Source: http://www.govpulse.us/entries/2004/10/22/04-23440/medicare-program-home-health-prospective-payment-system-rate-update-for-calendar-year-2005
Timestamp: 2015-03-05 18:44:47
Document Index: 324142394

Matched Legal Cases: ['§ 484', '§ 484', '§ 484', '§ 409', '§ 484', '§ 484', '§ 484', '§ 484', '§ 484', '§ 484', '§ 484', '§ 484', '§ 484']

govpulse | Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2005
Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2005
This final rule sets forth an update to the 60-day national episode rates and the national per-visit amounts under the Medicare prospective payment system for home health agencies. As part of this final rule, we are also rebasing and revising the home health market basket to ensure it continues to adequately reflect the price changes of efficiently providing home health services. In addition, we are revising the fixed dollar loss ratio, which is used in the calculation of outlier payments. This final rule will be the first update of the home health prospective payment system (HH PPS) rates on a calendar year update cycle. HH PPS was moved to a calendar year update cycle as a result of the provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
C. System for Payment of Home Health Services
A. National Standardized 60-Day Episode Rate
B. Rebasing and Revising of the Home Health Market Basket
C. Proposed CY 2005 Update to the Home Health Market Basket Index
D. Proposed Update to the Outlier Fixed Dollar Loss Ratio
E. Rural Add-On as Required by the MMA
F. Hospital Wage Index
Definition of Non-Metropolitan Statistical Area (MSA)/Wage Index
Rural 5 Percent Rural Add-On
IPPS-Related Comments
Comments on Home Health Prospective Payment System Rate Update for FY 2004 Notice, Published on July 2, 2003(68 FR 39764)
A. Rebasing and Revising of the Home Health Market Basket
1. Rebasing Results
B. CY 2005 Update to the Home Health Market Basket Index
CY 2005 Adjustments
C. National Per-Visit Amounts Used To Pay LUPAs and Compute Imputed Costs Used in Outlier Calculations
D. Update to the Outlier Fixed Dollar Loss Ratio
E. Rural Add-On as Required by MMA
Table 1.—Forecasted Annual Percent Change in the 1993-Based and 2000-Based Home Health Market Baskets
Table 2.—CY 2005 Forecasted Annual Percent Change for All Cost Categories in the 2000-Based Home Health Market Basket
Table 4.—National 60-Day Episode Amounts Updated by the Applicable Home Health Market Basket CY 2005, Minus 0.8 Percentage Points, Before Case-Mix Adjustment, Wage Index Adjustment Based on the Site of Service for the Beneficiary or Applicable Payment Adjustment
Table 5.—National Per-Visit Amounts for LUPAs and Outlier Calculations Updated by the Applicable Home Health Market Basket Increase for CY 2005, Minus 0.8 Percentage Points, Before Wage Index Adjustment Based on the Site of Service for the Beneficiary
Table 6-a.—Comparison of Estimated Outlier Payments as a Percentage of Total HH PPS Payments Under the Current FDL = 1.13 to Estimated Outlier Payments as Percentage of Total HH PPS Under the FDL = 0.70 by Type of Control
Table 6-b.—Comparison of Estimated Outlier Payments as a Percentage of Total HH PPS Payments Under the Current FDL = 1.13 to Estimated Outlier Payments as Percentage of Total HH PPS Under the FDL = 0.70 by Type of Facility
Table 6-c.—Comparison of Estimated Outlier Payments as a Percentage of Total HH PPS Payments Under the Current FDL = 1.13 to Estimated Outlier Payments as Percentage of Total HH PPS Under the FDL = 0.70 by Region
Table 6-d.—Comparison of Estimated Outlier Payments as a Percentage of Total HH PPS Payments Under the Current FDL = 1.13 to Estimated Outlier Payments as Percentage of Total HH PPS Under the FDL = 0.70 by Urban/Rural
Table 7.—CY 2005 Rural Add-On to 60-Day Episode Payment Amounts Ending on or After April 1, 2004 and Before April 1, 2005 for Beneficiaries Who Reside in a Non-MSA Area Before Case-Mix Adjustment, Wage Index Adjustment Based on the Site of Service for the Beneficiary or Applicable Payment Adjustment
Table 8.—CY 2005 Add-On to LUPA Per-Visit Amounts for Visits Ending on or After April 1, 2004 and Before April 1, 2005, Before Wage Index Adjustment Based on the Site of Service of the Beneficiary Who Resides in a Non-MSA Area or Payment Applicable Adjustment
Addendum A.—Wage Index for Rural Areas-Applicable Pre-Floor and Pre-Reclassified Hospital Wage Index
Addendum B.—CY 2005 Wage Index for Urban Areas Pre-Floor and Pre-Reclassified Hospital Wage Index
Addendum C.—Comparison of Pre-Floor and Pre-Reclassified Hospital Wage Index for FY 2003 and CY 2005
Randy Throndset, (410) 786-0131. Debra Gillespie, (410) 786-4631. Mary Lee Seifert (Market Basket), (410) 786-0030.Mollie Knight (Market Basket), (410) 786-7948.
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A. Statutory Background ↑
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. Until the implementation of a home health prospective payment system (HH PPS) on October 1, 2000, home health agencies (HHAs) received payment under a cost-based reimbursement system. Section 4603 of the BBA governed the development of the HH PPS.
Section 4603(a) of the BBA provides the authority for the development of a PPS for all Medicare-covered home health services provided under a plan of care that were paid on a reasonable cost basis by adding section 1895, entitled “Prospective Payment For Home Health Services,” to the Social Security Act (the Act).
Section 1895(b)(1) of the Act requires the Secretary to establish a 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 of 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 increase percentage as specified in the statute.
Section 1895(b)(4) of the Act governs the payment computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act require the standard prospective payment amount to be adjusted for case-mix and geographic differences in wage levels. Section 1895(b)(4)(B) of the Act requires the establishment of an appropriate case-mix adjustment factor that explains a significant amount of the variation in cost 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 the furnishing of home health services in a geographic area compared to the national average applicable level. These wage-adjustment factors may be the factors used by the Secretary for the different area wage levels for purposes of section 1886(d)(3)(E) of the Act.
Section 1895(b)(5) of the Act gives the Secretary the option to grant additions or adjustments to the payment amount otherwise made 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 cannot exceed 5 percent of total payments projected or estimated.
B. Updates ↑
On July 3, 2000, we published a final rule (65 FR 41128) in the Federal Register to implement the HH PPS legislation. That final rule established requirements for the new PPS for HHAs as required by section 4603 of the BBA, and 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 PPS for HHAs, consolidated billing requirements, and a number of other related changes. The 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.
As required by section 1895(b)(3)(B) of the Act, we have historically updated the HH PPS rates annually in a separate Federal Register document.
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, adjusted for case mix and wage index. For episodes with four or fewer visits, Medicare pays on the basis of a national per-visit amount by discipline, referred to as a low utilization payment adjustment (LUPA). Medicare also adjusts the 60-day episode payment for certain intervening events that give rise to a partial episode payment adjustment (PEP adjustment) or a significant change in condition adjustment (SCIC). For certain cases that exceed a specific cost threshold, an outlier adjustment may also beavailable. For a complete and full description of the HH PPS as required by the BBA and as amended by OCESAA and BBRA, see the July 3, 2000 HH PPS final rule (65 FR 41128).
D. Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ↑
On December 8, 2003, the Congress enacted the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-173). This new legislation affects our update to HH payment rates. Specifically, section 421 of MMA requires, for home health services furnished in a rural area (as defined in section 1886(d)(2)(D) of the Act), with respect to episodes or visits ending on or after April 1, 2004 and before April 1, 2005, that the Secretary increase the payment amount that otherwise would have been made under section 1895 of the Act for the services by 5 percent.
The statute waives budget neutrality for the purposes of this increase as it specifically states that the Secretary will not reduce the standard prospective payment amount (or amounts) under section 1895 of the Act applicable to home health services furnished during a period to offset the increase in payments resulting in the application of this section of the statute.
Section 701 of the MMA changes the yearly update cycle of the HH PPS rates from that of a fiscal year to a calendar year update cycle for 2004 and any subsequent year. Generally, section 701(a) of the MMA changes the references in the statute to refer to the calendar year for 2004 and any subsequent year. The changes result in updates to the HH PPS rates described as “fiscal year” updates for 2002 and 2003 and as calendar “year” updates for 2004 and any subsequent year (section 1895(b)(3)(B)(i) of the Act). In light of these provisions, we will not be updating the HH PPS rates on October 1, 2004 as HH PPS will now be updated on a calendar year update cycle.
In addition to changing the update cycle for HH PPS rates, section 701 of the MMA makes adjustments to the home health applicable increase percentage for 2004, 2005, and 2006. Specifically, section 701(a)(2)(D) of the MMA leaves unchanged the home health market basket increase for the last calendar year quarter of 2003 and the first calendar year quarter of 2004 (section 1895(b)(3)(B)(ii)(II) of the Act). Furthermore, section 701(b)(4) of the MMA sets the home health applicable percentage increase for the last 3 quarters of 2004 as the home health market basket (3.1 percent) minus 0.8 percentage points (section 1895(b)(3)(B)(ii)(III) of the Act). We implemented this provision through Pub. 100-20, One Time Notification, Transmittal 59, issued February 20, 2004. Section 701(b)(4) of the MMA also provides that updates for CY 2005 and CY 2006 will equal the applicable home health market basket percentage increase minus 0.8 percentage points. Lastly, section 701(b)(3) of the MMA revises the statute to provide that HH PPS rates for CY 2007 and any subsequent year will be updated by that year's home health market basket percentage increase (section 1895(b)(3)(B)(ii)(IV) of the Act).
E. Requirements for Issuance of Regulations ↑
This final rule finalizes provisions set forth in proposed rule published in the Federal Register(69 FR 31248) on June 2, 2004. In addition, this final rule has been published within the 3-year time limit imposed by section 902 of the MMA. Therefore, we believe that the final rule is in accordance with the Congress' intent to ensure timely publication of final regulations.
On June 2, 2004, we published a proposed rule in the Federal Register(69 FR 31248), proposing to update the 60-day national episode rates and the national per-visit amounts under the Medicare prospective payment system for home health agencies. We also proposed to rebase and revise the home health market basket to ensure it continues to adequately reflect the price changes of efficiently providing home health services. We also proposed to revise the fixed dollar loss ratio, which is used in the calculation of outlier payments.
A. National Standardized 60-Day Episode Rate ↑
Medicare HH PPS has been effective 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 Medicare HH PPS is a national standardized 60-day episode rate. As set forth in 42 CFR 484.220, we adjust the national standardized 60-day episode rate by a case mix grouping and a wage index value based on the site of service for the beneficiary. The proposed CY 2005 HH PPS rates used the same case-mix methodology and application of the wage index adjustment to the labor portion of the HH PPS rates as set forth in the July 3, 2000 final rule. We multiplied the national 60-day episode rate by the patient's applicable case-mix weight. We divided the case-mix adjusted amount into a labor and non-labor portion. We multiplied the labor portion by the applicable wage index based on the site of service of the beneficiary.
As required by section 1895(b)(3)(B) of the Act, we have updated the HH PPS rates annually in a separate Federal Register document. Section 484.225 sets forth the specific percentage update for fiscal years 2001, 2002, and 2003. To reflect the new statutory provisions enacted by section 701 of the MMA, in § 484.225, we proposed to redesignate paragraph (d) as paragraph (g) and revise it to read as follows:
(g) For 2007 and subsequent calendar years, the unadjusted national rate is equal to the rate for the previous calendar year increased by the applicable home health market basket index amount.
We also proposed to add new paragraphs (d), (e), and (f) to read as follows:
(d) For the last calendar quarter of 2003 and the first calendar quarter of 2004, the unadjusted national prospective 60-day episode payment rate is equal to the rate from the previous fiscal year (FY 2003) increased by the applicable home health market basket index amount.
(e) For the last 3 calendar quarters of 2004, the unadjusted national prospective 60-day episode payment rate is equal to the rate from the previous fiscal year (FY 2003) increased by the applicable home health market basket minus 0.8 percentage points.
(f) For each of calendar years 2005 and 2006, the unadjusted national prospective 60-day episode payment rate is equal to the rate from the previous calendar year, increased by the applicable home health market basket minus 0.8 percentage points.
We also proposed to rebase and revise the home health market basket. As proposed, the labor related portion of the rebased and revised home health market basket would be 76.775 percent, and the non-labor portion would be 23.225 percent. We added the wage-adjusted portion to the non-labor portion yielding the case-mix and wage-adjusted 60-day episode rate subject to applicable adjustments.
For CY 2005, we proposed to use again the design and case-mix methodology described in section III.G of the HH PPS July 3, 2000 final rule (65 FR 41192 through 41203). For CY 2005, we proposed to base the wage index adjustment to the labor portion of the PPS rates on the most recent pre-floor and pre-reclassified hospital wage index that does not apply the core-based statistical area (CBSA) policy. 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 amounts by discipline annually by the applicable home health market basket percentage. We adjust the national per-visit amount by the appropriate wage index based on the site of service for the beneficiary as set forth in § 484.230. We proposed to adjust the labor portion of the updated national per-visit amounts by discipline used to calculate the LUPA by the most recent pre-floor and pre-reclassified hospital wage index that does not apply the CBSA policy.
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 (b)(2). We may base the initial percentage payment on the submission of a request for anticipated payment 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 the rate level at which Medicare will pay the claim for the fiscal period.
We may also adjust the 60-day case-mix 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.
• A significant change in condition adjustment as set forth in § 484.205(e) and § 484.237.
• An outlier payment as set forth in § 484.205(f) and § 484.240.
The proposed rule reflected the updated CY 2005 rates that would be effective January 1, 2005.
B. Rebasing and Revising of the Home Health Market Basket ↑
We also proposed to rebase and revise the home health market basket to ensure it continues to adequately reflect the price changes of efficiently providing home health services. In addition to rebasing the base year cost structure from FY 1993 to FY 2000, we also proposed to revise the market basket by modifying several categories in the market basket cost structure. The major revision to the proposed market basket was the combining of the Administrative and General and Other Expenses cost categories. [See 69 FR 31251 for a more complete explanation of the market basket cost structure]
C. Proposed CY 2005 Update to the Home Health Market Basket Index ↑
Section 1895(b)(3)(B) of the Act, as amended by section 701 of the MMA, requires for CY 2005 that the standard prospective payment amounts be increased by a factor equal to the applicable home health market basket increase minus 0.8 percentage points. We proposed to amend the regulations in § 484.225 to reflect this requirement.
•Proposed CY 2005 Adjustments.
In calculating the annual update for the CY 2005 60-day episode rates, we proposed to first look at the CY 2004 rates as a starting point. The CY 2004 national 60-day episode rate, as modified by section 701 of the MMA and implemented through Pub. 100-20 One Time Notification, Transmittal 59 issued February 20, 2004 is $2,213.37.
In order to calculate the CY 2005 national 60-day episode rate, we proposed to multiply the CY 2004 national 60-day episode rate ($2,213.37) by the applicable home health market basket update, at the time of publication of the proposed rule, of 3.3 percent for CY 2005 minus 0.8 percentage points.
We proposed to increase the CY 2004 60-day episode payment rate by the proposed home health market basket increase (3.3 percent) minus 0.8 percentage points ($2,213.37 × 2.5 percent) to yield the proposed updated CY 2005 national 60-day episode rate ($2,268.70).
•National Per-visit Amounts Used to Pay LUPAs and Compute Imputed Costs Used in Outlier Calculations.
The policies governing the LUPAs and outlier calculations set forth in the July 3, 2000 HH PPS final rule will continue during CY 2005. In calculating the annual update for the CY 2005 national per-visit amounts we use to pay LUPAs and to compute the imputed costs in outlier calculations, we proposed to look again at the CY 2004 rates as a starting point. We then proposed to multiply those amounts by the proposed home health market basket increase minus 0.8 percentage points for CY 2005 to yield the updated per-visit amounts for each home health discipline for CY 2005. For details as to the specific LUPA rates that we proposed for CY 2005, see the proposed rule (69 FR 31256) published on June 2, 2004.
D. Proposed Update to the Outlier Fixed Dollar Loss Ratio ↑
Outlier payments are payments made in addition to regular 60-day case-mix and wage-adjusted episode payments for episodes that incur unusually large costs due to patient home health care needs. 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 payment amounts for all visits delivered during the episode. The outlier threshold for each case-mix group, PEP adjustment, or total SCIC adjustment is defined as the 60-day episode payment amount, PEP adjustment, or total SCIC adjustment for that group plus a fixed dollar loss amount. Both components of the outlier threshold are wage-adjusted.
The wage-adjusted fixed dollar loss amount (FDL) represents the amount of loss that an agency must bear before an episode becomes eligible for outlier payments. The FDL is computed by multiplying the wage-adjusted 60-day episode payment amount by the fixed dollar loss ratio, which is a proportion expressed in terms of the national standardized episode payment amount. The outlier payment is defined to be a proportion of the wage-adjusted estimated costs beyond the wage-adjusted threshold. The proportion of additional costs paid as outlier payments is referred to as the loss-sharing ratio.
Section 1895(b)(5) of the Act requires that estimated total outlier payments are no more than 5 percent of total estimated HH PPS payments. In response to the concerns about potentialfinancial losses that might result from unusually expensive cases expressed in comments to the October 28, 1999 proposed rule (64 FR 58133), the July 2000 final rule set the target for estimated outlier payments at the 5 percent level. The fixed dollar loss ratio and the loss-sharing ratio were then selected so that estimated total outlier payments would meet the 5 percent target.
For a given level of outlier payments, there is a trade-off between the values selected for the fixed dollar loss ratio and the loss-sharing ratio. A high fixed dollar loss ratio reduces the number of episodes that can receive outlier payments, but makes it possible to select a higher loss-sharing ratio and, therefore, increase outlier payments for outlier episodes. Alternatively, a lower fixed dollar loss ratio means that more episodes can qualify for outlier payments, but outlier payments per episode must be lower. As a result of public comments on the October 28, 1999 proposed rule, in our July 2000 final rule, we made the decision to attempt to cover a relatively high proportion of the costs of outlier cases for the most expensive episodes that would qualify for outlier payments within the 5 percent constraint.
We chose a value of 0.80 for the loss-sharing ratio, which is relatively high, but which preserves incentives for agencies to attempt to provide care efficiently for outlier cases. It is also consistent with the loss-sharing ratios used in other Medicare PPS outlier policies. Having made this decision, we estimated the value of the fixed dollar loss ratio that would yield estimated total outlier payments that were projected to be no more than 5 percent of total home health PPS payments. The resulting value for the fixed dollar loss ratio was 1.13.
Analysis of 100 percent of CY 2001 home health claims data reflected that outlier episodes represented approximately 3 percent of total episodes and 3 percent of total HH PPS payments. We proposed to make no change in the projected 5 percent target for outlier expenditures as a percent of total HH PPS payments. In addition, we proposed no change to the loss-sharing ratio of 0.80. Further, section 1895(b)(3)(C) of the Act requires that the episode payment amounts be adjusted to effectively pay for outlier payments within the same level of estimated total spending. We proposed no change to the adjustment to the episode payment amounts for outlier payments. We proposed to change only the fixed dollar loss ratio, and in turn, the fixed dollar loss amount.
For the proposed rule, we performed data analysis on CY 2001 HH PPS analytic data to update the fixed dollar loss ratio to enable the total estimated outlier payments to be 5 percent of total HH PPS payments. That analysis indicated that a fixed dollar loss ratio of 0.72 was consistent with the existing loss-sharing ratio of 0.80 and a target percentage of estimated outlier payments of the projected 5 percent. Consequently, we proposed to update the fixed dollar loss ratio from the current ratio of 1.13 to the fixed dollar loss ratio of 0.72. It was estimated that a fixed dollar loss ratio of 0.72 would allow approximately 6.5 percent of episodes to qualify for outlier payments. The estimated 6.5 percent outlier episodes is greater than the 3.0 percent of episodes that currently qualify for outlier payments, and is about the same as the 6.8 percent for outlier episodes that we estimated in our July 2000 final rule.
We believe that our proposed fixed dollar loss ratio of 0.72 preserved a reasonable degree of cost sharing, while allowing a greater number of episodes to qualify for outlier payments. In our proposed rule, we indicated our plan to update our estimate of the fixed dollar loss ratio using the most current, complete year of HH PPS data available.
E. Rural Add-On as Required by the MMA ↑
Section 421 of the MMA requires, for home health services furnished in a rural area with respect to episodes and visits ending on or after April 1, 2004 and before April 1, 2005, that we increase by 5 percent the payment amount that otherwise would be made for these services. The statute waives budget neutrality related to this provision. By statute, the 5 percent rural add-on applies to home health services furnished in a rural area (as defined in section 1886(d)(2)(D) of the Act) for episodes and visits ending on or after April 1, 2004 and before April 1, 2005. Therefore, the 5 percent rural add-on ends after the first quarter of CY 2005 for episodes and visits ending before April 1, 2005. After the rural add-on is determined, the applicable case-mix and wage index adjustment is then subsequently applied for the provision of home health services where the site of service is the non-Metropolitan Statistical Area (MSA) of the beneficiary. Similarly, the applicable wage index adjustment is subsequently applied to the LUPA per visit amounts adjusted for the provision of home health services where the site of service for the beneficiary is a non-MSA area. We implemented this provision for CY 2004 on April 1, 2004 through Pub. 100-20 One Time Notification, Transmittal 59 issued February 20, 2004. For further details as to the specific rates for HH PPS payments to beneficiaries in rural areas, see the proposed rule (69 FR 31259) published on June 2, 2004.
F. Hospital 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 HH PPS to account for area wage differences. We applied the appropriate wage index value to the labor portion of the HH PPS rates based on the geographic area in which the beneficiary received home health services. We determined each HHA's labor market area based on definitions of Metropolitan Statistical Areas (MSAs) issued by the Office of Management and Budget (OMB). We recognize that on June 6, 2003, the Office of Management and Budget (OMB) issued OMB Bulletin No. 03-04, announcing revised definitions of Metropolitan Statistical Areas, and new definitions of Micropolitan Statistical Areas, and Combined Statistical Areas. A copy of the Bulletin may be obtained at the following Internet address:http://www.whitehouse.gov/omb/bulletins/b03-04.html. We indicated in our proposed rule, that these new definitions would not be applied to the CY 2005 wage index used in the proposed update to the HH payment rates.
On May 18, 2004, we published a proposed rule entitled “Medicare Program; Changes to the Hospital Inpatient Prospective Payment Systems and FY 2005 Rates” (69 FR 28195), which discusses some of the issues associated with using these new definitions and proposes to use these new definitions for the Inpatient Hospital PPS for FY 2005. We indicated that we believed it would be appropriate to wait until the public comments on that proposed rule had been submitted and analyzed before we considered proposing any new labor market definitions in the home health context.
As discussed previously and set forth in the July 3, 2000 final rule, the statute provides that the wage adjustment factors may be the factors used by the Secretary for purposes of section 1886(d)(3)(E) of the Act for hospital wage adjustment factors. Again, as discussed in the July 3, 2000 final rule,we proposed to use the pre-floor and pre-reclassified hospital wage index to adjust the labor portion of the HH PPS rates based on the geographic area in which the beneficiary receives the home health services. We believe the use of the pre-floor and pre-reclassified hospital wage index results in the appropriate adjustment to the labor portion of the costs as required by statute. The most recent pre-floor and pre-reclassified hospital wage index available for this update of the CY 2005 home health rates was determined to be that of the 2005 pre-floor and pre-reclassified hospital wage index. Due to the mandated change from a fiscal year update cycle to that of a calendar year update cycle, the most recent pre-floor and pre-reclassified hospital wage index available for this update of the CY 2005 home health payment rates was determined to be that of the 2005 pre-floor and pre-reclassified hospital wage index.
Under previous fiscal year updates, the most recent pre-floor and pre-reclassified hospital wage index available at the time of publication of the HH PPS fiscal year update was that of the previous year. Beginning with the CY 2005 update to home health payment rates, the most recent pre-floor and pre-reclassified hospital wage index available at the time of publication will be that of the current year. Consequently, for our proposed CY 2005 update to the home health payment rates, we proposed to continue to use the most recent pre-floor and pre-reclassified hospital wage index available at the time of publication. We recognized that this change to a calendar year update cycle results in using the current year's wage index values. We also note that for HH PPS rates addressed in the proposed rule, we inadvertently published the 2004 pre-floor and pre-reclassified hospital wage index. Consequently, we published a correction notice in the Federal Register on July 30, 2004 (69 FR 45640), replacing the inadvertently published 2004 pre-floor and pre-reclassified hospital wage index with a preliminary 2005 pre-floor and pre-reclassified hospital wage index that does not apply the CBSA policy.
We received approximately 25 timely comments on the Home Health Prospective Payment System Rate Update for Calendar Year 2005 proposed rule (CMS-1265-P), published on June 2, 2004 (69 FR 31248). We have also received approximately 6 additional timely comments on the Home Health Prospective Payment System Rate Update for FY 2004 Notice (CMS-1473-NC), published on July 2, 2003 (68 FR 39764). We received comments from HHAs and other health care providers, national industry associations, suppliers and practitioners, State associations, health care consulting firms, and private citizens. The comments centered on issues such as the wage index used to update rates, home health market basket analysis, metropolitan statistical areas as they relate to the wage index, reduction in the fixed dollar loss ratio for outlier episodes, home health resource group (HHRG) payment inadequacies, responsibility of and payment for supplies in the home health episode, cost reporting requirements, and finally refinements to the HH PPS in the areas of: Case mix, LUPAs, RAPs, SCICs, PEPs, outliers, supplies, and OASIS items (that is, M0175). We have considered all comments received during the 60-day public comment period on the June 2, 2004 proposed rule, as well as from the July 2, 2003 notice. Our responses to the comments from both Federal Register publications, the June 2, 2004 proposed rule and the July 2, 2003 notice are set forth in the following section.
As noted in the proposed rule published in the Federal Register on June 2, 2004 (69 FR 31248), because of the large number of items of correspondence we normally receive on Federal Register documents published for comment, we are unable to respond to them individually. In this final rule, we address the concerns of the commenters that are related to the proposed rule and the notice with comment period published on July 2, 2003 (68 FR 39764). Summaries of the major concerns and our responses to these comments are set forth below.
Refinements ↑
Comment: There were several comments regarding refinement of the many different features of the HH PPS outside of the payment update such as outliers, supplies, PEPs, SCICs, LUPAs, and OASIS that make up the HH PPS, as well as other related issues such as dual-eligibles, long-term care patients, and telemedicine.
Response: These comments were generally outside the scope of the proposed payment updates. Our ongoing research agenda on HH PPS refinements encompasses review of case mix adjustment and other payment adjustment provisions introduced as part of the PPS system. Our continuing work also includes review of overall system performance to the extent data permit analysis of this topic.
We intend to address the aspects of the HH PPS that are subject to administrative revision when we initiate a refinement regulation. We believe it is prudent to avoid piecemeal revisions addressing one provision or another in isolation. Also, we believe it is common with new payment systems for providers to go through a period of adaptation. The adaptation process influences the data we use to study refinements, and those data lag by a year or more. We believe it is appropriate to base recommendations on data that reflect the end point of the provider adaptation process. Our study results will be more effective and provide a better basis for policy proposals when the data used in the studies reflect the end point of the adaptation period. Furthermore, we believe the best approach would be one that allows for analyzing interrelationships among payment features on the system in general. Moreover, it is more efficient to make numerous changes at the same time. Past experience with changes in systems and data collection for providers has shown that providers believe it is more burdensome when frequent changes are made to a payment system.
Comment: There were a few comments requesting that ostomy supplies be exempt from the consolidated billing requirements because of their high cost.
Response: The Medicare statute governing the home health PPS is specific to the type of items and services bundled to the HHA. Section 1842(b)(6)(F) of the Act requires that all home health items and services, including medical supplies, furnished to a beneficiary under a plan of care are subject to consolidated billing. For example, if a patient is admitted for a condition that is related to a chronic condition which requires medical supplies (such as ostomy supplies), the HHA is required to provide those medical supplies while the patient is under a home health plan of care during an episode of care. We also note that costs of medical supplies are included in the HH PPS payment rate as the statute required that all services, including medical supplies, that would have been covered under the cost-based reimbursement system be bundled and paid under HH PPS.