Medicare Program; Proposed Hospice Wage Index for Fiscal Year 2006, 22394-22510 [05-8387]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 70, Number 82 (Friday, April 29, 2005)]
[Proposed Rules]
[Pages 22394-22510]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-8387]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 418



Medicare Program; Proposed Hospice Wage Index for Fiscal Year 2006; 
Proposed Rule

Federal Register / Vol. 70, No. 82 / Friday, April 29, 2005 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 418

[CMS-1286-P]
RIN 0938-AN89


Medicare Program; Proposed Hospice Wage Index for Fiscal Year 
2006

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth the hospice wage index for 
fiscal year 2006 and identifies the revised labor market and 
metropolitan statistical areas. This proposed rule would also codify 
provisions of sections 408 and 946 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 28, 2005.

ADDRESSES: In commenting, please refer to file code CMS-1286-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.cms.hhs.gov/regulations/
ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-1286-
P, P.O. Box 8012, Baltimore, MD 21244-8012.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-9994 in advance to schedule your arrival 
with one of our staff members.
    Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, 
SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 
21244-1850.
    (Because access to the interior of the HHH 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.)
    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 mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Terri Deutsch, (410) 786-9462.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-1286-P and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. CMS posts all electronic 
comments received before the close of the comment period on its public 
website as soon as possible after they have been received. Hard copy 
comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of a document, at the headquarters of the Centers for 
Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, 
Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 
p.m. To schedule an appointment to view public comments, phone 1-800-
743-3951.

I. Background

A. General

1. Hospice Care
    Hospice care is an approach to treatment that recognizes that the 
impending death of an individual warrants a change in the focus from 
curative care to palliative care for relief of pain and for symptom 
management. The goal of hospice care is to help terminally ill 
individuals continue life with minimal disruption to normal activities 
while remaining primarily in the home environment. A hospice uses an 
interdisciplinary approach to deliver medical, social, psychological, 
emotional, and spiritual services through use of a broad spectrum of 
professional and other caregivers, with the goal of making the 
individual as physically and emotionally comfortable as possible. 
Counseling services and inpatient respite services are available to the 
family of the hospice patient. Hospice programs consider both the 
patient and the family as a unit of care.
    Section 1861(dd) of the Social Security Act (the Act) provides for 
coverage of hospice care for terminally ill Medicare beneficiaries who 
elect to receive care from a participating hospice. Section 1824(i) of 
the Act provides payment for Medicare-participating hospices.
2. Medicare Payment for Hospice Care
    Our regulations at 42 CFR part 418 establish eligibility 
requirements, payment standards and procedures, define covered 
services, and delineate the conditions a hospice must meet to be 
approved for participation in the Medicare program. Part 418 subpart G 
provides for payment in one of four prospectively-determined rate 
categories (routine home care, continuous home care, inpatient respite 
care, and general inpatient care) to hospices based on each day a 
qualified Medicare beneficiary is under a hospice election.

B. Hospice Wage Index

    The hospice wage index is used to adjust payment rates for hospice 
agencies under the Medicare program to reflect local differences in 
area wage levels. The original hospice wage index was based on the 1981 
Bureau of Labor Statistics hospital data and had not been updated since 
1983. In 1994, because of disparity in wages from one geographical 
location to another, a committee was formulated to negotiate a wage 
index methodology that could be accepted by the industry and the 
government. This committee, functioning under a process established by 
the Negotiated Rulemaking Act of 1990, was comprised of national 
hospice associations; rural, urban, large, and small hospices; 
multisite hospices; consumer groups; and a government representative. 
On April 13, 1995, the Hospice Wage Index Negotiated

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Rulemaking Committee signed an agreement for the methodology to be used 
for updating the hospice wage index.
1. Updates to the Hospice Wage Index
    In the August 8, 1997 Federal Register (62 FR 42860), we published 
a final rule implementing a new methodology for calculating the hospice 
wage index based on the recommendations of the negotiated rulemaking 
committee. The committee statement was included in the appendix of that 
final rule (62 FR 42883). The provisions of the final rule specified 
that the revised hospice wage index was to be-- (1) calculated using 
the most current available hospital wage data; and (2) phased in over a 
3-year transition period. For the first year of the transition period, 
October 1, 1997 through September 30, 1998, a blended index was 
calculated by adding two-thirds of the 1983 index value for an area to 
one-third of the revised wage index value for that area. During the 
second year of the transition period, October 1, 1998 through September 
30, 1999, the calculation was similar, except that the blend was one-
third of the 1983 index value and two-thirds of the revised wage index 
value for that area. The revised wage index was fully implemented 
during the third year of the transition period, October 1, 1999 through 
September 30, 2000.
    The annual update to the hospice wage index is published in the 
Federal Register and is based on the most current available hospital 
wage data, as well as any changes by the Office of Management and 
Budget (OMB) to the definitions of Metropolitan Statistical Areas 
(MSAs). Raw wage index values (inpatient hospital pre-floor and pre-
reclassified wage index values) (as described in the August 8, 1997 
hospice wage index final rule (62 FR 42860)) are subject to either a 
budget neutrality adjustment or application of the wage index floor. 
Raw wage index values of 0.8 or greater are adjusted by the budget 
neutrality adjustment factor. Budget neutrality means that, in a given 
year, estimated aggregate payments for Medicare hospice services using 
the updated wage index values will equal estimated payments that would 
have been made for these services if the 1983 wage index values had 
remained in effect. To achieve this budget neutrality, the raw wage 
index is multiplied by a budget neutrality adjustment factor. The 
budget neutrality adjustment factor is computed and applied annually. 
The budget neutrality adjustment factor is calculated by comparing what 
we would have paid using current rates and the 1983 wage index to what 
would be paid using current rates and new wage index.
    Raw wage index values below 0.8 are adjusted by the greater of: (1) 
The hospice budget neutrality adjustment factor; or (2) the hospice 
wage index floor (a 15 percent increase) subject to a maximum wage 
index value of 0.8.

C. Hospice Provisions of the 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 legislation provided for the following provisions affecting 
hospice services:
     Section 408, Recognition of Attending Nurse Practitioners 
as Attending Physicians to Serve Hospice Patients.
     Section 512, Coverage of Hospice Consultation Services.
     Section 946, Authorizing Use of Arrangements to Provide 
Core Hospice Services in Certain Circumstances.
    Section 408 of the MMA amended sections 1861(dd)(3)(B) and 
1814(a)(7) of the Act to add nurse practitioners (NPs) to the 
definition of an attending physician for beneficiaries who have elected 
the hospice benefit. In other words, if a beneficiary's primary care 
provider before the determination of the terminal illness and election 
of the hospice benefit is an NP, the NP can remain as the attending 
physician, if the beneficiary chooses, after a hospice election. If the 
beneficiary does not have an attending physician or NP at the time of 
the terminal diagnosis, the beneficiary may choose to designate either 
a physician or an NP as his or her attending physician when electing 
the hospice benefit. Section 408 of the MMA was implemented through an 
administrative issuance (Change Request (CR) 3226, Transmittals 22 and 
304, September 24, 2004).
    Section 512 of the MMA provides for a one-time evaluation and 
consultation to Medicare beneficiaries who have been determined to have 
a 6-month prognosis if the disease runs its normal course, and who 
require the expertise of the medical director or physician employed by 
a hospice in order to be able to make end-of-life decisions. This 
provision was implemented in the CY 2005 Physician Fee Schedule final 
rule published in the November 15, 2004 Federal Register (69 FR 66335) 
and is incorporated in our regulations at Sec.  418.205 and Sec.  
418.304(d).
    Section 946(a) of the MMA allows a hospice program ``in 
extraordinary, exigent, or other non-routine circumstances, such as 
unanticipated period of high patient loads, staffing shortages due to 
illness or other events, or temporary travel of a patient outside a 
hospice program's service area, * * * `` to enter into arrangements 
with another hospice program to provide services to beneficiaries. 
Section 946(b) of the MMA provides that ``in the case of hospice care 
provided by a hospice program under arrangement under section 
1861(dd)(5)(D) made by another hospice program, the hospice program 
that made the arrangements shall bill and be paid for the hospice 
care.'' In section II.B.2 of this proposed rule, we discuss our 
proposal to revise the regulations to implement payment for hospice 
services made under arrangements. We will address the implementation of 
section 946(a) of the MMA in a future rulemaking document.

II. Provisions of the Proposed Rule

A. Hospice Wage Index for FY 2006

1. Revised OMB Definition for Geographical Statistical Areas
    As required by Sec.  418.306(c), each hospice's labor market is 
established using the MSA definitions issued by OMB. In the September 
4, 1996 hospice wage index proposed rule (61 FR 46579), we explained 
that the MSA definitions were issued by OMB on December 28, 1992, based 
on the 1990 census, and updated by OMB based on the decennial census. 
In accordance with our regulations, changes to the MSA definitions are 
announced in a Federal Register notice.
    In the August 27, 2004 Federal Register (69 FR 52710), we published 
a notice with respect to the hospice wage index for FY 2005. In that 
notice, we acknowledged that on June 6, 2003, OMB issued OMB Bulletin 
No. 03-04 announcing revised definitions for MSAs, new definitions for 
Micropolitan Statistical Areas and Combined Statistical Areas, and 
guidance on using the statistical definitions. (A copy of the Bulletin 
may be obtained at the following Internet address: https://
www.whitehouse.gov/omb/bulletins/b03-04.html.) In addition, we noted 
that we would not address the new OMB definitions because the wage data 
used to calculate the FY 2005 hospice wage index (FY 2004 hospital wage 
data) did not reflect revisions based on the new definitions. We 
indicated that the new OMB definitions would be addressed in the FY 
2006 wage index update.
a. Background
    In general, OMB defines an urban area as a Metropolitan Statistical 
Area (MSA) or New England County Metropolitan Area (NECMA). A rural 
area is defined

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as any area outside of the urban area. Any area not included in an MSA 
is considered to be nonurban and receives the statewide rural rate.
    Under the hospital inpatient prospective payment system (IPPS), the 
wage index is calculated and assigned to hospitals on the basis of the 
labor market area in which the hospital is located or geographically 
reclassified under sections 1886(d)(8) and (d)(10) of the Act. In 
accordance with our regulations for hospice payment, we also use MSAs 
to define labor market areas, but the application differs from IPPS. 
Section 1814(i)(2)(D) of the Act requires Medicare to pay for hospice 
services based on the geographic location where the service is 
furnished. The wage index value used is based upon the location of the 
beneficiary's home for routine home care and continuous home care and 
the location of the hospice agency for general inpatient and respite 
care.
    In this proposed rule, we will address the new OMB definitions and 
their application to the hospice wage index. Since our regulations 
require the use of the IPPS wage data as the basis for determining the 
hospice wage index, we are providing the following summary of the 
revised geographical statistical areas adopted in the FY 2005 IPPS 
final rule. (For a more detailed discussion of the changes in the 
hospital wage index based on the new OMB definitions see the FY 2005 
IPPS proposed and final rules published May 18, 2004 (69 FR 28196) and 
August 11, 2004 (69 FR 48916).)
b. Current Labor Market Areas Based on MSAs
    As discussed in the FY 2005 IPPS final rule, ``the [hospital] wage 
index is calculated and assigned to hospitals on the basis of the labor 
market area in which the hospital is located.'' In addition, the IPPS 
final rule (69 FR 49026) defined hospital labor markets as follows:

    We currently define hospital labor market areas based on the 
definitions of Metropolitan Statistical Areas (MSAs), Primary MSAs 
(PMSAs), and New England County Metropolitan Areas (NECMAs) issued 
by OMB. OMB also designates Consolidated MSAs (CMSAs). A CMSA is a 
metropolitan area with a population of one million or more, 
comprising two or more PMSAs (identified by their separate economic 
and social character). For purposes of the hospital wage index, we 
use the PMSAs rather than CMSAs because they allow a more precise 
breakdown of labor costs. If a metropolitan area is not designated 
as part of a PMSA, we use the applicable MSA.
    These different designations use counties as the building blocks 
upon which they are based. Therefore, hospitals are assigned to 
either an MSA, PMSA, or NECMA based on whether the county in which 
the hospital is located is part of that area. For purposes of the 
IPPS wage index, we combine all of the counties in a State outside a 
designated MSA, PMSA, or NECMA together to calculate a statewide 
rural wage index.
c. Core-Based Statistical Areas
    In the December 27, 2000 Federal Register (65 FR 82228 through 
82238), OMB announced its new standards and in that notice, OMB defined 
a Core-Based Statistical Area (CBSA), beginning in 2003, as ``a 
geographic entity associated with at least one core of 10,000 or more 
population, plus adjacent territory that has a high degree of social 
and economic integration with the core as measured by commuting ties.'' 
The standards designate and define two categories of CBSAs: MSAs and 
Micropolitan Statistical Areas (65 FR 82235).
    According to OMB, MSAs are based on urbanized areas of 50,000 or 
more population, and Micropolitan Statistical Areas (referred to in 
further discussion as Micropolitan Areas) are based on urban clusters 
of at least 10,000 population but less than 50,000 population. Counties 
that do not fall within CBSA (either MSA or Micropolitan Areas) are 
deemed ``Outside CBSAs.'' In the past, OMB defined MSAs around areas 
with a minimum core population of 50,000, and smaller areas were 
``Outside MSAs.''
    In its June 6, 2003 bulletin, OMB announced the new CBSAs, 
comprised of MSAs and the new Micropolitan Areas based on Census 2000 
data. The new CBSA designations recognize 49 new (urban) MSAs and 565 
new Micropolitan Areas, and revised the composition of many of the 
existing (urban) MSAs. There are 1,090 counties in MSAs under these new 
CBSA designations compared with 848 counties in the previous MSAs. Of 
these 1,090 counties, 737 are in the same MSA as they were before the 
changes, 65 are in different MSAs, and 288 were not previously 
designated to any MSA. There are 674 counties in Micropolitan Areas. Of 
these, 41 were previously in an MSA, while 633 were not previously 
designated to an MSA.
d. Revised Labor Market Areas
    As discussed in the FY 2005 IPPS final rule (69 FR 49027), 
alternatives to the use of MSAs for the purpose of establishing labor 
market areas for the Medicare wage index were examined. In the May 27, 
1994, IPPS proposed rule (59 FR 27724), the latest research concerning 
possible future refinements to the labor market areas was presented. 
Public comments received on the May 27, 1994 proposed rule were 
described in the June 2, 1995 proposed rule (60 FR 29219). In that 
rule, it was noted that there was no consensus among commenters on the 
choice for new labor market areas. Consequently, MSAs have continued to 
be used to define labor market areas for purposes of the wage index by 
many Medicare payment systems as noted in previous discussion.
(1) New England County Metropolitan Areas
    NECMAs are currently used to define labor markets areas in New 
England, ``* * * because these are county-based designations rather 
than the 1990 MSA definitions for New England which used minor civil 
divisions such as cities and towns.'' Under the CBSA definition, ``OMB 
has defined the MSAs and Micropolitan Areas in New England on the basis 
of counties. OMB also established New England City and Town Areas, 
which are similar to the previous New England MSAs.'' Therefore, to 
maintain consistency in the definition of labor market areas between 
New England and the rest of the country, IPPS decided to use the New 
England MSAs under the new CBSA definition.
(2) Metropolitan Divisions
    Under OMB's new CBSA designations, a Metropolitan Division is a 
county or group of counties within a CBSA that contains a core 
population of at least 2.5 million, representing an employment center, 
plus adjacent counties associated with the main county or counties 
through commuting lines. For the hospital wage index the PMSAs are used 
rather than CMSA to define labor market areas ``because they comprise a 
smaller geographic area with potentially varying labor costs due to 
different local economies.''
(3) Micropolitan Areas
    The IPPS final rule noted the following regarding the use of 
Micropolitan Areas to define labor markets (69 FR 49029):

    One of the major issues with respect to the new definitions is 
whether to use Micropolitan Areas to define labor market areas for 
the purpose of the IPPS wage index. Because the new Micropolitan 
Areas are essentially a third area definition made up mostly of 
currently rural areas, but also some or all of current MSAs, how 
these areas are treated will have significant impacts on the 
calculation and application of the wage index. Treating Micropolitan 
Areas as separate and distinct labor market areas would affect both 
the wage indexes of the hospitals in the Micropolitan Areas and the

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hospitals in the labor market areas where those hospitals are 
currently located (both positively and negatively).
    Because we currently use MSAs to define urban labor market areas 
and we group all the hospitals in counties within each State that 
are not assigned to an MSA together into a statewide rural labor 
market area, we have used the terms ``urban'' and ``rural'' wage 
indexes in the past for ease of reference. However, the introduction 
of Micropolitan Areas complicates this terminology because these 
areas include so many hospitals that are currently included in the 
statewide rural labor market areas. In order to facilitate the 
discussion below, we use the term ``rural'' hospitals to describe 
hospitals in counties that are not assigned to either an MSA or a 
Micropolitan Area. This should not be taken to indicate that 
hospitals in Micropolitan Areas are no longer ``rural'' hospitals. 
In fact, we proposed that hospitals in Micropolitan Areas are 
included in the statewide rural labor market areas, for the reasons 
outlined below.
2. Annual Update to the Hospice Wage Index
(If you choose to comment on issues in this section, please include the 
caption ``Annual Update to the Hospice Wage Index'' at the beginning of 
your comments)
a. Background
    Section 418.306(c) requires that we issue annually in the Federal 
Register, hospice wage index based on our most current available 
hospital wage data, including any changes to the definitions of MSAs.
    Section 4441(a) of the Balanced Budget Act of 1997 (BBA) amended 
section 1814(i)(1)(C)(ii) of the Act to establish updates to hospice 
rates for FYs 1998 through 2002. Hospice rates were to be updated by a 
factor equal to the hospital market basket index, minus 1 percentage 
point. However, neither the BBA nor subsequent legislation specified 
the hospital market basket adjustment to be used to compute payment for 
FY 2006. Therefore, payment rates for FY 2006 will be updated according 
to section 1814(i)(1)(C)(ii)(VII) of the Act, which specifies that the 
update to the payment rates after FY 2002 will be the hospital market 
basket percentage increase for the fiscal year. This rate update is 
implemented via administrative issuance to be published July 2005 to 
provide adequate time to implement system change requirements and is 
not part of this proposed rule.
    The hospice wage index presented in this proposed rule would be 
effective October 1, 2005 through September 30, 2006. We note that we 
are not proposing any modifications to the hospice wage index 
methodology. In accordance with the our regulations and the agreement 
signed with other members of the Hospice Wage Index Negotiated 
Rulemaking Committee, we will continue to use the most current hospital 
data available to adjust for area wage differences. For this proposed 
rule, the FY 2005 hospital wage index was the most current hospital 
wage data available when the FY 2006 wage index values were calculated. 
We continue to use the pre-reclassified and prefloor hospital area wage 
index data. Payment rates for each of the four levels of care (routine 
home care, continuous home care, respite care, and general inpatient 
care) are adjusted annually based upon the hospital market basket for 
that year and are promulgated administratively to allow for sufficient 
time for system changes and provider notification. Due to the need to 
ensure appropriate time for implementing changes, we have not 
incorporated these payment rates into this proposed rule.
    The payment rates are divided into the labor and nonlabor portions. 
The appropriate wage index value is applied to the labor portion of the 
hospice rate based on the geographic area in which the beneficiary 
resides when receiving routine home care or continuous home care. The 
appropriate wage index value is applied to the labor portion of the 
hospice rate based on the geographic area of the hospice agency for 
beneficiaries receiving general inpatient or respite level of care.
    We use the previous fiscal year's hospital wage index data to 
calculate the hospice wage index values. For FY 2006 proposed hospice 
wage index, we use the FY 2005 hospital prefloor and pre-reclassified 
hospital wage data. This means that the hospital wage data used for the 
hospice wage index is not adjusted to take into account the geographic 
reclassification of hospitals in accordance with sections 1886(d)(8)(B) 
and 1886 (D)(10) of the Act. All wage index values for FY 2006 would be 
adjusted by either by the proposed FY 2006 budget neutrality adjustment 
factor, 1.063479, or the wage index floor adjustment. This means, that 
for wage index values 0.8 or greater, the value is multiplied by the 
budget neutrality adjustment factor. For wage index values that are 
below 0.8, either the budget neutrality adjustment factor or the wage 
index floor, not to exceed 0.8, is applied. In other words, the floor 
adjustment is the greater of the raw wage index value multiplied by the 
proposed budget neutrality adjustment factor (1.063479 for FY 2006) or 
the raw wage index value for that area is multiplied by 15 percent 
subject to a maximum value of 0.8. Budget neutrality means that, in a 
given year, estimated aggregate payments for Medicare hospice services 
using the updated wage index will equal estimated payments that would 
have been made for the same services if the wage index adopted for 
hospices in 1983 had remained in effect. (For a detailed discussion of 
the methodology used to compute the hospice wage index see the 
September 4, 1996 proposed rule (61 FR 46579) and the August 8, 1997 
final rule (62 FR 42860)). The proposed FY 2006 hospice wage indexes 
for urban and rural areas are listed in Tables A and B of the Addendum.
b. Implementation of the Revised Labor Market Designations
    (If you choose to comment on issues in this section, please include 
the caption ``Implementation of Revised Labor Market Designations'' at 
the beginning of your comments)

    For the hospice payment system, Sec.  418.306(c) requires that the 
hospice wage index be ``based on the most current available CMS 
hospital wage index, including any changes to the definitions of 
Metropolitan Statistical Areas.'' We continue to believe MSAs are a 
reasonable and appropriate proxy for developing geographic areas for 
purposes of adjusting for wage differences in hospice. We also note 
that MSAs are used to define labor market areas for purposes of the 
wage index for many of the other Medicare payment systems (for example, 
long term care hospital (LTCH) prospective payment system (PPS), 
inpatient rehabilitation facility (IRF) PPS, home health agency (HHA) 
PPS, skilled nursing facility (SNF) PPS, Outpatient PPS and inpatient 
psychiatric facility (IPF) PPS.
    First, historically, Medicare prospective payment systems have used 
metropolitan area (MA) definitions developed by OMB. For example, in 
adopting the MSA designation for the IPPS area labor adjustment, the 
Secretary stated:

    [i]n administering a national payment system, we must have a 
national classification system built on clear, objective standards. 
Otherwise the program becomes increasingly difficult to administer 
because the distinction between rural and urban hospitals is 
blurred. We believe that the MSA system is the only one that 
currently meets the requirements for use as a classification system 
in a national payment program. The MSA classification system is a 
statistical standard developed for use by Federal agencies in the 
production, analysis, and publication of data on metropolitan areas. 
The standards have been developed with the aim of producing 
definitions that will be consistent as possible for all MSAs 
nationwide.'' (49 FR 27426).


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    In addition, in numerous instances, the Congress has recognized 
that the areas developed by OMB may be used for differentiating among 
geographic areas for Medicare payment purposes. For example, in the 
IPPS statutory section, section 1886(d)(2)(D) of the Act, the Congress 
defines an ``urban area'' as ``an area within a Metropolitan 
Statistical Area (as defined by the Office of Management and Budget) or 
within such similar area as the Secretary has recognized.'' Similarly, 
in the sections of the statute governing the guidelines to be used by 
the Medicare Geographic Classification Review Board for purposes of 
reclassification, sections 1886(d)(10)(A) and (D)(i)(II) of the Act, 
the Congress directed the Secretary to create guidelines for 
``determining whether the county in which the hospital is located 
should be treated as being part of a particular [MSA].'' Thus, the 
Congress has accepted and ratified the use of MSAs as an inherently 
rational manner of dividing up labor-market areas for purposes of 
Medicare payments.
    The process used by OMB to develop the MSAs creates geographic 
areas that are based upon characteristics we believe also generally 
reflect the characteristics of unified labor market areas. For example, 
the CBSAs reflect a core population plus an adjacent territory that 
reflects a high degree of social and economic integration. This 
integration is measured by commuting ties, thus demonstrating that 
these areas may draw workers from the same general areas. In addition, 
the most recent CBSAs reflect the most up to date information. OMB 
reviews its MA definitions preceding each decennial census to reflect 
recent population changes, and the CBSAs are based on the Census 2000 
data. Finally, in the context of the inpatient prospective payment 
system, we have reviewed alternative methods for determining geographic 
areas for purposes of the wage index, and in each case, have determined 
to remain with the OMB designations rather than replace these 
designations with alternatives.
    As stated previously, Sec.  418.306(c) requires the hospice wage 
index to reflect changes to the definitions of MSA. Therefore, we are 
proposing to adopt the revised labor market area designations based on 
OMB's CBSA designations.
    For the proposed FY 2006 hospice wage index, we would adopt the 
CBSA designations as finalized in the FY 2005 IPPS. We believe that 
OMB's CBSA designations, based on Census 2000 data reflect the most 
recent available geographic classifications (MA definitions). We are 
not proposing to change at this time, the methodology derived as a 
result of the negotiated rulemaking committee. We believe that there 
are factors which require evaluation to determine if the hospice 
methodology supports the cost of providing hospice services and if the 
methodology requires modification.
    As discussed in the IPPS final rule (69 FR 49032), when the IPPS 
adopted the revised labor market areas based on OMB's new CBSA 
designations on October 1, 2004, IPPS established a transition to the 
new designations to mitigate the resulting adverse impact on certain 
hospitals. Section 1814(i)(1)(A) of the Act requires hospice payment to 
be based on ``costs which are reasonable and related to the cost of 
providing hospice care or which are based on such other tests of 
reasonableness the Secretary may prescribe in regulations * * *.'' Our 
regulations at Sec.  418.306(c) require us to issue annually in the 
Federal Register `` a hospice wage index based on the most current 
available CMS hospital data wage data, including any changes to the 
definitions of Metropolitan Statistical Areas.'' This language would 
not seem to permit us to establish a transition to the new CBSA 
designations. In addition, unlike IPPS and other payment systems where 
each entity uses a single MSA (CBSA), hospice agencies may use various 
wage indices to compute their payments based upon the location of the 
beneficiary for routine and continuous home care or the MSA (CBSA) for 
the location of the agency for respite and general inpatient care. The 
methodology for applying the hospice floor (15 percent) to wage index 
values below 0.8 is used to leverage areas where there are 
significantly low wage index values. Moreover, we do not believe that 
in the aggregate, hospice agencies would be impacted negatively by the 
new CBSA designations. The existing methodology of computing the 
hospice wage index, the annual calculation of the hospice payment rates 
based upon the market basket index, and the variability of CBSAs that 
may be attributed to different hospice agencies are sufficient to 
mitigate adverse effects on individual hospice agencies. While we 
understand that there are CBSAs that decrease based upon the new 
definitions, there are those that are positively affected. For example, 
many counties that have been included in the rural definitions under 
the MSA designations are now designated as urban areas under the CBSA 
will generally receive an increase in their wage index. We believe that 
adjustments made to CBSAs because of negative impact would necessitate 
adjustment to CBSAs that are positively impacted. Variability and 
changes in wage indices both positively and negatively have occurred 
under the MSA designations and occur as a result of geographic 
differences. As a result, we propose to adopt the CBSA definitions and 
resulting wage indices without transitions. The impact of the CBSA 
designations is discussed in section V of this proposed rule.
    In adopting the CBSA designations, we identified that there were no 
IPPS hospitals and thus no hospital wage index data on which to base 
the calculation of the FY 2006 hospice wage index for rural 
Massachusetts. Because there is no reasonable proxy for more recent 
rural data within Massachusetts, we are proposing to use the prefloor, 
preclassified hospital wage index data for FY 2005 and apply the FY 
2006 proposed budget neutrality factor of 1.063479. In the event that 
future rural areas do not have hospital wage index data to derive a 
hospice wage index, we propose to use a comparable methodology to 
derive a wage index. Similarly, if there urban areas without hospital 
wage index data, we propose to use all of the urban areas within the 
State as a reasonable proxy. We are soliciting comment on these 
approaches to calculating the wage index value for areas without 
hospital wage data for FY 2006 and subsequent years.
    To facilitate an understanding of the policies related to the 
proposed changes in the hospice wage index discussed in section II.A of 
this proposed rule, we are providing the following tables in the 
Addendum to this proposed rule:
     Table A--Proposed Hospice Wage Index for Urban Areas by 
CBSA.
     Table B--Proposed Hospice Wage Index for Rural Areas by 
CBSA.
     Table C--Comparison of Hospice Wage Index for Urban Areas 
by MSA and CBSA. This table lists the counties by MSA designation and 
the wage index if we had retained the use of MSAs. It also presents the 
CBSA designation for these counties and the corresponding wage index 
using the CBSA designations. The MSA designations include those 
counties that were classified as rural and indicated the State rural 
MSA code and the corresponding CBSA for these counties which under the 
CBSA designation are now urban. We note that some counties that are 
classified as rural under the MSA designation would become rural under 
the new CBSA designation and vice versa.
     Table D--Comparison of the Hospice Wage Index for Rural 
Areas by MSA and CBSA. This table compares

[[Page 22399]]

the State rural MSA designations and their corresponding wage indices 
to the CBSA designations and their respective wage indices.
     Table E--Rural Counties Converting to Urban Counties by 
State. This table presents the rural counties that under the CBSA 
designations convert to urban counties. The list includes the county 
name, State county code, MSA designation, MSA name, CBSA name, and CBSA 
designation. Please note that these conversions are based on the OMB 
designations.
     Table F--Crosswalk of Counties by State from MSA to CBSA. 
This table crosswalks all counties in each State from MSA to CBSA and 
includes the State, State county code, MSA designation, MSA name, CBSA 
designation, and CBSA name. These tables will assist providers in 
identifying their location and their catchment area(s) by their 
previous designations and their CBSA designation as well as the wage 
indices for those areas based upon the previous MSA designations as 
well as the CBSA designations.
3. Labeling Error in the Hospice Wage Index
    We have discovered an error in the labeling of the wage index 
tables that we have been publishing in the annual hospice wage index 
update. That labeling error is the listing of Stanly County, North 
Carolina as one of the areas under MSA 1520 when, in fact, we consider 
Stanly County, NC to be a rural area in North Carolina. Stanly County 
wage data have always been correctly treated as rural in the actual 
creation of the hospice wage index values, and it has only been the 
listing of Stanly County under MSA 1520 that was in error. 
Consequently, we are correcting our labeling error from past notices 
for the hospice and have removed Stanly County from the list of areas 
that fall under the MSA 1520 wage index. Since this is strictly a 
ministerial correction that does not affect the actual computation of 
the wage index values, hospice providers in and beneficiaries who 
reside in Stanly County and receive routine home and continuous home 
care in Stanly County will continue to fall under, and use, the wage 
index for rural North Carolina.

B. Proposed Changes To Implement Hospice-Related Provisions of the MMA

    (If you choose to comment on issues in this section, please include 
the caption ``MMA Provisions'' at the beginning of your comments)

    In section I.C of this proposed rule, we note that section 408 of 
the MMA was effective upon enactment and initially implemented through 
administrative issuances. This proposed rule would incorporate the 
provisions in regulation.
1. Coverage of Nurse Practitioner as Attending Physician in Hospice 
(Section 408 of the MMA)
    Section 408 of the MMA amended sections 1861(dd)(3)(B) and 
1814(a)(7) of the Act to add nurse practitioners (NPs) to the 
definition of an attending physician, for beneficiaries who have 
elected the hospice benefit. In other words, if a beneficiary's primary 
care provider is an NP, before the determination of the terminal 
illness and election of the hospice benefit, the NP can remain as the 
attending physician, if chosen by the beneficiary. If the beneficiary 
does not have an attending physician or NP, the beneficiary must be 
provided with an option of either a physician or an NP (if available 
and if allowed by State law) to serve as the attending physician. An NP 
is defined as a registered nurse who performs such services as he or 
she is legally authorized to perform (in the State in which the 
services are performed) in accordance with State law (or State 
regulatory mechanism provided by State law) and who meets the training, 
education, and experience requirements as the Secretary may prescribe.
    As discussed in Change Request 3226 (Transmittals 22 and 304, 
September 24, 2004), beginning December 8, 2003, Medicare pays for 
medically reasonable and necessary services provided by NPs to Medicare 
beneficiaries who have elected the hospice benefit and who have 
selected a nurse practitioner as their attending physician. Nurse 
practitioners are paid 85 percent of the fee schedule amount for their 
services as attending physicians. Services for the terminal and related 
conditions provided by an NP--
     Serving as the attending physician that are medical in 
nature must be reasonable and necessary and must be services that, in 
the absence of an NP, would be performed by a physician; and
     May not be separately billed if the--
    ++ Services would not be reasonable and necessary if provided by an 
attending physician;
    ++ NP is not the patient's attending physician; or
    ++ Services would be performed by a registered or licensed nurse in 
the absence of a physician or nurse practitioner.
    Since NPs are not physicians, as defined in 1861(r)(1) of the Act, 
they may not act as medical directors or physicians of the hospice or 
certify the beneficiary's terminal illness and hospices may not 
contract for their attending physician services as described in 
1861(dd)(2)(B)(i)(III) of the Act. All of these provisions apply to NPs 
without regard to whether they are hospice employees.
    We are proposing to revise Sec.  418.3, 418.22(c)(1)(ii), and Sec.  
418.304 to implement the provisions of section 408 of the MMA.
2. Payment for Authorizing Use of Arrangements To Provide Hospice 
Service Under Certain Circumstances (Section 946 of the MMA)
    Section 946(a) of the MMA amended section 1861(dd)(5) of the Act by 
adding the following: ``(D) In extraordinary, exigent, or other non-
routine circumstances, such as unanticipated periods of high patient 
loads, staffing shortages due to illness or other events, or temporary 
travel of a patient outside a hospice program's service area, a hospice 
program may enter into arrangements with another hospice program for 
the provision by that other program of services described in paragraph 
(2)(A)(ii)(I).'' Section 946(a) of the MMA is discussed in this 
proposed rule to assist the reader in understanding how hospices will 
be reimbursed for these types of arrangements. We will issue more 
specific regulations regarding section 946(a) of the MMA in future 
rulemaking.
    Section 946(b) of the MMA amended section 1814(i) of the Act to add 
the following: ``(5) In the case of hospice care provided by a hospice 
program under arrangements under section 1861(dd)(5)(D) made by another 
hospice program, the hospice program that made the arrangements shall 
bill and be paid for the hospice care.'' This means that the hospice 
that establishes the contractual arrangement with the hospice that will 
be providing services to the beneficiary, continues to bill for and 
receive payment during the hospice election.
    Section 4442 of the BBA amended section 1814(i)(2) of the Act, 
effective for services furnished on or after October 1, 1997, to 
require hospice agencies to submit claims for payment for hospice 
services furnished in an individual's home on the basis of the 
geographic location at which the service is furnished. Therefore, the 
methodology for applying the wage index to the labor portion of the 
payment rates remains the same. This means that the wage index for 
routine and continuous home care would reflect the place where the 
service is provided,

[[Page 22400]]

which may be outside of the hospice program's service area during 
periods of temporary travel. We do not propose in this rule to define 
``temporary travel'' since this would depend upon individual needs and 
abilities determined by the interdisciplinary group, the beneficiary, 
and his or her family. The wage index for general inpatient care would 
reflect the MSA for the hospice agency that retains management 
responsibility. Payment will continue to be made to the hospice agency 
for which the beneficiary has made the election. We are proposing to 
revise Sec.  418.302(d) to implement this provision.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    Section 418.22(c)(1) requires for the initial 90-day period, the 
hospice must obtain written certification statements (and oral 
certification statements if required under paragraph (a)(3) of this 
section) from the individual's attending physician, if the individual 
has an attending physician, that meets the definition of physician 
specified in Sec.  410.20 of this subchapter.
    While this requirement is subject to the PRA it is currently 
approved by OMB under control number 0938-0302, ``ICRs in Hospice Care 
Regulation and Supporting Regulations'', with a current expiration date 
of September 30, 2006.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

(If you choose to comment on issues in this section, please include the 
caption ``Impact Analysis'' at the beginning of your comments)

A. Overall Impact

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 
1995 (Pub. L. 104-4), and Executive Order 13132. We estimated the 
impact on hospices, as a result of the proposed changes to the FY 2006 
hospice wage index. As discussed previously, the methodology for 
computing the wage index was determined through a negotiated rulemaking 
committee and implemented in the August 8, 1997 final rule (62 FR 
42860). This proposed rule updates the hospice wage index in accordance 
with our regulation and that methodology, incorporating the adoption of 
the CBSA designations used in the hospital wage index data. Table I 
reflects the proposed hospice wage index impact using the CBSA 
designations. Table II indicates the proposed wage index impact using 
the hospice wage indices under the MSA designations as well as the CBSA 
designations.
    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 an MSA and has fewer 
than 100 beds. We have determined that this proposed rule would not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, and tribal governments, in the aggregate, or by the private 
sector, of $110 million or more. This proposed rule would have no 
substantial effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this proposed rule under the threshold 
criteria of Executive Order 13132, Federalism, and have determined that 
it would not have an impact on the rights, roles, and responsibilities 
of State, local, or tribal governments.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
1. Hospice Size
    The impact of hospice wage index changes have been analyzed 
according to type of hospice, geographic location, type of ownership, 
hospice base, and hospice size. Hospice size was determined by the 
number of routine home care days (RHC). Since routine home care days 
account for over 70 percent of the services provided by a hospice, we 
used RHC days as a proxy for the size of the hospice agency. In the 
past, we had, designated the size by four categories: (1) 0 to 1,754 
RHC days representing small agencies; (2) 1,754 to 4,373 RHC days or 
(3) 4,373 to 9,681 RHC days representing medium-sized agencies; and (4) 
9,681 RHC days or more representing large agencies.
    To determine the statistical distribution of RHC days, based upon 
the total number of hospice agencies and their respective RHC days 
using FY 2003 claims processed through March 2004, were used. In 
determining the statistical distribution, we deleted data for four 
hospice agencies with RHC days that greatly exceeded the total number 
of RHC days of other agencies. However, these data have been included 
in the impact analysis since we recognize that the skewness existed in 
the ``large'' agency size distribution using four size categories and 
does not change with the use of three size categories.
    Based upon this analysis, we are using only three size designations 
to present the impact analyses. We believe that these three 
designations better describe the size of the hospice. The three 
categories are: Small agencies having 0 to 3,499 RHC days; medium 
agencies having 3,500 to 19,999 RHC days; and large agencies having 
20,000 or more RHC days.
2. Impact on Hospices
    Our discussions for this proposed rule will focus on the impact of 
adopting the

[[Page 22401]]

CBSA designations. Table I indicates the impact of using the proposed 
CBSA designations. Table II provides a comparison between impact using 
the MSA and CBSA designations. As discussed above, we use the latest 
claims file available to us to develop the impact table when we issue 
the annual yearly wage index update. For the purposes of this proposed 
rule, we used the 2003 claims that were processed through June 2004 
since this was the latest file available. Thus the projections or 
anticipated payments indicated in Table I do not represent the 
expenditures that we anticipate for FY 2006. We anticipate that the 
final rule will more accurately project payment for FY 2006. For the 
purposes of this proposed rule, we compared estimated payments using 
the FY 1983 hospice wage index to estimated payments using the FY 2006 
wage index and determined the proposed hospice wage index to be budget 
neutral. Budget neutrality means that, in a given year, estimated 
aggregate payments for Medicare hospice services using the proposed FY 
2006 wage index would equal estimated aggregate payments that would 
have been made for the same services if the 1983 wage index had 
remained in effect. Budget neutrality to 1983 does not imply that 
estimated payments would not increase since the budget neutrality 
applies only to the wage index portion and not the total payment rate, 
which accommodates inflation.
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
We have determined that this proposed rule is not an economically 
significant rule under this Executive Order.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospices and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year (for details, see the Small 
Business Administration's regulation at 65 FR 69432, that sets forth 
size standards for health care industries). For purposes of the RFA, 
most hospices are small entities. As indicated in Table I below, there 
are 2,435 hospices. Approximately 70 percent of Medicare certified 
hospices are identified as voluntary, government, or other agencies 
and, therefore, are considered small entities. Because the National 
Hospice and Palliative Care Organization estimates that approximately 
79 percent of hospice patients are Medicare beneficiaries, we have not 
considered other sources of revenue in this analysis. Furthermore, the 
wage index methodology was previously determined by consensus, through 
a negotiated rulemaking committee that included representatives of 
national hospice associations; rural, urban, large, and small hospices; 
multisite hospices; and consumer groups. Based on all of the options 
considered, the committee agreed on the methodology described in the 
committee statement, and it was adopted into regulation in the August 
8, 1997 final rule. In developing the process for updating the wage 
index in the 1997 final rule, we considered the impact of this 
methodology on small entities and attempted to mitigate any potential 
negative effects.
    As stated previously, the following discussions are limited to 
demonstrating trends rather than projected dollars if the subsequent 
final rule to this proposed rule were implemented for FY 2006. We used 
the CBSA designations and wage indices as well as the data from FY 2003 
claims processed through June 2004 in developing the impact analysis. 
We will recalculate the impacts for the final rule using the FY 2004 
claims file. We will discuss the estimated payments for FY 2006 at that 
time. Since the impact tables are intended to reflect the 
implementation of the CBSA in contrast with the current MSA 
designations, the introduction of the wage indices is the only variable 
used in the computation. It is important to note that the payment rates 
used reflect the FY 2005 rates. The FY 2006 payment rates will be 
adjusted to reflect the full FY 2006 hospital market basket, as 
required by section 1814(i)(1)(C) (ii)(VII) of the Act. As previously 
noted, we publish these rates through administrative issuances. As 
discussed in section II.A.1.a. of this proposed rule, hospice agencies 
may various wage indices to compute their payments based on the 
geographic location of the beneficiary for routine and continuous home 
care or the MSA (CBSA) or the location of the hospice agency for 
respite and general inpatient care. Therefore, we analyze the impact on 
hospices using the following parameters: geographic location; hospice 
size; type of ownership; and hospice base).
    Our analysis demonstrates that, under this proposed rule, rural 
hospices would experience an increase in payment that is greater than 
that of urban hospices. Rural hospices are anticipated to experience a 
modest increase of 0.8 percent and urban hospices a slight decrease of 
0.2 percent. However, the impact overall is anticipated to remain 
unchanged if the CBSA designations are adopted. This flat trend is also 
evident when contrasting the findings with projections using the MSA 
designations. However, the projections using the MSA designations 
remain flat for urban areas and decrease slightly by 0.1 percent for 
rural areas.
    Of the urban hospices, we anticipate that most of the regions would 
experience decreases ranging from a 1.4 for the urban New England 
region to 0.1 decrease for the South Atlantic. A slight increase is 
anticipated for the West North Central, West South Central, and Pacific 
urban regions of 0.1, 0.2, and 0.1, respectively. In contrast, the 
rural regions are expected to receive an increase for all regions 
ranging from a substantial increase of 21.7 percent for rural Puerto 
Rico to a 1 percent increase for East North Central. We believe that 
that aberration for Puerto Rico can be attributed to the increase in 
the hospital wage indices in the region as well as the large number of 
rural counties under the MSA designations in Puerto Rico that have been 
designated as urban counties under the CBSA designations. Rural New 
England and West North Central regions are expected to remain flat. 
Only one rural region, the Mid-Atlantic, is anticipated to experience a 
decrease of 1.5 percent. The anticipated increase for the rural regions 
using the MSA designations is in contrast, more modest with increases 
ranging from 0.1 to 0.3 and decreases anticipated for the rural South 
Atlantic, East North Central, East South Central, and Middle Atlantic 
of 0.2, 0.3, 0.6, and 0.7, respectively.
    As discussed previously, we have designated three hospice sizes 
based on routine home care days. Under the Medicare hospice benefit, 
hospices can provide four different levels of care days. The majority 
of the days provided by a hospice are routine home care days. 
Therefore, the number of routine home care days can be used as a proxy 
for the size of the hospice, that is, the more days of care provided, 
the larger the hospice. Using routine home care days as a proxy for 
size, our analysis indicates that the impact of the wage index update 
on small hospices (those

[[Page 22402]]

that provide up to 3,499 days of routine home care) will experience a 
0.1 percent increase in both the CBSA and MSA projections. The impact 
remains virtually the same for both the CBSA and MSA designations for 
all three sizes. As indicated above, a 0.1 percent increase is 
anticipated for small agencies and remains unchanged for large 
agencies. There is a scant decrease of 0.1 percent for medium sized 
agencies (with 3,500 to 19,999 RHC days) using the CBSA designations 
while it remains unchanged for MSA designations. The lack of 
variability by agency size indicates that this proposed rule would have 
no impact on a small number of small entities. Rural Puerto Rico with 6 
hospice agencies and 184,000 routine care days, representing the 
smallest number of hospices and second lowest routine home care days in 
the rural region, is anticipated to experience a substantial increase 
of 21.7 percent while rural South Atlantic with 138 hospices and 
1,394,000 routine home care days, which represents the highest number 
of routine home days, will have an increase of 0.6 percent. The rural 
Mid-Atlantic region with 39 hospices and 280,000 routine home care days 
is anticipated to decrease by 1.5 percent. Rural New England with 27 
hospices representing the second lowest number of agencies with 112,000 
routine home care days, and representing the lowest number of rural 
days, is anticipated to remain unchanged.
    Urban Puerto Rico region with 30 hospice agencies with 428,000 
routine home care days, representing the lowest number of urban 
agencies and routine home care days, is anticipated to experience a 
decrease of 0.5 percent using the CBSA designations in contrast to a 
0.2 percent increase using the MSA designation. Urban East North 
Central with 244 hospice agencies representing the largest number of 
urban hospice agencies with 5,275,000 routine home care days is 
anticipated to experience a decrease of 0.3 percent using the CBSA 
designation and would remain unchanged using the MSA designation. Urban 
West South Central with the largest number of routine home care days of 
5,765,000 is anticipated to experience a 0.2 percent increase using the 
CBSA designations and 0.4 percent increase using the MSA designations. 
Based upon these comparisons, the urban regions would expect a slightly 
larger increase in payment using the MSA designations while the rural 
areas are anticipated to experience a substantially larger increase 
using the CBSA designations. However, as indicated above, in the 
aggregate, hospice agencies overall are anticipated to remain unchanged 
using either the CBSA or MSA designations.
    By type of ownership, proprietary hospice agencies are anticipated 
to increase by 0.2 percent while voluntary agencies with the largest 
number of agencies and routine home care days of 1,309 and 23,696,000, 
respectively, are anticipated to decrease by 0.2 percent and government 
by 0.3. Since we are unable to determine the ownership type for the 
unknown category, we are unable to determine the impact of the 
anticipated decrease of 1.1 percent. By MSA designation, in contrast, 
voluntary and proprietary hospice agencies are anticipated to remain 
unchanged with government agencies anticipated to decrease by 0.1 
percent.
    Freestanding hospice agencies with the largest number of agencies 
of 1,188 and routine home care days of 29,277,000 are anticipated to 
remain unchanged when using MSA as well as CBSA designations. Home 
health-based hospice agencies are anticipated to remain unchanged with 
the MSA designations but are anticipated to increase by 0.2 percent 
with CBSA designation. Hospital-based hospice agencies are anticipated 
to decrease slightly with both MSA and CBSA designations at 0.1 and 0.3 
respectively. SNF-based hospice agencies with the lowest number of 
agencies and routine home care days of 15 and 174,000, respectively, 
are also anticipated to experience a decrease with both MSA and CBSA 
designations of 0.6 and 0.9, respectively.
    As discussed above, the overall impact for hospice agencies remain 
unchanged using the CBSA designations with a slight decrease in urban 
and an increase in rural hospice agencies. While there are more 
decreases in urban hospice agencies, there is overall increase in the 
rural agencies. Hospice size remains virtua