAF phaseout through other avenues (for example, 

through Open Door Forums). All of 

these efforts should provide information 

to hospices to help them prepare for the 

BNAF phase-out. 

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 603 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 a 

metropolitan statistical area and has 

fewer than 100 beds. Therefore, the 

Secretary has determined that this 

proposed rule 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 about 

$100 million or more in 1995 dollars, 

updated for inflation. That threshold is 

currently approximately $133 million in 

2009. This proposed rule is not 

anticipated to have an effect on State, 

local, or tribal governments or on the 

private sector of $133 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 proposed rule 

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 

This section discusses the impact of 

the projected effects of the proposed 

hospice wage index, including the 

effects of an estimated 2.1 percent 

hospital market basket update that will 

be communicated separately through an 

administrative instruction. The 

proposed provisions include continuing 

to use the CBSA-based pre-floor, prereclassified hospital wage index as a 

basis for the hospice wage index and 

continuing to use the same policies for 

treatment of areas (rural and urban) 

without hospital wage data. In FY 2010, 

we are continuing with the 75 percent 

reduction of the BNAF which, in the 

August 8, 2008 FY 2009 Hospice Wage 

Index final rule (73 FR 46464), was 

originally implemented as the second 

year of a 3-year phase-out of the BNAF. 

The proposed FY 2010 hospice wage 

index is based upon the 2009 pre-floor, 

pre-reclassified hospital wage index and 

the most complete claims data available 

(FY 2007) with a 75 percent reduction 

in the BNAF. 

For the purposes of our impacts, our 

baseline is estimated FY 2009 payments 

(without any BNAF reduction) using the 

2008 pre-floor, pre-reclassified hospital 

wage index. Our first comparison 

(column 3, Table 1) compares our 

baseline to estimated FY 2010 payments 

(holding payment rates constant) using 

the updated wage data (2009 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 pre-floor, pre-reclassified 

hospital wage index data combined with 

the 75 percent reduction in the BNAF 

are illustrated in column 4 of Table 1. 

We have included a comparison of the 

combined effects of the 75 percent 

BNAF reduction, the updated pre-floor, 

pre-reclassified hospital wage index, 

and an estimated 2.1 percent hospital 

market basket increase for FY 2010 

(Table 1, column 5). Presenting these 

data gives the hospice industry a more 

complete picture of the effects on their 

total revenue of the proposed hospice 

wage index discussed in this rule, the 

BNAF phase-out, and the estimated FY 

2010 hospital market basket update. 

Certain events may limit the scope or 

accuracy of our impact analysis, because 

such an analysis is susceptible to 

forecasting errors due to other changes 

in the forecasted impact time period. 

The nature of the Medicare program is 

such that the changes may interact, and 

the complexity of the interaction of 

these changes could make it difficult to 

predict accurately the full scope of the 

impact upon hospices. 

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

HOSPITAL WAGE INDEX DATA, REDUCING THE BNAF BY 75 PERCENT AND APPLYING AN ESTIMATED 2.1 PERCENT

HOSPITAL MARKET BASKET UPDATE FOR THE FY 2010 PROPOSED HOSPICE WAGE INDEX, COMPARED TO THE FY 

2009 HOSPICE WAGE INDEX WITH NO BNAF REDUCTION

Number of 

hospices * 

Number of 

routine 

home care 

days in 

thousands 

Percent 

change in 

hospice 

payments 

due to FY 

2010 wage 

index 

change 

Percent 

change in 

hospice 

payments 

due to wage 

index 

change and 

75% reduction in 

BNAF 

Percent 

change in 

hospice 

payments 

due to wage 

index 

change, 

75% reduction in 

BNAF and 

estimated 

hospital 

market basket update 

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

ALL HOSPICES ....................................................................................... 3,206 67,763 (0.0) (3.2) (1.1) 

URBAN HOSPICES .......................................................................... 2,184 58,428 (0.1) (3.3) (1.2) 

RURAL HOSPICES .......................................................................... 1,022 9,336 0.1 (2.3) (0.3) 

BY REGION—URBAN: 


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

HOSPITAL WAGE INDEX DATA, REDUCING THE BNAF BY 75 PERCENT AND APPLYING AN ESTIMATED 2.1 PERCENT

HOSPITAL MARKET BASKET UPDATE FOR THE FY 2010 PROPOSED HOSPICE WAGE INDEX, COMPARED TO THE FY 

2009 HOSPICE WAGE INDEX WITH NO BNAF REDUCTION—Continued 

Number of 

hospices * 

Number of 

routine 

home care 

days in 

thousands 

Percent 

change in 

hospice 

payments 

due to FY 

2010 wage 

index 

change 

Percent 

change in 

hospice 

payments 

due to wage 

index 

change and 

75% reduction in 

BNAF 

Percent 

change in 

hospice 

payments 

due to wage 

index 

change, 

75% reduction in 

BNAF and 

estimated 

hospital 

market basket update 

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

NEW ENGLAND ............................................................................... 121 2,092 0.0 (3.4) (1.4) 

MIDDLE ATLANTIC .......................................................................... 209 5,971 (0.1) (3.4) (1.4) 

SOUTH ATLANTIC ........................................................................... 314 12,988 (0.8) (4.0) (1.9) 

EAST NORTH CENTRAL ................................................................. 307 8,318 (0.5) (3.7) (1.7) 

EAST SOUTH CENTRAL ................................................................. 171 4,512 (0.0) (2.9) (0.9) 

WEST NORTH CENTRAL ................................................................ 169 3,860 0.4 (2.9) (0.8) 

WEST SOUTH CENTRAL ................................................................ 410 7,949 0.0 (3.1) (1.1) 

MOUNTAIN ....................................................................................... 203 5,065 0.1 (3.2) (1.2) 

PACIFIC ............................................................................................ 245 6,702 1.6 (2.0) 0.1 

OUTLYING ** .................................................................................... 35 972 (1.2) (1.2) 0.9 

BY REGION—RURAL: 

NEW ENGLAND ............................................................................... 26 175 0.6 (2.7) (0.7) 

MIDDLE ATLANTIC .......................................................................... 44 462 (0.4) (3.5) (1.5) 

SOUTH ATLANTIC ........................................................................... 128 1,915 (0.1) (2.7) (0.7) 

EAST NORTH CENTRAL ................................................................. 145 1,354 (0.6) (3.8) (1.8) 

EAST SOUTH CENTRAL ................................................................. 152 2,051 (0.1) (1.3) 0.8 

WEST NORTH CENTRAL ................................................................ 192 965 0.7 (2.4) (0.4) 

WEST SOUTH CENTRAL ................................................................ 176 1,406 0.9 (0.9) 1.2 

MOUNTAIN ....................................................................................... 106 601 (0.4) (3.2) (1.2) 

PACIFIC ............................................................................................ 52 397 1.7 (1.7) 0.3 

OUTLYING ........................................................................................ 1 9 0.0 0.0 2.1 

ROUTINE HOME CARE DAYS: 

0–3499 DAYS (small) ....................................................................... 663 1,103 0.1 (2.9) (0.8) 

3500–19,999 DAYS (medium) .......................................................... 1,537 15,311 0.1 (2.9) (0.9) 

20,000+ DAYS (large) ...................................................................... 1,006 51,350 (0.1) (3.2) (1.2) 

TYPE OF OWNERSHIP: † 

VOLUNTARY (Non-Profit) ................................................................ 1,187 29,043 (0.1) (3.3) (1.3) 

PROPRIETARY (For Profit) .............................................................. 1,608 33,275 0.1 (3.0) (1.0) 

GOVERNMENT ................................................................................ 411 5,446 (0.1) (3.3) (1.3) 

HOSPICE BASE: 

FREESTANDING .............................................................................. 2,028 51,413 (0.1) (3.2) (1.2) 

HOME HEALTH AGENCY ............................................................... 601 9,509 0.2 (3.1) (1.1) 

HOSPITAL ........................................................................................ 561 6,627 0.2 (3.0) (0.9) 

SKILLED NURSING FACILITY ........................................................ 16 214 (0.1) (3.5) (1.5) 

BNAF = Budget Neutrality Adjustment Factor. 

* As of January 29, 2009; Source: OSCAR database. 

** Guam, Puerto Rico, Virgin Islands. 

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

‘‘Government’’ category. 

Note: Comparison is to FY 2009 estimated payments from the August 8, 2008 FY 2009 Hospice Wage Index final rule (73 FR 46464), but with 

no BNAF reduction. 

Table 1 shows the results of our 

analysis. In column 1, we indicate the 

number of hospices included in our 

analysis as of January 29, 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 2010 estimated payments 

with those estimated for FY 2009. The 

estimated FY 2009 payments 

incorporate a BNAF which has not been 

reduced. Column 3 shows the 

percentage change in estimated 

Medicare payments from FY 2009 to FY 

2010 due to the effects of the updated 

wage data only, with estimated FY 2009 

payments. Column 4 shows the 

percentage change in estimated hospice 

payments from FY 2009 to FY 2010 due 

to the combined effects of using the 

2009 pre-floor, pre-reclassified hospital 

wage index and reducing the BNAF by 

75 percent. Column 5 shows the 

percentage change in estimated hospice 

payments from FY 2009 to FY 2010 due 

to the combined effects of using updated 

wage data, a 75 percent BNAF 


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reduction, and a 2.1 percent estimated 

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 2,184 hospices located in urban 

areas and 1,022 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 2007. 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 

3,206 hospices. Approximately 49.8 

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 

2007) in developing the impact analysis. 

The FY 2010 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. Currently 

the FY 2010 hospital market basket 

update is estimated to be 2.1 percent; 

however this figure is subject to change. 

Since the inclusion of the effect of an 

estimated hospital market basket 

increase provides a more complete 

picture of projected total hospice 

payments for FY 2010, the last column 

of Table 1 shows the combined impacts 

of the updated wage index, the 75 

percent BNAF reduction, and an 

estimated 2.1 percent hospital market 

basket update factor. 

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 proposed changes to the hospice 

wage index in this rule. For this 

analysis, we use payments to the 

hospice in the aggregate based on the 

location of the hospice. 

The impact of hospice wage index 

changes has been analyzed according to 

the type of hospice, geographic location, 

type of ownership, hospice base, and 

size. Our analysis shows that most 

hospices are in urban areas and provide 

the vast majority of routine home care 

days. Most hospices are medium-sized 

followed by large hospices. Hospices are 

almost equal in numbers by ownership 

with 1,598 designated as non-profit and 

1,608 as proprietary. The vast majority 

of hospices are freestanding. 

1. 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 updated 

FY 2010 wage index values without any 

BNAF reduction are anticipated to 

increase payments to small and medium 

hospices by 0.1 percent, and to decrease 

payments to large hospices by 0.1 

percent (column 3); the FY 2010 wage 

index values using the updated wage 

data and the 75 percent BNAF reduction 

that was finalized in the FY 2009 final 

rule, published August 2008 (73 FR 

46464), are anticipated to decrease 

estimated payments to small and to 

medium hospices by 2.9 percent each, 

and to large hospices by 3.2 percent 

(column 4); and finally, the FY 2010 

wage index values with the updated 

wage data, the 75 percent BNAF 

reduction which was finalized in the FY 

2009 final rule, published in August 

2008 (73 FR 46464), and the estimated 

2.1 percent hospital market basket 

update are projected to decrease 

estimated payments by 0.8 percent for 

small hospices, by 0.9 percent for 

medium hospices, and to decrease 

estimated payments by 1.2 percent for 

large hospices (column 5). 

2. Geographic Location 

Column 3 of Table 1 shows that FY 

2010 wage index values without the 

BNAF reduction would result in little 

change in estimated payments. Urban 

hospices are anticipated to experience a 

slight decrease of 0.1 percent while 

rural hospices are anticipated to have a 

slight increase of 0.1 percent. For urban 

hospices, the greatest increase of 1.6 

percent is anticipated to be experienced 

by the Pacific regions, followed by an 

increase for West North Central regions 

of 0.4 percent, an increase for Mountain 

regions of 0.1 percent, and no change for 

the West South Central or New England 

regions. The remaining urban regions 

are anticipated to experience a decrease 

ranging from 0.1 percent in the Middle 

Atlantic region to a 1.2 percent decrease 

for Outlying regions. East South Central 

is anticipated to see a slight decrease 

which rounds to a 0.0 percent change. 

Column 3 shows that for rural 

hospices, Outlying regions are 

anticipated to experience no change. 

Five regions are anticipated to 

experience a decrease ranging from 0.1 

percent for the South Atlantic and East 

South Central regions to 0.6 percent for 

the East North Central region. The 

remaining regions are anticipated to 

experience an increase ranging from 0.6 

percent for the New England region to 

1.7 percent for the Pacific region. 

Column 4 shows the combined effect 

of the 75 percent BNAF reduction and 

the updated pre-floor, pre-reclassified 

hospital wage index values on estimated 

payments, as compared to the FY 2009 

estimated payments using a BNAF with 

no reduction. Overall urban hospices 

are anticipated to experience a 3.3 

percent decrease in payments, while 


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rural hospices expect a 2.3 percent 

decrease. The estimated percent 

decrease in payment for urban hospices 

ranged from 1.2 percent for Outlying 

hospices to 4.0 percent for South 

Atlantic hospices. 

The estimated percent decrease in 

payment for rural hospices ranged from 

0.9 percent for West South Central 

hospices to 3.8 percent for East North 

Central hospices. Rural Outlying 

estimated payments were unaffected. 

Column 5 shows the combined effects 

of the proposed FY 2010 wage index 

values with the updated wage data, the 

75 percent BNAF reduction which was 

finalized in the FY 2009 final rule, 

published in August 2008 (73 FR 

46464), and the estimated 2.1 percent 

hospital market basket update on 

estimated payments as compared to the 

estimated FY 2009 payments. Note that 

the FY 2009 payments had no BNAF 

reduction applied to them. Overall, 

urban hospices are anticipated to 

experience a 1.2 percent decrease in 

payments while rural hospices should 

experience a 0.3 percent decrease in 

payments. Urban hospices are 

anticipated to experience a decrease in 

estimated payments in 8 regions, 

ranging from a 0.8 percent decrease for 

the West North Central region to a 1.9 

percent decrease for South Atlantic 

hospices. Urban hospices in 2 regions 

are anticipated to see an increase in 

estimated payments of 0.1 percent for 

the Pacific region and 0.9 percent for 

Outlying regions. Rural hospices in 6 

regions are estimated to see a decrease 

in payments ranging from 0.4 percent 

for the West North Central region to 1.8 

percent for the East North Central 

region. Rural hospices in 4 regions are 

anticipated to see an increase in 

payments ranging from 0.3 percent for 

the Pacific region to 2.1 percent for the 

Outlying regions. 

3. Type of Ownership 

Column 3 demonstrates the effect of 

the updated pre-floor, pre-reclassified 

hospital wage index on FY 2010 

estimated payments versus FY 2009 

estimated payments with no BNAF 

reduction applied to them. We 

anticipate that using the updated prefloor, pre-reclassified hospital wage 

index data would increase estimated 

payments to proprietary (for-profit) 

hospices by 0.1 percent. We estimate a 

slight decrease in payments for 

voluntary (non-profit) and government 

hospices of 0.1 percent each. 

Column 4 demonstrates the combined 

effects of using updated pre-floor, prereclassified hospital wage index data 

and of incorporating a 75 percent BNAF 

reduction. Estimated payments to 

proprietary (for-profit) hospices are 

anticipated to decrease by 3.0 percent, 

while voluntary (non-profit) and 

government hospices are each 

anticipated to experience decreases of 

3.3 percent. 

Column 5 shows the combined effects 

of the updated pre-floor, pre-reclassified 

hospital wage index values with the 

updated wage data, the 75 percent 

BNAF reduction, and the estimated 2.1 

percent hospital market basket update 

on estimated payments, comparing FY 

2010 to FY 2009 (using a BNAF with no 

reduction). Estimated FY 2010 

payments are anticipated to decrease by 

1.0 percent for proprietary (for-profit) 

hospices, and by 1.3 percent for both 

voluntary (non-profit) and government 

hospices. 

4. Hospice Base 

Column 3 demonstrates the effect of 

using the updated pre-floor, prereclassified hospital wage index values, 

comparing estimated payments for FY 

2010 to FY 2009 (using a BNAF with no 

reduction). Estimated payments are 

anticipated to decrease by 0.1 percent 

each for freestanding facilities and for 

hospices based out of skilled nursing 

facilities. Home health and hospital 

based facilities are anticipated to 

experience a 0.2 percent increase in 

estimated payments. 

Column 4 shows the combined effects 

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

and reducing the BNAF by 75 percent 

(as finalized in the FY 2009 final rule, 

published August 2008, 73 FR 46464), 

comparing FY 2010 to FY 2009 (using 

a BNAF with no reduction) estimated 

payments. Skilled nursing facility based 

hospices are estimated to see a 3.5 

percent decrease, freestanding hospices 

are estimated to see a 3.2 percent 

decrease, home health agency based 

hospices are anticipated to experience a 

3.1 percent decrease in payments, and 

hospital-based hospices are anticipated 

to experience a 3.0 percent decrease in 

payments. 

Column 5 shows the combined effects 

of the updated pre-floor, pre-reclassified 

hospital wage index, the 75 percent 

BNAF reduction which was finalized in 

FY 2009 hospice wage index final rule 

(73 FR 46464), and the estimated 2.1 

percent hospital market basket update 

on estimated payments, comparing FY 

2010 to FY 2009 (using a BNAF with no 

reduction). Estimated payments are 

anticipated to decrease by 0.9 percent 

for hospital based hospices, by 1.1 

percent for home health agency based 

hospices, and by 1.2 percent and by 1.5 

percent for freestanding hospices and 

skilled nursing facility based hospices, 

respectively. 

C. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars/ 

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

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

proposed provisions of this rule. This 

table provides our best estimate of the 

decrease in Medicare payments under 

the hospice benefit as a result of the 

changes presented in this proposed rule 

on data for 3,206 hospices in our 

database. All expenditures are classified 

as transfers to Medicare providers (that 

is, hospices). 

TABLE 2—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2009 TO FY 

2010 

[In millions] 

Category Transfers 

Annualized Monetized 

Transfers.

$¥340. 

From Whom to Whom Federal Government 

to Hospices. 

Note: The $340 million reduction in 

transfers includes the 75 percent reduction in 

the BNAF and the updated wage data. It does 

not include the estimated hospital market 

basket update, which is currently forecast to 

be about 2.1 percent. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 405 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medical 

devices, Medicare, Reporting and 

recordkeeping requirements, Rural 

areas, X-rays. 

42 CFR Part 418 

Health facilities, Hospice care, 

Medicare, Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare and 

Medicare Services propose to amend 42 

CFR chapter IV as set forth below: 

PART 405—FEDERAL HEALTH 

INSURANCE FOR THE AGED AND 

DISABLED 

1. The authority citation for part 405 

subpart R continues to read as follows: 


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Authority: Secs. 205, 1102, 1814(b), 

1815(a), 1833, 1861(v), 1871, 1872, 1878, and 

1886 of the Social Security Act (42 U.S.C. 

405, 1302, 1395f(b), 1395g(a), 1395l, 

1395x(v), 1395hh, 1395ii, 1395oo, and 

1395ww). 

Subpart R—Provider Reimbursement 

Determinations and Appeals 

2. Section 405.1803 is amended by 

revising paragraph (a) introductory text 

and paragraph (a)(1) to read as follows: 

§ 405.1803 Intermediary determination and 

notice of amount of program 

reimbursement. 

(a) General requirement. Upon receipt 

of a provider’s cost report, or amended 

cost report where permitted or required, 

the intermediary must within a 

reasonable period of time (as described 

in § 405.1835(a)(3)(ii)), furnish the 

provider and other parties as 

appropriate (see § 405.1805) a written 

notice reflecting the intermediary’s 

determination of the total amount of 

reimbursement due the provider. For 

the purposes of hospice, the 

intermediaries’ determination of 

program reimbursement letter, which 

provides the results of the inpatient and 

aggregate cap calculations, shall serve as 

a notice of program reimbursement. The 

intermediary must include the following 

information in the notice, as 

appropriate: 

(1) Reasonable cost. The notice 

must—(i) Explain the intermediary’s 

determination of total program 

reimbursement due the provider on the 

basis of reasonable cost for the reporting 

period covered by the cost report or 

amended cost report, or in the case of 

hospice, on the basis of the cap 

calculations for the reporting period that 

is the cap year; and 

(ii) Relate this determination to the 

provider’s claimed total program 

reimbursement due the provider for this 

period. 

* * * * * 

PART 418—HOSPICE CARE 

3. The authority citation for part 418 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

Subpart A—General Provision and 

Definitions 

4. Section 418.1 is amended by 

revising the introductory text to read as 

follows: 

§ 418.1 Statutory basis. 

This part implements section 

1861(dd) of the Social Security Act (the 

Act). Section 1861(dd) of the Act 

specifies services covered as hospice 

care and the conditions that a hospice 

program must meet in order to 

participate in the Medicare program. 

Section 1861(dd) also specifies 

limitations on coverage of, and payment 

for, inpatient hospice care. The 

following sections of the Act are also 

pertinent: 

* * * * * 

5. Section 418.2 is revised to read as 

follows: 

§ 418.2 Scope of part. 

Subpart A of this part sets forth the 

statutory basis and scope and defines 

terms used in this Part. Subpart B 

specifies the eligibility and election 

requirements and the benefit periods. 

Subparts C and D specify the conditions 

of participation for hospices. Subpart E 

is reserved for future use. Subparts F 

and G specify coverage and payment 

policy. Subpart H specifies coinsurance 

amounts applicable to hospice care. 

Subpart B—Eligibility, Election and 

Duration of Benefits 

6. Section 418.22 is amended by 

adding a new paragraph (b)(3) to read as 

follows: 

§ 418.22 Certification of terminal illness. 

* * * * * 

(b) * * * 

(3) The physician must include on the 

certification a brief narrative 

explanation of the clinical findings that 

supports a life expectancy of 6 months 

or less. 

* * * * * 

Subpart C—Conditions of 

Participation: Patient Care 

7. Section 418.76 is amended by 

revising paragraph (f)(1) to read as 

follows: 

§ 418.76 Condition of participation: 

Hospice aide and homemaker services. 

* * * * * 

(f) * * * 

(1) Had been out of compliance with 

the requirements of § 484.36(a) and 

§ 484.36(b) of this chapter. 

* * * * * 

Subpart D—Conditions of 

Participation: Organizational 

Environment 

8. Section 418.100 is amended by 

revising paragraph (f)(1)(iii) to read as 

follows: 

§ 418.100 Condition of participation: 

Organization and administration of service. 

* * * * * 

(f) * * * 

(1) * * * 

(iii) The lines of authority and 

professional and administrative control 

must be clearly delineated in the 

hospice’s organizational structure and 

in practice, and must be traced to the 

location that issued the certification 

number. 

* * * * * 

§ 418.108 [Amended] 

9. In paragraph (b)(1)(ii), the cross 

reference to ‘‘§ 418.110(f)’’ is revised to 

read ‘‘§ 418.110(e).’’ 

Subpart F—Covered Services 

10. Section 418.200 is revised to read 

as follows: 

§ 418.200 Requirements for coverage. 

To be covered, hospice services must 

meet the following requirements. They 

must be reasonable and necessary for 

the palliation and management of the 

terminal illness as well as related 

conditions. The individual must elect 

hospice care in accordance with 

§ 418.24. A plan of care must be 

established and periodically reviewed 

by the attending physician, the medical 

director, and the interdisciplinary group 

of the hospice program. That plan of 

care must be established before hospice 

care is provided. The services provided 

must be consistent with the plan of care. 

A certification that the individual is 

terminally ill must be completed as set 

forth in section § 418.22. 

11. Section § 418.202 is amended by 

revising paragraphs (f) and (g) to read as 

follows: 

§ 418.202 Covered Services. 

* * * * * 

(f) Medical appliances and supplies, 

including drugs and biologicals. Only 

drugs as defined in section 1861(t) of 

the Act and which are used primarily 

for the relief of pain and symptom 

control related to the individual’s 

terminal illness are covered. Appliances 

may include covered durable medical 

equipment as described in § 410.38 of 

this chapter as well as other self-help 

and personal comfort items related to 

the palliation or management of the 

patient’s terminal illness. Equipment is 

provided by the hospice for use in the 

patient’s home while he or she is under 

hospice care. Medical supplies include 

those that are part of the written plan of 

care and that are for palliation and 

management of the terminal or related 

conditions. 

(g) Home health or hospice aide 

services furnished by qualified aides as 

designated in § 418.94 and homemaker 

services. Home health aides (also known 


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as hospice aides) may provide personal 

care services as defined in § 409.45(b) of 

this chapter. Aides may perform 

household services to maintain a safe 

and sanitary environment in areas of the 

home used by the patients, such as 

changing bed linens or light cleaning 

and laundering essential to the comfort 

and cleanliness of the patient. Aide 

services may include assistance in 

maintenance of a safe and healthy 

environment and services to enable the 

individual to carry out the treatment 

plan. 

* * * * * 

12. Section § 418.204 is amended by 

revising paragraph (a) to read as follows: 

§ 418.204 Special coverage requirements. 

(a) Periods of crisis. Nursing care may 

be covered on a continuous basis for as 

much as 24 hours a day during periods 

of crisis as necessary to maintain an 

individual at home. Either homemaker 

or home health aide (also known as 

hospice aide) services or both may be 

covered on a 24-hour continuous basis 

during periods of crisis but care during 

these periods must be predominantly 

nursing care. A period of crisis is a 

period in which the individual requires 

continuous care to achieve palliation 

and management of acute medical 

symptoms. 

* * * * * 

Subpart G—Payment for Hospice Care 

13. Section 418.302 is amended by 

revising paragraphs (b)(2) and (f)(2) to 

read as follows: 

§ 418.302 Payment procedures for hospice 

care. 

* * * * * 

(b) * * * 

(2) Continuous home care day. A 

continuous home care day is a day on 

which an individual who has elected to 

receive hospice care is not in an 

inpatient facility and receives hospice 

care consisting predominantly of 

nursing care on a continuous basis at 

home. Home health aide (also known as 

a hospice aide) or homemaker services 

or both may also be provided on a 

continuous basis. Continuous home care 

is only furnished during brief periods of 

crisis as described in § 418.204(a) and 

only as necessary to maintain the 

terminally ill patient at home. 

* * * * * 

(f) * * * 

(2) At the end of a cap period, the 

intermediary calculates a limitation on 

payment for inpatient care to ensure 

that Medicare payment is not made for 

days of inpatient care in excess of 20 

percent of the total number of days of 

hospice care furnished to Medicare 

patients. Only inpatient days that were 

provided and billed as general inpatient 

or respite days are counted as inpatient 

days when computing the inpatient cap. 

* * * * * 

14. Section 418.311 is revised to read 

as follows: 

§ 418.311 Administrative appeals. 

A hospice that believes its payments 

have not been properly determined in 

accordance with these regulations may 

request a review from the intermediary 

or the Provider Reimbursement Review 

Board (PRRB) if the amount in 

controversy is at least $1,000 or $10,000, 

respectively. In such a case, the 

procedure in 42 CFR part 405, subpart 

R, will be followed to the extent that it 

is applicable. The PRRB, subject to 

review by the Secretary under 

§ 405.1874 of this chapter, shall have 

the authority to determine the issues 

raised. The methods and standards for 

the calculation of the statutorily defined 

payment rates by CMS are not subject to 

appeal. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare-Supplementary Medical Insurance 

Program) 

Dated: March 30, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: April 15, 2009. 

Charles E. Johnson, 

Acting Secretary. 

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[FR Doc. E9–9417 Filed 4–21–09; 4:15 pm] 

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