Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2009, 65351-65384 [E8-26142]

Agencies

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

[Federal Register Volume 73, Number 213 (Monday, November 3, 2008)]
[Notices]
[Pages 65351-65384]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26142]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1555-N]
RIN 0938-AP20


Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2009

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

ACTION: Notice.

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SUMMARY: This notice 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 services, effective on 
January 1, 2009.

DATES: Effective Date: This notice is effective on January 1, 2009.

FOR FURTHER INFORMATION CONTACT: Randy Throndset, (410) 786-0131.

I. Background

A. Requirements of the Balanced Budget Act of 1997 for Establishing the 
Prospective Payment System for Home Health Services

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) enacted on 
August 5, 1997, significantly changed the way Medicare pays for 
Medicare home health services. Section 4603 of the BBA mandated the 
development of the home health prospective payment system (HH PPS). 
Until the implementation of a HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a cost-based reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered home health services provided under a plan of care 
that were paid on a reasonable cost basis by adding section 1895 of the 
Social Security Act (the Act), entitled ``Prospective Payment For Home 
Health Services''. Section 1895(b)(1) of the Act requires the Secretary 
to establish a HH PPS for all costs of home health services paid under 
Medicare.
    Section 1895(b)(3)(A) of the Act requires that (1) the computation 
of a standard prospective payment amount include all costs for home 
health services covered and paid for on a reasonable cost basis and be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the prospective payment amounts be 
standardized to eliminate the effects of case-mix and wage levels among 
HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the home health applicable 
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 change adjustment factor that adjusts for 
significant variation in costs among different units of services.
    Similarly, section 1895(b)(4)(C) of the Act requires the 
establishment of wage adjustment factors that reflect the relative 
level of wages, and wage-related costs applicable to home health 
services furnished in a geographic area compared to the applicable 
national average level. These wage-adjustment factors may be used by 
the Secretary for the different geographic 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 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers because of unusual variations in the type or 
amount of medically necessary care. Total outlier payments in a given 
fiscal year (FY) may not exceed 5 percent of total payments projected 
or estimated.
    In accordance with the statute, we published a final rule (65 FR 
41128) in the Federal Register on July 3, 2000 to implement the HH PPS 
legislation. The July 2000 final rule established requirements for the 
new HH PPS for home health services as required by section 4603 of the 
BBA, as subsequently amended by section 5101 of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act (OCESAA) for 
Fiscal Year 1999, (Pub. L. 105-277), enacted on October 21, 1998; and 
by sections 302, 305, and 306 of the Medicare, Medicaid, and SCHIP 
Balanced Budget Refinement Act (BBRA) of 1999, (Pub. L. 106-113), 
enacted on November 29, 1999. The requirements include the 
implementation of a HH PPS for home health services, consolidated 
billing requirements, and a number of other related changes. The HH PPS 
described in that rule replaced the retrospective reasonable cost-based 
system that was used by Medicare for the payment of home health 
services under Part A and Part B.
    For a complete and full description of the HH PPS as required by 
the BBA, see the July 2000 HH PPS final rule (65 FR 41128 through 
41214).

B. Deficit Reduction Act of 2005

    On February 8, 2006, the Deficit Reduction Act of 2005 (Pub. L. 
109-171) (DRA) was enacted. This legislation affected updates to HH 
payment rates for calendar year (CY) 2006. The DRA also required HHAs 
to submit home health care quality data and created a linkage between 
those data and payment, beginning in CY 2007.
    Specifically, section 5201 of the DRA changed the CY 2006 update 
from the applicable home health market basket percentage increase minus 
0.8 percentage points to a 0 percent update. In addition, section 5201 
of the DRA amends section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003). The amended section 421(a) of the MMA 
requires that for home health services furnished in a rural area (as 
defined in section 1886(d)(2)(D) of the Act) on or after January 1, 
2006 and before January 1, 2007, that the Secretary increase the 
payment amount otherwise made under section 1895 of the Act for home 
health services by 5 percent. The statute waives budget neutrality for 
purposes of this increase since it specifically states that the 
Secretary must 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.
    The 0 percent update to the payment rates and the rural add-on 
provisions of the DRA were implemented through a CMS transmittal (Pub. 
100-20, One Time Notification, Transmittal 211) issued on February 10, 
2006.
    In addition, section 5201 of the DRA requires HHAs to submit data 
for purposes of measuring health care quality, and links the quality 
data submission to payment. This requirement is applicable for CY 2007 
and each subsequent year. If an HHA does not submit quality data, the 
home health market basket percentage increase will be reduced 2 
percentage points. In accordance with the statute,

[[Page 65352]]

we published a final rule (71 FR 65884, 65935) in the Federal Register 
on November 9, 2006 to implement the pay-for-reporting requirement of 
the DRA, codified at 42 CFR 484.225(h) and (i). In addition, the 
November 2006 final rule ended the 1-year transition period that 
consisted of a blend of 50 percent of the new area labor market 
designations' wage index and 50 percent of the previous area labor 
market designations' wage index. We also revised the fixed dollar loss 
ratio, which is used in the calculation of outlier payments.

C. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment rate that is adjusted 
for the applicable case-mix and wage index. The national standardized 
60-day episode payment rate includes the six home health disciplines 
(skilled nursing, home health aide, physical therapy, speech-language 
pathology, occupational therapy, and medical social services) and non-
routine medical supplies. Durable medical equipment covered under home 
health is paid for outside the HH PPS payment. To adjust for case-mix, 
the HH PPS uses a 153-category case-mix classification to assign 
patients to a home health resource group (HHRG). Clinical needs, 
functional status, and service utilization are computed from responses 
to selected data elements in the OASIS assessment instrument.
    For episodes with four or fewer visits, Medicare pays on the basis 
of a national per-visit amount by discipline; an episode consisting of 
four or fewer visits within a 60-day period is referred to as a LUPA. 
Medicare also adjusts the national standardized 60-day episode payment 
rate for certain intervening events that are subject to a partial 
episode payment adjustment (PEP adjustment). For certain cases that 
exceed a specific cost threshold, an outlier adjustment may also be 
available.

D. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in a separate Federal 
Register document. We published a final rule with comment period in the 
Federal Register on August 29, 2007 (72 FR 49762) that set forth a 
refinement and rate update to the Medicare prospective payment system 
for home health services. As part of the CY 2008 HH PPS final rule with 
comment period, we rebased and revised the home health market basket to 
reflect FY 2003 Medicare cost report data, the latest available and 
most complete data on the structure of HHA costs. In the rebased and 
revised home health market basket, the labor-related share was 77.082 
(an increase from the previous labor-related share of 76.775). The non-
labor-related share is 22.918 (a decrease from the previous nonlabor-
related share of 23.225). The increase in the labor-related share using 
the FY 2003 home health market basket was primarily due to the increase 
in the benefit cost weight.
    The CY 2008 HH PPS final rule with comment period also implemented 
refinements to the payment system. Extensive research was conducted to 
investigate ways to improve the performance of the case-mix model. This 
research was the basis for our decision to refine the case-mix model. 
We refined the case-mix model to reflect different resource costs for 
early home health episodes versus later home health episodes and to 
expand the case-mix variables included in the payment model. For 2008, 
we used a 4-equation case-mix model that recognizes and differentiates 
payment for episodes of care based on whether a patient is in an early 
(1st or 2nd episode in a sequence of adjacent episodes) or later (the 
3rd episode and beyond in a sequence of adjacent episodes) episode of 
care as well as recognizing whether a patient was a high therapy (14 or 
more therapy visits) or low therapy (13 or fewer therapy visits) case. 
We defined episodes as adjacent if they were separated by no more than 
a 60-day period between claims. Analysis of the performance of the 
case-mix model for later episodes revealed two important differences 
for episodes occurring later in the home health treatment compared to 
earlier episodes: Higher resource use per episode and a different 
relationship between clinical conditions and resource use. We use 
additional variables to include scores for certain wound and skin 
conditions; more diagnosis groups such as pulmonary, cardiac, and 
cancer diagnoses; and certain secondary diagnoses. The 4-equation model 
results in 153 case-mix groups.
    In addition, we replaced the previous single therapy threshold of 
10 visits with three therapy thresholds at 6, 14, and 20 visits. The 
payment for additional therapy visits between the three thresholds 
increases gradually, incorporating a declining, rather than a constant, 
amount per added therapy visit. This approach does not reduce total 
payments to home health providers because the payment model still 
predicts total resource cost. The combined effect of the new therapy 
thresholds and payment gradations reduces the undesirable emphasis in 
treatment planning on a single therapy visit threshold and restores the 
primacy of clinical considerations in treatment planning for 
rehabilitation patients.
    In the CY 2008 HH PPS final rule with comment period, we further 
adjusted for case-mix that was not due to a change in the underlying 
health status of the home health users. Section 1895(b)(3)(B) of the 
Act requires that in compensating for case-mix change, a payment 
reduction must be applied to the standardized payment amount. For the 
CY 2008 HH PPS final rule with comment period, we conducted several 
analyses to determine if any portion of the total change in case-mix 
could be considered to be real change. Real change is a change in the 
underlying health status of the home health user population. The 
results of the analysis indicated that while a small amount (8.03 
percent) of measured case-mix change was real, most of the change was 
unrelated to the underlying health status of home health users.
    Using 100 percent of the home health interim payment system (HH 
IPS) file for our baseline (12 months ending September 30, 2000), the 
average case-mix weight per episode was 1.0960. (The HH IPS was the 
previous cost-based payment system under which HHAs were paid, prior to 
the HH PPS.) The 2005 20 percent sample file yielded an average CMI 
(case mix indicator) of 1.2361. Therefore, the change measurement was 
(1.2361 - 1.0960)/ 1.0960 = 12.78 percent. We adjusted this result 
downward by 8.03 percent (the percentage of total change in case-mix 
considered to be real) to get a final case-mix change measure of 11.75 
percent (0.1278 * (1-0.0803) = 0.1175). To account for the 11.75 
percent increase in case-mix which was not due to a change in the 
underlying health status of Medicare home health patients, we 
implemented a 2.75 percent reduction of the national standardized 60-
day episode payment rate for 3 years beginning in 2008 and solicited 
comments on extending that adjustment period to a fourth year based on 
a 2.71 percent reduction for 2011 (see 72 FR 49833).
    Additionally, we modified a number of existing HH PPS payment 
adjustments. Specifically, we increased the payment for low utilization 
payment adjustment (LUPA) episodes that occur as the only episode or 
the initial episode during a sequence of adjacent episodes, by $87.93. 
We also eliminated the significant change in condition (SCIC)

[[Page 65353]]

payment adjustment for various reasons. Specifically, we ended the 
policy because of the apparent difficulty HHAs had in interpreting the 
SCIC policy, the association between negative margins and SCIC 
episodes, the decline in the occurrence of SCICs, and the estimated 
minimal impact on outlays from eliminating the SCIC policy.
    In the development of the HH PPS, non-routine medical supplies 
(NRS) were accounted for by attributing $49.62 to the standardized 
episode payment. In the CY 2008 HH PPS final rule with comment period, 
we applied a severity adjustment to the NRS portion of the HH PPS 
standardized episode payment. Specifically, we adopted a six-severity-
group approach to account for NRS costs (see 72 FR 49851-49852) based 
on measurable conditions that are feasible to administer. This change 
offers HHAs some protection against episodes with extremely high NRS 
costs. Finally, we did not modify the existing Partial Episode Payment 
(PEP) Adjustment.
    Section 1895(b)(5) of the Act also allows for the provision of an 
addition or adjustment to account for outlier episodes, which are those 
episodes that incur unusually large costs due to heavy patient care 
needs. Under the HH PPS, outlier payments are made for episodes for 
which the estimated cost exceeds a threshold amount. The wage adjusted 
fixed dollar loss (FDL) amount represents the amount of loss that an 
agency must bear before an episode becomes eligible for outlier 
payments. Section 1895(b)(5) of the Act requires that the estimated 
total outlier payments may not exceed 5 percent of total estimated HH 
PPS payments. In the CY 2008 HH PPS final rule with comment period, we 
adjusted the FDL ratio to 0.89, based on the most recently available 
data, analysis, trends, and unknown effects of the refinements on 
outliers (see 72 FR 49857).
    Finally, we expanded the list of quality measures identified in the 
update notice for CY 2007. In CY 2007, we specified 10 OASIS quality 
measures from the OASIS data set as appropriate for public reporting of 
measurements of health care quality. For CY 2008, we added two more 
quality measures from the OASIS data set for public reporting. All 
twelve publicly reported measures are National Quality Forum (NQF)-
endorsed measures. The additional measures for 2008 were as follows:
     Emergent Care for Wound Infection, Deteriorating Wound 
Status; and
     Improvement in the Status of Surgical Wounds (see 72 FR 
49861).
    Accordingly, for CY 2008, we considered the existing OASIS data set 
submitted by HHAs to CMS for episodes beginning on or after July 1, 
2006, and before July 1, 2007, as meeting the reporting requirement for 
quality measures for CY 2008.

II. Comments Received From CY 2008 HH PPS Final Rule With Comment 
Period

    In the CY 2008 HH PPS final rule with comment period, we 
implemented a 2.75 percent payment reduction of the national 
standardized 60-day episode payment rate for three years beginning in 
CY 2008 and a fourth year reduction of 2.71 percent for CY 2011. We 
sought comments only on the 2.71 percent case-mix change adjustment for 
2011. We received approximately 44 items of correspondence from the 
public, only a few of which were directly related to the 2.71 percent 
adjustment to the HH PPS 60-day episode payment rate in the fourth 
year. The provision for the 2.71 percent adjustment was added as the 
fourth year's reduction to the rates to account for the additional 
change in case-mix, that was indicated in the analysis for the CY 2008 
final rule with comment period, that is not considered real; i.e., that 
is not related to an underlying change in patient health status. 
Comments originated from trade associations, HHAs, hospitals, and 
health care professionals such as physicians, nurses, social workers, 
and physical and occupational therapists. Because this is an update 
notice, we are not changing policy. However, in order to provide more 
meaningful and substantive responses we will respond to the above 
mentioned comments in future rulemaking. This approach allows us to 
respond comprehensively as more current data become available, while 
also affording the public ample opportunity to comment on possible 
future policy changes.
    At this time, CMS is maintaining our existing policy as implemented 
in the CY 2008 final rule with comment period and will impose a 2.75 
percent reduction to the national standardized 60-day episode rate for 
CY 2009. We will continue to monitor any changes in case-mix and may 
revise the percentage reductions to the HH PPS rates in future 
rulemaking.

III. Provisions of This Notice

A. National Standardized 60-Day Episode Rate

    The Medicare HH PPS has been in effect since October 1, 2000. As 
set forth in the final rule published July 3, 2000 in the Federal 
Register (65 FR 41128), the unit of payment under the Medicare HH PPS 
is a national standardized 60-day episode rate. As set forth in Sec.  
484.220, we adjust the national standardized 60-day episode rate by a 
case-mix relative weight and a wage index value based on the site of 
service for the beneficiary. In the CY 2008 HH PPS final rule with 
comment period, we refined the case-mix methodology and also rebased 
and revised the home health market basket. The labor-related share of 
the case-mix adjusted 60-day episode rate is 77.082 percent and the 
non-labor-related share is 22.918 percent. The CY 2009 HH PPS rates use 
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 
CY 2008 HH PPS final rule with comment period. We multiply the national 
60-day episode rate by the patient's applicable case-mix weight. We 
divide the case-mix adjusted amount into a labor and non-labor portion. 
We multiply the labor portion by the applicable wage index based on the 
site of service of the beneficiary. We add the wage-adjusted portion to 
the non-labor portion yielding the case-mix and wage-adjusted 60-day 
episode rate subject to any additional applicable adjustments.
    In accordance with section 1895(b)(3)(B) of the Act, we have 
updated the HH PPS rates annually in a separate Federal Register 
document. The HH PPS regulations at Sec.  484.225 sets forth the 
specific annual percentage update. To reflect section 1895(b)(3)(B)(v) 
of the Act, as added by section 5201 of the DRA, we added Sec.  
484.225, paragraphs (h) and (i), in the November 9, 2006 final rule to 
reflect the requirement for submission of quality data, as follows:
    (h) For 2007 and subsequent calendar years, in the case of a home 
health agency that submits home health quality data, as specified by 
the Secretary, the unadjusted national prospective 60-day episode rate 
is equal to the rate for the previous calendar year increased by the 
applicable home health market basket index amount.
    (i) For 2007 and subsequent calendar years, in the case of a home 
health agency that does not submit home health quality data, as 
specified by the Secretary, the unadjusted national prospective 60-day 
episode rate is equal to the rate for the previous calendar year 
increased by the applicable home health market basket index amount 
minus 2 percentage points. Any reduction of the percentage change will 
apply only to the calendar year involved and will not be taken into 
account in computing the prospective payment amount for a subsequent 
calendar year.
    For CY 2009, we will base the wage index adjustment to the labor 
portion of

[[Page 65354]]

the HH PPS rates on the most recent pre-floor and pre-reclassified 
hospital wage index. As discussed in the July 3, 2000 HH PPS final 
rule, for episodes with four or fewer visits, Medicare pays the 
national per-visit amount by discipline, referred to as a ``low 
utilization payment adjustment'' (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 Sec.  484.230. We will 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, as discussed in the CY 2008 HH PPS final rule with 
comment period. We are also updating the amounts of the LUPA add-on and 
the NRS conversion factor by the applicable home health market basket 
update of 2.9 percent for CY 2009.
    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 Sec.  484.205(b)(1) and Sec.  484.205(b)(2). We 
may base the initial percentage payment on the submission of a request 
for anticipated payment (RAP) and the final percentage payment on the 
submission of the claim for the episode, as discussed in Sec.  409.43. 
The claim for the episode that the HHA submits for the final percentage 
payment determines the total payment amount for the episode and whether 
we make an applicable adjustment to the 60-day case-mix and wage-
adjusted episode payment. The end date of the 60-day episode as 
reported on the claim determines which calendar year rates Medicare 
would use to pay the claim.
    We may also adjust the 60-day 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 Sec.  484.205(c) and Sec.  484.230.
     A partial episode payment adjustment as set forth in Sec.  
484.205(d) and Sec.  484.235.
     An outlier payment as set forth in Sec.  484.205(e) and 
Sec.  484.240.

B. CY 2009 Update to the Home Health Market Basket Index

    Section 1895(b)(3)(B) of the Act, as amended by section 5201 of the 
DRA, requires for CY 2009 that the standard prospective payment amounts 
be increased by a factor equal to the applicable home health market 
basket update for those HHAs that submit quality data as required by 
the Secretary.
    The applicable home health market basket update will be reduced by 
2 percentage points for those HHAs that fail to submit the required 
quality data. This requirement has been codified in regulations at 42 
CFR 484.225. The HH PPS market basket update for CY 2009 is 2.9 
percent. This is based on Global Insights Inc.'s, third quarter 2008 
forecast, utilizing historical data through the second quarter of 2008. 
A detailed description of how we derived the HHA market basket is 
available in the CY 2008 Home Health PPS proposed rule (72 FR 25356, 
25435).
 CY 2009 Adjustments
    In order to calculate the CY 2009 national standardized 60-day 
episode rate, we first increase the CY 2008 national standardized 60-
day episode payment rate of $2,270.32 by the home health market basket 
update of 2.9% for CY 2009.
    Given this updated rate, we then take a reduction of 2.75 percent 
to account for the change in case-mix that is not related to the real 
change in patient acuity levels, as discussed above. The resulting 
updated CY 2009 national standardized 60-day episode rate for an HHA 
that submits the required quality data is shown in Table 1. The updated 
CY 2009 national standardized 60-day episode rate for an HHA that does 
not submit the required quality data is shown in Table 2.

  Table 1--National 60-Day Episode Amounts Updated by the Home Health Market Basket Update for CY 2009, Before
           Case-Mix Adjustment, Wage Index Adjustment Based on the Site of Service for the Beneficiary
----------------------------------------------------------------------------------------------------------------
                                   Multiply by the    Updated National     Reduce by 2.75
     Total CY 2008 National      Home Health Market   Standardized 60-       Percent for       CY 2009 National
  Standardized 60-Day Episode    Basket Update (2.9      Day Episode      Nominal Change in  Standardized 60-Day
          Payment Rate              Percent) \1\           Payment            Case-Mix         Episode Payment
----------------------------------------------------------------------------------------------------------------
$2,270.32......................  x 1.029...........  $2,336.16.........  x 0.9725..........  $2,271.92
----------------------------------------------------------------------------------------------------------------
\1\ The estimated home health market basket update of 2.9 percent for CY 2009 is based on Global Insight Inc.,
  3rd Qtr 2008 forecast with historical data through 2nd Qtr 2008.


 Table 2--For HHAs That Do Not Submit the Required Quality Data--National 60-Day Episode Amounts Updated by the
  Home Health Market Basket Update for CY 2009, Before Case-Mix Adjustment, Wage Index Adjustment Based on the
                                       Site of Service for the Beneficiary
----------------------------------------------------------------------------------------------------------------
                                                      Updated National
                                   Multiply by the    Standardized 60-                         CY 2009 National
     Total CY 2008 National      Home Health Market      Day Episode       Reduce by 2.75    Standardized 60-Day
  Standardized 60-Day Episode    Basket Update (2.9   Payment for HHAs       Percent for     Episode Payment for
          Payment Rate           Percent) \1\ minus  that do not submit   Nominal Change in    HHAs that do not
                                      2 percent       required quality        Case-Mix         submit required
                                                            data                                 quality data
----------------------------------------------------------------------------------------------------------------
$2,270.32......................  x 1.009...........  $2,290.75.........  x 0.9725..........  $2,227.75
----------------------------------------------------------------------------------------------------------------
\1\ The estimated home health market basket update of 2.9 percent for CY 2009 is based on Global Insight Inc.,
  3rd Qtr 2008 forecast with historical data through 2nd Qtr 2008.


[[Page 65355]]

 National Per-Visit Amounts Used To Pay LUPAs and Compute 
Imputed Costs Used in Outlier Calculations
    As discussed previously in the CY 2008 HH PPS final rule with 
comment period, the policies governing LUPAs and the outlier 
calculations set forth in the July 3, 2000 HH PPS final rule will 
continue (65 FR 41128). Also, we implemented a LUPA add-on amount of 
$87.93 for initial and only episode LUPAs during CY 2008. In 
calculating the CY 2009 national per-visit amounts used to calculate 
payments for LUPA episodes and to compute the imputed costs in outlier 
calculations, we start with the CY 2008 per-visit amounts. We increase 
the CY 2008 per-visit amounts for each home health discipline for CY 
2009 by the home health market basket update (2.9 percent). LUPA rates 
are not reduced due to the nominal increase in case-mix since they are 
per-visit rates and hence are not subject to changes in case-mix.

    Table 3--National Per-Visit Amounts for LUPAs (Not including the Increase in Payment for a Beneficiary's Only Episode or the Initial Episode in a
 Sequence of Adjacent Episodes) and Outlier Calculations Updated by the Home Health Market Basket Update for CY 2009, Before Wage Index Adjustment Based
                                                       on the Site of Service for the Beneficiary
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             For HHAs that DO submit the required quality     For HHAs that DO NOT submit the required
------------------------------------------------------------                     data                                       quality data
                                                            --------------------------------------------------------------------------------------------
                                                              Multiply by the Home                          Multiply by the Home
       Home Health Discipline           CY 2008 per-visit     Health Market Basket    CY 2009 per-visit     Health Market Basket     CY 2009 per-visit
                                             payment          Update (2.9 Percent)         payment          Update (2.9 percent)          payment
                                                                      \1\                                   \1\ minus 2 percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
Home Health Aide...................  $47.51................  x 1.029..............  $48.89...............  x 1.009..............  $47.94
Medical Social Services............  168.17................  x 1.029..............  173.05...............  x 1.009..............  169.68
Occupational Therapy...............  115.48................  x 1.029..............  118.83...............  x 1.009..............  116.52
Physical Therapy...................  114.71................  x 1.029..............  118.04...............  x 1.009..............  115.74
Skilled Nursing....................  104.91................  x 1.029..............  107.95...............  x 1.009..............  105.85
Speech-Language Pathology..........  124.65................  x 1.029..............  128.26...............  x 1.009..............  125.77
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The estimated home health market basket update of 2.9 percent for CY 2009 is based on Global Insight Inc., 3rd Qtr 2008 forecast with historical
  data through 2nd Qtr 2008.

    Payment for LUPA episodes changed in CY 2008 in that for LUPAs that 
occur as initial episodes in a sequence of adjacent episodes or as the 
only episode, an additional payment amount is added to the LUPA 
payment. The Table 3 per-visit rates noted above are before that 
additional payment is added to the LUPA payment, and are the per-visit 
rates paid to all other LUPA episodes and used in computing outlier 
payments. LUPA episodes that occur as the only episode or initial 
episode in a sequence of adjacent episodes are adjusted by adding an 
additional amount to the LUPA payment before adjusting for wage index. 
For CY 2008, that amount was $87.93. This additional LUPA amount is 
updated in the same manner as the national standardized 60-day episode 
payment amount and the per-visit rates (i.e. by the home health market 
basket percentage update). Consequently, for CY 2009, the additional 
amount paid to LUPAs that occur as initial episodes in a sequence of 
adjacent episodes or as the only episode is 90.48 ($87.93 x 1.029).
    Beginning in CY 2008, to ensure that the variation in non-routine 
medical supplies (NRS) is more appropriately reflected in the HH PPS, 
we replaced the original portion ($49.62) of the HH PPS base rate that 
accounted for NRS, with a system that pays for NRS based on 6 severity 
groups. For a complete description of the analysis and research behind 
the development of this system for the payment of NRS, we refer readers 
to the CY 2008 HH PPS proposed rule (72 FR 25426-25434). Following 
public comment on the initial proposal made in the proposed rule, we 
made several modifications using a file of more recent data. The 
revisions resulted in some scoring changes, and the addition of the 
sixth severity group to the original five severity groups, to provide 
more adequate reimbursement for episodes with a high utilization of 
NRS. As we did in the CY 2008 HH PPS final rule with comment, payments 
for NRS are updated by the home health market basket and reduced by the 
2.75 percent reduction to the rates through the updating of the NRS 
conversion factor. NRS payments are computed by multiplying the 
relative weight for a particular severity level by the NRS conversion 
factor. For this notice, the NRS conversion factor is updated by the 
home health market basket update of 2.9 percent and reduced by the 2.75 
percent reduction to the rates. The NRS conversion factor for CY 2008 
was $52.35. Consequently, for CY 2009, the NRS conversion factor is 
$52.39 (52.35 x (1.029 x (1-0.0275))). The payment amounts for the 
various severity levels based on the updated conversion factor are 
calculated in Table 4.

                             Table 4--Relative Weights for the 6-Severity NRS System
----------------------------------------------------------------------------------------------------------------
                                                                                     Relative       NRS payment
                Severity level                          Points  (scoring)             weight          amount
----------------------------------------------------------------------------------------------------------------
1.............................................  0...............................          0.2698          $14.13
2.............................................  1 to 14.........................          0.9742           51.04
3.............................................  15 to 27........................          2.6712          139.94
4.............................................  28 to 48........................          3.9686          207.91
5.............................................  49 to 98........................          6.1198          320.62
6.............................................  99+.............................         10.5254          551.43
----------------------------------------------------------------------------------------------------------------


[[Page 65356]]

C. Home Health Care Quality Improvement

    Section 5201(c)(2) of the DRA added section 1895(b)(3)(B)(v)(II) to 
the Act, requiring that, starting with the initial reporting year from 
July 2005 through June 2006 and each year thereafter, ``each home 
health agency shall submit to the Secretary such data that the 
Secretary determines are appropriate for the measurement of health care 
quality.'' In response to the DRA requirements, CMS published 
information about the quality measures in the Federal Register as a 
proposed rule on August 3, 2006 (71 FR 44082-44090) and as a final rule 
on November 9, 2006 (71 FR 65903). We proposed, and made final, the 
decision to use the subset of OASIS data that is publicly reported on 
Home Health Compare, as the appropriate measures of home health 
quality.
    Therefore, OASIS assessments submitted by HHAs to CMS in compliance 
with HHA conditions of participation for dates of service beginning 
July 1, 2007 and ending June 30, 2008 will fulfill the HH PPS quality 
reporting requirement for CY 2009 payments. This reporting time period 
allows for 12 full months of data and provides us the time necessary to 
analyze and make any necessary payment adjustments to the CY 2009 
payment rates. The required quality measures for meeting the submission 
requirements for CY 2009 are the same as those required for meeting the 
submission requirements for CY 2008. These measures are:
     Improvement in Ambulation/Locomotion,
     Improvement in Bathing,
     Improvement in Transferring,
     Improvement in Management of Oral Medication,
     Improvement in Pain Interfering with Activity,
     Acute Care Hospitalization,
     Emergent Care,
     Discharge to Community,
     Improvement in Dyspnea,
     Improvement in Urinary incontinence,
     Improvement in surgical wounds, and
     Emergent Care for wound deterioration.
    HHAs that meet the reporting requirements are eligible for the full 
home health market basket percentage increase. Consistent with our 
previous policy, home health agencies that are certified on or after 
May 1, 2007 for payments to be made in CY 2009 will be excluded from 
the quality reporting requirement in CY 2009 because data submission 
and analysis will not be possible for an agency certified this late in 
the reporting time period. At the earliest time possible after 
obtaining the CCN number, reporting is mandatory. These exclusions only 
affect quality reporting requirements and do not affect the agency's 
OASIS reporting responsibilities under the CoP submission requirement.
    Additionally, section 1895(b)(3)(B)(v)(I) of the Act requires that 
all HHAs, unless covered by specific exclusions, meet the reporting 
requirement, or be subject to a 2 percent reduction in the home health 
market basket percentage increase. CMS will reconcile the OASIS 
submissions with claims data in order to verify full compliance with 
the quality reporting requirements on an annual cycle July 1 through 
June 30. The 2 percent reduction applies to all HHAs who have not 
submitted an OASIS assessment in the required time frame for payments 
beginning in January 2007 and each year thereafter. We will reconcile 
the OASIS submissions with claims data in order to verify full 
compliance with the quality reporting requirements. Section 
1895(b)(3)(B)(v)(III) of the Act further requires that ``[t]he 
Secretary shall establish procedures for making data submitted under 
subclause (II) available to the public. Such procedures shall ensure 
that a home health agency has the opportunity to review the data that 
is to be made public with respect to the agency prior to such data 
being made public.'' To meet the requirement for making such data 
public, we will continue to use the Home Health Compare Web site, which 
lists HHAs geographically. Currently, the Home Health Compare Web site 
lists 12 quality measures from the OASIS set, and these 12 measures are 
all NQF-endorsed measures for public reporting. Consumers can search 
for all Medicare-approved home health providers that serve their city 
or zip code (which would include the quality measures) and then find 
the agencies offering the types of services they need. See https://
www.medicare.gov/HHCompare/Home.asp. HHAs currently have pre-
publication access every November to their own agency's quality data 
(collected and periodically updated by a contractor), which enables 
each agency to know how it is performing before public posting of data 
on the Home Health Compare Web site. In addition, each agency formally 
receives quarterly updates via the CASPER system known as Outcome Based 
Quality Improvement (OBQI) and Outcome Based Quality Monitoring (OBQM) 
and a report describing the agency patient characteristics based on 
OASIS. Continuing to use the OASIS instrument ensures that providers 
will not have an additional burden of reporting through a separate 
mechanism and that the costs associated with the development and 
testing of a new reporting mechanism can be avoided. For CY 2009, we 
will continue to require that the HHA submit OASIS data appropriate for 
the measurement of health care quality.
    Over the past year, CMS has tested new patient level best practice 
and process measures for home health agencies, and has continued to 
refine the current OASIS instrument. CMS is testing the new measure the 
NQF has developed a Global Measure for Flu/Pneumonia vaccination across 
care settings. We anticipate making further modifications to the 
current OASIS items, including refinements to response categories. Any 
new data elements go through OMB process and measures go through the 
NQF consensus development process, prior to proposing them through the 
rulemaking process. Additionally, section 1895(b)(3)(B)(v)(II) of the 
Act requires each HHA to submit appropriate health care quality data in 
a form, manner, and at a time specified by the Secretary. Such measures 
would be evidence-based, clearly linked to improved outcomes, and 
reliably captured with the least burden to the provider. Data element 
revisions and measures across settings of care will be integral to CMS' 
vision of addressing national quality care priorities and use of a 
future single instrument for quality, payment, clinical relevance, and 
risk adjustment.

D. Consumer Assessment of Healthcare Providers and Systems 
(CAHPS[supreg]) Home Health Care

    As part of the U.S. Department of Health and Human Services (DHHS) 
Transparency Initiative, CMS plans to implement a process to measure 
and publicly report patient experiences with home health care using a 
survey developed by the Agency for Healthcare Research and Quality's 
(AHRQ's) Consumer Assessment of Healthcare Providers and Systems 
(CAHPS[supreg]) program. The CAHPS Home Health Care survey is part of a 
family of CAHPS[supreg] surveys that ask patients to report on and rate 
their experiences with health care. This notice provides an update on 
the development of the CAHPS Home Health Care survey, as initially 
discussed in the May 4, 2007 proposed rule (72 FR 25356, 25452). The 
CAHPS[supreg] Home Health Care survey presents home health patients 
with a set of standardized questions about their

[[Page 65357]]

home health care providers and the quality of their home health care. 
Prior to this survey, there was no national standard for collecting 
information about patient experience that would allow comparisons 
across all home health agencies.
    The survey captures topics such as patients' interactions with home 
health staff, provider care and communication, and patient 
characteristics. The survey allows the patient to give an overall 
rating of the agency, and asks if the patient would recommend the 
agency to family and friends.
    AHRQ conducted a field test to determine the length and content of 
the CAHPS Home Health Care Survey. CMS has submitted the survey to the 
National Quality Forum (NQF) for consideration and approval in their 
consensus process. NQF endorsement represents the consensus opinion of 
many healthcare providers, consumer groups, professional organizations, 
purchasers, federal agencies, and research and quality organizations. 
The final survey will be submitted to the Office of Management and 
Budget (OMB) for their approval under the Paperwork Reduction Act (PRA) 
process.
    CMS is working with a contractor to develop protocols and 
guidelines for implementation of CAHPS Home Health Care survey. 
Administration of the survey will be conducted by multiple, independent 
survey vendors working under contract with home health agencies to 
facilitate data collection and reporting. During 2008, vendor training 
materials are being developed, and implementation procedures for data 
submission and processing will be finalized. Recruitment and training 
of vendors who wish to be approved to collect survey data will begin in 
2009. The CAHPS Home Health Care survey will be implemented similar to 
the CAHPS Hospital survey where vendors are approved to conduct the 
survey and trained prior to agency participation in the survey. Home 
health agencies interested in learning about the survey are encouraged 
to view the CAHPS Home Health Care Survey Web site: https://
www.homehealthCAHPS.org. They can also call toll-free: 1-866-354-0985 
or send an email to the project team at HHCAHPS@rti.org for more 
information.
    More information about the national implementation will be 
available next year in the Home Health Rule: The Home Health 
Prospective Payment System Refinement and Rate Update for Calendar Year 
2010.

E. Outliers and the Fixed Dollar Loss Ratio

    In addition to the regular 60-day case-mix and wage-adjusted 
episode payments, the HH PPS allows for outlier payments for episodes 
that incur unusually high costs. As noted in section I.A., of this 
notice, outlier payments are made for episodes for which the estimated 
cost exceeds a threshold amount. Section 1895(b)(5) of the Act requires 
that the estimated total outlier payments be no more than 5 percent of 
total estimated HH PPS payments for a given year. For a full 
description of our outlier policy, we refer to the CY 2008 HH PPS final 
rule with comment period (72 FR 49855-49857).
    The wage adjusted fixed dollar loss (FDL) amount represents the 
amount of loss that an agency must bear before an episode becomes 
eligible for outlier payments. Annually, we review the percentage of 
outlier payments and adjust the FDL ratio as appropriate.
    Past experience has shown that outlier payments have been 
increasing as a percent of total payments from 4.1 percent in CY 2005, 
to 5.0 percent in CY 2006, to 6.4 percent in CY 2007. More recent 
analysis estimates outlier payments to increase to approximately 8.1 
percent in CY 2008 (an increase of slightly more than 27 percent).
    In the CY 2008 final rule with comment period, in the interest of 
using the latest data and best analysis available, we performed 
supplemental analysis on the most recent data available in order to 
best estimate the FDL ratio. That analysis derived a final FDL ratio of 
0.89 for CY 2008.
    In order to determine the appropriate value for the FDL ratio for 
CY 2009 we performed an updated analysis using the most recent, 
complete available data (CY 2007), applying a methodology similar to 
that which we used to update the FDL ratio in the CY 2008 HH PPS final 
rule with comment. That updated analysis projects that in CY 2009 we 
will expend an estimated 10.26 percent of total estimated HH PPS 
payments in outlier payments, more than double our 5 percent statutory 
limit. However, our analysis also revealed that this growth in outlier 
payments is primarily the result of excessive growth in a few specific 
areas of the country. Specifically, we have noticed statistical 
anomalies in outlier payments, as a percentage of total HH PPS 
payments, in areas such as Miami-Dade, Florida, where outlier payments 
to providers far exceed the national average and the 5 percent target 
for outlier payments. Using similar analysis to what was performed for 
the CY 2009 final rule with comment; we estimated that we would need to 
raise our FDL ratio from 0.89 to 2.71 for CY 2009. This is a dramatic 
change that appears to be driven by statistical anomalies in outlier 
payments in areas such as Miami-Dade, Florida. In addition, the size of 
these statistical anomalies raises concerns about the medical necessity 
of the outlier episodes in some areas. We will be examining outlier 
payments in these areas in more detail and will take action to remedy 
inappropriate outlier payments as necessary.
    Therefore, we believe that raising the FDL ratio to 2.71 is not 
justified at this time, given the statistical outlier data anomalies 
that we have identified in certain areas, and the actions that are 
underway to address excessive, suspect outlier payments that are 
occurring in these areas. We believe the most reasonable policy to 
achieve paying no more than 5 percent outlier payments as a percentage 
of total estimated HH PPS payments is through the combined effects of 
maintaining the current (CY 2008) FDL ratio of 0.89 in CY 2009 and the 
actions being taken to remedy any inappropriate outlier payments in 
these areas of the country where outlier data anomalies exist. Any 
further update to the FDL ratio, if any, will not occur until future 
rulemaking when we expect to have a better understanding of appropriate 
outlier payments, particularly in those areas of the country with 
extremely high outlier payments as a percentage of total HH PPS 
payments.

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 the HH PPS to account 
for area wage differences. As discussed previously, we apply the 
appropriate wage index value to the labor portion (77.082 percent) of 
the HH PPS rates based on the site of service for the beneficiary 
(defined by section 1861(m) of the Act as the beneficiary's place of 
residence). Generally, we determine each HHA's labor market area based 
on definitions of Metropolitan Statistical Areas (MSAs) issued by the 
Office of Management and Budget (OMB). We have consistently used the 
pre-floor, pre-reclassified hospital wage index data to adjust the 
labor portion of the HH PPS rates. We believe the use of the pre-floor, 
pre-reclassified hospital wage index data results in the appropriate 
adjustment to

[[Page 65358]]

the labor portion of the costs as required by statute.
    In the November 9, 2005 final rule for CY 2006 (70 FR 68132), we 
adopted revised labor market area definitions based on Core-Based 
Statistical Areas (CBSAs). At the time, we noted that these were the 
same labor market area definitions (based on OMB's new CBSA 
designations) implemented under the Hospital Inpatient Prospective 
Payment System (IPPS). In adopting the CBSA designations, we identified 
some geographic areas where there are no hospitals and, thus, no 
hospital wage data on which to base the calculation of the home health 
wage index. We continue to use the methodology discussed in the 
November 9, 2006 final rule for CY 2007 (71 FR 65884) to address the 
geographic areas that lack hospital wage data on which to base the 
calculation of their home health wage index. For rural areas that do 
not have IPPS hospitals, we use the average wage index from all 
contiguous CBSAs as a reasonable proxy. This methodology is used to 
calculate the wage index for rural Massachusetts. However, we could not 
apply this methodology to rural Puerto Rico due to the distinct 
economic circumstances that exist there, but instead continue using the 
most recent wage index previously available for that area (from CY 
2005). For urban areas without IPPS hospitals, we use the average wage 
index of all urban areas within the State as a reasonable proxy for the 
wage index for that CBSA. The only urban area without IPPS hospital 
wage data is Hinesville-Fort Stewart, Georgia (CBSA 25980).
1. Clarification of New England Deemed Counties
    We are taking this opportunity to address the change in the 
treatment of ``New England deemed counties'' (that is, those counties 
in New England listed at 42 CFR 412.64(b)(1)(ii)(B) that were deemed to 
be part of urban areas under section 601(g) of the Social Security 
Amendments of 1983) that was made in the FY 2008 IPPS final rule with 
comment period (72 FR 47337 through 47338, August 22, 2007). These 
counties include the following: Litchfield County, Connecticut; York 
County, Maine; Sagadahoc County, Maine; Merrimack County, New 
Hampshire; and Newport County, Rhode Island. Of these five ``New 
England deemed counties,'' three (York County, ME; Sagadahoc County, 
ME; and Newport County, RI) are also included in metropolitan 
statistical areas defined by OMB and are considered urban under both 
the current IPPS and HH PPS labor market area definitions in Sec.  
412.64(b)(1)(ii)(A). The remaining two, Litchfield County, CT, and 
Merrimack County, NH, are geographically located in areas that are 
considered rural under the current IPPS (and HH PPS) labor market area 
definitions, but have been previously deemed urban under the IPPS in 
certain circumstances, as discussed below.
    In the FY 2008 IPPS final rule with comment period, Sec.  
412.64(b)(1)(ii)(B) was revised such that the two ``New England deemed 
counties'' that are still considered rural under the OMB definitions 
(Litchfield County, CT and Merrimack County, NH), are no longer 
considered urban effective for discharges occurring on or after October 
1, 2007, and therefore, are considered rural in accordance with Sec.  
412.64(b)(1)(ii)(C). However, for purposes of payment under the IPPS, 
acute-care hospitals located within those areas are treated as being 
reclassified to their deemed urban area effective for discharges 
occurring on or after October 1, 2007 (see 72 FR 47337 through 47338). 
We note that the HH PPS does not provide for such geographic 
reclassification. Also, in the FY 2008 IPPS final rule with comment 
period (72 FR 47338), we explained that we have limited this policy 
change for the ``New England deemed counties'' only to IPPS hospitals, 
and any change to non-IPPS provider wage indexes would be addressed in 
the respective payment system rules. Accordingly, we are taking this 
opportunity to clarify the treatment of ``New England deemed counties'' 
under the HH PPS in this notice.
    As discussed above, the HH PPS has consistently used the IPPS 
definition of ``urban'' and ``rural'' with regard to the wage index 
used in the HH PPS. Historical changes to the labor market area/
geographic classifications and annual updates to the wage index values 
under the HH PPS are made effective January 1 each year. When we 
established the most recent HH PPS payment rate update, effective for 
HH services provided on or after January 1, 2008 through December 31, 
2008, we considered the ``New England deemed counties'' (including 
Litchfield County, CT and Merrimack County, NH) as urban for CY 2008, 
as evidenced by the inclusion of Litchfield County as one of the 
constituent counties of urban CBSA 25540 (Hartford-West Hartford-East 
Hartford, CT), and the inclusion of Merrimack County as one of the 
constituent counties of urban CBSA 31700 (Manchester-Nashua, NH).
    At 42 CFR 484.202, the terms ``rural'' and ``urban'' are defined 
according to the definitions of those terms as used in the IPPS. 
Applying the IPPS definitions, Litchfield County, CT and Merrimack 
County, NH are not considered ``urban'' under Sec.  412.64(b)(1)(ii)(A) 
through (B) as revised under the FY 2008 IPPS final rule and, 
therefore, are considered ``rural'' under Sec.  412.64(b)(1)(ii)(C). 
Accordingly, reflecting our policy to use the IPPS definitions of 
``urban'' and ``rural,'' these two counties will be considered 
``rural'' under the HH PPS effective with the next update of the HH PPS 
payment rates on January 1, 2009, and will no longer be included in 
urban CBSA 25540 (Hartford-West Hartford-East Hartford, CT) and urban 
CBSA 31700 (Manchester-Nashua, NH), respectively. We note that this 
policy is consistent with our policy of not taking into account IPPS 
geographic reclassifications in determining payments under the HH PPS.
2. Multi-Campus Hospital Wage Index Data
    In the CY 2008 HH PPS final rule with comment period, we 
established HH PPS wage index values for CY 2008 calculated from the 
same data (collected from cost reports submitted by hospitals for cost 
reporting periods beginning during FY 2004) used to compute the FY 2008 
acute care hospital inpatient wage index, without taking into account 
geographic reclassification under sections 1886(d)(8) and (d)(10) of 
the Act. However, the IPPS policy that apportions the wage data for 
multi-campus hospitals was not finalized before the HH PPS final rule 
with comment period.
    We are continuing to use IPPS wage data for this CY 2009 update 
notice because we believe that in the absence of home health-specific 
wage data, using the hospital inpatient wage data is appropriate and 
reasonable for the HH PPS. We note that the IPPS wage data used to 
determine the CY 2009 HH wage index values reflect our policy that was 
adopted under the IPPS beginning in FY 2008, which apportions the wage 
data for multi-campus hospitals located in different labor market 
areas, or Core-Based Statistical Areas (CBSAs), to each CBSA where the 
campuses are located (see the FY 2008 IPPS final rule with comment 
period (72 FR 47317 through 47320)). Specifically, for the CY 2009 HH 
PPS, the wage index was computed using IPPS wage data (published by 
hospitals for cost reporting periods beginning in 2005, as with the FY 
2009 IPPS wage index), which allocated salaries and hours to the 
campuses of two multi-campus hospitals with campuses that are located 
in different labor areas; one is Massachusetts and the other is 
Illinois. The wage index

[[Page 65359]]

values for the CY 2009 HH PPS in the following CBSAs are affected by 
this policy: Boston-Quincy, MA (CBSA 14484), Providence-New Bedford-
Falls River, RI-MA (CBSA 39300), Chicago-Naperville-Joliet, IL (CBSA 
16974) and Lake County-Kenosha County, IL-WI (CBSA 29404) (please refer 
to Addendum B in this notice).
    As previously discussed in the July 3, 2000 final rule (65 FR 
41128), 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. Since publication of 
the July 3, 2000 final rule, we continue to believe that the use of the 
pre-floor and pre-reclassified hospital wage index data results in the 
appropriate and reasonable adjustment to the labor portion of the costs 
as required by statute. The HH PPS does not use the hospital area wage 
index's occupational mix adjustment, as this adjustment serves 
specifically to define the occupational categories more clearly in a 
hospital setting. See Addenda A and B of this notice, respectively, for 
the rural and urban pre-floor, pre-reclassified hospital wage indexes 
for 2009. The 2009 wage index is based on data collected from hospital 
cost reports submitted for cost reporting periods beginning during FY 
2005. These data reflect the multi-campus and New England deemed 
counties policies discussed above.
    Under the HH PPS, we use the wage index value associated with the 
labor market in which the beneficiary's home is located. As has been 
our longstanding practice, any area not included in an MSA (urban area) 
is considered to be nonurban (Sec.  412.64(b)(1)(ii)(C)) and receives 
the statewide rural wage index value (see, for example, 65 FR 41173).

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a notice such as this take effect. We can waive this 
procedure, however, if we find good cause that a notice-and-comment 
procedure is impracticable, unnecessary, or contrary to the public 
interest and incorporate a statement of finding and its reasons in the 
notice issued.
    We find that it is unnecessary, impracticable and contrary to the 
public interest to undertake proposed notice and comment rulemaking in 
this Notice. We believe it is unnecessary because the statute requires 
annual updates to the HH PPS rates and the methodologies used to update 
the rates have been previously subject to public comment; we are simply 
applying the methodology to the most recent data. With respect to the 
update of the outlier FDL ratio, we find that insofar as we have 
deviated from our usual methodology in this calendar year, such change 
is an analytical change. Moreover, we believe that the difficulty of 
deriving a new methodology to address the limited data discrepancies in 
localized areas of the country makes issuing a notice of proposed 
rulemaking in this instance impracticable. Moreover, it would be 
contrary to the public interest to undertake notice and comment 
rulemaking as it would impose a hardship on home health agencies and 
their patients by delaying publication of this update in order to 
solicit comments. Since it would pose additional harm to those home 
health agencies across the country that would be deemed ineligible for 
outlier payments because of these localized data discrepancies, 
applying the FDL analysis that we have used in past years is likewise 
contrary to the public interest for CY 2009. Therefore, we find good 
cause to waive notice and comment procedures for CY 2009.

V. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 501 et seq. ).

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this notice as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866, as amended, 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 rules with economically significant 
effects ($100 million or more in any 1 year). This notice, as defined 
by Executive Order 12866, is not an economically significant rule. This 
notice would not be considered major under the Congressional Review 
Act. The update set forth in this notice applies to Medicare payments 
under HH PPS in CY 2009. Accordingly, the following analysis describes 
the impact in CY 2009 only.
    We estimate that the net impact in this notice, including a 2.75 
percent reduction to the payment rate to account for the case-mix 
change adjustment, is estimated to be approximately $30 million in CY 
2009 expenditures. This total estimated $30 million impact reflects the 
distributional effects of an updated wage index (-$20 million) as well 
as the 2.9 percent home health market basket increase (an estimated 
additional $4