40948 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 409, 424, 484, and 489 

[CMS–1560–P] 

RIN 0938–AP20 

Medicare Program; Home Health 

Prospective Payment System Rate 

Update for Calendar Year 2010 

Editorial Note: Federal Register proposed 

rule document E9–18587, originally 

published at pages 39436 to 39496 in the 

issue of Thursday, August 6, 2009, included 

incorrect tables from pages 39471 to 39496. 

This document, along with the correct tables, 

is being republished in its entirety. 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule sets forth 

an update to the Home Health 

Prospective Payment System (HH PPS) 

rates; the national standardized 60-day 

episode rates, the national per-visit 

rates, the non-routine medical supply 

(NRS) conversion factor, and the low 

utilization payment amount (LUPA) 

add-on payment amount, under the 

Medicare prospective payment system 

for home health agencies effective 

January 1, 2010. In addition, this rule 

proposes a change to the HH PPS outlier 

policy and proposes to require the 

submission of OASIS data as a 

condition for payment under the HH 

PPS. Also, this rule proposes payment 

safeguards that would improve our 

enrollment process, improve the quality 

of care that Medicare beneficiaries 

receive from HHAs, and reduce the 

Medicare program’s vulnerability to 

fraud. This rule also proposes clarifying 

language to the ‘‘skilled services’’ 

section and Condition of Participation 

(CoP) section of our regulations. This 

proposed rule also clarifies the coverage 

of routine medical supplies under the 

HH PPS. We are also soliciting 

comments on: Physician/patient 

interaction associated with the home 

health plan of care (POC); a Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) Home Health Care 

Survey; the Outcome and Assessment 

Information Set (OASIS), Version C, 

effective January 1, 2010; proposed pay 

for reporting measures for use in CY 

2011; and a number of minor paymentrelated issues. We are also responding to 

comments received as a result of our 

solicitation in the CY 2008 HH PPS final 

rule with comment period. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on September 28, 2009. 

ADDRESSES: In commenting, please refer 

to file code CMS–1560–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–1560– 

P, P.O. Box 8016, Baltimore, MD 21244– 

1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–1560– 

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— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

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. 

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. EST. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

FOR FURTHER INFORMATION CONTACT: 

Randy Throndset, (410)786–0131 

(overall HH PPS). Sharon Ventura, (410) 

786–1985 (for information related to 

payment rates and wage indexes). James 

Bossenmeyer, (410) 786–9317 (for 

information related to payment 

safeguards). Doug Brown, (410) 786– 

0028 (for quality issues). Kathleen 

Walch, (410) 786–7970 (for skilled 

services requirements and clinical 

issues). 

Table of Contents 

I. Background 

A. Requirements of the Balanced Budget 

Act of 1997 for Establishing the 

Prospective Payment System for Home 

Health Services 

B. Deficit Reduction Act of 2005 

C. System for Payment of Home Health 

Services 

D. Updates to the HH PPS 

II. Analysis of and Responses to Comments 

on the HH PPS Refinement and Rate 

Update for CY 2008 

III. Provisions of the Proposed Regulation 


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A. Outlier Policy 

B. Case-Mix Measurement Analysis 

C. Proposed CY 2010 Payment Rate Update 

1. Home Health Market Basket Update 

2. Home Health Care Quality Improvement 

3. Home Health Wage Index 

4. Proposed CY 2010 Payment Update 

a. National Standardized 60-Day Episode 

Rate 

b. Proposed Updated CY 2010 National 

Standardized 60-Day Episode Payment 

Rate 

c. Proposed National Per-Visit Rates Used 

To Pay LUPAs and Compute Imputed 

Costs Used in Outlier Calculations 

d. Proposed LUPA Add-On Payment 

Amount Update 

e. Proposed Non-Routine Medical Supply 

Conversion Factor Update 

D. OASIS Issues 

1. HIPPS Code Reporting 

2. OASIS Submission as a Condition for 

Payment 

E. Qualifications for Coverage as They 

Relate to Skilled Services Requirements 

F. OASIS for Significant Change in 

Condition No Longer Associated With 

Payment 

G. Proposed Payment Safeguards for Home 

Health Agencies 

H. Physician Certification and 

Recertification of the Home Health Plan 

of Care 

I. Routine Medical Supplies 

IV. Collection of Information Requirements 

A. ICRs Regarding the Requirements for 

Home Health Services 

B. ICRs Regarding Deactivation of Medicare 

Billing Privileges 

C. ICRs Regarding Prohibition Against Sale 

or Transfer of Billing Privileges 

D. ICRs Regarding Patient Assessment Data 

V. Response to Comments 

VI. Regulatory Impact Analysis 

I. Background 

A. Requirements of the Balanced Budget 

Act of 1997 for Establishing the 

Prospective Payment System for Home 

Health Services 

The Balanced Budget Act of 1997 

(BBA) (Pub. L. 105–33) enacted on 

August 5, 1997, significantly changed 

the way Medicare pays for Medicare 

home health services. Section 4603 of 

the BBA mandated the development of 

the home health prospective payment 

system (HH PPS). Until the 

implementation of a HH PPS on October 

1, 2000, home health agencies (HHAs) 

received payment under a cost-based 

reimbursement system. 

Section 4603(a) of the BBA mandated 

the development of a HH PPS for all 

Medicare-covered home health services 

provided under a plan of care (POC) that 

were paid on a reasonable cost basis by 

adding section 1895 of the Social 

Security Act (the Act), entitled 

‘‘Prospective Payment For Home Health 

Services’’. Section 1895(b)(1) of the Act 

requires the Secretary to establish a HH 

PPS for all costs of home health services 

paid under Medicare. 

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

requires that: (1) The computation of a 

standard prospective payment amount 

include all costs for home health 

services covered and paid for on a 

reasonable cost basis and be initially 

based on the most recent audited cost 

report data available to the Secretary, 

and (2) the prospective payment 

amounts be standardized to eliminate 

the effects of case-mix and wage levels 

among HHAs. 

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

addresses the annual update to the 

standard prospective payment amounts 

by the home health applicable 

percentage increase. 

Section 1895(b)(4) of the Act governs 

the payment computation. Sections 

1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the 

Act require the standard prospective 

payment amount to be adjusted for casemix and geographic differences in wage 

levels. Section 1895(b)(4)(B) of the Act 

requires the establishment of an 

appropriate case-mix change adjustment 

factor that adjusts for significant 

variation in costs among different units 

of services. 

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

Act requires the establishment of wage 

adjustment factors that reflect the 

relative level of wages, and wage-related 

costs applicable to home health services 

furnished in a geographic area 

compared to the applicable national 

average level. Pursuant to 1895(b)(4)(c), 

the wage-adjustment factors used by the 

Secretary may be the factors used under 

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

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

Secretary the option to make additions 

or adjustments to the payment amount 

otherwise paid in the case of outliers 

because of unusual variations in the 

type or amount of medically necessary 

care. Total outlier payments in a given 

fiscal year (FY) or year may not exceed 

5 percent of total payments projected or 

estimated. 

In accordance with the statute, we 

published a final rule (65 FR 41128) in 

the Federal Register on July 3, 2000, to 

implement the HH PPS legislation. The 

July 2000 final rule established 

requirements for the new HH PPS for 

home health services as required by 

section 4603 of the BBA, as 

subsequently amended by section 5101 

of the Omnibus Consolidated and 

Emergency Supplemental 

Appropriations Act (OCESAA) for Fiscal 

Year 1999 (Pub. L. 105–277), enacted on 

October 21, 1998; and by sections 302, 

305, and 306 of the Medicare, Medicaid, 

and SCHIP Balanced Budget Refinement 

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

enacted on November 29, 1999. The 

requirements include the 

implementation of a HH PPS for home 

health services, consolidated billing 

requirements, and a number of other 

related changes. The HH PPS described 

in that rule replaced the retrospective 

reasonable cost-based system that was 

used by Medicare for the payment of 

home health services under Part A and 

Part B. For a complete and full 

description of the HH PPS as required 

by the BBA, see the July 2000 HH PPS 

final rule (65 FR 41128 through 41214). 

B. Deficit Reduction Act of 2005 

On February 8, 2006, the Deficit 

Reduction Act of 2005 (Pub. L. 109–171) 

(DRA) was enacted. Section 5201 of the 

DRA requires HHAs to submit data for 

purposes of measuring health care 

quality, and links the quality data 

submission to payment. This 

requirement is applicable for CY 2007 

and each subsequent year. If an HHA 

does not submit quality data, the home 

health market basket percentage 

increase will be reduced 2 percentage 

points. In accordance with the statute, 

we published a final rule (71 FR 65884, 

65935) in the Federal Register on 

November 9, 2006 to implement the 

pay-for-reporting requirement of the 

DRA, codified at 42 CFR 484.225(h) and 

(i). 

C. System for Payment of Home Health 

Services 

Generally, Medicare makes payment 

under the HH PPS on the basis of a 

national standardized 60-day episode 

payment rate that is adjusted for the 

applicable case-mix and wage index. 

The national standardized 60-day 

episode rate includes the six home 

health disciplines (skilled nursing, 

home health aide, physical therapy, 

speech-language pathology, 

occupational therapy, and medical 

social services). Payment for nonroutine medical supplies (NRS), is no 

longer part of the national standardized 

60-day episode rate and is computed by 

multiplying the relative weight for a 

particular NRS severity level by the NRS 

conversion factor (See section III.C.4.e). 

Durable medical equipment covered 

under the home health benefit is paid 

for outside the HH PPS payment. To 

adjust for case-mix, the HH PPS uses a 

153-category case-mix classification to 

assign patients to a home health 

resource group (HHRG). Clinical needs, 

functional status, and service utilization 

are computed from responses to selected 

data elements in the OASIS assessment 

instrument. 

For episodes with four or fewer visits, 

Medicare pays on the basis of a national 


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per-visit rate by discipline; an episode 

consisting of four or fewer visits within 

a 60-day period receives what is referred 

to as a low utilization payment 

adjustment (LUPA). Medicare also 

adjusts the national standardized 60-day 

episode payment rate for certain 

intervening events that are subject to a 

partial episode payment adjustment 

(PEP adjustment). For certain cases that 

exceed a specific cost threshold, an 

outlier adjustment may also be 

available. 

D. Corrections 

We published a final rule with 

comment period in the Federal Register 

on August 29, 2007 (72 FR 49762) that 

set forth a refinement and rate update to 

the 60-day national episode rates and 

the national per-visit rates under the 

Medicare prospective payment system 

for home health services for CY 2008. In 

this final rule with comment period, in 

Table 10B (72 FR 49854), the short 

description for ICD–9–CM code 250.8x 

& 707.10–707.9 should read ‘‘PRIMARY 

DIAGNOSIS = 250.8x AND FIRST 

OTHER DIAGNOSIS=707.10–707.9’’. 

Instead of a formal correction notice, we 

are notifying the public of this 

correction in this proposed rule, and 

subsequent final rule. 

E. Updates to the HH PPS 

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

of the Act, we have historically updated 

the HH PPS rates annually in the 

Federal Register. 

We published a notice in the Federal 

Register on November 3, 2008 (73 FR 

65351) that set forth the update to the 

60-day national episode rates and the 

national per-visit rates under the 

Medicare prospective payment system 

for home health services for CY 2009. 

II. Analysis of and Responses to 

Comments on the HH PPS Refinement 

and Rate Update for CY 2008 

Our August 29, 2007 final rule with 

comment period set forth an update to 

the 60-day national episode rates and 

the national per-visit rates under the 

Medicare prospective payment system 

for HHAs for CY 2008. For that final 

rule, analysis performed on home health 

claims data, from CY 2005, indicated a 

12.78 percent increase in the observed 

case-mix since 2000. The case-mix 

represented the variations in conditions 

of the patient population served by the 

HHAs. We then performed a more 

detailed analysis on the 12.78 percent 

increase in case-mix to see if any 

portion of that increase was associated 

with a real change in the actual clinical 

condition of home health patients. CMS 

examined data on demographics, family 

support, pre-admission location, clinical 

severity, and non-home health Part A 

Medicare expenditure data to predict 

the average case-mix weight for 2005. 

As a result of that analysis, CMS 

recognized that an 11.75 percent 

increase in case-mix was due to changes 

in coding practices and documentation 

rather than to treatment of more 

resource-intensive patients. 

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

underlying change in patient health 

status, CMS implemented a reduction 

over 4 years in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor. 

That reduction was to be taken at 2.75 

percent per year for three years 

beginning in CY 2008 and at 2.71 

percent for the fourth year in CY 2011. 

CMS indicated that it would continue to 

monitor for any further increase in casemix that was not related to a change in 

patient status, and would adjust the 

percentage reductions and/or 

implement further case-mix change 

adjustments in the future. 

The CY 2008 HH PPS final rule with 

comment period specifically solicited 

comments on the 2.71 percent reduction 

that is scheduled to occur in 2011. In 

response, we received approximately 44 

items of correspondence from the 

public. Comments originated from trade 

associations, HHAs, hospitals, and 

health care professionals such as 

physicians, nurses, social workers, and 

physical and occupational therapists. In 

the HH PPS Rate Update for CY 2009, 

we stated that we would delay our 

responses to these comments until 

future rulemaking, enabling us to 

respond more comprehensively as more 

current data became available. The 

following discussion, arranged by 

subject area, includes our responses to 

the comments. 

A. Payment Reductions in the 4th Year 

(2011) 

Comment: Commenters requested that 

CMS release the Abt technical report so 

that the industry could review the data 

and information within it. Without the 

Abt report, the commenters stated the 

industry would be unable to offer 

meaningful comments on the case-mix 

reductions. 

Response: The Abt Technical Report 

was posted online and made available to 

the public on April 30, 2008 at: 

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

downloads/ 

Coleman_Final_April_2008.pdf. 

Although we posted the report later 

than anticipated, we believe that the CY 

2008 HH PPS final rule with comment 

period adequately presented 

information, documentation and 

evidence describing the Abt case-mix 

study and CMS’ rationale for the 

reductions. Accordingly, we believe we 

have provided sufficient time and 

information to the public to fully review 

and comment upon the rate reductions 

that will take effect in CY 2011. 

Comment: A commenter suggested 

that the 4th year cut of 2.71 percent be 

eliminated or indefinitely deferred until 

better data are available. Some 

commenters stated that an additional 

year of rate cuts will place a financial 

burden on HHAs, and will result in 

limited access to home care, especially 

in rural areas. These commenters further 

state that limited access may result in 

more hospitalizations and/or care being 

provided in more costly settings. 

Commenters also stated that imposing a 

4th year reduction on HHAs would be 

detrimental and unduly harsh, as many 

HHAs are already struggling to meet the 

rising costs of providing care, and that 

the reductions will cause HHAs to 

operate at negative margins and likely 

close. 

Several commenters suggested 

alternatives to CMS’ approach to 

adjusting for nominal case-mix. For 

example, one commenter suggested 

spreading the total cuts across a 6-year 

period rather than a 4-year period, 

enabling CMS to better monitor the 

impact of the CY 2008 HH PPS 

refinements and CY 2008 and 2009 

reductions prior to imposing additional 

reductions. 

Another commenter suggested that 

CMS withdraw its decision to reduce 

the payment rates until CMS could 

design and implement a better method 

to analyze changes in the case-mix, 

based on adjusted final claims data that 

would utilize patient characteristics in 

the model, as well as changes in perpatient annual expenditures, patient 

clinical, functional, and service 

utilization data, and dynamic factors in 

the Medicare system that impact on the 

nature of patients served with home 

health care. 

Response: Our continued analysis 

shows that Medicare nominal case-mix 

continues to increase. Therefore, we 

continue to believe it necessary to 

reduce rates through 2011 to 

counterbalance the Medicare 

expenditure effects of this nominal 

increase. We also continue to believe 

that phasing in the reductions over a 

four year period provides fair and ample 

time for HHAs to prepare for the 

reductions. 

As more current data become 

available, we will continue to update 

our case-mix analysis. As discussed in 

Section III.B. of this proposed rule, 


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based on analysis of data through 2007, 

nominal case-mix has further increased. 

We now estimate that the nominal casemix has grown by an estimated 13.56 

percent between FY 1999 (the Interim 

Payment System (IPS) baseline period) 

and 2007, an additional 1.81 percentage 

points above the previously recognized 

increase. If we were to account for the 

entire 13.56 percent increase in nominal 

case-mix in one year (taking into 

account that we have already imposed 

2.75 percentage reductions in CY 2008 

and CY 2009), we estimate that the 

percentage reduction in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor 

would be 6.89 percent in CY 2010. If we 

were to account for the entire 13.56 

percent increase in nominal case-mix 

over two years (taking into account that 

we have already imposed 2.75 

percentage reductions in CY 2008 and 

CY 2009), we estimate that the 

percentage reduction in the national 

standardized 60-day episode payment 

rates and the NRS conversion factor for 

each of the remaining two years (2010 

and 2011) would be 3.51 percent per 

year. As discussed in Section II.C. of 

this proposed rule, we currently plan to 

move forward with the CY 2010 

reduction of 2.75 percent, as set forth in 

the CY 2008 final rule. However, we 

note that, in light of, among other 

things, new policy developments, more 

recent information, or changed 

circumstances from the time the CY 

2008 rule was published, the Secretary 

is also considering making additional 

changes in the final rule to account for 

the residual increase in nominal casemix discussed above. In such an 

instance, we would consider accounting 

for the residual increase in nominal 

case-mix in one year in the final rule, 

which we estimate would result in a 

6.89 percent reduction to the national 

standardized 60-day episode payment 

rates and the NRS conversion factor for 

CY 2010. We are seeking comments on 

the full range of potential nominal casemix reduction percentages. 

With high projected HH margins and 

continued growth in the number of new 

HH agencies, we do not believe that the 

2.71 percent reduction for 2011 will 

result in decreased access to home 

health care for Medicare beneficiaries. 

The Medicare Payment Advisory 

Commission’s (MedPAC) March 2009 

Annual Report states that the home 

health industry margin for 2007 was 

16.6 percent and projects that average 

margins for 2009, which considers the 

2.75 reduction, will be 12.2 percent. 

MedPAC also analyzed the average rate 

of HH cost growth and found that in 

most years, the rate of actual cost 

growth in HHAs has been lower than 

the rate of inflation indicated by the 

home health market basket. MedPAC 

reports that payments for HHAs have 

exceeded costs for all of the period 

under PPS by a wide margin. 

Also, in their March 2009 report, 

MedPAC reports a 32 percent growth in 

the number of HH agencies since 2003, 

stating that the supply of agencies 

continues to increase faster than the 

growth in the overall number of 

Medicare beneficiaries. We believe that 

new home health providers continue to 

enter the home health industry because 

Medicare payment levels give them 

adequate incentive to do so. 

In response to commenters who 

suggested that we consider alternative 

methods to identify nominal case-mix 

before we impose the CY 2011 

reductions, we continue to believe that 

the Abt model adequately identifies 

nominal case-mix. As we described in 

our August 2007 final rule, our 

enhanced model included variables 

such as changes in the age structure of 

the home health user population, 

changes in the types of patients being 

admitted to home health, utilization of 

Medicare Part A services in the 120 days 

leading up to home health, the type of 

preadmission acute care stays when the 

patient last had such a stay and 

variables describing living situations. 

Many of these model enhancements 

addressed suggestions made by the 

industry in their proposed rule 

comments. 

B. General Case-Mix Comments 

Our August 29, 2007 final rule with 

comment period solicited comments 

only on the 2.71 percent fourth year 

reduction (72 FR 49762). Nevertheless, 

we received several comments unrelated 

to the fourth year reduction. Because 

such comments (including comments on 

outliers, LUPAs (Low Utilization 

Payment Adjustments), OASIS, wage 

index, operational issues, diagnosis 

coding, HHRGs, and wound care 

payment) are out of the scope of this 

rulemaking, we are not responding to 

these comments in this proposed rule. 

However, we are responding to 

comments on case-mix measurement 

methodology, as we believe such 

comments are tangentially related to the 

reduction for CY 2011, and because we 

wish to fully address this issue. 

Comment: A commenter stated that 

the August 27, 2007 final rule with 

comment period was not a ‘‘logical 

outgrowth’’ of the May 4, 2007 proposed 

rule. The commenter stated that CMS 

used a different methodology for 

evaluating case-mix weight scores and 

changes in patient characteristics than 

had been used in the proposed rule. The 

commenter recommended that CMS 

engage in another cycle of rulemaking in 

order to provide further opportunity to 

comment. 

Response: The policy adopted in the 

August 2007 final rule was a policy that 

adjusted payments in order to account 

for increases in nominal case-mix. This 

policy was both proposed and finalized. 

The commenter is addressing not the 

policy of adjusting payments for 

nominal case-mix increases, but rather, 

how CMS implements this policy; that 

is, the methodology CMS uses for 

determining the level of nominal casemix increase. While we do not believe 

we are required to subject our exact, 

final calculations regarding the increase 

to public comment, it is also important 

to note that our final methodology 

clearly was an outgrowth of the 

proposed rule. The proposed rule 

included a detailed analysis of various 

kinds of data, such as an extensive 

review of the content of changes in 

OASIS instructions, a review of changes 

in the frequencies of severity levels of 

the case-mix system, and a detailed 

presentation of how OASIS items other 

than those used for case-mix frequently 

changed little, if at all. We also 

discussed the pattern of change in 

functional items, showing that for a 

number of items, some changes 

occurred at the high-functioning end, 

while the worst-functioning levels 

didn’t increase in the population. There 

was a similar analysis of wound item 

changes. Our interpretation of the 

totality of the data was that real casemix did not materially change since the 

IPS baseline. We also identified a large 

increase in post-surgical patients with 

their traditionally lower case-mix index. 

However, we made an adjustment to our 

estimate of case-mix change to account 

for the change in the composition of the 

home health industry on account of the 

exit of some hospital-owned agencies. 

These details enabled the home health 

industry to analyze our proposed 

methodology and provide comments 

suggesting specific types of changes in 

patient acuity that could help to explain 

identified changes in home health casemix. For the final rule, we enhanced our 

formal estimate of case-mix change, 

which we had statistically adjusted to 

account for change in the presence of 

hospital-owned agencies in the 

industry, with a methodology that 

statistically adjusted for multiple 

factors, including the types of factors 

mentioned by commenters. Application 

of this model allowed us to 

simultaneously ‘‘subtract’’ from the 


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growth in the national case-mix index 

the effects of a multitude of factors 

besides the change in hospital-owned 

agencies. Additionally, in the May 4, 

2007 proposed rule (72 FR 25395) we 

indicated that our analysis for the final 

rule would be updated to include 2005 

data. 

Specifically, for the final rule, we 

updated the case-mix index and some of 

the statistical data (e.g., average 

resources per episode) to include 2005 

data. We also added analyses focusing 

on certain types of patients, including 

those mentioned in public comments on 

the proposal (e.g., knee replacement 

patients). Further, as just discussed in 

the paragraph above, we added results 

from a multivariate model of case-mix 

that isolated real case-mix change 

between the HH IPS baseline and 2005. 

The newly added data and the model 

responded to comments that cited 

circumstances of particular types of 

patients and/or sought additional types 

of evidence. These added data and 

analyses were made in response to the 

proposed rule comments. The data and 

information added for the final rule, 

along with the entire array of evidence 

we presented in the proposed and the 

final rule are the bases for the 

identification of nominal case-mix 

change. 

Comment: Some commenters focused 

on the finding that only 8 percent of the 

case-mix change from 2000 to 2005 was 

real. These commenters recommended 

that CMS start with the assumption that 

all case-mix change is real, and only 

consider the amount that could be 

estimated as nominal to be unjustified. 

Another commenter pointed to CMS’ 

assertion that ‘‘real’’ case-mix increased 

prior to implementation of the HH PPS 

(prior to September 2000) and argued 

that this fact demonstrates that it was 

unreasonable for CMS to assume that 

none of the change after that point was 

real. 

Commenters suggested that case-mix 

has increased due to several factors, 

including earlier discharges from 

general acute hospitals, PPS changes 

that provided incentives to treat higheracuity patients, and other post-acute 

care regulations issued by CMS (such as 

the inpatient rehabilitation ‘‘75% 

Rule’’), which diverts more medically 

complex patients to homecare. One 

commenter urged CMS to defer any 

adjustment for case-mix change and to 

perform an analysis that accounted for 

these factors. 

Response: The predictive model 

isolated 8.03 percent of the overall 12.78 

percent increase in case-mix as real, 

resulting in an 11.75 percent nominal 

increase in case-mix. We relied on those 

results to arrive at the nominal case-mix 

reductions ¥2.75 percent for 3 years 

and ¥2.71 percent for the fourth year of 

the phase-in. (Refer to Section III.B. of 

this proposed rule for an update based 

on analysis of data through 2007.) Thus, 

our model allowed and presumed some 

real case-mix change. The model data 

relied on claims data instead of OASIS 

data (with the exception of one variable, 

which described the patient’s living 

situation), to avoid reliance on data 

which we knew were subject to coding 

changes such as those resulting from 

educational improvements, changes in 

OASIS instructions, and financial 

incentives. The model takes into 

account the total change between the 

baseline and the follow-up year (2005) 

in the sources of patients (hospital, 

inpatient rehabilitation facility, and 

skilled nursing facility). It also takes 

into account total change in the types of 

acute hospital problems and hospitalrecorded comorbidities experienced by 

patients before they entered home 

health care, total change in living 

situation, and total change in patients’ 

Part A expenditures incurred in the 120 

days leading up to the beginning of each 

episode (expenditures were adjusted for 

price increases). Length of stay is also 

accounted for by summing the number 

of inpatient days of various types. 

Additionally, we added analyses 

focusing on certain types of patients, 

including those mentioned in public 

comments on the proposal (e.g., knee 

replacement patients). 

Every predictive model has its 

limitations; however, we believe the 

model and data we used were the best 

available for the purposes of measuring 

case-mix in an unbiased manner. For 

example, we relied on hospital claims 

data instead of OASIS data (with the 

exception of one OASIS variable), and 

enhanced our calculation method to 

include a multivariate approach to casemix measurement. For those patients 

who were hospitalized before home 

care, the model included whether the 

hospitalization was surgical or medical, 

and in many cases the model identified 

the particular, detailed conditions that 

were responsible for that hospital stay. 

These additions to the model were 

suggested by the industry in comments 

on the proposed rule. 

Moreover, we again note that the Abt 

model was not the sole basis for the 

final regulation provision on nominal 

case-mix change. The basis for the final 

provision was the entire array of 

evidence we presented in the proposed 

and the final rules. In addition, in the 

May 4, 2007, proposed rule (72 FR 

25362–25366) we noted data as well as 

commentary from observers indicating 

that therapy treatment plans were 

sometimes ‘‘padded’’ to reach the tenvisit therapy threshold; we consider this 

behavior a component of nominal casemix change, because therapy visits help 

to determine the case-mix group. 

In response to the comment that CMS 

should have started with the 

assumption that all case-mix growth 

was real, and then calculate what 

portion, if any, was nominal, the model 

did assess real case-mix using a variety 

of Part A claims. We then compared the 

model’s prediction of real case-mix with 

the actual billed case-mix, determining 

the calculated difference to be nominal. 

The May 4, 2007, proposed rule put the 

case-mix of the Medicare home health 

population in historical perspective. It 

described the changes affecting the 

home health benefit since the Balanced 

Budget Act of 1997 and cited MedPAC, 

GAO and other literature findings that 

the HH IPS had a strong impact on the 

types of patients served. We compared 

the case-mix index from the Abt 

Associates study sample with the casemix index of the HH IPS baseline (1999– 

2000), a comparison that suggested that 

changes in real case-mix did occur as a 

result of the HH IPS. Literature findings 

(GAO, ‘‘Medicare Home Health Benefit: 

Impact of Interim Payment System and 

Agency Closures on Access to Services,’’ 

September 1998, GAO/HEHS–98–238) 

describe an HH IPS incentive to admit 

many different patients with short-term 

or rehabilitation needs instead of 

lengthy low skilled care needs. We did 

not rule out that some of the change 

during that period was nominal, in part 

because the HH PPS proposed rule of 

1999 probably affected provider 

behavior. 

Moreover, our analysis of changes in 

resource use showed that resource use 

stayed below the resource use level of 

the HH IPS period for much of the 

succeeding five years, casting doubt on 

the commenters’ assertion that patient 

acuity increased. Specifically, after the 

IPS was implemented, we saw a decline 

in visit use from 73 visits per person in 

1997 to 42 visits per person in 1999. 

The number of visits further decreased 

under the HH PPS, decreasing to 37 in 

2000, and 31 for each year 2001 through 

2004. 

Comment: A commenter believes that 

CMS’s decision to implement these 

payment reductions is unjustified and 

flawed for two basic reasons: (1) There 

have been actual changes in the home 

health population; and (2) providers 

have improved the accuracy of OASIS 

coding. The commenter refers to 

recently released data by Outcome 

Concept Systems citing the average 2005 

adjusted case-mix weight nationally and 


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in New York was approximately 1.15, 

not 1.2361, as CMS asserts. 

The commenter believes that the 

average case-mix weight has changed 

because CMS fails to consider therapy 

as a patient characteristic and because 

patients’ clinical severity has increased. 

Furthermore, the commenter believes 

that the increase in patients’ clinical 

needs is largely due to an inpatient 

hospital payment system that has 

created incentives for early discharge of 

patients who require more care. The 

result is a home health population with 

higher acuity and more intense resource 

needs. The commenter also states that 

growth in Medicare Advantage plans 

has shifted lower acuity patients out of 

traditional Medicare, leaving higher 

need and higher cost beneficiaries 

within the traditional Medicare 

program. 

A commenter stated that current 

OASIS data show that HHAs are 

admitting increased numbers of 

beneficiaries with: (1) Comorbidities 

such as diabetes and obesity; (2) 

abnormalities of gait; (3) wound 

infections; (4) urinary incontinence; and 

(5) increased cognitive function deficits. 

The accumulative effect of these 

admissions has necessitated increased 

therapy services which have resulted in 

higher clinical and functional scores in 

case-mix weights. In addition, the 

commenter believes that physical 

therapy services were underutilized 

during the HH IPS and at the onset of 

the HH PPS because of lack of clinical 

knowledge and understanding of best 

practice standards. The delivery of 

medical services in the home has 

improved over recent years. This is 

evident by implementation of quality 

measures and outcomes data. Several 

commenters believe that the increase in 

average case-mix can be attributed fully 

to an improvement in each agency’s 

ability to correctly answer OASIS items 

and increased emphasis on OASIS 

validity by Quality Improvement 

Organizations (QIO). Another 

commenter stated that their agency has 

experienced a change in the percentage 

of orthopedic patients due to changes in 

regulations for rehabilitation hospitals. 

Response: In the May 4, 2007 HH PPS 

proposed rule, we indicated that the 

analysis of national case-mix would be 

updated using 2005 data in that year’s 

HH PPS final rule, and that the annual 

adjustments for nominal case-mix 

change would be modified accordingly. 

As we have noted elsewhere, 

improvements in coding do not 

represent real case-mix changes, which 

means that the Medicare program 

arguably may have overpaid for some of 

the services which were provided after 

improvements in OASIS coding were 

implemented. CMS subsequently 

adjusted the standardized payment 

amount to compensate for the nominal 

change in case-mix used to pay claims 

in the years following the introduction 

of the PPS. 

We acknowledge that therapy 

treatment services were used as a casemix characteristic in the case-mix 

model, in the absence of sufficient 

explanatory power from OASIS data 

items to model resource use by 

themselves. However, we found a 

dramatic change in the distribution of 

episodes according to the number of 

therapy visits between the HH IPS 

baseline period and the early years of 

the HH PPS period, and the new 

distribution has persisted. We continue 

to believe that the change in this short 

period is an indication of behavioral 

change on the part of home health 

agencies, and is not necessarily related 

to real case-mix change. Moreover, the 

distributional shift occurred in the 

absence of convincing evidence from 

various OASIS items that patients were 

actually more impaired and sickly. 

Furthermore, when we took account of 

patient characteristics in the model of 

real case-mix change, the results did not 

support a large difference in patient 

acuity. 

We also note that the reporting of 

more comorbidities by HHAs is not 

clear evidence of change in patient 

status, as it could be a result of 

improvements in coding training alone. 

In addition, changes in regulations 

affecting rehabilitation hospitals are 

represented in the case-mix change 

model by the variables that measure the 

source of admission. 

To the extent that the home health 

industry has accomplished 

improvements in patient function 

without adding significant resources to 

the provision of care in home health 

episodes, we understand this is likely 

attributable to shifts in the service mix 

provided within the episode, as well as 

improved care practices. Again, 

however, the situation does not 

necessarily indicate a real change in 

case-mix. 

Without more detailed information 

about their analysis, we are unable to 

comment on the implication in the 

statistic from Outcome Concept Systems 

in New York State (as reported by the 

commenter) that the average case-mix 

rose only 1.15 as compared to 1.2361 in 

CMS’s analysis. The average case-mix is 

computed from an extremely large 

representative sample of national home 

health claims data. The commenter does 

not provide information about the 

method of adjustment, the conditions of 

data-gathering, or the quality or source 

of the data sources used by Outcome 

Concept Systems. 

Comment: A commenter stated that 

CMS’ review of 20 percent of claims 

(OASIS for 2004–2005) does not reflect 

the patient characteristics in 2007, and 

it certainly does not reflect those 

receiving services in 2010 and 2011. 

Response: We based our proposals on 

the latest statistically representative 

data available, and those data were from 

2005 at the time of the preparation of 

the final regulation. We will continue to 

update the data as they become 

available. 

Comment: A commenter stated that 

CMS should look more closely at 

specific agencies it suspects may be 

upcoding and then seek financial 

restitution from those that are ultimately 

deemed to be following this practice. 

Across-the-board cuts of this magnitude 

are unwarranted at a time when the 

home health industry should be 

receiving additional support to serve an 

expanding older population. 

Response: As we stated in the CY 

2008 HH PPS final rule (72 FR at 

49837), we believe that it is more 

appropriate to implement a nationwide 

approach to the issue of a case-mix 

change adjustment. An individual 

agency approach would be 

administratively burdensome and 

difficult to implement. Policies to 

address the identity of agencies in light 

of changes to organizational structures 

and configurations would need to be 

developed. Furthermore, smaller 

agencies might have difficulty in 

providing accurate measures of real 

case-mix changes because of their small 

caseloads. Because the nominal increase 

in case-mix grew significantly from 

2003 to 2005 (8.7 percent to 11.75 

percent), we spread out the schedule of 

adjustments from 3 years to 4 years in 

order to ameliorate the impact that 

would have been felt by HHAs had we 

decided to account for the entire 11.75 

percent increase in case-mix over 3 

years. 

Comment: A commenter is concerned 

that CMS has not correctly addressed 

factors measuring the apparent ‘‘creep’’. 

Additionally, the commenter states that 

it was useful to have CMS clarify that 

they had excluded LUPAs from the two 

measurement bases utilized and that 

fact raises an issue that CMS did not 

address in the rule. When the original 

HH PPS was proposed (October 1999) 

and finalized (July 2000), CMS asserted 

that it expected LUPA incidence, as 

estimated by its actuaries, would be five 

percent. Actual incidence has, since 

implementation, averaged sixteen 

percent of total reimbursements. Using 


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just a five percent rate of occurrence 

resulted in every original HHRG 

assigned a lower value than if CMS had 

used, say, a fifteen percent rate of 

incidence. Accordingly, the commenter 

argues that home health agencies were 

under-compensated by approximately 

11 percent for LUPA savings. 

Response: While this comment is 

outside the scope of the topic (the 4th 

year reductions) which we solicited 

comments on, we will briefly respond. 

In the July 2000 final rule (65 FR 

41162), we stated that the estimate of 

the percentage of LUPA episodes was an 

actuarial estimate, as were the estimates 

of incidence of SCICs, PEPs, and 

outliers. Our base episode payment rates 

are derived using the best data available 

at that time. The commenter is correct 

that the actual number of LUPA 

episodes is higher than our original 

estimate. However, while it is true that 

16 percent of episodes from the 1998 

pre-PPS data analysis were shown to be 

LUPA-type episodes (65 FR 41186), we 

also provided reasoning in that 

discussion as to why we believed actual 

LUPA incidence under the HH PPS 

would be lower. Granted, the incidence 

of LUPAs did not drop to the level of 

5 percent of the total number of 

episodes as was originally estimated, 

however the average actual incidence of 

LUPAs is, and has always been 

considerably lower than the 16 percent 

suggested by the commenter. In fact, 

data analysis shows us that the 

incidence of LUPA episodes was first 

measured at approximately 15.2 percent 

of the total number of episodes and has 

continued to decrease under the HH 

PPS. Specifically, recent analysis of 

home health claims shows that LUPA 

episodes made up approximately 10.6 

percent of the total number HH PPS 

episodes in CY 2007. 

Another important fact that should 

not be lost, as part of this discussion, is 

that while the incidence of LUPAs is 

less than originally estimated, we note 

that the average number of home health 

visits provided per episode for nonLUPAs episodes is also lower than what 

we originally estimated (65 FR 41171) 

when we built the base payment rates 

(21.16 vs 25.5 home health visits). 

Hence, the national standardized 60-day 

episode payment is currently based on 

the delivery of significantly more home 

health visits per episode (25.5) than is 

currently being delivered (21.16). 

It is also worth noting that the manner 

in which the commenter appears to 

arrive at their under-compensation of 

payment percentage is by subtracting 

the original estimate for LUPA episodes 

of 5 percent from their inaccurate 

estimate of 16 percent incidence of 

LUPA episodes. In addition to the 

commenters 16 percent being inaccurate 

(as mentioned above), it is important to 

point out that even in doing the math, 

an inaccurate 16 percent minus 5 

percent actually reflects that there is an 

11 percentage point difference between 

the two, not an 11 percent undercompensation in payment as the 

commenter suggests. Because the 

incidence of LUPAs is considerably 

lower than the 16 percent that the 

commenter suggests, and the average 

number of home health visits per 

episode is far less than originally 

estimated, HHAs have not been undercompensated by 11 percent, as the 

commenter suggests. 

Since the inception of the HH PPS, we 

have monitored home health utilization 

in preparing the refinements to the HH 

PPS. We have always contended that it 

would not be appropriate to address 

single aspects of the system, as the 

many pieces/aspects of the system 

interact and there are causes and effects 

that each has on one another. 

Consequently, we have addressed those 

issues for which we believed we had 

adequate information, as a result of our 

analysis in the CY 2008 HH PPS 

proposed and final rules. In doing so, as 

is generally done in a prospective 

payment system, we decided not to 

make retroactive adjustments for actual 

utilization that differed from estimates. 

III. Provisions of the Proposed Rule 

A. Outlier Policy 

1. Background 

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

for the provision of an addition or 

adjustment to the regular 60-day casemix and wage-adjusted episode 

payment amount in the case of episodes 

that incur unusually high costs due to 

patient home health care needs. This 

section further stipulates that total 

outlier payments in a given year may 

not exceed 5 percent of total projected 

or estimated HH PPS payments. Section 

1895(b)(3)(C) of the Act stipulates that 

the standard episode payment be 

reduced by such a proportion to account 

for the aggregate increase in payments 

resulting from outlier payments. 

In the July 2000 final rule (65 FR 

41189), we described and subsequently 

implemented an HH PPS outlier policy 

under which we reduce the standard 

episode payment by 5 percent, and 

target up to 5 percent of total projected 

estimated HH PPS payments to be paid 

as outlier payments. The July 2000 final 

rule described a methodology for 

determining outlier payments. Under 

this system, outlier payments are made 

for episodes whose estimated cost 

exceeds a threshold amount. The 

episode’s estimated cost is the sum of 

the national wage-adjusted per-visit rate 

amounts for all visits delivered during 

the episode. The outlier threshold is 

defined as the national standardized 60- 

day episode payment rate for that casemix group plus a fixed dollar loss (FDL) 

amount. Both components of the outlier 

threshold are wage-adjusted. The wageadjusted FDL amount represents the 

amount of loss that an agency must 

experience before an episode becomes 

eligible for outlier payments. The wageadjusted FDL amount is computed by 

multiplying the national standardized 

60-day episode payment amount by the 

FDL ratio, and wage-adjusting that 

amount. That wage-adjusted FDL 

amount is added to the HH PPS 

payment amount to arrive at the wageadjusted outlier threshold amount. The 

outlier payment is defined to be a 

proportion of the wage-adjusted 

estimated costs beyond the wageadjusted outlier threshold amount. The 

proportion of additional costs paid as 

outlier payments is referred to as the 

loss-sharing ratio. The FDL ratio and the 

loss-sharing ratio were selected so that 

the estimated total outlier payments 

would not exceed the 5 percent level. 

We chose a value of 0.80 for the losssharing ratio, which is relatively high, 

but preserves incentives for agencies to 

attempt to provide care efficiently for 

outlier cases. A loss-sharing ratio of 0.80 

means that Medicare pays 80 percent of 

the additional costs above the wageadjusted outlier threshold amount. A 

loss-sharing ratio of 0.80 is also 

consistent with the loss-sharing ratios 

used in other Medicare PPS outlier 

policies, such as inpatient hospital, 

inpatient rehabilitation, long-term 

hospital, and inpatient psychiatric 

payment systems. In CY 2000, we 

estimated that a FDL ratio of 1.13 would 

yield estimated total outlier payments 

that were projected to be no more than 

5 percent of total HH PPS payments. As 

discussed in the October 1999 proposed 

rule (64 FR 58169) and the July 2000 

final rule (65 FR 41189), the percentage 

constraint on total outlier payments 

creates a tradeoff between the values 

selected for the FDL amount and the 

loss-sharing ratio. For a given level of 

outlier payments, a higher fixed dollar 

loss amount reduces the number of 

cases that receive outlier payments, but 

makes it possible to select a higher losssharing ratio and therefore increase 

outlier payments per episode. 

Alternatively, a lower fixed dollar loss 

amount means that more episodes 

qualify for outlier payments but outlier 

payments per episode must be lower. 


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Therefore, setting these two parameters 

involves policy choices about the 

number of outlier cases and their rate of 

payment. 

When the data became available, we 

performed an analysis of CY 2001 home 

health claims data. This analysis 

revealed that outlier episodes 

represented approximately 3 percent of 

total episodes and 3 percent of total HH 

PPS payments. Additionally, we 

performed the same analysis on CY 

2002 and CY 2003 home health claims 

data and found the number of outlier 

episodes and payments held at 

approximately 3 percent of total 

episodes and total HH PPS payments, 

respectively. Based on these analyses 

and comments we received, we decided 

that an update to the FDL ratio would 

be appropriate. 

To that end, for the October 22, 2004 

HH PPS rate update for the CY 2005 

final rule, we performed data analysis 

on CY 2003 HH PPS claims data. The 

results of that analysis indicated that a 

FDL ratio of 0.70 was consistent with 

the existing loss-sharing ratio of 0.80 

and a projected target percentage of 

estimated outlier payments of no more 

than 5 percent. Consequently, we 

updated the FDL ratio from the initial 

ratio of 1.13 to an FDL ratio of 0.70. Our 

analysis showed that reducing the FDL 

ratio from 1.13 to 0.70 would increase 

the percentage of episodes that qualified 

for outlier episodes from 3.0 percent to 

approximately 5.9 percent. A FDL ratio 

of 0.70 also better met the estimated 5 

percent target of outlier payments to 

total HH PPS payments. We believed 

that this updated FDL ratio of 0.70 

preserved a reasonable degree of cost 

sharing, while allowing a greater 

number of episodes to qualify for outlier 

payments. 

Our CY 2006 update to the HH PPS 

rates (70 FR 68132) updated the FDL 

ratio from 0.70 to 0.65 to allow even 

more home health episodes to qualify 

for outlier payments and to better meet 

the estimated 5 percent target of outlier 

payments to total HH PPS payments. 

For the CY 2006 update, we used CY 

2004 home health claims data. 

In our CY 2007 update to the HH PPS 

rates (71 FR 65884) we again updated 

the FDL ratio from 0.65 to 0.67 to better 

meet the estimated 5 percent target of 

outlier payments to total HH PPS 

payments. For the CY 2007 update, we 

used CY 2005 home health claims data. 

In the CY 2008 final rule with 

comment period, in the interest of using 

the latest data and best analysis 

available, we performed supplemental 

analysis on the most recent data 

available in order to best estimate the 

FDL ratio. That analysis derived a final 

FDL ratio of 0.89 for CY 2008. 

In order to determine the appropriate 

value for the FDL ratio for the CY 2009 

rate update, in the November 3, 2008 

HH PPS Rate Update for CY 2009 notice 

(73 FR 65351), we performed an 

analysis using the most recent, complete 

available data at the time (CY 2006), 

applying a methodology similar to that 

which we used to update the FDL ratio 

in the CY 2008 HH PPS final rule. That 

updated analysis projected that in CY 

2009 we would expend an estimated 

10.26 percent of total estimated HH PPS 

payments in outlier payments, more 

than twice our 5 percent statutory limit. 

Our analysis also revealed that this 

growth in outlier payments was 

primarily the result of excessive growth 

in outlier payments in a few discrete 

areas of the country. We noticed 

statistical anomalies in outlier payments 

in terms of both high outlier dollars and 

as a percentage of total HH PPS 

payments, in areas such as Miami-Dade 

Florida, where outlier payments to 

providers far exceed the national 

average and the 5 percent target for 

outlier payments. Using similar analysis 

to what was performed for the CY 2008 

final rule with comment, we estimated 

that we would need to raise our FDL 

ratio from 0.89 to 2.71 for CY 2009 in 

order for estimated outlier payments to 

be no more than 5 percent of total HH 

PPS payments. In addition, the size of 

these statistical anomalies raised 

concerns about the medical necessity of 

the outlier episodes in some areas. 

However, in our CY 2009 payment 

update, we did not raise the FDL ratio 

to 2.71, given the statistical outlier data 

anomalies that we identified in certain 

targeted areas, because program 

integrity efforts, such as payment 

suspensions for suspect HHAs, were 

underway to address excessive, suspect 

outlier payments that were occurring in 

these areas. Instead, we maintained the 

then-current (CY 2008) FDL ratio of 0.89 

in CY 2009 while actions to remedy any 

inappropriate outlier payments in these 

target areas of the country were 

effectuated. 

2. Proposed Change To Target Outlier 

Payment Percentage 

For CY 2010 rulemaking, we have 

expanded our outlier analysis. In 

addition to assessing what FDL ratio 

would most accurately achieve the 5 

percent target of outlier payments as a 

percentage of total HH PPS payments, 

we also performed analyses to assess the 

appropriateness of adopting a lower 

target percentage of outlier payments to 

total HH PPS payments. Some 

commenters to our CY 2008 proposed 

rule suggested that CMS should 

consider targeting a lower percentage in 

outlier payments to total estimated HH 

PPS payments. 

Commenters suggested that by 

lowering the target outlier percentage to 

total estimated HH payments, CMS 

could then return to the national 

standardized 60-day episode payment 

rate, a portion of that 5 percent which 

was originally withheld from the rates 

to fund the 5 percent of total estimated 

HH PPS outlier payments. In our 

response to the CY 2008 comments, we 

described our concern that reducing the 

target outlier percentage could risk 

access to home care for high needs 

patients. However, recent analysis of 

more current data, specifically CY 2007 

and CY 2008 data, suggests that a target 

around that of 2.5 percent in outlier 

payments to total estimated HH PPS 

payments may be a more appropriate 

target than 5 percent, while not risking 

access to care for high needs patients. 

Section 1895(b)(5) of the Act states that 

the Secretary ‘‘may’’ provide for an 

addition or adjustment to the payment 

amount otherwise made in the case of 

outliers. It goes on to say that if the 

Secretary decides to provide such a 

payment, that the total amount of the 

additional payments or payment 

adjustments may not exceed 5 percent 

of the total payment projected or 

estimated to be made under the 

payment system. Consequently, 

providing an addition or adjustment to 

the payment amount for outliers is 

optional and not statutorily required. 

We performed an analysis of all 

providers who receive outlier payments, 

focusing our analysis on total HH PPS 

payments, total outlier payments, 

number of episodes, number of outlier 

episodes, and location of provider. As 

discussed below under ‘‘Proposed 

Outlier Cap Policy’’, our analysis 

incorporates a proposed 10 percent cap 

on outliers and looks at outlier 

payments as a percentage of total HH 

PPS payments with that 10 percent cap 

in place. In our analysis of 2007 data, 

after implementing the 10 percent cap, 

outlier dollars accounted for 

approximately 2.1 percent of total HH 

PPS payments. 

Additionally, we performed a separate 

analysis on a major association of home 

health agencies who claim to be safetynet providers, serving sicker, more 

costly patients. The average outlier 

payment to these agencies is also under 

2 percent. Therefore, we believe a target 

of less than 5 percent for outlier dollars 

as a percentage of total estimated HH 

PPS payments is appropriate. However, 

past years’ data trends show us that 

outlier payments will likely continue to 


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grow. Consequently, we propose to 

change our target percentage of outlier 

payments from 5 percent to 

approximately 2.5 percent of total 

estimated HH PPS payments. 

Currently, we reduce the national 

standardized 60-day episode payment 

rates, the national per-visit rates, the 

LUPA add-on amount, and the NRS 

conversion factor by 5 percent in order 

to create an outlier pool that 

accommodates estimated outlier 

payments of 5 percent of total HH PPS 

payments. Targeting the percentage of 

outlier payments at approximately 2.5 

percent will allow us to create a smaller 

outlier pool and return the remaining 

2.5 percent to the HH PPS rates. We 

would retain a 2.5 percent reduction to 

the national standardized 60-day 

episode rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

to fund the proposed target of 

approximately 2.5 percent of total 

estimated HH PPS payments in outlier 

payments, adhering to the statutory 

requirement in Section 1895(b)(3) of the 

Act. 

3. Proposed Outlier Cap Policy 

Although program integrity efforts 

associated with excessive outlier 

payments continue in targeted areas of 

the country, we continue to be at risk of 

exceeding the 5 percent statutory limit 

on estimated outlier expenditures. 

Therefore, our recent analysis also 

focused on whether a broader policy 

change to our outlier payment policy 

might also be warranted, to mitigate 

possible billing vulnerabilities 

associated with excessive outlier 

payments, and to adhere to our statutory 

limit on outlier payments. 

We also considered eliminating 

outlier payments altogether and 

restoring the 5 percent, originally taken 

out of the national standardized 60-day 

episode rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor 

to pay for the existing outlier policy, 

back into the HH PPS rates. Eliminating 

outlier payments would simplify 

payments to HHAs and remove the 

vulnerability associated with 

inappropriate outlier payments. 

However, we are concerned that 

eliminating outlier payments to HHAs 

could result in denying added 

protection to HHAs that historically 

treat sicker, more costly patients. 

In attempts to better estimate outlier 

payments as a percentage of total HH 

PPS payments and to mitigate 

vulnerabilities associated with 

inappropriate outlier payments, we also 

looked into options that would impose 

an outlier cap, at the agency level, such 

that in any given year, an individual 

HHA would receive no more than a set 

percentage of its total HH PPS payments 

in outlier payments. We performed 

extensive analyses to model the impact 

to HHAs of a variety of percent caps in 

outlier payments. A primary focus of 

this analysis was to identify HHAs 

which would be representative of the 

types of agencies we are most concerned 

about disadvantaging with an outlier 

policy that included an outlier cap at 

the agency level. Our analysis revealed 

that a 10 percent agency cap in outlier 

payments would mitigate potential 

inappropriate outlier billing 

vulnerabilities while minimizing the 

access to care risk for high needs 

patients. 

We used CY 2007 claims data to 

perform a detailed impact analysis. We 

identified 1137 HH agencies whose 

outlier payments exceeded 10 percent of 

their total HH PPS payments in CY 

2007. However, we excluded 700 of 

these agencies from the impact analysis, 

because these agencies received sizeable 

outlier payments (totaling at least 

around $100,000), had high percentages 

(at least around 30 percent) of outlier 

payments to total HH PPS payments, 

and were located in the counties in FL, 

TX and CA where we believe possible 

program integrity issues had been 

identified. 

We targeted our in-depth impact 

analysis to the remaining 437 agencies, 

about 5 percent of all Medicare home 

health agencies. We analyzed these 

agencies as a group and individually. 

Our analysis focused on total HH PPS 

payments, total outlier payments, 

number of episodes, number of outlier 

episodes, percentage reductions in 

payments if a 10 percent outlier cap 

were imposed, and location. Analyzing 

CY 2007 data, these 437 agencies would 

have experienced about a 10 percent 

decrease in their total HH payments if 

an outlier cap of 10 percent, at the 

agency level, were imposed. As we 

looked closely at the individual 437 

agencies, we excluded additional 

agencies for a number of reasons. 

Specifically, we excluded 70 agencies 

that had fewer than 20 Medicare HH 

episodes, believing that Medicare 

beneficiaries account for such a small 

part of their business that they are not 

representative of the types of agencies 

we are most concerned about 

disadvantaging with an outlier cap 

policy. 

We excluded an additional 197 

agencies because they are also located in 

the counties identified as experiencing 

program integrity problems. While these 

197 agencies did not receive exorbitant 

outlier payments, their relatively high 

outlier payment percentages to total 

agency HH PPS payments led us to 

suspect inappropriate payments. We 

believe that the remaining 170 agencies, 

representing less than 2 percent of all 

Medicare home health agencies, are 

representative of the types of agencies 

we are most concerned about 

disadvantaging with an outlier policy 

that included a 10 percent cap at the 

agency level. 

This analysis showed that almost all 

of the 170 agencies are in urban areas, 

with only 16 agencies in rural areas. The 

total number of episodes that resulted in 

outlier payments is 4,497, about 15 

percent of their total episodes. The total 

HH PPS payments for these agencies 

equaled about $85 million in CY 2007. 

The total outlier payments for these 

agencies equaled $14.4 million, 

representing an average of about 17 

percent of their total HH PPS payments. 

The total amount of payments that 

would be lost by these providers due to 

a 10 percent cap would be $6.6 million, 

representing an average of 

approximately 7.9 percent of their total 

HH PPS payments. However, because 

most affected agencies are in urban 

areas, and there is not an access 

problem with regard to receiving home 

health services in urban areas, we do 

not expect that an outlier cap of 10 

percent at the agency level would result 

in any access to care issues. 

Additionally, we also performed a 

separate analysis of the major home 

health agency association which claims 

to service a sicker, more costly 

population. In 2007, only one of these 

agencies exceeded 10 percent of its total 

episode payments in outlier payments, 

receiving approximately 15 percent of 

its total HH PPS payments in outlier 

payments. 

Finally, we performed an analysis of 

the impact that imposing an outlier cap 

of 10 percent at the agency level would 

have on total outlier payments as a 

percentage of total HH PPS payments. 

The FDL ratio for CY 2007 was 0.67. In 

simulating for 2010 using 2007 data, 

imposing an outlier cap of 10 percent at 

the agency level, we estimate that we 

would pay approximately 2.32 percent 

of total HH PPS payments in outlier 

payments. 

Therefore, to mitigate possible billing 

vulnerabilities associated with excessive 

outlier payments, and to adhere to our 

statutory limit on outlier payments, we 

propose to implement an agency level 

outlier cap such that in any given 

calendar year, an individual HHA 

would receive no more than 10 percent 

of its total HH PPS payments in outlier 

payments. Additionally, we propose to 


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reduce the FDL ratio to 0.67 for CY 

2010. This combination of a 10 percent 

agency level outlier cap, and reduced 

FDL ratio of 0.67, and allowing for 

future growth in outlier payments, 

results in a projected target outlier 

payment outlay of approximately 2.5 

percent of total HH PPS payments in 

outlier payments. 

Our analysis demonstrates that 

approximately 2 percent of HH agencies 

may experience an average 7.9 percent 

decrease in payments. This decrease 

will be mitigated by a 2.5 percent 

increase in the HH PPS rates, as a result 

of lowering the outlier pool from 5 

percent to 2.5 percent. However, these 

impacts are averages. Some agencies 

that legitimately serve a sicker 

population may experience a larger 

decrease. Because MedPAC reported in 

their January 2009 public meeting 

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

0108–0109MedPAC.final.pdf) that 

Medicare beneficiaries have access to an 

adequate number of HHAs, we do not 

believe this policy will result in access 

to home care issues for high needs 

patients. 

As discussed in the CY 2009 HH PPS 

Update notice (73 FR 65357), past 

experience has shown that outlier 

payments have been increasing as a 

percentage of total payments from 4.1 

percent in CY 2005, to 5.0 percent in CY 

2006, to 6.4 percent in CY 2007. 

Analysis at the time of the above notice 

indicated that we could expect outlier 

payments as a percentage of total HH 

PPS payments to be approximately 8.1 

percent of total payments in CY 2008, 

and increase to approximately 10.26 

percent in CY 2009. Given that 

predicted trend in outlier payments, we 

estimated that we would have had to 

raise our FDL ratio from 0.89 to 2.71 for 

CY2009 in order to ensure that 

estimated outlier payments would be no 

more than 5 percent of total HH PPS 

payments. We believe that it is the high 

suspect outlier payments in suspect 

areas of the country that cause existing 

data analysis to seemingly require such 

a high FDL ratio in order to meet the 

target 5 percent of total HH PPS 

payments. 

Because outlier payments continue to 

grow, and those outlier payments as a 

percentage of total HH PPS payments 

already exceed the statutory limit, 

absent our proposed outlier cap of 10 

percent at the agency level, we would be 

required to raise the FDL ratio to a level 

much higher than either the current 0.89 

or the proposed 0.67, and doing so 

would deleteriously affect agencies 

providing legitimate care to home health 

beneficiaries. We do not believe that 

raising the FDL ratio to such a high 

level, making it even harder for 

legitimate episodes to qualify for outlier 

payments, is the appropriate policy, 

especially given the fact that we believe 

it is these high suspect outlier payments 

in suspect areas of the country that are 

causing outlier payments as a 

percentage of total HH PPS payments to 

continue to increase to levels beyond 

the existing 5 percent target. Conversely, 

we believe that our proposed outlier 

policy that includes a 10 percent cap on 

outlier payments at the agency level, in 

concert with a new 2.5 percent outlier 

pool (as opposed to the existing 5 

percent outlier pool), and returning 2.5 

percent back into the national 

standardized 60-day episode rates, the 

national per-visit rates, the LUPA addon payment amount, and the NRS 

conversion factor, with a 0.67 FDL ratio, 

would be the appropriate policy at this 

time. We expect the new outlier policy 

to curtail approximately $340 million, 

in CY 2010, in what we believe to be 

inappropriate outlier payments. 

Finally, CMS will continue to monitor 

the trends in outlier payments and these 

policy effects. Specifically, CMS plans 

to analyze overall national spending on 

outlier payments relative to the new 2.5 

percent outlier pool by geographic area 

and provider type. CMS also plans on 

looking at outlier payments, per HHA, 

relative to the proposed 10 percent cap 

on outlier payments at the agency level 

by geographic area and provider type. 

So far as activities related to high 

suspect outlier payments, CMS is 

continuing with program integrity 

efforts including possible payment 

suspensions for suspect agencies. If we 

are unable to see measurable 

improvements with respect to suspected 

fraudulent billing practices as they 

relate to HHA outlier payments, CMS 

may consider eliminating the outlier 

policy entirely in future rulemaking. 

Proposed implementation approach 

to a 10 percent agency level outlier cap. 

CMS envisions the proposed 10 

percent cap on outlier payments at the 

agency level would be managed by the 

claims processing system. For each HH 

provider, for a given calendar year, the 

claims processing system would 

maintain a running tally of YTD total 

HH PPS payments and YTD actual 

outlier payments. The claims processing 

system would ensure that each time a 

claim for a provider was processed; YTD 

outlier payments for that calendar year 

could never exceed 10 percent of YTD 

total HH PPS payments for that provider 

for that calendar year. As a provider’s 

claims (RAPs and final claims) were 

processed and YTD HH PPS payments 

for that calendar year increased 

throughout the course of the year, the 

claims processing system would be 

triggered to pay outlier payments, 

adjusting prior final claims by paying 

previously unpaid outlier payments, as 

the YTD total HH PPS payments for that 

calendar year allowed, never exceeding 

10 percent of total YTD HH payments 

for that calendar year. In cases where a 

provider submitted a claim with an 

outlier payment early in the year when 

YTD total HH PPS payments for that 

calendar year were low, outlier 

payments would be delayed until YTD 

total HH PPS payments for that calendar 

year reached a level to pay the outlier 

payment. 

More specifically, instead of a given 

claim being readjusted several times as 

total HH PPS payments increase, but not 

enough to pay an entire outlier payment 

on a given claim, we are considering a 

process by which an outlier payment on 

a previous claim would not be adjusted 

until total HH PPS payments for that 

calendar year were such that the entire 

outlier payment could be made without 

exceeding 10 percent of total HH PPS 

payments for a particular HHA for that 

calendar year. Doing so would avoid not 

only the cost of possible multiple 

adjustments to a given claim, but would 

also simplify the process making 

adjustments easier to track and 

understand. We solicit comments on 

these proposed outlier policy changes. 

B. Case-Mix Measurement Analysis 

In the CY 2008 HH PPS final rule with 

comment period, we stated that we 

would continue to monitor case-mix 

changes in the HH PPS and to update 

our analysis to measure change in casemix, both nominal and real. We have 

continued to monitor case-mix changes 

and our latest analysis supports the 

payment adjustments which we 

implemented in the CY 2008 HH PPS. 

We have updated our examination of 

five conditions that commenters on our 

case mix change adjustment suggested 

indicate a real case mix change. This 

analysis was originally summarized as 

Table 8 in the August 29, 2007, final 

rule. The updated results (see Table 1 

below) show that the shares of episodes 

preceded by a hospital discharge for hip 

fracture, congestive heart failure, and 

cerebrovascular accident have 

continued to decline since the IPS 

baseline. The percent share for hip and 

knee replacements rose and then began 

to decline slightly around the middle of 

the time series shown. (Note: Data since 

2005 for joint replacements differ 

slightly from the original Table 

regarding the five conditions published 

in the August 29, 2007, Final Rule 

because we changed our methodology to 

recognize several ICD–9 procedure code 


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changes that affected joint 

replacements). The increase in joint 

replacements as a proportion of all 

episodes was not sustained at the 2004– 

2005 level by the end of the period, 

perhaps because whatever mechanism 

operated to cause the growth lost some 

of its strength, or perhaps because even 

faster growth occurred in other types of 

episodes (such as outlier episodes and/ 

or later episodes). 

Our interpretation of these trends in 

the Aug. 29, 2007, Final Rule was that, 

with the possible exception of knee 

replacements, the trends observed at 

that time were not clearly indicative of 

a more-severe case mix. If anything, the 

sustained downward trend for hip 

fracture, CHF, and CVA suggests that 

the burden of these diseases on home 

health providers is lighter now than it 

used to be. For hip replacement, the 

share appears to have ended up (thus 

far) below the share of such patients 

during the IPS period. For knee 

replacements, it appears that shares may 

have ceased climbing. Our 

interpretation of the knee replacement 

trend in the August 29, 2007, final rule 

was that this category constituted a 

small share, that the Abt case mix 

change model took account of it, and 

that based on the model results the knee 

replacement change apparently was not 

enough to move the estimate of real case 

mix change very much. The updated 

data now suggest that knee 

replacements leveled off as a share of 

total episodes since around 2005. As a 

result, we have not changed our 

interpretation of the trends in episode 

shares for these five conditions. 

Our estimates of average number of 

days from hospital discharge to entrance 

into home health was an attempt to 

examine the hypothesis that patients 

were entering home health in a more 

sickly condition. We did not see any 

evidence of that for the three medical 

conditions; the number of days prior to 

entering home health exhibits no clear 

trend. For joint replacements, as in the 

earlier analysis, we saw a continuing 

decline in the average number of days 

prior to entering home health. These 

patients may present in a more sickly 

condition than was the case under IPS, 

but they are no longer a growing share 

of the HH caseload and represent 

slightly less than 4% of the episodes. 

Combined with the downward or 

stabilizing trends in the shares for all 

five conditions, the shortening of the 

time period to admission for the two 

joint replacement conditions does not 

suggest an overall more-acute case mix, 

at least as indicated by these five 

conditions. As we noted in the CY 2008 

final rule, the Abt Associates model 

simultaneously takes account of all of 

the kinds of patients incurring home 

health episodes, including the five 

conditions detailed here. 

TABLE 1 

FY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006 CY2007 CY2008 * 

Hip fracture ................ pct share ........................ 0.82 0.83 0.75 0.73 0.70 0.62 0.56 0.50 0.48 

days prior to entering .... 7.19 7.12 7.17 7.21 7.30 7.10 7.08 7.20 7.00 

Congestive heart failure.pct share ........................ 3.31 3.06 2.96 2.89 2.72 2.45 2.23 1.95 2.06 

days prior to entering .... 3.38 3.28 3.35 3.33 3.36 3.40 3.40 3.53 3.55 

Cerebrovascular accident.pct share ........................ 1.52 1.45 1.40 1.29 1.15 1.03 0.92 0.85 0.82 

days prior to entering .... 4.32 4.23 4.21 4.29 4.20 4.32 4.31 4.42 4.59 

Hip replacement ........ pct share ........................ 1.47 1.65 1.64 1.59 1.63 1.49 1.38 1.33 1.27 

days prior to entering .... 6.45 6.32 6.26 6.29 5.92 5.56 5.30 5.01 4.78 

Knee replacement ..... pct share ........................ 1.89 2.20 2.31 2.44 2.59 2.74 2.62 2.49 2.64 

days prior to entering .... 5.40 5.30 5.42 5.19 4.93 4.60 4.25 3.99 3.71 

Note: Based on a 10% beneficiary HH user sample. 

* CY 2008 data for first quarter of the year only. 

In the course of updating the estimate 

of real case-mix change, our analysis 

contractor, Abt Associates, discovered a 

number of errors in data handling for 

the case-mix change model. The 

analysis files included relatively small 

numbers of records that should have 

been excluded, and relatively small 

numbers that were dropped but that 

should have been included. Another 

error was in the handling of missing 

data for one of the key variables in the 

regression model (patient’s living 

situation); data were not recognized as 

missing and were therefore miscoded. 

Methodologically, an improvement was 

implemented to ensure that the 

observation period for the IPS baseline 

sample was consistent with the 

observation period for the PPS sample 

(2005). 

Abt Associates made corrections in 

response to each problem identified. 

The only significant change in results 

came from correcting the handling of 

missing data. Correcting this error (by 

imputing values for cases with missing 

data) caused an increase in the 

estimated real change in case-mix. Our 

original estimate, published in the CY 

2008 HH PPS final rule (72 FR 49842), 

was that about 8.03 percent of the 

increase in case-mix between the IPS 

baseline (1999–2000) and 2005 was due 

to actual changes in patient 

characteristics (i.e., ‘‘real’’). After this 

correction, the real case-mix change 

estimate for the same period increased 

by several percentage points. Had the 

data corrections and improvements been 

implemented in the CY 2008 HH PPS 

final rule, our estimate of real case-mix 

change, as a percentage of total case-mix 

change, would have been approximately 

14.15 percent as opposed to 8.03 

percent (73 FR 49833, 49842). Updating 

that analysis, using PPS data from 2006, 

our best estimate of real case-mix 

change, as a percentage of total case-mix 

change, is slightly lower (11.45 percent). 

This is due to the combination of 

continued strong annual growth 

between 2005 and 2006 in the average 

case-mix weight, along with little 

change between 2005 and 2006 in 

patient characteristics. 

We have further updated our case-mix 

analysis, for this rule, using PPS data 

from 2007. That analysis indicated a 

15.03 percent increase in the overall 

observed case-mix since 2000. We next 

determined what portion of that 

increase was associated with a real 

change in the actual clinical condition 

of home health patients. As was done 

for the CY 2008 final rule, using Abt 

Associates’ 6-phase model, we 

examined data on demographics, family 

support, pre-admission location, clinical 

severity, and non-home health Part A 

Medicare expenditure data to predict 

the average case-mix weight for 2007. 


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As such, our best estimate is that 

approximately 9.77 percent of the 15.03 

percent increase in the overall observed 

case-mix between the IPS baseline and 

2007 is real, that is, due to actual 

changes in patient characteristics. 

The estimate of real case-mix change 

continues to decrease for a number of 

reasons: First, because the nominal 

change in case-mix continues to grow, 

real case-mix as a percentage of the total 

change/increase in case-mix becomes 

less. With each successive sample, 

beginning with 2005 data (in the CY 

2008 final rule), the predicted average 

national case-mix weight is moving very 

little because the variables in the model 

used to predict case-mix are not 

changing much. At the same time, the 

actual average case-mix continues to 

grow steadily. Thus, the gap between 

the predicted case-mix value, which is 

based on information external to the 

OASIS, and the actual case-mix value, 

grows with each successive sample. 

Consequently, as a result of this 

analysis, CMS recognizes that a 13.56 

percent nominal increase 

((15.03¥(15.03 × 0.0977)) in case-mix is 

due to changes in coding practices and 

documentation rather than to treatment 

of more resource-intensive patients. 

To compensate for this growth over 

four years, an increase of this magnitude 

(13.56 percent), had it existed when the 

CY 2008 final rule was published, 

would have implied reductions in the 

rates of 3.13 percent per year for 4 years 

(CY 2008–CY 2011). We stated in our 

CY 2008 HH PPS proposed and final 

rules that we might find it necessary to 

adjust the offsets as new data became 

available. Given that we have adjusted 

the rates for two consecutive years by 

¥2.75 percent in each year, based on 

2007 data available for this proposed 

rule, if we were to account for the 

residual increase in nominal case-mix 

over the next two years, maintain our 

existing policy of a ¥2.75 percent casemix change in 2010, and account for the 

residual increase in nominal case-mix in 

2011, we estimate that the percentage 

reduction in the rates for nominal casemix change in 2011 would be 4.26 

percent. If we were to account (in the 

final rule) for the full residual increase 

in nominal case-mix in CY 2010, we 

estimate that the percentage reduction 

to the national standardized 60-day 

episode rates and the NRS conversion 

factor would be 6.89 percent. Similarly, 

if we were to account (in the final rule) 

for the full residual increase in nominal 

case-mix in two years, we estimate that 

the percentage reduction to the national 

standardized 60-day episode payment 

rates and the NRS conversion factor 

would be 3.51 percent, per year, in CY 

2010 and CY 2011. We are planning to 

move forward with our existing policy, 

as implemented in the August 22, 2007 

HH PPS Refinement and Rate Update for 

CY 2008 final rule with comment, of 

imposing a 2.75 percent reduction to the 

national standardized 60-day episode 

rates and the NRS conversion factor for 

CY 2010. We are accepting comments 

on the reduction percentages. We will 

continue to monitor any future changes 

in case-mix as more current data 

become available. Given the continued 

growth in nominal case-mix, we expect 

to revise, upward, the 2.71 percent 

reduction to the national standardized 

60-day episode rates and the NRS 

conversion factor for CY 2011 in next 

year’s rule. Analysis in next year’s rule 

will update the measure of the nominal 

increase in case-mix and compute the 

appropriate percent reduction to the 

national standardized 60-day episode 

rates and the NRS conversion factor to 

account for that increase. 

We may update the above-mentioned 

analysis for the final rule in a number 

of ways. We have been assembling data 

to enhance the Abt model to take into 

account factors that might have been 

unmeasured in the original model. We 

plan to introduce diagnostic summaries 

created from a broader sweep of the 

patient’s claims history, including Part 

B claims. Specifically, we may add 

information from the Medicare 

Hierarchical Coexisting Condition 

(HCC) data file to identify diagnoses for 

home health users and their impact on 

the predicted real case-mix weight. The 

HCC system is used for risk adjustment 

in Part C of the Medicare program. CMS 

annually produces an HCC record 

containing diagnosis flags and an HCC 

‘‘score’’ for every beneficiary. The 

diagnoses used for HCC risk adjustment 

come from hospital inpatient claims 

(primary and secondary diagnoses) 

(including rehabilitation, long-term, and 

psychiatric hospitals), hospital 

outpatient department claims, physician 

claims, and claims from clinically 

trained nonphysicians such as 

podiatrists, psychologists, and physical 

therapists. Until now, diagnostic 

information for the Abt model came 

from Part A inpatient claims only. 

Commenters have suggested that we 

take into account changes in the role of 

managed care in the Medicare program. 

These commenters stated that growth in 

managed care enrollment implies a 

generally sicker population remaining 

in the fee-for-service program; a change 

in home health users’ general health 

status might be reflected in OASIS items 

that determine the episode’s HHRG. 

Medicare managed care began to grow 

modestly in 2004, but growth 

accelerated in 2006. Therefore, another 

enhancement that we may test is a 

variable measuring managed care 

penetration in the beneficiary’s area; 

this variable is intended to capture any 

possible effects of attrition from FFS 

Medicare due to growing enrollment in 

Medicare Advantage plans. Attrition 

might result in the exit of relatively 

healthy beneficiaries from the FFS 

program, leaving a population in FFS 

whose average health status worsens 

over time. It is only the FFS population 

that is at risk for home health benefit 

use in the HH PPS. 

C. Proposed CY 2010 Rate Update 

1. The Home Health Market Basket 

Update 

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

requires for CY 2010 that the standard 

prospective payment amounts be 

increased by a factor equal to the 

applicable home health market basket 

update for those HHAs that submit 

quality data as required by the 

Secretary. 

The proposed HH PPS market basket 

update for CY 2010 is 2.2 percent. This 

is based on Global Insight Inc.’s first 

quarter 2009 forecast, utilizing historical 

data through the fourth quarter 2008. A 

detailed description of how we derive 

the HHA market basket is available in 

the CY 2008 Home Health PPS proposed 

rule (72 FR 25356, 25435). 

2. Home Health Care Quality 

Improvement 

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

requires that ‘‘each home health agency 

shall submit to the Secretary such data 

that the Secretary determines are 

appropriate for the measurement of 

health care quality. Such data shall be 

submitted in a form and manner, and at 

a time, specified by the Secretary for 

purposes of this clause.’’ In addition, 

section 1895(b)(3)(B)(v)(I) of the Act 

dictates that ‘‘for 2007 and each 

subsequent year, in the case of a home 

health agency that does not submit data 

to the Secretary in accordance with 

subclause (II) with respect to such a 

year, the home health market basket 

percentage increase applicable under 

such clause for such year shall be 

reduced by 2 percentage points.’’ This 

requirement has been codified in 

regulations at § 484.225. 

CMS published information about the 

quality measures in the Federal Register 

as a proposed rule on May 4, 2007 (72 

FR 25449, 25452) and as a final rule 

with comment period on August 29, 

2007 (72 FR 49861, 49864). We 

proposed and made final the decision to 

use a subset of OASIS data that is 


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publicly reported on Home Health 

Compare as the appropriate measure of 

home health quality. 

Reporting these quality data has also 

required the development of several 

supporting mechanisms such as the 

HAVEN software, used to encode and 

transmit data using a CMS standard 

electronic record layout, edit 

specifications, and data dictionary. The 

HAVEN software includes the required 

OASIS data set that has become a 

standard part of HHA operations. These 

early investments in data infrastructure 

and supporting software that CMS and 

HHAs have made over the past several 

years in order to create this quality 

reporting structure have been successful 

in making quality reporting and 

measurement an integral component of 

the HHA industry. 

Development and selection of home 

health quality measures is a constant 

and dynamic process based on the 

characteristics and needs of the 

population served. A total of 54 quality 

measures are currently reported to home 

health agencies for use in their 

Outcomes Based Quality Improvement 

(OBQI) activities. Every three years a 

selection of Home Health quality 

measures are submitted to the National 

Quality Forum (NQF) for consideration 

and endorsement through their 

consensus process. A subset of measures 

are chosen by CMS for public reporting 

on the Home Health Compare Web site. 

The following twelve measures are 

currently publicly reported: 

• Improvement in ambulation/ 

locomotion, 

• Improvement in bathing, 

• Improvement in transferring, 

• Improvement in management of 

oral medications, 

• Improvement in pain interfering 

with activity, 

• Acute care hospitalization, 

• Emergent care, 

• Discharge to community, 

• Improvement in dyspnea, 

• Improvement in urinary 

incontinence, 

• Improvement in status of surgical 

wounds, and 

• Emergent care for wound infections, 

deteriorating wound status. 

Accordingly, for CY 2010, we propose 

to continue to use submission of OASIS 

data and the quality measures that are 

publicly reported on Home Health 

Compare to meet the requirement that 

the HHA submit data appropriate for the 

measurement of health care quality. 

Continuing to use the specified 

measures from the OASIS instrument 

for purposes of measuring health care 

quality ensures that providers will not 

have an additional burden of reporting 

through a separate mechanism, and that 

the costs associated with the 

development and testing of a new 

reporting mechanism can be avoided. 

We are proposing for CY 2010 to 

consider OASIS assessments submitted 

by HHAs to CMS in compliance with 

HHA conditions of participation for 

episodes beginning on or after July 1, 

2008 and before July 1, 2009 as fulfilling 

the quality reporting requirement for CY 

2010. This time period would allow 12 

full months of data collection and 

would provide us the time necessary to 

analyze and make any necessary 

payment adjustments to the payment 

rates in CY 2010 and each year 

thereafter. We propose to reconcile the 

OASIS submissions with claims data in 

order to verify full compliance with the 

quality reporting requirements in CY 

2010 and each year thereafter on an 

annual cycle July 1 through June 30 as 

described above. 

As set forth in the CY 2008 final rule 

with comment period (72 FR 49863), 

agencies do not need to submit quality 

measures for reporting purposes for 

those patients who are excluded from 

the OASIS submission requirements 

under the Home Health Conditions of 

Participation (CoP). The conditions of 

participation (42 CFR 484.200–484.265) 

that require submission also provide for 

exclusions from this requirement if: 

• Those patients are receiving only 

non-skilled services, 

• Neither Medicare nor Medicaid is 

paying for home health care (patients 

receiving care under a Medicare or 

Medicaid Managed Care Plan are not 

excluded from the OASIS reporting 

requirement), 

• Those patients are receiving pre- or 

post-partum services, or 

• Those patients are under the age of 

18 years. 

As set forth in the CY 2008 final rule 

with comment period (72 FR 49863), 

agencies that certify on or after May 31 

of the preceding year involved are 

excluded from any payment penalty for 

quality reporting purposes for the 

following CY. Therefore, HHAs that are 

certified on or after May 1, 2009 are 

excluded from the quality reporting 

requirement for CY 2010 payments 

since data submission and analysis will 

not be possible for an agency certified 

this late in the reporting time period. At 

the earliest time possible after obtaining 

the CMS Certification Number (CCN), 

reporting would be mandatory. These 

exclusions only affect quality reporting 

requirements and do not affect the 

HHA’s reporting responsibilities under 

the CoP. 

HHAs that meet the reporting 

requirements would be eligible for the 

full home health market basket 

percentage increase. HHAs that do not 

meet the reporting requirements would 

be subject to a 2 percent reduction to the 

home health market basket increase. We 

provide the proposed payment rates in 

Tables 1, 2, and 3. 

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

further requires that ‘‘[t]he Secretary 

shall establish procedures for making 

data submitted under subclause (II) 

available to the public. Such procedures 

shall ensure that a home health agency 

has the opportunity to review the data 

that is to be made public with respect 

to the agency prior to such data being 

made public.’’ To meet the requirement 

for making such data public, we propose 

to continue using the Home Health 

Compare Web site, which lists HHAs 

geographically. Currently, the Home 

Health Compare Web site lists 12 

quality measures from the OASIS set as 

described above. The Home Health 

Compare Web site is located at the 

following Web address: http:// 

www.medicare.gov/HHCompare/

Home.asp. Each HHA currently has prepublication access (through the CMS 

contractor) to its own quality data 

(which the contractor updates 

periodically). We plan to continue this 

process, to enable each agency to view 

its quality measures before public 

posting of data on Home Health 

Compare. 

CMS is requesting OMB approval to 

modify the OASIS data set. This process 

is in the final stages of OMB clearance. 

Pending OMB approval, CMS intends to 

implement the use of the OASIS–C 

(Form Number CMS–R–245 (OMB# 

0938–0760)) on January 1, 2010. This 

revision to the current OASIS version 

B–1 has undergone additional testing as 

part of the information collection 

request approved under OMB control 

number 0938–1040. As part of the OMB 

approval process, the revision to the 

current OASIS version was also 

distributed for public comment and 

other technical expert recommendations 

over the past few years. We propose that 

this new version of OASIS be collected 

on episodes of care with a 

corresponding OASIS item (M0090) date 

of January 1, 2010 or later. The OASIS– 

C can be found using the following link: 

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

ReductionActof1995/PRAL/itemdetail.

asp?filterType=none&filterByDID=- 

99&sortByDID=2&sortOrder=

descending&itemID=CMS1217682

&intNumPerPage=10. 

We are also planning to update Home 

Health Compare to reflect the addition 

of the following 13 new process of care 

measures: 

Æ Timely initiation of care, 


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Æ Influenza immunization received 

for current flu season, 

Æ Pneumococcal polysaccharide 

vaccine ever received, 

Æ Heart failure symptoms addressed 

during short-term episodes, 

Æ Diabetic foot care and patient 

education implemented during shortterm episodes of care, 

Æ Pain assessment conducted, 

Æ Pain interventions implemented 

during short-term episodes, 

Æ Depression assessment conducted, 

Æ Drug education on all medications 

provided to patient/caregiver during 

short-term episodes. 

Æ Falls risk assessment for patients 65 

and older, 

Æ Pressure ulcer prevention plans 

implemented, 

Æ Pressure ulcer risk assessment 

conducted, and 

Æ Pressure ulcer prevention included 

in the plan of care. 

Also under consideration are three 

additional process of care measures that 

may be added to Home Health Compare 

based on results of consumer testing. 

Those additional process measures are: 

Æ Drug education on high risk 

medications provided to patient/ 

caregiver at start of episode; 

Æ Potential medication issues 

identified and timely physician contact 

at start of episode; 

Æ Potential medication issues 

identified and timely physician contact 

during episode. 

The implementation of OASIS–C will 

impact the quality data reporting 

requirement for the CY 2011 HH PPS. 

However, we expect the conversion 

from OASIS–B1 to OASIS–C to have 

little to no impact on HHAs’ ability to 

meet the quality data reporting 

requirements under Section 

1895(b)(3)(B)(v). 

For CY 2011, CMS proposes to 

expand the home health quality 

measures reporting requirements to 

include the Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS®) Home Health Care Survey 

(pending OMB approval). The CAHPS®

Home Health Care Survey (hereafter 

‘‘HHCAHPS’’) is a quality tool that we 

believe that we can use to collect quality 

of care data, as required by section 

1895(b)(3)(B)(v)(II) of the Act, and as 

permitted under section 1861(o)(8) of 

the Act, which requires any Medicare 

participating HHA to ‘‘meet [ ] such 

additional requirements * * * as the 

Secretary finds necessary for the 

effective and efficient operation of the 

program’’. The HHCAHPS data 

collection will support the effective and 

efficient operation of the program 

because patients’ feedback on their 

perspectives of the home health quality 

of care from the agency cannot be 

obtained from any other quality measure 

in the program. The Home Health Care 

Survey is part of a family of CAHPS®

surveys that ask patients to report on 

and rate their experiences with health 

care. The HHCAHPS survey developed 

by the Agency for Healthcare Research 

and Quality (AHRQ), which is part of 

the Department of Health and Human 

Services, presents home health patients 

with a set of standardized questions 

about their home health care providers 

and the quality of their home health 

care. Prior to this survey, there was no 

national standard for collecting 

information about patient experiences 

that would enable valid comparisons 

across all HHAs. 

AHRQ developed the HHCAHPS 

survey with the assistance of many 

entities (for example, government 

agencies, professional stakeholders, 

consumer groups and other key 

individuals and organizations involved 

in home health care). The HHCAHPS 

survey was designed to measure and 

assess the experiences of those persons 

receiving home health care with the 

following three goals in mind: 

• To produce comparable data on 

patients’ perspectives of care that allow 

objective and meaningful comparisons 

between home health agencies on 

domains that are important to 

consumers; 

• To create incentives for agencies to 

improve their quality of care through 

public reporting of survey results; and 

• To hold health care providers 

accountable by informing the public 

about the providers’ quality of care 

(http://www.homehealthcahps.org). 

These three goals support Section 

1861(o)(8) of the Act, which requires 

any Medicare participating HHA to 

‘‘meet [] such additional requirements 

* * * as the Secretary finds necessary 

for the effective and efficient operation 

of the program.’’ 

The development process for the 

survey began in 2006 and included a 

public call for measures, review of the 

existing literature, consumer input, 

stakeholder input, public response to 

Federal Register notices, and a field test 

conducted by AHRQ. AHRQ conducted 

this field test to validate the length and 

content of the HHCAHPS survey. CMS 

submitted the survey to the National 

Quality Forum (NQF) for consideration 

and endorsement via their consensus 

process. NQF endorsement represents 

the consensus opinion of many 

healthcare providers, consumer groups, 

professional organizations, health care 

purchasers, Federal agencies and 

research and quality organizations. The 

survey received NQF endorsement on 

March 31, 2009. 

The HHCAHPS survey includes 34 

questions that cover topics such as 

specific types of care provided by home 

health providers, communication with 

providers, interactions with the HHA, 

and global ratings of the agency. For 

public reporting purposes, CMS will 

utilize composite measures and global 

ratings of care. Each composite measure 

consists of four or more questions that 

ask about one of the following related 

topics: 

• Patient care; 

• Communications between providers 

and patients; 

• Specific care issues (medications, 

home safety and pain). 

There are also two global ratings; the 

first rating asks the patient to assess the 

care given by the HHA’s care providers, 

and the second asks the patient about 

his/her willingness to recommend the 

HHA to family and friends. 

We are proposing two options for 

administering the HHCAHPS survey. 

The agency can choose to administer the 

existing HHCAHPS survey, or the HHA 

can integrate additional questions 

within the HHCAHPS survey. If an 

agency chooses to implement an 

integrated survey, the core questions 

from the HHCAHPS survey (questions 1 

through 25) must be placed before any 

specific/supplemental questions that the 

HHA wishes to add to the survey. 

Questions 26 through 34 (the ‘‘About 

You’’ survey questions) must be 

administered as a unit—although they 

may be placed either before or after any 

supplemental questions that the HHA 

wishes to add to the HHCAHPS survey. 

If no HHA-specific questions are to be 

added to the HHCAHPS survey, the 

‘‘About You’’ questions should follow 

the core questions (numbered 1 through 

25) on the HHCAHPS survey. 

The survey is currently available in 

both English and Spanish. HHAs and 

their survey vendors will not be 

permitted to translate the HHCAHPS 

survey into any other languages on their 

own. However, CMS will provide 

additional translations of the survey 

over time. The Web site https:// 

www.homehealthcahps.org will provide 

information about the subsequent 

availability of additional translations. 

CMS also solicits user suggestions for 

any additional language translations. 

Such suggestions should be submitted 

online to the HHCAHPS Survey 

Coordination Team, at 

HHCAHPS@rti.org. HHAs interested in 

learning about the survey are 

encouraged to view the HHCAHPS 

survey Web site, at https:// 


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www.homehealthcahps.org. Agencies 

can also call toll-free 1–866–354–0985, 

or send an e-mail to the HHCAHPS 

Survey Coordination Team at 

HHCAHPS@rti.org for more information. 

The following types of home health 

care patients will be considered eligible 

to participate in the HHCAHPS survey: 

• Current or discharged patients who 

had at least one home health visit at any 

time during the sample month; 

• Patients who were at least 18 years 

of age at any time during the sample 

period, and are believed to be alive; 

• Patients who received at least two 

visits from HHA personnel during a 60- 

day look-back period (Note that the 60- 

day look-back period is defined as the 

60-day period prior to and including the 

last day in the sample month.); 

• Patients who have not been selected 

for the monthly sample during any 

month in the current quarter or during 

the 5 months immediately prior to the 

sample month; 

• Patients who are not currently 

receiving hospice care; 

• Patients who do not have routine 

‘‘maternity’’ care as the primary reason 

for receiving home health care; and 

• Patients who have not requested 

‘‘no publicity status.’’ 

CMS has modeled HHCAHPS after the 

Hospital CAHPS survey where both the 

CAHPS and clinical data are collected 

for both Medicare and non-Medicare 

patients to get a complete picture of 

hospital quality. Since HHCAHPS data 

used to develop case-mix collection of 

data for HHCAHPS are not carried out 

under the auspices of section 4602(e) of 

the BBA, such collections are not 

subject to the OASIS limitation to 

Medicare and Medicaid patients only, 

set out under section 704(a) of the 

MMA. To collect and submit HHCAHPS 

data to CMS, Medicare-certified 

agencies will need to contract with an 

approved HHCAHPS survey vendor. 

Interested vendors can now apply to 

become approved HHCAHPS vendors. 

The application process is delineated 

online at https:// 

www.homehealthcahps.org. Vendors 

will also be required to attend training 

conducted by CMS and the HHCAHPS 

Survey Coordination Team. HHAs that 

are interested in participating in the 

HHCAHPS survey may do so on a 

voluntary basis for the remaining 

months of 2009. Such agencies must 

select a vendor from the list of 

HHCAHPS approved survey vendors. 

This listing will be available on the Web 

site https://www.homehealthcahps.org 

during the summer of 2009. 

CMS proposes that beginning in the 

first quarter of CY 2010, all Medicarecertified HHAs shall begin to collect the 

CAHPS® Home Health Care 

(HHCAHPS) survey data in accordance 

with the Protocols and Guidelines 

Manual located on the HHCAHPS Web 

site https://www.homehealthcahps.org. 

HHAs shall contract with approved 

HHCAHPS survey vendors that are 

posted on https:// 

www.homehealthcahps.org to conduct 

the survey on behalf of HHAs. CMS 

proposes that participating home health 

agencies conduct a dry run of the survey 

for at least one month in the first quarter 

of 2010 (January, and/or February, and/ 

or March 2010), and submit the dry run 

data to the Home Health CAHPS® Data 

Center by 11:59 p.m. EST on June 23, 

2010. The dry run data would not be 

publicly reported on the Home Health 

Compare. This dry run would provide 

an opportunity for vendors and HHAs to 

acquire first-hand experience with data 

collection, including sampling and data 

submission to the Home Health 

CAHPS® Data Center, with no public 

reporting of the results. CMS proposes 

that all Medicare-certified HHAs 

continuously collect HHCAHPS survey 

data every quarter beginning in the 

second quarter (April, May and June) of 

2010, and submit these data for the 

second quarter of 2010 to the Home 

Health CAHPS® Data Center by 11:59 

p.m. EST on September 22, 2010. CMS 

proposes that these data submission 

deadlines are firm; that is, there will be 

no late submissions allowed. 

The Medicare-certified HHAs will 

need to provide their respective survey 

vendors with information about their 

survey-eligible patients (either current 

or discharged) every month in 

accordance with the Protocols and 

Guidelines Manual posted on https:// 

www.homehealthcahps.org. The details 

about selecting the HHA sample are 

delineated in the Protocols and 

Guidelines manual on the Web site 

https://www.homehealthcahps.org. It is 

proposed that the HHCAHPS survey 

data be submitted and analyzed 

quarterly, and that the sample selection 

and data collection occur on a monthly 

basis. HHAs should target 300 

HHCAHPS survey completes annually. 

Smaller agencies that are unable to 

reach 300 survey completes by sampling 

should survey all HHCAHPS eligible 

patients. For reasons of statistical 

precision, a target minimum of 300 or 

more completed Home Health CAHPS 

surveys has been set for each home 

health agency. 300 completes is based 

on a reliability target of 0.8 or higher. 

We propose that survey vendors initiate 

the survey for each monthly sample 

within three weeks after the end of the 

sample month. All data collection for 

each monthly sample would have to be 

completed within six weeks (42 days) 

after data collection began. CMS has 

approved three modes of the survey to 

be used: Mail only, telephone only, and 

mail with telephone follow-up (the 

‘‘mixed mode’’). We are proposing that 

for mail-only and mixed-mode surveys, 

data collection for a monthly sample 

would have to end six weeks after the 

first questionnaire was mailed. For 

telephone-only surveys, data collection 

would have to end six weeks following 

the first telephone attempt. 

CMS is aware that there is a wide 

variation in the size of Medicarecertified HHAs. CMS proposes that the 

requirement to collect HHCAHPS 

survey data be waived for agencies that 

serve fewer than 60 HHCAHPS eligible 

patients annually. We are proposing this 

threshold amount in order to exempt 

agencies that serve a very small home 

health eligible population. These 

agencies serve, on average, 5 or fewer 

patients per month. The HHCAHPS 

eligible, unduplicated patient counts for 

the period of October 1 through 

September 30 for a given year would be 

used to determine if the HHA would 

have to participate in the HHCAHPS 

survey in the next calendar year. If a 

Medicare-certified HHA had fewer than 

60 eligible, unduplicated HHCAHPS 

eligible patients for the period October 

1 through September 30, then they 

would be excluded from the HHCAHPS 

requirement for the next calendar year. 

For example, if a small HHA had 85 

patients in the period October 1, 2008 

through September 30, 2009, and 45 of 

the patients were routine maternity 

patients, then there would only be 40 

HHCAHPS eligible patients. This agency 

would therefore not be required to 

participate in the HHCAHPS survey. 

Alternatively, if a small HHA had 85 

patients for the period October 1, 2008 

through September 30, 2009, and 70 of 

these patients were eligible to 

participate in the HHCAHPS survey 

(i.e., because they: (1) Were 65 years or 

older; (2) were recently discharged from 

the hospital to their homes; (3) were not 

receiving hospice care; (4) were not 

designated as ‘‘no publicity’’ patients; 

and (5) had received at least two home 

health visits) this agency would be 

required to participate in the HHCAHPS 

survey. Only Medicare-certified HHAs 

with fewer than 60 eligible, 

unduplicated patients for the period 

October 1, 2008 through September 30, 

2009 would submit their patient counts 

to the HHCAHPS Data Center by 

Wednesday, January 13, 2010. 

We also propose that newly Medicarecertified HHAs (that is, those certified 

on or after January 1, 2010 for payments 


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to be made in CY 2011) be excluded 

from the HHCAHPS survey reporting 

requirement, as data submission and 

analysis would not be possible for an 

agency so late in the reporting period. 

In future years, agencies that first certify 

on or after January 1 of the preceding 

year would be excluded from any 

payment penalty for reporting purposes 

in the following CY. We note that this 

exclusion for new HHAs pertains only 

to the HHCAHPS survey reporting 

requirement. 

CMS strongly recommends that HHAs 

participating in the HHCAHPS survey 

promptly review the required Data 

Submission Summary Reports that are 

delineated in the Protocols and 

Guidelines Manual posted on https:// 

www.homehealthcahps.org. These 

reports will enable the HHA to ensure 

that its survey vendor has submitted 

their data on time, and that the data 

have been accepted/received by the 

Home Health CAHPS® Data Center. 

CMS anticipates first reporting 

HHCAHPS survey data in early 2011 on 

Home Health Compare. The HHCAHPS 

survey data would be updated quarterly. 

HHAs would be provided a preview of 

the data each quarter before it was 

reported on Home Health Compare. 

CMS proposes that vendors and HHAs 

be required to participate in HHCAHPS 

survey oversight activities to ensure 

compliance with HHCAHPS survey 

protocols, guidelines and survey 

requirements. The purpose of the 

oversight activities is to ensure that 

HHAs and approved survey vendors 

follow the Protocols and Guidelines 

Manual. It is proposed that all approved 

survey vendors develop a Quality 

Assurance Plan (QAP) for survey 

administration in accordance with the 

Protocols and Guidelines Manual. The 

QAP should include the following: 

• Organizational chart; 

• Work plan for survey 

implementation; 

• Description of survey procedures 

and quality controls; 

• Quality assurance oversight of onsite work and of all subcontractors 

work; and 

• Confidentiality/Privacy and 

Security procedures in accordance with 

the Health Insurance Portability and 

Accountability Act (HIPAA). 

As part of the oversight activities the 

HHCAHPS Survey Coordination Team 

would conduct on-site visits or 

conference calls. The HHCAHPS Survey 

Coordination Team would review the 

survey vendor’s survey systems, and 

will assess administration protocols 

based on the Protocols and Guidelines 

Manual posted on https:// 

www.homehealthcahps.org. All 

materials relevant to survey 

administration would be subject to 

review. The proposed systems and 

program review would include, but not 

be limited to: (a) Survey management 

and data systems; (b) printing and 

mailing materials and facilities; (c) data 

receipt, entry and storage facilities; and 

(d) written documentation of survey 

processes. Organizations would be given 

a defined time period in which to 

correct any problems and provide 

follow-up documentation of corrections 

for review. Survey vendors will be 

subject to follow-up site visits as 

needed. 

CMS strongly recommends that all 

HHAs participating in the HHCAHPS 

survey regularly check the Web site, 

https://www.homehealthcahps.org for 

program updates and information. 

As mandated in current law, all 

HHAs, unless covered by specific 

exclusions, will continue to be required 

to meet the quality reporting 

requirements or be subject to a 2 percent 

reduction in the home health market 

basket percentage increase in 

accordance with section 

1895(b)(3)(B)(v)(I) of the Act. A 

reconsideration and appeals process is 

being developed for HHAs who fail to 

meet the HHCAHPS reporting 

requirements. These procedures would 

be outlined in the HH PPS proposed 

rule for CY 2011 in which we are 

proposing that the HHCAHPS survey 

would be linked to home health 

payment, as a requirement under the 

regulation requiring the reporting of 

quality data. 

3. Home Health Wage Index 

Sections 1895(b)(4)(A)(ii) and (b)(4)(C) 

of the Act require the Secretary to 

establish area wage adjustment factors 

that reflect the relative level of wages 

and wage-related costs applicable to the 

furnishing of home health services and 

to provide appropriate adjustments to 

the episode payment amounts under the 

HH PPS to account for area wage 

differences. As discussed previously, we 

apply the appropriate wage index value 

to the labor portion (77.082 percent) of 

the HH PPS rates based on the site of 

service for the beneficiary (defined by 

section 1861(m) of the Act as the 

beneficiary’s place of residence). 

Generally, we determine each HHA’s 

labor market area based on definitions 

of Metropolitan Statistical Areas (MSAs) 

issued by the Office of Management and 

Budget (OMB). We have consistently 

used the pre-floor, pre-reclassified 

hospital wage index data to adjust the 

labor portion of the HH PPS rates. We 

believe the use of the pre-floor, prereclassified hospital wage index data 

results in the appropriate adjustment to 

the labor portion of the costs as required 

by statute. 

In the November 9, 2005 final rule for 

CY 2006 (70 FR 68132), we adopted 

revised labor market area definitions 

based on Core-Based Statistical Areas 

(CBSAs). At the time, we noted that 

these were the same labor market area 

definitions (based on OMB’s new CBSA 

designations) implemented under the 

Hospital Inpatient Prospective Payment 

System (IPPS). In adopting the CBSA 

designations, we identified some 

geographic areas where there are no 

hospitals and, thus, no hospital wage 

data on which to base the calculation of 

the home health wage index. We 

continue to use the methodology 

discussed in the November 9, 2006 final 

rule for CY 2007 (71 FR 65884) to 

address the geographic areas that lack 

hospital wage data on which to base the 

calculation of their home health wage 

index. For rural areas that do not have 

IPPS hospitals, we use the average wage 

index from all contiguous CBSAs as a 

reasonable proxy. This methodology is 

used to calculate the wage index for 

rural Massachusetts. However, we could 

not apply this methodology to rural 

Puerto Rico due to the distinct 

economic circumstances that exist there, 

but instead continue using the most 

recent wage index previously available 

for that area (from CY 2005). For urban 

areas without IPPS hospitals, we use the 

average wage index of all urban areas 

within the State as a reasonable proxy 

for the wage index for that CBSA. The 

only urban area without IPPS hospital 

wage data is Hinesville-Fort Stewart, 

Georgia (CBSA 25980). 

On November 20, 2008, OMB issued 

Bulletin No. 09–01 located at Web 

address http://www.whitehouse.gov/ 

omb/bulletins/fy2009/09-01.pdf. This 

bulletin highlights three geographic 

areas that were previously classified as 

Micropolitan Statistical Areas but now 

qualify as Metropolitan Statistical 

Areas. The three areas are (1) CBSA 

16020, Cape Girardeau-Jackson, MO–IL 

(this includes Alexander County in 

Illinois and Bollinger and Cape 

Girardeau Counties in Missouri); (2) 

CBSA 31740, Manhattan, KS (this 

includes Geary, Pottawatomie, and Riley 

Counties in Kansas); and (3) CBSA 

31860, Mankato-North Mankato, MN 

(this includes Blue Earth and Nicollet 

Counties in Minnesota). These three 

new CBSAs and their associated wage 

index values are shown in Addendum 

B. 


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40964 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

4. Proposed CY 2010 Payment Update 

a. National Standardized 60-Day 

Episode Rate 

The Medicare HH PPS has been in 

effect since October 1, 2000. As set forth 

in the final rule published July 3, 2000 

in the Federal Register (65 FR 41128), 

the unit of payment under the Medicare 

HH PPS is a national standardized 60- 

day episode rate. As set forth in 

§ 484.220, we adjust the national 

standardized 60-day episode rate by a 

case-mix relative weight and a wage 

index value based on the site of service 

for the beneficiary. 

In the CY 2008 HH PPS final rule with 

comment period, we refined the casemix methodology and also rebased and 

revised the home health market basket. 

The labor-related share of the case-mix 

adjusted 60-day episode rate is 77.082 

percent and the non-labor-related share 

is 22.918 percent. The proposed CY 

2010 HH PPS rates use the same casemix methodology and application of the 

wage index adjustment to the labor 

portion of the HH PPS rates as set forth 

in the CY 2008 HH PPS final rule with 

comment period. We multiply the 

national 60-day episode rate by the 

patient’s applicable case-mix weight. 

We divide the case-mix adjusted 

amount into a labor and non-labor 

portion. We multiply the labor portion 

by the applicable wage index based on 

the site of service of the beneficiary. We 

add the wage-adjusted portion to the 

non-labor portion yielding the case-mix 

and wage adjusted 60-day episode rate 

subject to any additional applicable 

adjustments. 

In accordance with section 

1895(b)(3)(B) of the Act, we update the 

HH PPS rates annually in a separate 

Federal Register document. The HH 

PPS regulations at 42 CFR 484.225 set 

forth the specific annual percentage 

update. In accordance with § 484.225(i), 

in the case of a HHA that does not 

submit home health quality data, as 

specified by the Secretary, the 

unadjusted national prospective 60-day 

episode rate is equal to the rate for the 

previous calendar year increased by the 

applicable home health market basket 

index amount minus two percentage 

points. Any reduction of the percentage 

change will apply only to the calendar 

year involved and will not be taken into 

account in computing the prospective 

payment amount for a subsequent 

calendar year. 

For CY 2010, we will base the wage 

index adjustment to the labor portion of 

the HH PPS rates on the most recent 

pre-floor and pre-reclassified hospital 

wage index. As discussed in the July 3, 

2000 HH PPS final rule, for episodes 

with four or fewer visits, Medicare pays 

the national per-visit amount by 

discipline, referred to as a LUPA. We 

update the national per-visit rates by 

discipline annually by the applicable 

home health market basket percentage. 

We adjust the national per-visit rate by 

the appropriate wage index based on the 

site of service for the beneficiary, as set 

forth in § 484.230. We will adjust the 

labor portion of the updated national 

per-visit rates used to calculate LUPAs 

by the most recent pre-floor and prereclassified hospital wage index, as 

discussed in the CY 2008 HH PPS final 

rule with comment period. We are also 

updating the LUPA add-on payment 

amount and the NRS conversion factor 

by the applicable home health market 

basket update of 2.2 percent for CY 

2010. 

Medicare pays the 60-day case-mix 

and wage-adjusted episode payment on 

a split percentage payment approach. 

The split percentage payment approach 

includes an initial percentage payment 

and a final percentage payment as set 

forth in § 484.205(b)(1) and 

§ 484.205(b)(2). We may base the initial 

percentage payment on the submission 

of a request for anticipated payment 

(RAP) and the final percentage payment 

on the submission of the claim for the 

episode, as discussed in § 409.43. The 

claim for the episode that the HHA 

submits for the final percentage 

payment determines the total payment 

amount for the episode and whether we 

make an applicable adjustment to the 

60-day case-mix and wage-adjusted 

episode payment. The end date of the 

60-day episode as reported on the claim 

determines which calendar year rates 

Medicare would use to pay the claim. 

We may also adjust the 60-day casemix and wage-adjusted episode 

payment based on the information 

submitted on the claim to reflect the 

following: 

• A low utilization payment provided 

on a per-visit basis as set forth in 

§ 484.205(c) and § 484.230. 

• A partial episode payment 

adjustment as set forth in § 484.205(d) 

and § 484.235. 

• An outlier payment as set forth in 

§ 484.205(e) and § 484.240. 

b. Proposed Updated CY 2010 National 

Standardized 60-Day Episode Payment 

Rate 

In calculating the annual update for 

the CY 2010 national standardized 60- 

day episode payment rates, we first look 

at the CY 2009 rates as a starting point. 

The CY 2009 national standardized 60- 

day episode payment rate is $2,271.92. 

As previously discussed in section 

II.B., ‘‘Outlier Policy’’, of this proposed 

rule, in our proposed policy of targeting 

outlier payments to be approximately 

2.5 percent of total HH PPS payments in 

CY 2010, we are proposing to return 2.5 

percent back into the HH PPS rates, to 

include the national standardized 60- 

day episode payment rate. As such, to 

calculate the proposed CY 2010 national 

standardized 60-day episode payment 

rate, we first increase the CY 2009 

national standardized 60-day episode 

payment rate ($2,271.92) to adjust for 

the 5 percent originally set aside for 

outlier payments. We then reduce that 

adjusted payment amount by 2.5 

percent, the proposed target percentage 

of outlier payments as a percentage of 

total HH PPS payment. Next, we update 

by the current proposed CY 2010 home 

health market basket update percentage 

of 2.2 percent. 

As previously discussed in Section 

II.C., ‘‘Case-Mix Measurement 

Analysis’’, of this proposed rule, our 

updated analysis of the change in casemix not due to an underlying change in 

patient health status reveals additional 

increase in nominal change in case-mix. 

However, we are maintaining our 

existing policy to reduce rates by 2.75 

percent in CY 2010. Consequently, to 

calculate the proposed CY 2010 national 

standardized 60-day episode payment 

rate, we then reduce the rate by 2.75 

percent, for a proposed updated CY 

2010 national standardized 60-day 

episode payment rate of $2,325.79. The 

proposed updated CY 2010 national 

standardized 60-day episode payment 

rate for an HHA that submits the 

required quality data is shown in Table 

2. The proposed updated CY 2010 

national standardized 60-day episode 

payment rate for an HHA that does not 

submit the required quality data (home 

health market basket update of 2.2 

percent is reduced by 2 percent) is 

shown in Table 3. 


erowe on DSK5CLS3C1PROD with PROPOSALS2
Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40965 

TABLE 2—PROPOSED NATIONAL STANDARDIZED 60-DAY EPISODE PAYMENT RATE UPDATED BY THE PROPOSED HOME

HEALTH MARKET BASKET UPDATE FOR CY 2010, BEFORE CASE-MIX ADJUSTMENT AND WAGE ADJUSTMENT BASED

ON THE SITE OF SERVICE FOR THE BENEFICIARY

CY 2009 National 

Standardized 60-Day 

Episode Payment 

Rate 

Adjusted to return the 

outlier funds, that paid 

for the original 5% 

target for outlier 

payments 

Adjusted to account 

for the proposed 2.5% 

outlier policy 

Multiply by the proposed home health 

market basket update 

(2.2 percent) 1

Reduce by 2.75 

percent for nominal 

change in case-mix 

Proposed CY 2010 

National Standardized 

60-Day 

Episode Payment 

Rate 

$2,271.92 / 0.95 × 0.975 × 1.022 × 0.9725 $2,317.47 

1The proposed estimated home health market basket update of 2.2 percent for CY 2010 is based on Global Insight Inc., 1st Qtr 2009 forecast 

with historical data through 4th Qtr 2008. 

TABLE 3—FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY DATA; PROPOSED NATIONAL STANDARDIZED 60- 

DAY EPISODE PAYMENT RATE UPDATED BY THE PROPOSED HOME HEALTH MARKET BASKET UPDATE FOR CY 2010, 

BEFORE CASE-MIX ADJUSTMENT AND WAGE ADJUSTMENT BASED ON THE SITE OF SERVICE FOR THE BENEFICIARY

Total CY 2009 

National Standardized 

60-Day Episode Payment Rate 

Adjusted to return the 

outlier funds, that paid 

for the original 5% 

target for outliers 

Adjusted to account 

for the proposed 2.5% 

outlier policy 

Multiply by the 

proposed home 

health market basket 

update (2.2 percent)1

minus 2 percent for a 

0.2 percent update 

Reduce by 2.75 

percent for nominal 

change in case-mix 

Proposed CY 2010 

National Standardized 

60-Day Episode 

Payment Rate for 

HHAs That Do Not 

Submit 

Required Quality Data 

$2,271.92 / 0.95 × 0.975 × 1.002 × 0.9725 $2,272.12 

1The proposed estimated home health market basket update of 2.2 percent for CY 2010 is based on Global Insight Inc., 1st Qtr 2009 forecast 

with historical data through 4th Qtr 2008. 

c. Proposed National Per-Visit Rates 

Used To Pay LUPAs and Compute 

Imputed Costs Used in Outlier 

Calculations 

In calculating the proposed CY 2010 

national per-visit rates used to calculate 

payments for LUPA episodes and to 

compute the imputed costs in outlier 

calculations, we start with the CY 2009 

national per-visit rates. We first adjust 

the CY 2009 national per-visit rates to 

adjust for the 5 percent originally set 

aside for outlier payments. We then 

reduce those national per-visit rates by 

2.5 percent, the proposed target 

percentage of outlier payments as a 

percentage of total HH PPS payment. 

Next we update by the by the current 

proposed CY 2010 home health market 

basket update percentage of 2.2 percent. 

National per-visit rates are not subject to 

the 2.75 percent reduction related to the 

nominal increase in case-mix because 

they are per-visit rates and hence not 

case-mix adjusted. The proposed CY 

2010 national per-visit rates per 

discipline are shown in Table 4. The six 

home health disciplines are Home 

Health Aide (HH aide), Medical Social 

Services (MSS), Occupational Therapy 

(OT), Physical Therapy (PT), Skilled 

Nursing (SN), and Speech Language 

Therapy (SLP). 

TABLE 4—PROPOSED NATIONAL PER-VISIT RATES FOR LUPAS (NOT INCLUDING THE LUPA ADD-ON PAYMENT AMOUNT

FOR A BENEFICIARY’S ONLY EPISODE OR THE INITIAL EPISODE IN A SEQUENCE OF ADJACENT EPISODES) AND

OUTLIER CALCULATIONS UPDATED BY THE PROPOSED CY 2010 HOME HEALTH MARKET BASKET UPDATE, BEFORE

WAGE INDEX ADJUSTMENT

Home Health Discipline Type 

CY 2009 

Per-Visit 

Amounts 

Per 60-Day 

Episode for 

LUPAs 

Adjusted to 

return the 

outlier funds 

that paid for 

the original 

5% target 

for outlier 

payments 

Adjusted to 

account for 

the proposed 2.5% 

outlier policy 

For HHAs that DO submit 

the required quality data 

For HHAs that DO NOT 

submit the required quality data 

Multiply by 

the proposed home 

health market basket 

update (2.2 

percent) 1

CY 2010 

per-visit 

payment 

amount for 

HHAs that 

DO submit 

the required 

quality data 

Multiply by 

the proposed home 

health market basket 

update (2.2 

percent)1

minus 2 

percent, for 

a 0.2 percent update 

CY 2010 

per-visit 

payment 

amount for 

HHAs that 

DO NOT 

submit the 

required 

quality data 

Home Health Aide ..................................................................... $48.89 / 0.95 × 0.975 × 1.022 $51.28 × 1.002 $50.28 

Medical Social Services ............................................................ 173.05 / 0.95 × 0.975 × 1.022 181.51 × 1.002 177.96 

Occupational Therapy ............................................................... 118.83 / 0.95 × 0.975 × 1.022 124.64 × 1.002 122.20 

Physical Therapy ....................................................................... 118.04 / 0.95 × 0.975 × 1.022 123.81 × 1.002 121.39 

Skilled Nursing .......................................................................... 107.95 / 0.95 × 0.975 × 1.022 113.23 × 1.002 111.01 

Speech-Language Pathology .................................................... 128.26 / 0.95 × 0.975 × 1.022 134.53 × 1.002 131.90 

1The proposed estimated home health market basket update of 2.2 percent for CY 2010 is based on Global Insight Inc., 1st Qtr 2009 forecast with historical data 

through 4th Qtr 2008. 


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40966 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

d. Proposed LUPA Add-on Payment 

Amount Update 

Beginning in CY 2008, LUPA episodes 

that occur as the only episode or initial 

episode in a sequence of adjacent 

episodes are adjusted by adding an 

additional amount to the LUPA 

payment before adjusting for area wage 

differences. As previously discussed, we 

are proposing to return 2.5 percent back 

into the HH PPS rates, to include the 

LUPA add-on payment amount, as a 

result of our proposed policy to target 

outlier payments to be approximately 

2.5 percent of total HH PPS payments in 

CY 2010. As such, we first adjust the CY 

2009 LUPA add-on payment amount to 

adjust for the 5 percent originally set 

aside for outlier payments. We then 

reduce that amount by 2.5 percent, the 

proposed target percentage of outlier 

payments as a percentage of total HH 

PPS payment. Next we update by the 

current proposed CY 2010 home health 

market basket update percentage of 2.2 

percent. The LUPA add-on payment 

amount is not subject to the 2.75 percent 

reduction related to the nominal 

increase in case-mix because it is an 

add-on to the per-visit rates which are 

not case-mix adjusted. The proposed CY 

2010 LUPA add-on payment amount is 

shown in Table 5 below. Just as the 

standardized 60-day episode rate and 

the per-visit rates paid to HHAs that do 

not submit the required quality are 

reduced by 2 percent, the additional 

LUPA payment should be reduced by 2 

percent also. In neither the CY 2008 nor 

the CY 2009 HH PPS rulemaking did we 

include such an adjustment to the LUPA 

add-on payment amount. For CY 2010, 

we propose that the add-on to the LUPA 

payment to HHAs that submit the 

required quality data would be updated 

by the home health market basket 

update. We propose that the add-on to 

the LUPA payment to HHAs that do not 

submit the required quality data would 

be updated by the home health market 

basket update minus two percent. 

TABLE 5—PROPOSED CY 2010 LUPA ADD-ON PAYMENT AMOUNTS

CY 2009 LUPA 

add-on payment 

amount 

adjusted to return 

the outlier funds, 

that paid for the 

original 5% target 

for outliers 

Adjusted to return 

the outlier funds, 

that paid for the 

original 5% target 

for outliers 

Adjusted to account for the proposed 2.5% outlier 

policy 

For HHAs that DO submit the required 

quality data 

For HHAs that DO NOT submit the 

required quality data 

Multiply by the 

proposed home 

health market 

basket update 

(2.2 percent)1

Proposed CY 

2010 LUPA addon payment 

amount for HHAs 

that DO submit 

required quality 

data 

Multiply by the 

proposed home 

health market 

basket update 

(2.2 percent) 1

minus 2 percent, 

for a 0.2 percent 

update 

Proposed CY 

2010 LUPA addon payment 

amount for HHAs 

that DO NOT 

submit required 

quality data 

$90.48 / 0.95 × 0.975 × 1.022 $94.90 × 1.002 $93.05 

1The proposed estimated home health market basket update of 2.2 percent for CY 2010 is based on Global Insight Inc., 1st Qtr 2009 forecast 

with historical data through 4th Qtr 2008. 

e. Proposed Non-Routine Medical 

Supply Conversion Factor Update 

Payments for non-routine medical 

supplies (NRS) are computed by 

multiplying the relative weight for a 

particular severity level by the NRS 

conversion factor. We first adjust the CY 

2009 NRS conversion factor ($52.39) to 

adjust for the 5 percent originally set 

aside for outlier payments. We then 

reduce that amount by 2.5 percent, the 

proposed target percentage of outlier 

payments as a percentage of total HH 

PPS payment. Next we update by the 

current proposed CY 2010 home health 

market basket update percentage of 2.2 

percent. Finally, we then reduce that 

adjusted payment amount by 2.75, to 

account for the increase in nominal 

case-mix. The proposed CY 2010 NRS 

conversion factor is shown in Table 6a 

below. The NRS conversion factor for 

CY 2009 was $52.39. Consequently, for 

CY 2010, the proposed NRS conversion 

factor would be $53.44. 

TABLE 6a—PROPOSED CY 2010 NRS CONVERSION FACTOR FOR HHAS THAT DO SUBMIT THE REQUIRED QUALITY DATA

CY 2009 NRS 

conversion factor 

Adjusted to return the 

outlier funds, that paid 

for the original 5% 

target for outlier 

payments 

Adjusted to account 

for the proposed 2.5% 

outlier policy 

Multiply by the proposed home health 

market basket update 

(2.2 percent) 

Reduce by 2.75 

percent for nominal 

change in case-mix 

Proposed CY 2010 

NRS conversion 

factor for HHAs that 

do submit the required quality data 

$52.39 / 0.95 × 0.975 × 1.022 × 0.9725 $53.44 

The proposed payment amounts, 

using the above computed proposed CY 

2010 NRS conversion factor ($53.44), for 

the various severity levels based on the 

proposed updated conversion factor are 

calculated in Table 6b. 

TABLE 6b—RELATIVE WEIGHTS FOR THE 6-SEVERITY NRS SYSTEM

Severity level Points (scoring) Relative 

weight 

Proposed NRS 

payment 

amount 

1 .................................................................................... 0 .................................................................................... 0.2698 $14.42 

2 .................................................................................... 1 to 14 .......................................................................... 0.9742 52.06 

3 .................................................................................... 15 to 27 ........................................................................ 2.6712 142.75 

4 .................................................................................... 28 to 48 ........................................................................ 3.9686 212.08 

5 .................................................................................... 49 to 98 ........................................................................ 6.1198 327.04 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40967 

TABLE 6b—RELATIVE WEIGHTS FOR THE 6-SEVERITY NRS SYSTEM—Continued 

Severity level Points (scoring) Relative 

weight 

Proposed NRS 

payment 

amount 

6 .................................................................................... 99+ ................................................................................ 10.5254 562.48 

For HHAs that do not submit the 

required quality data, we again begin 

with the CY 2009 NRs conversion factor. 

We first adjust the CY 2009 NRS 

conversion factor ($52.39) to adjust for 

the 5 percent originally set aside for 

outlier payments. We then reduce that 

amount by 2.5 percent, the proposed 

target percentage of outlier payments as 

a percentage of total HH PPS payment. 

Next we update by the current proposed 

CY 2010 home health market basket 

update percentage of 2.2 percent minus 

2 percent) for a 0.002 percent update. 

Finally, we then reduce that adjusted 

payment amount by 2.75, to account for 

the increase in nominal case-mix. The 

proposed CY 2010 NRS conversion 

factor is shown in Table 7a below.5 

TABLE 7a—PROPOSED CY 2010 NRS CONVERSION FACTOR FOR HHAS THAT DO NOT SUBMIT THE REQUIRED QUALITY

DATA

CY 2009 NRS 

conversion factor 

Adjusted to return the 

outlier funds, that paid 

for the original 5% 

target for outlier 

payments 

Adjusted to account 

for the proposed 2.5% 

outlier policy 

Multiply by the proposed home health 

market basket update 

(2.2 percent) minus 2 

percent for a 0.25 

update 

Reduce by 2.75 

percent for nominal 

change in case-mix 

Proposed CY 2010 

NRS conversion 

factor for HHAs that 

do submit the required quality data 

$52.39 / 0.95 × 0.975 × 1.002 × 0.9725 $52.39 

The proposed payment amounts for 

the various severity levels based on the 

proposed updated conversions factor, 

for HHAs that do not submit quality 

data, are calculated in Table 7b, below. 

TABLE 7b—RELATIVE WEIGHTS FOR THE 6-SEVERITY FOR HHAS THAT DO NOT SUBMIT QUALITY DATA

Severity level Points 

scoring) Relative weight 

Proposed NRS 

payment 

amount 

1 .................................................................................... 0 0.2698 ........................................................................... $14.13 

2 .................................................................................... 1 to 14 0.9742 ........................................................................... 51.04 

3 .................................................................................... 15 to 27 2.6712 ........................................................................... 139.94 

4 .................................................................................... 28 to 48 3.9686 ........................................................................... 207.91 

5 .................................................................................... 49 to 98 6.1198 ........................................................................... 320.62 

6 .................................................................................... 99+ 10.5254 ......................................................................... 551.43 

D. OASIS Issues 

1. HIPPS Code Reporting 

We would first like to clarify our 

policy regarding the submission of the 

Health Insurance Prospective Payment 

System (HIPPS) code to CMS via the 

OASIS. § 484.250 requires HHAs to 

submit to CMS the OASIS data 

described in § 484.55(b)(1) and 

§ 484.55(d)(1) in order for CMS to 

administer the payment rate 

methodologies. Also, as described in 

§ 484.20, HHAs must electronically 

report all OASIS data collected in 

accordance with § 484.55 as a condition 

of participation, and HHAs must encode 

and electronically transmit the 

completed OASIS assessment to CMS in 

the standard data format as described in 

§ 484.20(d). For those OASIS 

assessments required for payment, the 

standard format which is electronically 

transmitted by the HHA to CMS 

includes a HIPPS code, generated by 

grouper software at the HHA. When an 

HHA electronically transmits OASIS 

assessments to CMS (via the State 

agency), the CMS OASIS submission 

system performs a validation check of 

the transmitted OASIS items, including 

the submitted HIPPS code. If the CMS 

OASIS submission system validation 

determines that the submitted HIPPS 

code is in error, it informs HHAs of that 

error via the Final Validation Report 

which is returned to HHA. The Final 

Validation Report will include the valid, 

CMS OASIS submission system 

calculated HIPPS code. We have become 

aware of a proliferation of incidents 

where the HIPPS code submitted to 

CMS on the OASIS does not match the 

HIPPS code which is calculated by the 

CMS OASIS submission system. The 

HH PPS Grouper Software, which is 

used by the CMS OASIS submission 

system in its validation, is the official 

grouping software of the HH PPS, and 

thus the HIPPS code produced by the 

CMS OASIS submission system is the 

HIPPS code that should ultimately be 

billed on the claim. Consequently, in 

the interest of accurate coding and 

billing, we propose that the HHA be 

required to ensure that the HIPPS code 

billed on the claim is consistent with 

that which CMS’ OASIS submission 

system calculated. In the case where the 

Final Validation Report returns to the 

HHA a HIPPS code which is different 

than the HIPPS code submitted to CMS 

by the HHA on the OASIS, the HHA 

must ensure that the HIPPS code from 

the Final Validation report is the HIPPS 

code reported on the bill. 


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40968 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

2. OASIS Submission as a ‘‘Condition of 

Payment’’ 

Section 484.20 requires that HHAs 

must electronically report to CMS (via 

the State agency or OASIS contractor) 

all OASIS data collected in accordance 

with § 484.55 as a condition of 

participation. Additionally, § 484.250 

requires that HHAs must submit to CMS 

the OASIS data described at 

§ 484.55(b)(1) and (d)(1) in order for 

CMS to administer the payment rate 

methodologies. Building on the above 

clarification for HHAs to ensure the 

HIPPS code reported on the bill is 

consistent with that which CMS’ OASIS 

submission system calculated, and in 

order to be consistent with § 484.250, 

we are proposing to require the 

electronic reporting of OASIS to CMS as 

a condition of payment in § 484.210. 

Currently, as a requirement for pay for 

reporting, HHAs are required to submit 

quality data (that being OASIS data) in 

order to receive the full home health 

market basket update to the rates. The 

burden associated with the requirement 

for the HHA to submit the OASIS is 

currently accounted for under OMB# 

0938–0761. Making OASIS submission a 

condition for payment is consistent with 

both OASIS submissions being a 

condition of participation and a 

requirement to receive full market 

basket updates under pay for reporting. 

As such, we are proposing to revise 

§ 484.210 ‘‘Data used for the calculation 

of the national prospective 60-day 

episode payment’’ to reflect this 

requirement. 

E. Qualifications for Coverage as They 

Relate to Skilled Services Requirements 

To qualify for Medicare coverage of 

home health services a Medicare 

beneficiary must meet each of the 

following requirements as stipulated in 

§ 409.42: Be confined to the home or an 

institution that is not a hospital, SNF, or 

nursing facility as defined in sections 

1861(e)(1), 1819(a)(1) or 1919 of Act; be 

under the care of a physician as 

described in § 409.42(b); be under a plan 

of care that meets the requirements 

specified in § 409.43; the care must be 

furnished by or under arrangements 

made by a participating HHA, and the 

beneficiary must be in need of skilled 

services as described in § 409.42(c). 

Subsection 409.42(c) of our regulations 

requires that the beneficiary need at 

least one of the following services as 

certified by a physician in accordance 

with § 424.22: Intermittent skilled 

nursing services and the need for skilled 

services which meet the criteria in 

§ 409.32; Physical therapy which meets 

the requirements of § 409.44(c), Speechlanguage pathology which meets the 

requirements of § 409.44(c); or have a 

continuing need for occupational 

therapy that meets the requirements of 

§ 409.44(c), subject to the limitations 

described in § 409.42(c)(4). 

Basis for Revisions to § 409.42(c)(1), 

409.44(b), and § 424.22 

In recent years, MedPAC, the HHS 

Office of the Inspector General (OIG), 

and Medicaid State agencies suggested 

the need for CMS to clarify the Medicare 

home health coverage criteria regarding 

the skilled services specified at § 409.42. 

In their March 2004 report (http:// 

www.medpac.gov/documents/ 

Mar04_Entire_reportv3.pdf), MedPAC 

reported that the Medicare eligibility 

criteria for the home health benefits 

leaves a great deal open to 

interpretation, describing a particular 

concern with the lack of clarity 

regarding the Medicare home health 

skilled nursing services requirement. In 

their Memorandum Report dated 

February 5, 2009 titled ‘‘Medicaid and 

Medicare Home Health Payments for 

Skilled Nursing and Home Health Aide 

Services’’ (http://oig.hhs.gov/oei/ 

reports/oei-07–06–00641.pdf), the OIG 

also stated that Medicare coverage 

policy regarding skilled nursing services 

lacked clarity. The OIG indicated that 

our payment methodology might be 

prone to error. HHAs were unclear 

about which skilled nursing services 

were covered by Medicare’s home 

health benefit. Further, Medicaid State 

agencies have also communicated to 

CMS their concerns that HHAs find it 

difficult to accurately determine when 

services provided to dually Medicare 

and Medicaid eligible individuals 

(‘‘dual eligibles’’) meet the Medicare 

coverage criteria, especially the 

requirements for needing skilled 

nursing care on an intermittent basis. 

State Medicaid agencies have 

communicated to CMS that this 

ambiguity is resulting in some HHAs 

routinely submitting all claims for dualeligible persons with chronic care needs 

to their State Medicaid agencies for 

payment. State Medicaid agencies and 

CMS are concerned about this practice, 

referencing the requirement under the 

Social Security Act that Medicaid must 

be the payer of last resort. State agencies 

have told CMS that some of these claims 

would have been covered and paid by 

Medicare if they were submitted for 

payment. Other State agencies have 

used Medicaid post payment reviews to 

identify claims they believe should have 

been paid by another payer (e.g., 

Medicare). 

In 2006, CMS and certain Medicaid 

State Agencies embarked on an 

educational initiative to improve the 

ability of HHAs, State Agencies, and 

CMS contractors to make appropriate 

coverage decisions, resulting in an 

improved ability by HHAs to identify 

the appropriate payer for services 

provided, ultimately improving HHA 

billing accuracy. 

As part of its provider education 

program, CMS focused on clarifying 

§ 409.42 ‘‘Beneficiary qualifications for 

coverage of services’’. During the course 

of the training, it became apparent that 

confusion existed among certain 

Medicaid State Agencies and HHAs 

regarding under what circumstances the 

overall management and evaluation of a 

care plan would constitute a skilled 

service. HHAs asked what underlying 

conditions, complications, or 

circumstances would require a patient 

otherwise receiving unskilled services 

to need care plan management and 

evaluation by a registered nurse, thus 

rendering such care skilled. CMS 

therefore ensured that the training 

provided a particular focus on the 

requirement that a beneficiary be in 

need of skilled services. CMS provided 

comprehensive guidance to clarify that 

in the home health setting, management 

and evaluation of a patient care plan is 

considered a reasonable and necessary 

skilled service only when underlying 

conditions or complications are such 

that only a registered nurse can ensure 

that essential non-skilled care is 

achieving its purpose. Another area of 

confusion that surfaced during the 

training was when the need for patient 

education services constitutes skilled 

services in the home health setting. 

HHAs questioned which specific sorts 

of educational services would render 

the education a skilled service in the 

home health setting. 

To address the concerns identified by 

OIG, MedPAC, State Medicaid agencies 

and the clarity concerns home health 

agencies communicated to CMS during 

the 2006 training, we propose to revise 

§ 409.42(c)(1) to further clarify that in 

order for services to be considered 

skilled in the home health setting, 

certain limitations (discussed below) 

would apply. We believe these revisions 

would assist HHAs in their 

determination of home health eligibility 

and will enable HHAs to more 

accurately bill for their dual eligible 

population. 

Proposed Revisions to § 409.42(c)(1) 

To clarify what constitutes skilled 

services in the home health setting, we 

are proposing the following revision to 

§ 409.42. We propose to add a qualifying 

instruction to § 409.42(c)(1) to explain 

that intermittent skilled nursing services 


erowe on DSK5CLS3C1PROD with PROPOSALS2
Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40969 

meeting the criteria for skilled services 

and the need for skilled services found 

in § 409.32 (with examples in § 409.33 

(a) and (b)) are subject to certain 

limitations in the home health setting. 

We propose to describe the limitations 

in two new paragraphs, § 409.42(c)(1)(i) 

and § 409.42(c)(1)(ii). 

Proposed New Paragraph 

§ 409.42(c)(1)(i) 

Our policy at § 409.33(a)(1) describes 

that the development, management, and 

evaluation of a patient’s care plan based 

on physician’s orders constitute skilled 

services when, because of the patient’s 

physical or medical condition, oversight 

by technical or professional personnel is 

needed to promote recovery and ensure 

medical safety. The examples described 

in § 409.33(a)(1)(ii) further describe that 

when the patient’s overall condition 

supports a finding that recovery and 

safety can be ensured only if the total 

care is planned, managed, and evaluated 

by technical or professional personnel, 

it is appropriate to infer that skilled 

services are being provided. 

We propose in § 409.42(c)(1)(i) that in 

the home health setting, management 

and evaluation of a patient care plan is 

considered a reasonable and necessary 

skilled service only when underlying 

conditions or complications are such 

that only a registered nurse can ensure 

that essential non-skilled care is 

achieving its purpose. 

Further, in § 409.42(c)(1)(i) we also 

propose to clarify that to be considered 

a skilled service, the complexity of the 

necessary unskilled services that are a 

necessary part of the medical treatment 

must require the involvement of 

licensed nurses to promote the patient’s 

recovery and medical safety in view of 

the overall condition. Where nursing 

visits are not needed to observe and 

assess the effects of the nonskilled 

services being provided to treat the 

illness or injury, skilled nursing care 

would not be considered reasonable and 

necessary, and the management and 

evaluation of the care plan would not be 

considered a skilled service. 

Additionally, we propose to further 

clarify in § 409.42(c)(1)(i) that in some 

cases, the condition of the patient may 

require that a service that would 

normally be considered unskilled be 

classified as a skilled nursing service 

given a patient’s unique circumstances. 

This would occur when the patient’s 

underlying condition or complication 

required that only a registered nurse 

could ensure that essential non-skilled 

care was achieving its purpose. The 

registered nurse would ensure that 

services were safely and effectively 

performed. However, any individual 

service would not be deemed a skilled 

nursing service merely because it was 

performed by or under the supervision 

of a licensed nurse. Where a service can 

be safely and effectively performed (or 

self administered) by the average nonmedical person without the direct 

supervision of a nurse, the service 

cannot be regarded as a skilled service 

although a nurse actually provided the 

service. 

Proposed New Paragraph 

§ 409.42(c)(1)(ii) 

Additionally, we also propose a new 

§ 409.42(c)(1)(ii), which would clarify 

when patient education services as 

described in § 409.33(a)(3) constituted 

skilled services in the home health 

setting. Current § 409.32(a)(3) states that 

patient education services are skilled 

services if the use of technical or 

professional personnel is necessary to 

teach patient self-maintenance. 

However, to address the concerns and 

lack of clarity surrounding when 

education services are skilled services 

as described above, we are proposing to 

add a new paragraph, § 409.42(c)(1)(ii). 

In the home health setting, skilled 

education services would be deemed to 

no longer be needed when it became 

apparent, after a reasonable period of 

time, that the patient, family, or 

caregiver could not or would not be 

trained. Further teaching and training 

would cease to be reasonable and 

necessary in this case, and would cease 

to be considered a skilled service. 

Notwithstanding that the teaching or 

training was unsuccessful, the services 

for teaching and training would be 

considered to be reasonable and 

necessary prior to the point that it 

became apparent that the teaching or 

training was unsuccessful, as long as 

such services were appropriate to the 

patient’s illness, functional loss, or 

injury. 

Proposed Change to § 409.44(b) 

We are proposing to revise the 

introductory material at § 409.44(b)(1), 

to refer to the newly proposed 

limitations of skilled services in the 

home health benefit at § 409.42(c)(1)(i) 

and 409.42(c)(1)(ii). The clauses under 

the revised paragraphs (i) through (iv) 

would remain unchanged. 

Proposed Revision to § 424.22(a)(1)(i) 

and § 424.22(b)(2) 

We also propose to revise 

§ 424.22(a)(1)(i) and § 424.22(b)(2) to 

require a written narrative of clinical 

justification on the physician 

certification and recertification for the 

targeted condition where the patient’s 

overall condition supports a finding that 

recovery and safety could be ensured 

only if the care was planned, managed, 

and evaluated by a registered nurse. We 

believe that this revision would address 

HHAs’ questions regarding the specific 

circumstances which would necessitate 

the need for skilled management and 

evaluation of the care plan. 

Additionally, we believe this 

requirement would be an important step 

in enhancing the physician 

accountability and involvement in the 

patient’s plan of care. 

As we described above, many 

Medicaid State Agencies and HHAs 

contend that there is confusion as to 

when overall management and 

evaluation of a care plan constitute a 

skilled service. They questioned what 

specific beneficiary underlying 

conditions, or complications or 

circumstances would warrant a patient 

who was receiving unskilled services to 

need care plan management and 

evaluation by a registered nurse, thus 

rendering the care skilled. To clarify for 

home health agencies what specific 

circumstances would necessitate the 

involvement of a registered nurse in the 

development, management, and 

evaluation of a patient’s care plan when 

only unskilled services are being 

provided, we propose additions to the 

home health certification content 

requirements as described at 

§ 424.22(a)(i) and recertification content 

requirements at § 424.22(b)(2). 

Specifically, when a patient’s 

underlying condition or complication 

requires exclusively that a registered 

nurse ensure that essential non-skilled 

care is achieving its purpose, and 

necessitates a registered nurse be 

involved in the development, 

management, and evaluation of a 

patient’s care plan, we propose to 

require the physician include a written 

narrative on the certification and 

recertification describing the 

physician’s clinical justification of this 

need. 

In the Physician Fee Schedule 

proposed rule published in the July 7, 

2008 Federal Register (73 FR 38578), we 

solicited comments asking the industry 

to suggest options to enhance contact 

between the physician and the patient. 

In that solicitation of comments, we 

described policy options that we had 

been considering such as a review of the 

RVUs associated with the certification 

and recertification of the HH plan of 

care (POC), and that we were 

considering proposing new 

requirements, for example, a 

requirement for ‘‘direct’’ patient contact 

with the physician, to ensure more 

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certification and recertification of the 

HH POC. 

As a result of this solicitation, some 

commenters suggested that CMS 

establish documentation expectations 

associated with the certification and 

recertification of the need for Medicare 

home health services. We are continuing 

to consider policy options to enhance 

the physician-patient interaction in the 

home health setting. We believe that the 

commenters’ suggestion that CMS 

establish documentation expectations 

associated with the certification and 

recertification, such as our proposed 

clinical justification narrative 

requirement, may be a first step in 

achieving this goal. 

Finally, we believe that this new 

requirement would increase physician 

accountability and oversight of the 

certification and recertification of home 

health services and plan of care by 

focusing attention on the physician’s 

responsibility to set out the clinical 

basis for this skilled need as indicated 

in the patient’s medical record. 

This brief narrative could be written 

or typed on the certification form itself. 

We do not believe that this brief 

narrative should be allowed as an 

attachment to the certification form 

because an attachment could easily be 

prepared by someone other than the 

physician, and what we are seeking is 

more direct involvement on part of the 

physician. We seek comments on 

whether this proposed requirement 

would increase physician engagement 

in the certification and recertification 

process, and clarify industry confusion 

associated with when a patient’s 

condition would require the need for a 

registered nurse to oversee the patient’s 

care plan, thus rendering such ‘‘skilled 

care’’ under our payment system. 

F. OASIS for Significant Change in 

Condition: No Longer Associated With 

Payment 

We propose to remove an obsolete 

reference to ‘‘new case-mix 

assignments’’ as a result of significant 

changes in a patient’s condition that 

appears in 42 CFR 484 subpart E at 

§ 484.55(d)(1)(ii). The significant change 

in condition (SCIC), as it relates to new 

case-mix assignments affecting 

payment, was an element of the HH PPS 

at the time of its first implementation in 

fiscal year 2000. However, as part of the 

HH PPS payment refinements 

implemented in CY 2008, we eliminated 

the SCIC policy, and the assignment of 

subsequent case-mix assignments under 

the HH PPS. However, it should be 

noted that it was not the SCIC payment 

policy that required the HHA to perform 

the assessment, but rather the 

significant change in the patient’s 

condition. We are not proposing to 

change that requirement. An HHA 

would still be required to perform an 

assessment in the event that a patient 

experienced a significant change in 

condition. The proposed modification is 

only that a new case-mix assignment is 

no longer associated with this 

assessment. 

In addition, we propose to revise 

§ 484.250 to delete an obsolete reference 

to § 484.237. § 484.237 referred to the 

SCIC payment policy and was removed 

in the CY 2008 HH PPS final rule (72 

FR 49879). 

G. Proposed Payment Safeguards for 

Home Health Agencies 

The provisions contained in this 

section are designed to: (1) Improve our 

ability to verify that home health 

agencies (HHAs) meet minimum 

enrollment criteria; (2) ensure that 

HHAs that are changing ownership meet 

and continue to meet the Conditions of 

Participation for HHAs found in 42 CFR 

Part 484; and (3) improve the quality of 

care that Medicare beneficiaries receive 

from HHAs. 

1. Program Integrity Concerns Involving 

Home Health Agencies (HHAs) 

The fraudulent business practices of 

certain HHAs continue to cost the 

Medicare program millions of dollars 

nationwide. This issue was discussed in 

a recent report issued by the 

Government Accountability Office 

(GAO) entitled ‘‘Improvements Needed 

to Address Improper Payments in Home 

Health’’ (GAO–09–185). This report, 

discussed in more detail below, 

concluded, in part, that ‘‘In the absence 

of greater prevention, detection, and 

enforcement efforts, the Medicare home 

health benefit will continue to be a 

ready target for fraud and abuse.’’ 

The problem has been especially 

acute in, though by no means limited to, 

the States of Texas and California. In 

Los Angeles County in California, for 

instance, the amount of money for 

which HHAs in that county billed 

Medicare between Fiscal Years 2003 

and 2006 rose from $569 million to $921 

million—an increase of 62 percent, and 

one that was not accompanied by a 

similar increase in the county’s 

Medicare beneficiary population. There 

has also been an abnormal proliferation 

of HHAs in California as a whole. 

Between October 2002 and May 2007, 

the number of HHAs in the State rose 

by 25 percent—again, without a 

concomitant upswing in the number of 

Medicare beneficiaries in California. 

This suggests that there may also be an 

increase in improper billing. HHA 

proliferation has been an even bigger 

problem in Texas. Between October 

2002 and October 2006, the number of 

HHAs in the State doubled, while— 

during this same period—the number of 

HHAs in Harris County, Texas (which 

includes the city of Houston) increased 

by almost 150 percent. As with 

California, these figures are out of all 

proportion with any increase in the 

beneficiary population or demand for 

HHA services in Texas or Harris County. 

The aforementioned GAO report 

expressed similar concerns. It noted 

that, nationwide, ‘‘spending on the 

Medicare home health benefit grew 

about 44 percent from 2002 through 

2006, despite an increase of just less 

than 17 percent in the number of 

beneficiaries using the benefit during 

that 5-year period.’’ The report also 

noted discrepancies in States other than 

Texas and California. To illustrate, 

between 2002 and 2006, the number of 

HHAs that billed Medicare rose in 

Florida by 100 percent, in Michigan by 

62 percent, in Illinois by 59 percent, in 

Ohio by 42 percent, in Arizona by 32 

percent, and in the District of Columbia 

by 67 percent. However, the increases in 

the number of Part A beneficiaries who 

used HHA services in these six 

jurisdictions were as follows: Florida— 

28 percent; Michigan—19 percent; 

Illinois—23 percent; Ohio—14 percent; 

Arizona—4 percent; and the District of 

Columbia—2 percent. 

The disparity in many jurisdictions 

between the increase in the number of 

HHAs and the rise in the number of 

beneficiaries is so overwhelming that it 

cannot be attributed solely to an aging 

populace. The fact that, as shown above, 

between 2002 and 2006, the number of 

HHAs in Arizona rose at a rate 8 times 

greater than the number of Part A 

beneficiaries that use HHA services— 

and that the rate was an astounding 33 

times greater in Washington, DC—must 

raise serious questions as to the 

legitimacy of some of these entities. 

The GAO report also outlined a 

number of instances of allegedly 

fraudulent activities on the part of 

HHAs. In a particularly glaring example 

in Houston, Texas, the GAO noted the 

following: ‘‘One PSC (Program 

Safeguard Contractor) interviewed 670 

Houston beneficiaries who had the most 

severe clinical rating and who were 

patients of HHAs identified by the PSC 

as having aberrant billing patterns. The 

PSC found 91 percent of claims for these 

beneficiaries to be in error. Nearly 50 

percent of the beneficiaries were not 

homebound and therefore were not 

eligible to receive any Medicare home 

health services. The investigators also 

found that while 39 percent of the 


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beneficiaries they interviewed were 

eligible for the benefit, their clinical 

severity had been exaggerated. The PSC 

concluded that only 9 percent of claims 

for the 670 beneficiaries were properly 

coded. In addition, the PSC found that 

other home health beneficiaries it 

interviewed were not homebound; for 

instance, some were mowing their 

lawns when investigators came to 

interview them.’’ 

Of particular concern to CMS is that 

the problems discussed above have been 

seen with HHAs on a far greater scale 

than with any other type of certified 

provider. The dramatic rise in the 

number of HHAs in relation to the 

increase in Medicare beneficiaries has 

not been even remotely duplicated with 

other Part A entities. In sum, the relative 

level of potentially fraudulent behavior 

among HHAs exceeds that of other 

certified provider types, and it is for this 

reason that CMS needs to take 

additional steps to ensure that only 

legitimate, bona fide HHAs remain 

enrolled in the Medicare program. 

2. Prohibition on Sharing of Practice 

Location 

In 2008, we determined that a number 

of HHAs had enrolled or attempted to 

enroll into the Medicare program using 

the same practice location or base of 

operations listed in Section 4 of their 

respective Medicare provider 

enrollment applications. In one case, a 

business attempted to enroll more than 

twenty different HHAs with the same 

Section 4 practice location as the base 

of operations. 

We believe that allowing HHAs to 

share practice locations, operations, and 

other aspects of the provider’s 

operations (for example, patient and 

financial records) in this manner 

constitutes a significant risk to the 

Medicare program. To allow an HHA to 

share its Section 4 practice location or 

base of operations with another 

Medicare-enrolled HHA or supplier 

limits the ability of CMS, a State survey 

agency, or an accreditation organization 

to ensure that each HHA meets the 

Conditions of Participation specified at 

42 CFR part 484. Indeed, pursuant to 

Section 1866(j)(1)(A) of the Act, the 

Secretary is required to establish by 

regulation a process for the enrollment 

of providers and suppliers into the 

Medicare program. However, the 

sharing of HHA practice locations or 

bases of operations listed in Section 4 of 

the Medicare provider enrollment 

application hinders CMS’s ability to 

properly enroll HHAs into Medicare 

because of the extreme difficulty in 

determining which site is in operation 

at a particular time, and which provider 

has control over the space, staff, 

equipment, etc. We do not believe that 

legitimate HHA providers share Section 

4 practice locations or bases of 

operations with another Medicareenrolled HHA or supplier. 

At § 489.19, we are proposing a 

provision that would prohibit an HHA 

from sharing, leasing, or subleasing its 

practice location or base of operations 

listed in Section 4 of its Medicare 

provider enrollment application with or 

to another Medicare-enrolled HHA or 

supplier. We believe that this provision 

is consistent with existing provisions 

found in § 410.33(g)(15), which 

established limitations on the sharing of 

space (that is, a practice location) by 

independent diagnostic testing facilities 

(IDTF). 

At § 489.12(a)(5), we are proposing to 

allow CMS to refuse to enter into a 

provider agreement with a prospective 

HHA if we determined, under proposed 

42 CFR 489.19, that the HHA was 

sharing, leasing, or subleasing its 

practice location or base of operations 

listed in Section 4 of its Medicare 

provider enrollment application with or 

to another Medicare-enrolled HHA or 

supplier. 

At § 424.530(a)(8), we are proposing 

to allow a Medicare contractor, 

including a Regional Home Health 

Intermediary or A/B MAC, to deny 

Medicare billing privileges to an HHA if 

it determined, under proposed 42 CFR 

489.19, that the HHA was sharing, 

leasing, or subleasing its practice 

location or base of operations listed in 

Section 4 of its Medicare provider 

enrollment application with or to 

another Medicare-enrolled HHA or 

supplier. 

At § 424.535(a)(11), we are proposing 

to allow a Medicare contractor, 

including a Regional Home Health 

Intermediary or A/B MAC, to revoke the 

Medicare billing privileges of an HHA 

that it determined, under proposed 42 

CFR 489.19, was sharing, leasing, or 

subleasing its practice location or base 

of operations listed in Section 4 of its 

Medicare provider enrollment 

application with or to another Medicareenrolled HHA or supplier. 

We are, nevertheless, soliciting 

comments on whether there are 

legitimate business reasons for a 

Medicare-enrolled HHA to share space 

with another Medicare-enrolled HHA or 

supplier when there is common 

ownership. We are also soliciting 

comments on whether there are 

legitimate business reasons for a 

Medicare-enrolled HHA to be co-located 

with another Medicare-enrolled HHA or 

supplier when there is no common 

ownership. In addition, we are soliciting 

comments on whether there are 

legitimate business reasons for a 

Medicare-enrolled HHA to engage in 

leasing or subleasing arrangements with 

a Medicare-enrolled supplier when 

there is common ownership. 

3. Sale or Transfer of Ownership Within 

3 Years of Enrollment 

We have recently found instances 

where owners of a HHA, some of which 

were working in concert with brokers or 

organizations operating ‘‘turn-key’’ 

businesses, have enrolled or have 

attempted to enroll in the Medicare 

program for the specific purpose of 

selling the Medicare billing privileges 

and the Medicare provider agreement of 

their HHA to a third-party. In this 

scenario, the buyer or seller of the HHA 

typically would notify Medicare of the 

sale or change of ownership via the 

Medicare enrollment application (CMS– 

855A) after the billing privileges have 

been transferred when the HHA is sold. 

Current CMS policy recommends 

surveys when there is a change of 

ownership. However, surveys in cases of 

a change of ownership do not occur 

with the frequency that they do when 

providers initially enroll in Medicare. 

Consequently, there are instances in 

which a change of ownership takes 

place yet the new owner does not 

undergo a survey, in which case 

Medicare cannot conclusively ascertain 

whether the business, under new 

ownership, meets the Conditions of 

Participation under 42 CFR part 484. 

This serves as an incentive for certain 

prospective providers to enroll in the 

Medicare program with the sole purpose 

of transferring Medicare billing 

privileges and the associated provider 

agreement when the business is sold. 

This is problematic for two reasons. 

First, the prospective provider has 

minimal incentive for ensuring quality 

care for its patients after it is enrolled 

because its exclusive objective for 

participating in Medicare in the first 

place is to sell the business shortly after 

receiving Medicare billing privileges. In 

other words, the provider, aware that it 

may be able to sell the business without 

the HHA having to undergo a survey, 

may have little motivation to ensure that 

it is in compliance with the Conditions 

of Participation under 42 CFR part 484, 

since it intends on selling the business 

in any event. Medicare beneficiaries, 

therefore, may receive inadequate 

services as a result of this activity. 

Second, without the protection that a 

survey provides, the HHA may attempt 

to bill Medicare for these insufficient 

services. These circumstances increase 

the risk for an HHA to submit 

inappropriate and potentially fraudulent 


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claims to Medicare, which places the 

Medicare Trust Funds at risk. 

We further note that 42 CFR 

424.550(a) states that a provider or 

supplier ‘‘is prohibited from selling its 

Medicare billing number or privileges to 

any individual or entity, or allowing 

another individual or entity to use its 

Medicare billing number.’’ We believe 

that the ‘‘turn-key’’ scenarios described 

in this subsection 2 fall within the 

general intent and purview of this 

provision, in that the broker may focus 

more on the selling of the HHA’s billing 

privileges, rather than of the HHA itself. 

Nevertheless, while the provisions of 42 

CFR § 424.550(a) and (b) were designed 

to prohibit this type of practice, we 

cannot realistically enforce the 

prohibitions on the sale, including an 

asset sale or stock transfer, or transfer of 

billing privileges, unless we can confirm 

the nature of the financial arrangements 

involved therein. 

We recognize that the issue of a 

potential lack of a survey in HHA 

ownership changes exists with respect 

to other types of providers and certified 

suppliers. Yet there are several reasons 

as to why this concern is more acute 

with HHAs than with other provider 

types. First, and as already outlined in 

subsection 1, the level of fraud in the 

HHA sector appears to be more 

prevalent than with other provider 

categories. Second, CMS has not seen 

the types of turn-key arrangements 

described above with any type of 

provider or certified supplier other than 

HHAs. It is the combination of these two 

factors that, in our view, make it 

necessary for us to focus the proposed 

provisions below on HHAs, rather than 

on provider types with whom our 

concerns are not nearly as acute. We 

stress that CMS in the past has 

undertaken a number of enrollment 

initiatives to ensure that only eligible 

and qualified providers and suppliers 

obtain and maintain Medicare billing 

privileges; specifically, CMS 

promulgated rules to address fraud and 

abuse and quality of care concerns for 

IDTFs (in 42 CFR 410.33(g)) as well as 

suppliers of durable medical equipment, 

prosthetics, orthotics and supplies 

(DMEPOS) (42 CFR 424.57(c)). We 

therefore believe, for the reasons just 

stated, that a similar approach is 

warranted here with respect to HHAs. 

With that said, and in view of the 

aforementioned schemes that appear to 

be designed to subvert Medicare’s 

existing statutory and regulatory 

authorities related to enrollment and 

State survey procedures, we maintain 

that additional tools are needed to 

address this program vulnerability. 

At 42 CFR 424.550(b)(1), we are 

proposing that an HHA undergoing an 

ownership change (including asset sales 

and stock transfers) must obtain an 

initial State survey or accreditation by 

an approved accreditation organization 

if the change takes place within 36 

months after the effective date of the 

HHA’s enrollment in Medicare. This 

means that any change of ownership 

that occurs during the 36 months 

following an initial enrollment would 

not result in the transfer of the HHA’s 

provider agreement and Medicare 

billing privileges to the new owner. The 

new owner of the existing HHA would 

instead be required to enroll in the 

Medicare program as a new provider 

under the provisions of § 424.510 and 

obtain an initial State survey or 

accreditation by an approved 

accreditation organization. This is to 

ensure that the HHA under new 

ownership remains in compliance with 

the Conditions of Participation in 42 

CFR part 484. We believe that this will 

help deter turn-key entities from 

purchasing HHAs for the sole purpose 

of selling them, in that the facility will 

be unable to undergo a change of 

ownership within the above-referenced 

36-month period without the HHA 

being subject to a State survey. 

We further believe that 36 months is 

an appropriate period of time for which 

to apply this requirement. It is long 

enough to ensure that a newly-enrolled 

HHA is serious about furnishing quality 

services to Medicare beneficiaries and is 

not merely looking to sell the HHA’s 

Medicare billing privileges at the 

earliest possible moment. Conversely, a 

36-month timeframe is, in our view, not 

so extensive as to greatly hinder the 

ability of a bonafide HHA to sell its 

business after the HHA has been 

operational and providing legitimate 

Medicare services for a reasonable 

period of time. While we do recognize 

that some legitimate, newly-enrolling 

HHAs may be inconvenienced by their 

inability to utilize, for a certain amount 

of time, the change of ownership 

provisions in 42 CFR 489.18, we also 

stress that the aforementioned survey 

requirement will, to a substantial extent, 

benefit legitimate members of the HHA 

provider community, in that it will help 

ensure that unqualified HHAs are no 

longer in the Medicare program. This 

will, for bonafide HHAs, reduce 

competition from less than legitimate 

HHAs and, on a larger level, help 

protect the Medicare Trust Funds. 

Finally, if adopted, we believe that 

any change of ownership (including 

asset sales or stock transfers) that is 

pending a Medicare contractor’s review 

and approval at the time this rule 

becomes effective, would be subject to 

this provision. 

4. Home Health Agency Reactivations of 

Medicare Billing Privileges 

In order to help address CMS’ 

concerns about potentially 

inappropriate activity by HHAs, an 

additional tool that we therefore believe 

is necessary to help stem this behavior 

involves enhanced safeguards for use as 

part of the reactivation process 

identified in § 424.540(a). 

To ensure that HHAs whose Medicare 

billing privileges have been deactivated 

for 12 months of non-billing and who 

seek to reactivate these privileges are 

still in compliance with the Conditions 

of Participation in 42 CFR part 484, we 

propose to revise § 424.540(b)(3) from 

its current form, ‘‘Reactivation of 

Medicare billing privileges does not 

require a new certification of the 

provider or supplier by the State survey 

agency or the establishment of a new 

provider agreement’’ to ‘‘With the 

exception of home health agencies, 

reactivation of Medicare billing 

privileges does not require a new 

certification of the provider or supplier 

by the State survey agency or the 

establishment of a new provider 

agreement.’’ We are also proposing to 

add § 424.540(b)(3)(i), which states that 

any HHA whose Medicare billing 

privileges are deactivated under the 

provisions found in § 424.540(a) are also 

required to obtain an initial State survey 

or accreditation by an approved 

accreditation organization before its 

Medicare billing privileges can be 

reactivated. 

As already explained, CMS remains 

concerned about the excessive level of 

potentially inappropriate activity in the 

HHA arena. To this end, CMS believes 

that the proposed provisions outlined in 

this subsection will, for reasons already 

identified, help address the concerns 

outlined in the aforementioned GAO 

report by ensuring that HHAs are in 

constant and verifiable compliance with 

the HHA Conditions of Participation 

found in 42 CFR part 484, and that only 

qualified and legitimate home health 

providers are enrolled in Medicare. 

H. Physician Certification and 

Recertification of the Home Health Plan 

of Care 

a. Background 

Sections 1814(a)(2)(C) and 

1835(a)(2)(A) of the Act require that a 

plan for furnishing home health services 

be established and periodically 

reviewed by a physician in order for 

Medicare payments for those services to 

be made. Our regulations at § 409.43(e) 


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specifically states that a home health 

plan of care (HH POC) must be 

reviewed, signed, and dated by the 

physician who reviews the POC (as 

specified in § 409.42(b)) in consultation 

with agency clinical staff at least every 

60 days (or more frequently as specified 

in § 409.43(e)(1). Additionally, 

§ 424.22(b) states that a recertification is 

required at least every 60 days, 

preferably at the time the plan is 

reviewed, and must be signed by the 

physician who reviews the home health 

POC. These schedules, for the review of 

the POC and the recertification, 

coordinate well with the 60-day episode 

payment unit under the HH PPS. In 

implementing the statutory requirement 

as well as these regulations, we believed 

that these requirements would 

encourage enhanced physician 

involvement in the HH POC and patient 

management, and would include more 

direct ‘‘in-person’’ patient encounters 

(as logistically feasible). 

Currently, physicians are paid for 

both the certification and recertification 

of the HH POC under HCPCS codes 

G0180 and G0179, respectively. The 

basis for the payment amounts of these 

physician services is the relative 

resources in RVUs required to furnish 

these services. We believe physician 

involvement is very important in 

maintaining quality of care under the 

HH PPS. 

In the HH PPS proposed rule 

published in the October 28, 1999 

Federal Register (64 FR 58196), we had 

proposed to require the physician to 

certify the case-mix weight/home health 

resource group (HHRG) as part of the 

required physician certification of the 

POC. This reflected our belief that the 

physician should be more involved in 

the decentralized delivery of home 

health services. However, in the final 

rule published in the July 3, 2000 

Federal Register (65 FR 41163), we did 

not finalize that proposal and decided to 

focus our attention on physician 

certification and education in order to 

better involve the physician in the 

delivery of home health services. 

b. Solicitation of Comments 

It has come to our attention that 

physician involvement in the 

certification and recertification of HH 

POC varies greatly. While some 

physicians have direct contact with 

their patients in the delivery of home 

health services, we believe that a 

significant number of physicians 

provide only a brief, albeit thorough, 

review of the HH POC, without any 

direct contact with the patient. We 

continue to believe that active 

involvement of the physician, including 

‘‘in-person’’ contact with the patient, 

during the certification and 

recertification of the HH POC is 

essential for the delivery of high quality 

HH services. 

In the Physician Fee Schedule 

proposed rule published in the July 7, 

2008 Federal Register (73 FR 38578), we 

mentioned several options to enhance 

direct contact between the physician 

and the patient. First, we considered a 

review of the RVUs associated with the 

certification and recertification of the 

HH POC. As a result of that review, the 

payment amounts to physicians could 

be reduced based on a more accurate 

determination of the actual RVUs 

required to provide these services. We 

also considered proposing new 

requirements; for example, a 

requirement for ‘‘direct’’ patient contact 

with the physician, to ensure more 

active physician involvement in the 

certification and recertification of the 

HH POC. We specifically solicited 

comments on these policy options. The 

following is a summary of the comments 

and our responses as published in the 

Physician Fee Schedule final rule 

published in the November 19, 2008 

Federal Register (73 FR 69855). 

Most commenters suggested that we 

leave our current policies and payment 

to physicians unchanged, at least until 

further analysis is completed. To that 

end, it was suggested that we continue 

to study the role of the physician in 

home care and determine which factors 

enhance a physician’s ability to conduct 

oversight activities, ensure 

appropriateness of care, and work 

collaboratively with HHAs without 

further burdening Medicare 

beneficiaries. Commenters urged CMS 

to engage with industry organizations 

that represent the physicians that 

furnish these services, to determine 

goals and assess options. Commenters 

further suggested that goals and options 

could include revising the procedure 

codes used for billing, assessing the 

current RVUs, and establishing 

documentation expectations. 

Some commenters suggested that 

payments to physicians for certifying 

and recertifying HH POCs should be 

restructured to provide incentives for 

greater physician involvement, to 

include personally seeing the patients. 

Specifically, some commenters 

suggested adding different payments for 

the varying levels of physician 

involvement in the certification and 

recertification of HH POCs. Other 

commenters urged CMS to consider how 

home telehealth can be employed to a 

greater degree to increase input of 

clinical information directly to 

physicians in lieu of face-to-face 

contact. 

Other commenters suggested that we 

actively support amending the Medicare 

statute to allow nurse practitioners 

(NPs) to certify and recertify HH POCs. 

Some commenters suggested that we 

actively support demonstrations and 

legislative proposals to build on the 

concept of merging home care with 

primary care under a single care 

management entity for persons in the 

advanced stages of chronic illnesses. 

Other commenters suggested that 

payment to medical directors should be 

restored to HHAs, along with 

requirements for their education and a 

definition of their role, and that we 

consider reimbursement for a planning 

teleconference between the physician 

and home health personnel. 

In the November 19, 2008 final rule, 

we expressed our appreciation for the 

comments and responded that we 

would continue to analyze and consider 

the comments and suggestions in future 

rulemaking. Additionally, as a result of 

comments received on the above 

physician rule, as it relates to physicianpatient contact, we are considering the 

possibility of requiring physicians to 

make phone calls to patients at various 

times over the course of home health 

treatment (prior to recertifications), as a 

means to promote that physician-patient 

contact and to help ensure the delivery 

of high quality HH services to our 

beneficiaries. 

In this HH PPS proposed rule for CY 

2010, we are specifically soliciting 

additional comments on this topic. 

I. Routine Medical Supplies 

HHAs have expressed to the HHS 

Office of the Inspector General (OIG) 

some confusion regarding routine 

medical supplies and how we account 

for the cost of those supplies. Therefore, 

we would like to reiterate our policy 

regarding routine medical supplies and 

how they are reimbursed under the HH 

PPS. 

Section 1895(b)(1) states that ‘‘all 

services covered and paid on a 

reasonable cost basis under the 

Medicare home health benefit as of the 

date of the enactment of this section, 

including medical supplies, shall be 

paid for on the basis of a prospective 

payment amount * * *’’. The cost of 

routine medical supplies was included 

in the average cost per visit amounts 

derived from the audit sample. These 

average cost per visit amounts were 

used to calculate the initial HH PPS 

rates published in the July 3, 2000 HH 

PPS final rule (FR 65 41184). Because 

reimbursement for routine medical 

supplies is bundled into the HH PPS 60- 


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day episode rate and the per-visit rates, 

HHAs may not bill separately for 

routine supplies. 

As noted in Chapter 7—Home Health 

Services of the Medicare Benefit Policy 

Manual (Pub. L. 100–02), sections 

50.4.1.2 and 50.4.1.3, routine supplies 

are supplies that are customarily used in 

small quantities during the course of 

most home care visits. They are usually 

included in the staff’s supplies and not 

designated for a specific patient. 

Routine supplies would not include 

those supplies that are specifically 

ordered by the physician or are essential 

to HHA personnel in order to effectuate 

the plan of care. Examples of supplies 

which are usually considered routine 

include, but are not limited to: 

A. Dressings and Skin Care 

• Swabs, alcohol preps, and skin prep 

pads; 

• Tape removal pads; 

• Cotton balls; 

• Adhesive and paper tape; 

• Nonsterile applicators; and 

• 4x4’s. 

B. Infection Control Protection 

• Nonsterile gloves; 

• Aprons; 

• Masks; and 

• Gowns. 

C. Blood Drawing Supplies 

• Specimen containers. 

D. Incontinence Supplies 

• Incontinence briefs and Chux 

covered in the normal course of a 

visit. For example, if a home health 

aide in the course of a bathing visit 

to a patient determines the patient 

requires an incontinence brief 

change, the incontinence brief in 

this example would be covered as a 

routine medical supply. 

E. Other 

• Thermometers; and 

• Tongue depressors. 

There are occasions when the 

supplies listed in the above examples 

would be considered non-routine and 

thus would be considered a billable 

supply, i.e., if they are required in 

quantity, for recurring need, and are 

included in the plan of care. Examples 

include, but are not limited to, tape, and 

4x4s for major dressings. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information (COI) 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. In order to fairly 

evaluate whether an information 

collection should be approved by OMB, 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for the following 

sections of this document that contain 

information collection requirements 

(ICRs): 

A. ICRs Regarding the Requirements for 

Home Health Services 

Section 424.22 proposes that if a 

patient’s underlying condition or 

complication required a registered nurse 

to ensure that essential non-skilled care 

was achieving its purpose, and 

necessitated a registered nurse be 

involved in the development, 

management, and evaluation of a 

patient’s care plan, the physician would 

include a written narrative describing 

the clinical justification of this need. 

The burden associated with this 

requirement would be the time and 

effort put forth by the physician to 

include the written narrative. We 

estimate it would take one physician 

approximately 5 minutes to meet this 

requirement. We estimate the frequency 

of such a situation to occur in about 5 

percent of episodes (or about 345,600 

episodes a year); therefore, the total 

annual burden associated with this 

requirement would be 28,800 hours for 

CY 2010. 

B. ICRs Regarding Deactivation of 

Medicare Billing Privileges 

In the proposed § 424.540(b)(3)(i), an 

HHA whose Medicare billing privileges 

are deactivated under the provisions 

found in 424.540(a) must obtain an 

initial State survey or accreditation by 

an approved accreditation organization 

before its Medicare billing privilege can 

be reactivated. 

The burden associated with this 

requirement would be the time and 

effort put forth by the HHA to obtain a 

State survey or accreditation. We 

estimate it would take the prospective 

provider/owner 60 hours to obtain a 

State survey or accreditation. We 

estimate that there would be 2,000 such 

occurrences annually; therefore, the 

total annual burden associated with this 

requirement would be 120,000 hours. 

C. ICRs Regarding Prohibition Against 

Sale or Transfer of Billing Privileges 

At § 424.550(b)(1) we propose that an 

HHA undergoing an ownership change 

would have to obtain an initial State 

survey or accreditation by an approved 

accreditation organization if the change 

takes place within 36 months after the 

effective date of the HHA’s participation 

in Medicare. Between April 2008 and 

April 2009, approximately 2,000 

Medicare-enrolled HHAs—or 22.5 

percent of the 9,000 total number of 

HHAs enrolled in Medicare—underwent 

a change of ownership. Naturally, the 

magnitude of the ownership changes 

varied by HHA, but the fact that almost 

one-quarter of all Medicare-enrolled 

HHAs changed ownership in some form 

within the past year is, for the reasons 

outlined in the preamble to this 

proposed rule, significant. 

It is also important to note that of the 

2,000 ownership changes, 

approximately 20 percent occurred in 

Texas, another 20 percent in Florida, 

and 14 percent in California, meaning 

that over one-half of all changes in 

ownership occurred in three States. 

Though it is possible that, if this 

provision was implemented, the number 

of total annual ownership changes 

would decrease, we will assume that the 

figure of 2,000 would remain constant. 

The burden associated with the 

proposed requirement in § 424.550(b)(1) 

would be twofold. First, the HHA would 

need to complete and submit a Medicare 

enrollment application (paper or 

electronic) as an initial applicant. This 

can be done electronically via the 

Internet-Based Provider Enrollment, 

Chain and Ownership System (PECOS) 

or by using the paper CMS–855 

enrollment application. The estimated 

burden of completing the entire 

application as a new enrollee is 3 hours. 

Thus, the estimated annual burden for 

the approximately 2,000 HHAs that will 

change ownership would be 6,000 

hours. Second, the provider would need 

to undergo a survey (or obtain 

accreditation in lieu of a survey) and 

perform administrative activities 

associated therewith. We estimate that 

the total hourly burden to the HHA for 

said activities would be 60 hours, for an 

annual burden of 120,000 hours (2,000 

HHAs × 60 hours). Therefore, we 

estimate that the total annual burden of 

compliance with § 424.550(b)(1) would 

be 126,000 hours (120,000 hours + 6,000 

hours). 

D. ICRs Regarding Patient Assessment 

Data 

Section 484.210 would require an 

HHA to submit to CMS the OASIS data 


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described at § 484.55(b)(1) and (d)(1) in 

order for CMS to administer the 

payment rate methodologies described 

in §§ 484.215, 484.230 and 484.235. 

The burden associated with this is the 

time and effort put forth by the HHA to 

submit the OASIS data. This burden is 

currently accounted for under OMB# 

0938–0761. 

OMB No. Requirements Number of 

respondents Burden hours Total annual burden hours 

None ................................................................................ 424.22 345,600 1/12 28,800 

None ................................................................................ 424.540(a)(3)(i) 2,000 60 120,000 

None ................................................................................ 424.550(b)(1) 2,000 63 126,000 

0938–0761 ....................................................................... 484.210 N/A N/A N/A 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–1560–P. Fax: (202) 395–6974; or 

E-mail: OIRA_submission@omb.eop.gov. 

E. ICRs Regarding Annual Update of the 

Unadjusted National Prospective 60- 

Day Episode Payment Rate 

Section 484.225(i) requires the 

submission of quality measures as 

specified by the Secretary. As part of 

this requirement, each HHA sponsoring 

a Home Health Care CAHPS 

(HHCAHPS) Survey must prepare and 

submit to its survey vendor a file 

containing patient data on patients 

served the preceding month that will be 

used by the survey vendor to select the 

sample and field the survey. This file 

(essentially the sampling frame) for 

most home health agencies can be 

generated from existing databases with 

minimal effort. For some small HHAs, 

preparation of a monthly sample frame 

may require more time. However, data 

elements needed on the sample frame 

will be kept at a minimum to reduce the 

burden on all HHAs. 

The burden associated with this 

requirement is the time and effort put 

forth by the HHA to prepare and submit 

the file containing patient data on 

patients. The survey instrument and 

procedures for completing the 

instrument are designed to minimize 

burden on all respondents. No 

significant burden is expected for small 

agencies beyond providing their 

contracted vendor with a monthly file of 

patients served. 

Initially, we estimate it would take 

one HHA 5 hours for the first month to 

meet this requirement. The subsequent 

monthly burden is estimated to be 30 

minutes per HHA. We estimate 

approximately 7,000 HHAs would be 

submitting this data annually. Based on 

that number, the burden associated with 

the first month is estimated at 35,000 

hours. The burden would decrease to 

2,100 for subsequent months. Therefore, 

the total annual burden for the first year 

would total 58,100. 

The burden associated with the home 

health patient’s submission of the 

HHCAHPS survey is currently pending 

OMB approval (CMS–10275/OMB# 

0938–NEW). Once OMB approval has 

been obtained, CMS will revise the 

package to include the burden on the 

HHAs as discussed above. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Analysis 

A. Overall Impact 

We have examined the impacts of this 

proposed rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993 as 

further amended) the Regulatory 

Flexibility Act (RFA) (September 19, 

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

the Social Security Act, section 202 of 

the Unfunded Mandates Reform Act of 

1995 (Pub. L. 104–4), Executive Order 

13132 on Federalism (August 4, 1999) 

and the Congressional Review Act (5 

U.S.C. 804(2)). 

Executive Order 12866(as amended by 

Executive Order 13258) 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 

rules with economically significant 

effects ($100 million or more in any 1 

year). We estimate that this rulemaking 

is ‘‘economically significant’’ as 

measured by the $100 million threshold 

and hence also a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a Regulatory Impact 

Analysis, that to the best of our ability, 

presents the costs and benefits of the 

rulemaking. 

1. HHA Provisions Regarding CoMingling, Ownership Changes, and 

Reactivation of Billing Privileges 

We believe that our proposals 

regarding: (1) The prohibition against 

co-mingling, (2) HHA changes of 

ownership, and (3) the reactivation of 

HHA billing privileges would have 

minimal budgetary impact, as the total 

number of entities that will be effected 

each year would be small. Moreover, we 

believe that these changes are necessary 

to ensure that currently enrolled and 

prospective HHAs are billing for the 

services provided and are in compliance 

with the conditions of participation in 

42 CFR part 484, and all other Medicare 

requirements. 

As for the issue of beneficiary access, 

the number of affected HHAs is such 

that we do not believe that beneficiaries 

would be adversely impacted by the 

proposed provisions. To the contrary, 

any reduction in the number of enrolled 

HHAs that would result from the 

implementation of these proposed 

provisions would be more than offset by 

the assurance that those HHAs that 

cannot meet Medicare requirements and 

quality standards are no longer in the 

program. 

We are unable to determine the exact 

extent to which currently enrolled and 

prospective HHAs would be able to 

meet the requirements outlined in the 

proposed provisions. In addition, as a 

result of a dearth of quantifiable data, 

we cannot effectively derive an estimate 

of the monetary impacts of these 

provisions. Accordingly, we are seeking 

public comment so that the public may 

provide any data available that provides 


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a calculable impact or any alternative to 

the proposed provisions. 

1. CY 2010 Update 

The update set forth in this proposed 

rule applies to Medicare payments 

under HH PPS in CY 2010. Accordingly, 

the following analysis describes the 

impact in CY 2010 only. We estimate 

that the net impact of the proposals in 

this rule, including a 2.75 percent 

reduction to the national standardized 

60-day episode payment rates and the 

NRS conversion factor to account for the 

case-mix change adjustment, is 

approximately $100 million in CY 2010 

savings. The estimated $100 million 

impact reflects the distributional effects 

of an updated wage index (¥$10 

million) as well as the 2.2 percent home 

health market basket increase (an 

additional $390 million in CY 2010 

expenditures attributable only to the CY 

2010 home health market basket), and 

the 2.75 percent decrease (¥$480 

million for the third year of a 4-year 

phase-in) to the HH PPS national 

standardized 60-day episode rate to 

account for the case-mix change 

adjustment under the HH PPS. The $100 

million is reflected in column 5 of Table 

8 as a 0.86 percent decrease in 

expenditures when comparing the 

current CY 2009 system to the CY 2010 

system. If the Secretary were to impose 

a 6.89 percent decrease to the national 

standardized 60-day episode rates and 

the NRS conversion factor in CY 2010, 

to account for the increase in nominal 

case-mix, the impact would be an 

estimated decrease in payments to 

HHAs of 4.9 percent (column 3 of Table 

8) or $1,220 million. Similarly, if the 

Secretary were to impose a 3.51 percent 

decrease to the national standardized 

60-day episode rates and the NRS 

conversion factor in CY 2010, to account 

for the increase in nominal case-mix, 

the impact would be an estimated 

decrease in payments to HHAs of 1.6 

percent (column 4 of table 8) or $590 

million. For comparison purposes, 

estimated impacts that take these 

alternative percentage reductions (6.89 

percent and 3.51 percent) into account 

can be found in columns 3 and 4 of 

Table 8 in Section VI.B. of this rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7 million to $34.5 million in any 1 

year. For the purposes of the RFA, 

approximately 75 percent of HHAs are 

considered to small businesses 

according to the Small Business 

Administration’s size standards with 

total revenues of $13.5 million or less in 

any 1 year. Individuals and States are 

not included in the definition of a small 

entity. Excluding HHAs in areas of the 

country where high and suspect outlier 

payments exist, this proposed rule is 

estimated to have an overall positive 

effect upon small entities (see section 

IB.B ‘‘Anticipated Effects’’, of this 

proposed rule, for supporting analysis). 

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 of 

a Metropolitan Statistical Area and has 

fewer than 100 beds. This proposed rule 

applies to home health agencies. 

Therefore, the Secretary has determined 

that this proposed rule will not have a 

significant economic impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of 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, in the aggregate, or by the 

private sector, of $133 million or more. 

Executive Order 13132 established 

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 would not have 

substantial direct effects on the rights, 

roles, and responsibilities of States, 

local, or tribal governments. 

B. Anticipated Effects 

This proposed rule sets forth updates 

to the HH PPS rates contained in the CY 

2009 notice (73 FR 65351, November 3, 

2008). The impact analysis of this 

proposed rule presents the estimated 

expenditure effects of policy changes 

proposed in this rule. We use the latest 

data and best analysis available, but we 

do not make adjustments for future 

changes in such variables as number of 

visits or case-mix. 

This analysis incorporates the latest 

estimates of growth in service use and 

payments under the Medicare home 

health benefit, based on Medicare 

claims from 2007. We note that certain 

events may combine to limit the scope 

or accuracy of our impact analysis, 

because such an analysis is futureoriented and, thus, susceptible to errors 

resulting from other changes in the 

impact time period assessed. Some 

examples of such possible events are 

newly-legislated general Medicare 

program funding changes made by the 

Congress, or changes specifically related 

to HHAs. In addition, changes to the 

Medicare program may continue to be 

made as a result of the BBA, the BBRA, 

the Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection 

Act of 2000, the MMA, the DRA, or new 

statutory provisions. Although these 

changes may not be specific to the HH 

PPS, the nature of the Medicare program 

is such that the changes may interact, 

and the complexity of the interaction of 

these changes could make it difficult to 

predict accurately the full scope of the 

impact upon HHAs. 

Table 8 represents how home health 

agency revenues are likely to be affected 

by the policy changes described in this 

rule. For this analysis, we used linked 

home health claims and OASIS 

assessments; the claims represented a 

20-percent sample of 60-day episodes 

occurring in CY 2007. Column one of 

this table classifies HHAs according to 

a number of characteristics including 

provider type, geographic region, and 

urban versus rural location. 

For the purposes of analyzing impacts 

on payments, we performed three 

simulations and compared them to each 

other. Based on our assumption that 

outliers, as a percentage of total HH PPS 

payments, will be no more than 5 

percent in CY 2009, the 2009 baseline, 

for the purposes of these simulations, 

we assumed that the full 5 percent 

outlay for outliers will be paid under 

our policy in 2009 of a 0.89 FDL ratio. 

As described in section III.A. of this 

proposed rule, given our proposed 

policies of a 0.67 FDL ratio and a 10 

percent cap on outlier payments, we 

would return 2.5 percent back into the 

national standardized 60-day episode 

payment rates, the national per-visit 

rates, the LUPA add-on payment 

amount, and the NRS conversion factor, 

and then estimate outlier payments to 

be approximately 2.5 percent of total 

HH PPS payments in CY 2010. All three 


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simulations use a CBSA-based wage 

index reported on the 2007 claims to 

determine the appropriate wage index. 

The first simulation estimates CY 

2009 payments under the current 

system (to include the 2009 wage 

index). The second simulation estimates 

CY 2009 payments under the current 

system, but with the 2010 wage index. 

The second simulation produces an 

estimate of what total payments using 

the sample data would have been in CY 

2009 without any of the proposed 

provisions in this rule, except for that of 

the 2010 wage index. The third 

simulation estimates CY 2010 payments 

with the 2010 wage index, incorporating 

our maintaining of the 2.75 percent 

reduction to the HH PPS rates, as well 

as all the proposed provisions of this 

rule. 

These simulations demonstrate the 

effects of: A new 2010 wage index, a 

2.75 percent reduction to account for 

the increase in nominal case-mix, a 2.2 

percent market basket update, a 2.5 

percent increase to account for a new 

outlier target of 2.5 percent, a 0.67 FDL 

ratio, and a 10 percent cap on outlier 

payments. Specifically, the second 

column of Table 8 shows the percent 

change due to the effects of the 2010 

wage index. The third and fourth 

columns are for comparison purposes, 

and show the percent change due to the 

combined effects of the 2010 wage 

index, an alternative 6.89 percent 

reduction (column 3) or an alternative 

3.51 percent reduction (column 4) to the 

rates to account for the increase in 

nominal case-mix, the 2.2 percent home 

health market basket update, the 2.5 

percent increase to the HH PPS rates to 

account for an approximate 2.5 percent 

target for outliers as a percentage of total 

HH PPS payments, a 0.67 FDL ratio, and 

a 10 percent outlier cap. The fifth 

column of Table 8 shows the percent 

change due to the combined effects of 

the 2010 wage index, our maintaining of 

a 2.75 percent reductions to the rates to 

account for the increase in nominal 

case-mix, the 2.2 percent home health 

market basket update, the 2.5 percent 

increase to the HH PPS rates to account 

for an approximate 2.5 percent target for 

outliers as a percentage of total HH PPS 

payments, a 0.67 FDL ratio, and a 10 

percent outlier cap. 

The overall percentage change, for all 

HHAs, in estimated total payments from 

CY 2009 to CY 2010 is a decrease of 

approximately 0.86 percent. Rural 

HHAs, however, are estimated to see an 

increase in payments from CY 2009 to 

CY 2010 of about 3.45 percent. On the 

other hand, urban HHAs are expected to 

see a decrease of approximately 1.64 

percent in payments from CY 2009 to 

CY 2010. 

Voluntary non-profit HHAs (3.52 

percent), facility-based HHAs (3.90 

percent), and government owned HHAs 

(3.11 percent) are estimated to see an 

increase in the percentage change in 

estimated total payments from CY 2009 

to CY 2010. Proprietary and 

freestanding HHAs, on the other hand, 

are estimated to see decreases of 3.14 

percent and 1.73 percent, respectively, 

in estimated total payments from CY 

2009 to CY 2010. Freestanding HHAs, 

broken out, show that voluntary nonprofit and governmental HHAs are 

estimated to see increases of 3.22 

percent and 2.63 percent, respectively, 

in estimated total payments from CY 

2009 to CY 2010. 

HHAs in the North and Midwest 

regions are expected to experience a 

percentage change increase in the 

estimated total payments from CY 2009 

to CY 2010 of 3.79 percent and 3.67 

percent, respectively. HHAs in the 

South and West regions of the country 

are estimated to experience decreases in 

the percentage change in estimated total 

payments from CY 2009 to CY 2010 of 

4.01 percent and 1.52 percent. We 

believe that the major contributors to 

the estimated decreases in payments in 

these areas of the country are those with 

high and suspect outlier payments. 

Breaking this down even further, it is 

estimated that New England, Mid 

Atlantic, East South Central, East North 

Central, and West North Central area 

HHAs are all expected to experience 

increases in their payments in CY 2010 

ranging from just over 2 percent to 

almost 5 percent. Conversely, South 

Atlantic and Pacific HHAs are expected 

to experience decreases, 11.68 percent 

and 2.90 percent respectively, in the 

percentage change in estimated total 

payments from CY 2009 to CY 2010. 

Again, we believe that the major 

contributors to the estimated decreases 

in payments in these areas of the 

country are those with high and suspect 

outlier payments. 

Larger HHAs (those with 200 or more 

Medicare home health initial episodes 

per year) are estimated to experience an 

increase in payments from CY 2009 to 

CY 2010 of approximately 2.44 percent. 

Mid-size to small agencies are expected 

to see a decrease in their payments in 

CY 2010, ranging from 1.77 percent to 

15.93 percent. However, we believe that 

the major contributors to the estimated 

decreases in payments for mid-size to 

small agencies are those agencies in 

areas of the country with high and 

suspect outlier payments. Consequently, 

we have provided a more detailed 

discussion, and analysis in Table 9 

below, that demonstrates where, in the 

country, these estimated large decreases 

for mid-size to small agencies are 

occurring. 

TABLE 8—IMPACT BY AGENCY TYPE

Group 

Comparisons 

Percent change 

due to the effects 

of the updated 

wage index only 

(percent) 

(For comparison purposes) 

Impact of CY 2010 

proposed policies 1

(w/alternative 6.89 

percent reduction in 

place of the proposed 

2.75 percent reduction) 

(percent) 

(For comparison purposes) 

Impact of CY 2010 

proposed policies 1

(w/alternative 3.51 

percent reduction in 

place of the proposed 

2.75 percent reduction) 

(percent) 

Impact of CY 

2010 proposed 

policies 1

(percent) 

Type of Facility: 

Free-Standing/Other Vol/NP ................. ¥0.01 ¥0.89 2.47 3.22 

Free-Standing/Other Proprietary .......... ¥0.05 ¥7.25 ¥4.00 ¥3.27 

Free-Standing/Other Government ........ ¥0.32 ¥1.49 1.88 2.63 

Facility-Based Vol/NP ........................... ¥0.12 ¥0.22 3.19 3.96 

Facility-Based Proprietary .................... ¥0.22 ¥0.57 2.89 3.66 

Facility-Based Government .................. ¥0.27 ¥0.56 2.88 3.65 

Subtotal: Freestanding .................. ¥0.05 ¥5.74 ¥2.46 ¥1.73 

Subtotal: Facility-based ................. ¥0.15 ¥0.29 3.13 3.90 

Subtotal: Vol/PNP .......................... ¥0.06 ¥0.62 2.76 3.52 


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40978 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 

TABLE 8—IMPACT BY AGENCY TYPE—Continued 

Group 

Comparisons 

Percent change 

due to the effects 

of the updated 

wage index only 

(percent) 

(For comparison purposes) 

Impact of CY 2010 

proposed policies 1

(w/alternative 6.89 

percent reduction in 

place of the proposed 

2.75 percent reduction) 

(percent) 

(For comparison purposes) 

Impact of CY 2010 

proposed policies 1

(w/alternative 3.51 

percent reduction in 

place of the proposed 

2.75 percent reduction) 

(percent) 

Impact of CY 

2010 proposed 

policies 1

(percent) 

Subtotal: Proprietary ...................... ¥0.05 ¥7.12 ¥3.87 ¥3.14 

Subtotal: Government ................... ¥0.30 ¥1.05 2.35 3.11 

Total ....................................... ¥0.06 ¥4.90 ¥1.60 ¥0.86 

Type of Facility: (Rural * Only) 

Free-Standing/Other Vol/NP ................. ¥0.50 ¥0.61 2.83 3.60 

Free-Standing/Other Proprietary .......... ¥0.14 ¥0.98 2.51 3.29 

Free-Standing/Other Government ........ ¥0.58 ¥0.52 2.88 3.63 

Facility-Based Vol/NP ........................... ¥0.44 ¥0.52 2.91 3.68 

Facility-Based Proprietary .................... ¥0.62 ¥1.30 2.16 2.93 

Facility-Based Government .................. ¥0.42 ¥0.47 2.97 3.74 

Type of Facility: (Urban * Only) 

Free-Standing/Other Vol/NP ................. 0.06 ¥0.93 2.41 3.16 

Free-Standing/Other Proprietary .......... ¥0.03 ¥8.11 ¥4.89 ¥4.17 

Free-Standing/Other Government ........ ¥0.04 ¥2.58 0.76 1.51 

Facility-Based Vol/NP ........................... ¥0.04 ¥0.14 3.27 4.03 

Facility-Based Proprietary .................... 0.03 ¥0.10 3.35 4.13 

Facility-Based Government .................. ¥0.03 ¥0.71 2.75 3.52 

Type of Facility: (Urban* or Rural*) 

Rural ..................................................... ¥0.31 ¥0.79 2.67 3.45 

Urban .................................................... ¥0.02 ¥5.64 ¥2.37 ¥1.64 

Total ....................................... ¥0.06 ¥4.90 ¥1.60 ¥0.86 

Facility Location: Region* 

North ..................................................... 0.05 ¥0.30 3.04 3.79 

South .................................................... ¥0.05 ¥7.95 ¥4.73 ¥4.01 

Midwest ................................................. ¥0.23 ¥0.57 2.89 3.67 

West ...................................................... ¥0.08 ¥5.55 ¥2.26 ¥1.52 

Outlying ................................................. 0.37 0.21 3.68 4.46 

Total ....................................... ¥0.06 ¥4.90 ¥1.60 ¥0.86 

Facility Location: Area of the Country 

New England ........................................ 0.53 0.75 4.13 4.88 

Mid Atlantic ........................................... ¥0.21 ¥0.87 2.44 3.19 

South Atlantic ....................................... 0.27 ¥15.29 ¥12.34 ¥11.68 

East South Central ............................... ¥0.23 ¥0.57 2.94 3.72 

West South Central .............................. ¥0.29 ¥3.71 ¥0.34 0.41 

East North Central ................................ ¥0.27 ¥0.62 2.85 3.62 

West North Central ............................... ¥0.07 ¥0.37 3.08 3.85 

Mountain ............................................... 0.33 ¥2.05 1.33 2.09 

Pacific ................................................... ¥0.23 ¥6.88 ¥3.63 ¥2.90 

Outlying ................................................. 0.37 0.21 3.68 4.46 

Total ....................................... ¥0.06 ¥4.90 ¥1.60 ¥0.86 

Facility Size: (Number of First Episodes) 

< 19 ....................................................... 0.12 ¥19.43 ¥16.57 ¥15.93 

20 to 49 ................................................ 0.03 ¥15.28 ¥12.29 ¥11.62 

50 to 99 ................................................ ¥0.04 ¥12.79 ¥9.72 ¥9.04 

100 to 199 ............................................ ¥0.13 ¥5.79 ¥2.51 ¥1.77 

200 or More .......................................... ¥0.07 ¥1.70 1.69 2.44 

Total ....................................... ¥0.06 ¥4.90 ¥1.60 ¥0.86 

Note:Based on a 20% sample of CY 2007 claims linked to OASIS assessments. *Urban/rural status, for the purposes of these simulations, is 

based on the wage index on which episode payment is based. The wage index is based on the site of service of the beneficiary. 

Region Key: 

New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic = Pennsylvania, New Jersey, 

New York; South Atlantic = Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia; 

East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central = Alabama, Kentucky, Mississippi, Tennessee; West North 

Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central = Arkansas, Louisiana, Oklahoma, 

Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific = Alaska, California, Hawaii, Oregon, 

Washington; Outlying = Guam, Puerto Rico, Virgin Islands. 


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1Percent change due to the effects of the update wage index, the 2.2% home health market basket update, the 2.75% reduction to the national standardized episode rates, the national per-visit rates, the LUPA add-on payment amount, and the NRS conversion factor for nominal increase in case-mix, the 2.5% increase in the rates due to the new approximate 2.5% target for outliers as a percentage of total HH PPS payments, a 0.67 FDL ratio, and a 10% outlier cap. 

Given the overall large negative 

impact observed by smaller agencies, we 

performed more detailed analysis 

targeted at identifying where the large 

negative impacts were occurring. Table 

9 below presents the results of the 

regional analysis for small agencies. 

Column 1, of Table 9, shows the 

regional and agency size classifications 

similar to those in Table 8. In column 

2 we repeat the overall impacts (from 

Table 8) for those classifications. In 

columns 3 through 7, we drill down in 

our analysis, looking at those 

classifications by the size of the agency 

(as defined by the number of first 

episodes). It is clear from this analysis 

that, for smaller agencies, the vast 

majority of the negative impact is 

occurring in areas of the country (such 

as the South and South Atlantic) where 

there exist high and suspect outlier 

payments. Specifically, in columns 3, 4, 

and 5 of Table 9, for the South Atlantic 

area of the country (which includes 

Miami-Dade, Florida), the negative 

percentage impacts in payment ranging 

from around 40 percent to just over 53 

percent are evidence that it is the high 

and suspect outlier payments in areas 

such as this, that are skewing the results 

of the overall impact analysis. Estimated 

impacts for small agencies in the South 

(negative impacts ranging around 15 

percent to 22 percent) and the Pacific 

(negative impacts ranging from around 

11 percent to 17 percent) areas of the 

country, reflect similar results. 

Conversely, small HHAs in most other 

parts of the country are estimated to see 

increases in payments in CY 2010, 

ranging from 0.20 percent to almost 4.5 

percent. Consequently, we believe that 

small HHAs without high and suspect 

outlier payments, on average, will see a 

positive impact on their payments in CY 

2010. We do not believe there would be 

any significant impact on beneficiaries, 

as a result of the provisions of this rule. 

Areas where negative impacts have been 

estimated for HHAs, are primarily 

urban, and thus we believe that 

beneficiaries have a reasonable pool of 

HHAs from which to receive home 

health services. 

TABLE 9—SMALL AGENCY IMPACTS

Group 

Comparison of 2009–2010 Changes 

Overall 

(percent) 

< 20 

episodes 

(percent) 

20–49 

episodes 

(percent) 

50–99 

episodes 

(percent) 

100–199 

episodes 

(percent) 

200 or more 

episodes 

(percent) 

Facility Location: Region of the Country 

North ................................................................................ 3.79 0.20 3.05 3.06 3.70 3.83 

South ................................................................................ ¥4.01 ¥21.93 ¥17.44 ¥14.71 ¥3.67 1.29 

Midwest ............................................................................ 3.67 2.63 3.45 3.52 3.79 3.75 

West ................................................................................. ¥1.52 ¥5.67 ¥10.21 ¥9.16 ¥3.78 1.98 

Outlying ............................................................................ 4.46 4.48 4.41 4.86 4.40 4.44 

Total .......................................................................... ¥0.86 ¥15.93 ¥11.62 ¥9.04 ¥1.77 2.44 

Facility Location: Region of the Country (Census Region) 

New England .................................................................... 4.88 ¥3.21 3.53 4.79 4.05 5.04 

Mid Atlantic ...................................................................... 3.19 3.94 2.59 1.42 3.30 3.21 

South Atlantic ................................................................... ¥11.68 ¥53.28 ¥45.86 ¥40.50 ¥16.47 ¥0.59 

East South Central ........................................................... 3.72 4.11 2.30 3.90 3.24 3.79 

West South Central .......................................................... 0.41 ¥5.64 ¥2.55 ¥1.26 1.67 2.27 

East North Central ........................................................... 3.62 2.45 3.21 3.61 3.88 3.69 

West North Central .......................................................... 3.85 4.05 4.69 3.17 3.46 3.99 

Mountain .......................................................................... 2.09 1.59 ¥1.38 1.52 1.80 2.99 

Pacific ............................................................................... ¥2.90 ¥11.37 ¥16.68 ¥13.11 ¥6.55 1.65 

Outlying ............................................................................ 4.46 4.48 4.41 4.86 4.40 4.44 

Total .......................................................................... ¥0.86 ¥15.93 ¥11.62 ¥9.04 ¥1.77 2.44 

Facility Size (Number of First Episodes) 

< 19 episodes .................................................................. ¥15.93 ¥15.93 .................... .................... .................... ....................

20 to 49 ............................................................................ ¥11.62 .................... ¥11.62 .................... .................... ....................

50 to 99 ............................................................................ ¥9.04 .................... .................... ¥9.04 .................... ....................

100 to 199 ........................................................................ ¥1.77 .................... .................... .................... ¥1.77 ....................

200 or More ..................................................................... 2.44 .................... .................... .................... .................... 2.44 

Total .......................................................................... ¥0.86 ¥15.93 ¥11.62 ¥9.04 ¥1.77 2.44 

Region Key: New England = Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Middle Atlantic = Pennsylvania, 

New Jersey, New York; South Atlantic = Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, 

West Virginia; East North Central = Illinois, Indiana, Michigan, Ohio, Wisconsin; East South Central = Alabama, Kentucky, Mississippi, Tennessee; West North Central = Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota; West South Central = Arkansas, Louisiana, Oklahoma, Texas; Mountain = Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming; Pacific = Alaska, California, 

Hawaii, Oregon, Washington; Outlying = Guam, Puerto Rico, Virgin Islands 


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C. Accounting Statement and Table 

Whenever a rule is considered a 

significant rule under Executive Order 

12866, we are required to develop an 

Accounting Statement showing the 

classification of the expenditures 

associated with the provisions of this 

proposed rule. 

Table 10, below provides our best 

estimate of the decrease in Medicare 

payments under the HH PPS as a result 

of the changes presented in this 

proposed rule based on the best 

available data. The expenditures are 

classified as a transfer to the Federal 

Government of $100 million. 

TABLE 10—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2009 HH PPS 

CALENDAR YEAR TO THE 2010 HH PPS CALENDAR YEAR

Category Transfers 

Annualized Monetized Transfers .............................................................. Negative transfer—Estimated decrease in expenditures: $100 million. 

From Whom To Whom ............................................................................. Federal Government to HH Providers. 

D. Conclusion 

In conclusion, we estimate that the 

net impact of the proposals in this rule, 

including a 2.75 percent reduction to 

the national standardized 60-day 

episode rates and the NRS conversion 

factor to account for the case-mix 

change adjustment, is approximately 

$100 million in CY 2010 savings. The 

$100 million impact reflects the 

distributional effects of an updated 

wage index (¥$10 million) as well as 

the 2.2 percent home health market 

basket increase (an additional $390 

million in CY 2010 expenditures 

attributable only to the CY 2010 home 

health market basket), and the 2.75 

percent decrease (¥$480 million for the 

third year of a 4-year phase-in) to the 

national standardized 60-day episode 

rates and the NRS conversion factor to 

account for the case-mix change 

adjustment under the HH PPS. This 

analysis above, together with the 

remainder of this preamble, provides a 

Regulatory Impact Analysis. 

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 409 

Health facilities, Medicare. 

42 CFR Part 424 

Emergency medical services, Health 

facilities, Health professions, Medicare, 

Reporting and recordkeeping. 

requirements 

42 CFR Part 484 

Health facilities, Health professions, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 489 

Health facilities, Medicare, Reporting 

and recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as set forth below: 

PART 409—HOSPITAL INSURANCE 

BENEFITS 

1. The authority citation for part 409 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

2. Section 409.42 is amended as 

follows: 

A. Revising paragraph (c)(1). 

B. Adding paragraph (c)(1)(i) and 

(c)(1)(ii) 

The revisions and additions read as 

follows: 

§ 409.42 Beneficiary qualifications for 

coverage of services. 

* * * * * 

(c) * * * 

(1) Intermittent skilled nursing 

services that meet the criteria for skilled 

services and the need for skilled 

services found in § 409.32. (Also see 

§ 409.33(a) and (b) for a description of 

examples of skilled nursing and 

rehabilitation services.) These criteria 

are subject to the following limitations 

in the home health setting: 

(i) In the home health setting, 

management and evaluation of a patient 

care plan is considered a reasonable and 

necessary skilled service only when 

underlying conditions or complications 

are such that only a registered nurse can 

ensure that essential non-skilled care is 

achieving its purpose. To be considered 

a skilled service, the complexity of the 

necessary unskilled services that are a 

necessary part of the medical treatment 

must require the involvement of 

licensed nurses to promote the patient’s 

recovery and medical safety in view of 

the overall condition. Where nursing 

visits are not needed to observe and 

assess the effects of the non-skilled 

services being provided to treat the 

illness or injury, skilled nursing care 

would not be considered reasonable and 

necessary, and the management and 

evaluation of the care plan would not be 

considered a skilled service. In some 

cases, the condition of the patient may 

cause a service that would originally be 

considered unskilled to be considered a 

skilled nursing service. This would 

occur when the patient’s underlying 

condition or complication requires that 

only a registered nurse can ensure that 

essential non-skilled care is achieving 

its purpose. The registered nurse is 

ensuring that service is safely and 

effectively performed. However, a 

service is not considered a skilled 

nursing service merely because it is 

performed by or under the supervision 

of a licensed nurse. Where a service can 

be safely and effectively performed (or 

self administered) by non-licensed staff 

without the direct supervision of a 

nurse, the service cannot be regarded as 

a skilled service even if a nurse actually 

provides the service. 

(ii) In the home health setting, skilled 

education services are no longer needed 

if it becomes apparent, after a 

reasonable period of time, that the 

patient, family, or caregiver could not or 

would not be trained. Further teaching 

and training would cease to be 

reasonable and necessary in this case, 

and would cease to be considered a 

skilled service. Notwithstanding that the 

teaching or training was unsuccessful, 

the services for teaching and training 

would be considered to be reasonable 

and necessary prior to the point that it 

became apparent that the teaching or 

training was unsuccessful, as long as 

such services were appropriate to the 

patient’s illness, functional loss, or 

injury. 

* * * * * 

3. Section 409.43 is amended by 

revising paragraph (e)(1)(ii) to read as 

follows: 

§ 409.43 Plan of care requirements. 

* * * * * 

(e) * * * 

(1) * * * 

(ii) Significant change in condition; or 

* * * * * 

4. Section 409.44 is amended by 

revising the introductory paragraph of 

(b)(1) to read as follows: 


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§ 409.44 Skilled services requirements. 

* * * * * 

(b) * * * 

(1) Skilled nursing care consists of 

those services that must, under State 

law, be performed by a registered nurse, 

or practical (vocational) nurse, as 

defined in § 484.4 of this chapter, meet 

the criteria for skilled nursing services 

specified in § 409.32, and meet the 

qualifications for coverage of skilled 

services specified in § 409.42(c). See 

§ 409.33(a) and (b) for a description of 

skilled nursing services and examples of 

them. 

* * * * * 

PART 424—CONDITIONS FOR 

MEDICARE PAYMENT 

5. The authority citation for part 424 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395hh). 

6. Section 424.22 is amended as 

follows: 

A. Revising paragraph (a)(1)(i); 

B. Revising paragraph (b)(2). 

§ 424.22 Requirements for home health 

services. 

(a) * * * 

(1) * * * 

(i) The individual needs or needed 

intermittent skilled nursing care, or 

physical or speech therapy, or (for the 

period from July through November 30, 

1981) occupational therapy. If a 

patient’s underlying condition or 

complication requires a registered nurse 

to ensure that essential non-skilled care 

is achieving its purpose, and 

necessitates a registered nurse be 

involved in the development, 

management, and evaluation of a 

patient’s care plan, the physician will 

include a written narrative describing 

the clinical justification of this need. 

* * * * * 

(b) * * * 

(2) Content and basis of 

recertification. The recertification 

statement must indicate the continuing 

need for services and estimate how 

much longer the services will be 

required. Need for occupational therapy 

may be the basis for continuing services 

that were initiated because the 

individual needed skilled nursing care 

or physical therapy or speech therapy. 

If a patient’s underlying condition or 

complication requires a registered nurse 

to ensure that essential non-skilled care 

is achieving its purpose, and 

necessitates a registered nurse be 

involved in the development, 

management, and evaluation of a 

patient’s care plan, the physician will 

include a written narrative describing 

the clinical justification of this need. 

* * * * * 

7. Section 424.530 is amended by 

adding paragraph (a)(8) to read as 

follows: 

§ 424.530 Denial of enrollment in the 

Medicare program. 

(a) * * * 

(8) A prospective HHA is determined, 

under 42 CFR § 489.19, to be sharing, 

leasing, or subleasing its practice 

location or base of operations identified 

in Section 4 of its Medicare provider 

enrollment application with or to 

another Medicare-enrolled HHA or 

supplier. 

* * * * * 

8. Section 424.535 is amended by 

adding paragraph (a)(11) to read as 

follows: 

§ 424.535 Revocation of enrollment and 

billing privileges in the Medicare program. 

(a) * * * 

(11) An HHA is determined, under 42 

CFR § 489.19, to be sharing, leasing, or 

subleasing its practice location or base 

of operations identified in Section 4 of 

its Medicare provider enrollment 

application with or to another Medicareenrolled HHA or supplier. 

* * * * * 

9. Section 424.540 is amended by 

revising paragraph 

(b)(3) to read as follows: 

§ 424.540 Deactivation of Medicare billing 

privileges. 

* * * * * 

(b) * * * 

(3) With the exception of home health 

agencies, reactivation of Medicare 

billing privileges does not require a new 

certification of the provider or supplier 

by the State survey agency or the 

establishment of a new provider 

agreement. 

(i) An HHA whose Medicare billing 

privileges are deactivated under the 

provisions found at 42 CFR 424.540(a) 

must obtain an initial State survey or 

accreditation by an approved 

accreditation organization before its 

Medicare billing privileges can be 

reactivated. 

(ii) [Reserved] 

* * * * * 

10. Section 424.550 is amended by 

adding paragraphs (b)(1) and (2) to read 

as follows: 

§ 424.550 Prohibitions on the sale or 

transfer of billing privileges. 

* * * * * 

(b) * * * 

(1) If an owner of a home health 

agency sells (including asset sales or 

stock transfers), transfers or relinquishes 

ownership of the HHA within 36 

months after the effective date of the 

HHA’s enrollment in Medicare, the 

provider agreement and Medicare 

billing privileges do not convey to the 

new owner. The prospective provider/ 

owner of the HHA must instead: 

(i) Enroll in the Medicare program as 

a new HHA under the provisions of 

§ 424.510, and 

(ii) Obtain a State survey or an 

accreditation from an approved 

accreditation organization. 

(2) [Reserved] 

* * * * * 

PART 484—HOME HEALTH SERVICES 

11. The authority citation for part 484 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

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

1395(hh)). 

Subpart C—Furnishing of Services 

12. Section 484.55 is amended by 

revising paragraph (d)(1)(ii) to read as 

follows: 

§ 484.55 Condition of participation: 

Comprehensive assessment of patients. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) Significant change in condition; or 

* * * * * 

Subpart E—Prospective Payment 

System for Home Health Agencies 

13. Section 484.210 is amended by 

revising paragraph (e) to read as follows: 

§ 484.210 Data used for the calculation of 

the national prospective 60-day episode 

payment. 

* * * * * 

(e) OASIS assessment data and other 

data that account for the relative 

resource utilization for different HHA 

Medicare patient case-mix. An HHA 

must submit to CMS the OASIS data 

described at § 484.55(b)(1) and (d)(1) in 

order for CMS to administer the 

payment rate methodologies described 

in §§ 484.215, 484.230 and 484.235. 

14. Revising § 484.250 to read as 

follows: 

§ 484.250 Patient assessment data. 

An HHA must submit to CMS the 

OASIS data described at § 484.55(b)(1) 

and (d)(1) in order for CMS to 

administer the payment rate 

methodologies described in §§ 484.215, 

484.230, and 484.235. 


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PART 489—PROVIDER AGREEMENTS 

AND SUPPLIER APPROVAL 

15. The authority citation for part 489 

continues to read as follows: 

Authority: Secs. 1102, 1819, 1820(e), 1861, 

1864(m), 1866, 1869, and 1871 of the Social 

Security Act (42 U.S.C. 1302, 1395i–3, 1395x, 

1395aa(m), 1395cc, 1395ff, and 1395hh). 

16. Section 489.12 is amended by 

adding paragraph (a)(5) to read as 

follows: 

§ 489.12 Decision to deny an agreement. 

(a) * * * 

(5) A prospective HHA is determined 

to be sharing, leasing, or subleasing its 

practice location or base of operations 

identified in Section 4 of its Medicare 

provider enrollment application with or 

to another Medicare enrolled HHA or 

supplier in violation of the HHA space 

sharing prohibition set forth in § 489.19. 

* * * * * 

17. Adding a new § 489.19 to read as 

follows: 

§ 489.19 Prohibition on Space Sharing. 

An HHA is prohibited from engaging 

in the following space sharing and/or 

leasing arrangements: 

(a) Sharing its practice location or 

base of operations identified in Section 

4 of its Medicare provider enrollment 

application with another Medicareenrolled HHA or supplier; or 

(b) Leasing or subleasing its practice 

location or base of operations identified 

in Section 4 of its Medicare provider 

enrollment application to another 

Medicare-enrolled HHA or supplier. 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: May 28, 2009. 

Charlene Frizzera, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: July 17, 2009. 

Kathleen Sebelius, 

Secretary. 

Note: The following addenda will not be 

published in the Code of Federal Regulations. 

BILLING CODE 13–01–00–D 


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40988 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


erowe on DSK5CLS3C1PROD with PROPOSALS2EP13AU09.005</GPH>
Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40989 


erowe on DSK5CLS3C1PROD with PROPOSALS2EP13AU09.006</GPH>
40990 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40991 


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40992 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40993 


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40994 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40995 


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40996 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40997 


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40998 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 40999 


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41000 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 41001 


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41002 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 41003 


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41004 Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 


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Federal Register / Vol. 74, No. 155 / Thursday, August 13, 2009 / Proposed Rules 41005 

[FR Doc. E9–18587 Filed 7–30–09; 4:15 pm] 

Editorial Note: Federal Register proposed 

rule document E9–18587, originally 

published at pages 39436 to 39496 in the 

issue of Thursday, August 6, 2009, included 

incorrect tables from pages 39471 to 39496. 

This document, along with the correct tables, 

is being republished in its entirety. 

[FR Doc. R9–18587 Filed 8–12–09; 8:45 am] 

BILLING CODE 13–01–00–C 


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