Medicare Program; Home Health Prospective Payment System; Rate Update for Calendar Year 2010, 58078-58183 [E9-26503]

Agencies

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

[Federal Register Volume 74, Number 216 (Tuesday, November 10, 2009)]
[Rules and Regulations]
[Pages 58078-58183]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-26503]



[[Page 58077]]

-----------------------------------------------------------------------

Part II





Department of Health and Human Services





-----------------------------------------------------------------------



Centers for Medicare & Medicaid Services



-----------------------------------------------------------------------



42 CFR Parts 409, 424, and 484



Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2010; Final Rule

Federal Register / Vol. 74, No. 216 / Tuesday, November 10, 2009 / 
Rules and Regulations

[[Page 58078]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, and 484

[CMS-1560-F]
RIN 0938-AP55


Medicare Program; Home Health Prospective Payment System; Rate 
Update for Calendar Year 2010

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule sets forth an update to the Home Health 
Prospective Payment System (HH PPS) rates; the national standardized 
60-day episode rates, the national per-visit rates, the non-routine 
medical supply (NRS) conversion factors, and the low utilization 
payment amount (LUPA) add-on payment amounts, under the Medicare 
prospective payment system for home health agencies effective January 
1, 2010. This rule also updates the wage index used under the HH PPS. 
In addition, this rule changes the HH PPS outlier policy, requires the 
submission of OASIS data as a condition for payment under the HH PPS, 
implements a revised Outcome and Assessment Information Set (OASIS-C) 
for episodes beginning on or after January 1, 2010, and implements a 
Consumer Assessment of Healthcare Providers and Systems (CAHPS) Home 
Health Care Survey (HHCAHPS) affecting payment to HHAs beginning in CY 
2012. Also, this rule makes payment safeguards that will improve our 
enrollment process, improve the quality of care that Medicare 
beneficiaries receive from HHAs, and reduce the Medicare program's 
vulnerability to fraud. This rule also adds clarifying language to the 
``skilled services'' section and Conditions of Participation (CoP) 
section of our regulations. This rule also clarifies the coverage of 
routine medical supplies under the HH PPS.

DATES: Effective Date: These regulations are effective on January 1, 
2010.

FOR FURTHER INFORMATION CONTACT:
Randy Throndset, (410) 786-0131 (overall HH PPS).
James Bossenmeyer, (410) 786-9317 (for information related to payment 
safeguards).
Doug Brown, (410) 786-0028 (for quality issues).
Kathleen Walch, (410) 786-7970 (for skilled services requirements and 
clinical issues).

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Requirements of the Balanced Budget Act of 1997 for 
Establishing the Prospective Payment System for Home Health Services
    B. Deficit Reduction Act of 2005
    C. System for Payment of Home Health Services
    D. Updates to the HH PPS
II. Summary of the Proposed Provisions and Response to Comments
    A. Outlier Policy
    B. Case-Mix Measurement Analysis
    C. CY 2010 Payment Rate Update
    1. Home Health Market Basket Update
    2. Home Health Care Quality Improvement
    3. Home Health Wage Index
    4. CY 2010 Payment Update
    a. National Standardized 60-Day Episode Rate
    b. Updated Cy 2010 National Standardized 60-Day Episode Payment 
Rate
    c. National Per-Visit Rates Used To Pay LUPAs and Compute 
Imputed Costs Used in Outlier Calculations
    d. LUPA Add-On Payment Amount Update
    e. Non-Routine Medical Supply Conversion Factor Update
    D. OASIS Issues
    1. HIPPS Code Reporting
    2. OASIS Submission as a Condition for Payment
    E. Qualifications for Coverage as They Relate to Skilled 
Services Requirements
    F. OASIS for Significant Change in Condition No Longer 
Associated With Payment
    G. Payment Safeguards for Home Health Agencies
    H. Physician Certification and Recertification of the Home 
Health Plan of Care
    I. Routine Medical Supplies
III. Provisions of the Final Rule
IV. Collection of Information Requirements
    A. ICRs Regarding the Requirements for Home Health Services
    B. ICRs Regarding Deactivation of Medicare Billing Privileges
    C. ICRs Regarding Prohibition Against Sale or Transfer of 
Billing Privileges
    D. ICRs Regarding Patient Assessment Data
V. Regulatory Impact Analysis

I. Background

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

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) enacted on 
August 5, 1997, significantly changed the way Medicare pays for 
Medicare home health services. Section 4603 of the BBA mandated the 
development of the home health prospective payment system (HH PPS). 
Until the implementation of a HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a cost-based reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of a HH PPS for 
all Medicare-covered home health services provided under a plan of care 
(POC) that were paid on a reasonable cost basis by adding section 1895 
of the Social Security Act (the Act), entitled ``Prospective Payment 
For Home Health Services''. Section 1895(b)(1) of the Act requires the 
Secretary to establish a HH PPS for all costs of home health services 
paid under Medicare.
    Section 1895(b)(3)(A) of the Act requires that: (1) The computation 
of a standard prospective payment amount include all costs for home 
health services covered and paid for on a reasonable cost basis and be 
initially based on the most recent audited cost report data available 
to the Secretary, and (2) the prospective payment amounts be 
standardized to eliminate the effects of case-mix and wage levels among 
HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the home health applicable 
percentage increase. Section 1895(b)(4) of the Act governs the payment 
computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act 
require the standard prospective payment amount to be adjusted for 
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. Pursuant to 1895(b)(4)(c), the wage-adjustment 
factors used by the Secretary may be the factors used under section 
1886(d)(3)(E) of the Act.
    Section 1895(b)(5) of the Act gives the Secretary the option to 
make additions or adjustments to the payment amount otherwise paid in 
the case of outliers because of unusual variations in the type or 
amount of medically necessary care. Total outlier payments in a given 
fiscal year (FY) or year may not exceed 5 percent of total payments 
projected or estimated.
    In accordance with the statute, we published a final rule (65 FR 
41128) in the Federal Register on July 3, 2000, to implement the HH PPS 
legislation. The July 2000 final rule established requirements for the 
new HH PPS for home health services as required by section 4603 of the 
BBA, as

[[Page 58079]]

subsequently amended by section 5101 of the Omnibus Consolidated and 
Emergency Supplemental Appropriations Act (OCESAA) for Fiscal Year 
1999, (Pub. L. 105-277), enacted on October 21, 1998; and by sections 
302, 305, and 306 of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act (BBRA) of 1999, (Pub. L. 106-113), enacted on November 
29, 1999. The requirements include the implementation of a HH PPS for 
home health services, consolidated billing requirements, and a number 
of other related changes. The HH PPS described in that rule replaced 
the retrospective reasonable cost-based system that was used by 
Medicare for the payment of home health services under Part A and Part 
B. For a complete and full description of the HH PPS as required by the 
BBA, see the July 2000 HH PPS final rule (65 FR 41128 through 41214).

B. Deficit Reduction Act of 2005

    On February 8, 2006, the Deficit Reduction Act of 2005 (Pub. L. 
109-171) (DRA) was enacted. Section 5201 of the DRA requires HHAs to 
submit data for purposes of measuring health care quality, and links 
the quality data submission to payment. This requirement is applicable 
for CY 2007 and each subsequent year. If an HHA does not submit quality 
data, the home health market basket percentage increase will be reduced 
2 percentage points. In accordance with the statute, we published a 
final rule (71 FR 65884, 65935) in the Federal Register on November 9, 
2006 to implement the pay-for-reporting requirement of the DRA, 
codified at 42 CFR 484.225(h) and (i).

C. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS on the basis of 
a national standardized 60-day episode payment rate that is adjusted 
for the applicable case-mix and wage index. The national standardized 
60-day episode rate includes the six home health disciplines (skilled 
nursing, home health aide, physical therapy, speech-language pathology, 
occupational therapy, and medical social services). Payment for non-
routine medical supplies (NRS), is no longer part of the national 
standardized 60-day episode rate and is computed by multiplying the 
relative weight for a particular NRS severity level by the NRS 
conversion factor (See section III.C.4.e). Durable medical equipment 
covered under the home health benefit is paid for outside the HH PPS 
payment. To adjust for case-mix, the HH PPS uses a 153-category case-
mix classification to assign patients to a home health resource group 
(HHRG). Clinical needs, functional status, and service utilization are 
computed from responses to selected data elements in the OASIS 
assessment instrument.
    For episodes with four or fewer visits, Medicare pays on the basis 
of a national per-visit rate by discipline; an episode consisting of 
four or fewer visits within a 60-day period receives what is referred 
to as a low utilization payment adjustment (LUPA). Medicare also 
adjusts the national standardized 60-day episode payment rate for 
certain intervening events that are subject to a partial episode 
payment adjustment (PEP adjustment). For certain cases that exceed a 
specific cost threshold, an outlier adjustment may also be available.

D. Corrections

    We published a final rule with comment period in the Federal 
Register on August 29, 2007 (72 FR 49762) that set forth a refinement 
and rate update to the 60-day national episode rates and the national 
per-visit rates under the Medicare prospective payment system for home 
health services for CY 2008. In this final rule with comment period, in 
Table 10B (72 FR 49854), the short description for ICD-9-CM code 250.8x 
& 707.10-707.9 should read ``PRIMARY DIAGNOSIS = 250.8x AND FIRST OTHER 
DIAGNOSIS =707.10-707.9. Instead of a formal correction notice, we are 
notifying the public of this correction in this final rule.

E. Updates to the HH PPS

    As required by section 1895(b)(3)(B) of the Act, we have 
historically updated the HH PPS rates annually in the Federal Register. 
Most recently, we published a notice in the Federal Register on 
November 3, 2008 (73 FR 65351) that set forth the update to the 60-day 
national episode rates and the national per-visit rates under the 
Medicare prospective payment system for home health services for CY 
2009.

F. Requirements for Issuance of Regulations

    Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) amended section 1871(a) of the Act and 
requires the Secretary, in consultation with the Director of the Office 
of Management and Budget, to establish and publish timelines for the 
publication of Medicare final regulations based on the previous 
publication of a Medicare proposed or interim final regulation. Section 
902 of the MMA also states that the timelines for these regulations may 
vary but shall not exceed 3 years after publication of the preceding 
proposed or interim final regulation except under exceptional 
circumstances.
    This final rule finalizes provisions set forth in the August 13, 
2009 proposed rule (74 FR 40948). In addition, this final rule has been 
published within the 3-year time limit imposed by section 902 of the 
MMA. Therefore, we believe that the final rule is in accordance with 
the Congress' intent to ensure timely publication of final regulations.

II. Summary of the Proposed Provisions and Response to Comments

    In the, August 13, 2009 Federal Register (74 FR 40948) we published 
the proposed rule entitled, ``Medicare Program; Home Health Prospective 
Payment System Rate Update for CY 2010'' and provided for a 60-day 
comment period. In this proposed rule we proposed updates to the Home 
Health Prospective Payment System (HH PPS) rates; the national 
standardized 60-day episode rates, the national per-visit rates, the 
non-routine medical supply (NRS) conversion factor, and the low 
utilization payment amount (LUPA) add-on payment amount, under the 
Medicare prospective payment system for home health agencies effective 
January 1, 2010. As part of the CY 2010 proposed rule (74 FR 40948), we 
also proposed a change to the HH PPS outlier policy, proposed to 
require the submission of OASIS data as a condition for payment under 
the HH PPS, and proposed payment safeguards that would improve our 
enrollment process, improve the quality of care that Medicare 
beneficiaries receive from HHAs, and reduce the Medicare program's 
vulnerability to fraud. The CY 2010 proposed rule also added clarifying 
language to the ``skilled services'' section and the Conditions of 
Participation (CoPs) sections of our regulations, and also clarified 
the coverage of routine medical supplies under the HH PPS. We also 
solicited comments on: Physician/patient interaction associated with 
the home health plan of care (POC); a Consumer Assessment of Healthcare 
Providers and Systems (CAHPS) Home Health Care Survey; the Outcome and 
Assessment Information Set (OASIS), Version C, effective January 1, 
2010; proposed pay for reporting measures for use in CY 2011; and a 
number of minor payment-related issues. We also responded, in the CY 
2010 proposed rule (74 FR 40948), to comments received as a result of 
our solicitation in the CY 2008 HH

[[Page 58080]]

PPS final rule with comment period (72 FR 49762).
    In response to the publication of the CY 2010 HH PPS proposed rule, 
we received approximately 73 items of correspondence from the public. 
We received numerous comments from various trade associations and major 
health-related organizations. Comments also originated from HHAs, 
hospitals, other providers, suppliers, practitioners, advocacy groups, 
consulting firms, and private citizens. The following discussion, 
arranged by subject area, includes our responses to the comments and, 
where appropriate, a brief summary as to whether or not we are 
implementing the proposed provision or some variation thereof.

A. Outlier Policy

    Section 1895(b)(5) of the Act allows for the provision of an 
addition or adjustment to the regular 60-day case-mix and wage-adjusted 
episode payment amount in the case of episodes that incur unusually 
high costs due to patient home health care needs. This section further 
stipulates that total outlier payments in a given year may not exceed 5 
percent of total projected or estimated HH PPS payments. Section 
1895(b)(3)(C) of the Act stipulates that the standard episode payment 
be reduced by such a proportion to account for the aggregate increase 
in payments resulting from outlier payments. 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 
episodes becomes eligible for outlier payments.
    In recent years, our analysis has revealed excessive growth in 
outlier payments, primarily the result of suspiciously high outlier 
payments in a few discrete areas of the country. In our CY 2009 payment 
update, we did not raise the FDL ratio, given the statistical outlier 
data anomalies that we identified in certain targeted areas, because 
program integrity efforts, such as payment suspensions for HHAs with 
questionable outlier billing activities, were underway to address 
excessive, suspicious outlier payments that were occurring in these 
areas. Instead, we maintained the then-current (CY 2008) FDL ratio of 
0.89 in CY 2009 while actions to remedy inappropriate outlier payments 
in these target areas of the country were effectuated.
    In our CY 2010 HH PPS proposed rule, we expanded our outlier 
analysis to assess the appropriateness of adopting a lower target 
percentage of outlier payments to total HH PPS payments. We performed 
an analysis of all providers who receive outlier payments, focusing our 
analysis on total HH PPS payments, total outlier payments, number of 
episodes, number of outlier episodes, and location of provider. 
Specifically, our analysis incorporated a 10 percent per-agency cap on 
outliers and looked at outlier payments as a percentage of total HH PPS 
payments with that 10 percent per-agency cap in place. That analysis 
revealed that with a 10 percent per-agency outlier cap in place, 
outlier dollars accounted for approximately 2.1 percent of total HH PPS 
payments. Additionally, we performed a separate analysis on CMS data 
using Medicare provider numbers of members of a major association of 
home health agencies who claim to be safety-net providers, serving 
sicker, more costly patients. The average outlier payment to these 
agencies was found to be less than 2 percent.
    In the proposed rule we recognized that although program integrity 
efforts associated with excessive outlier payments continue in targeted 
areas of the country, we continue to be at risk of exceeding the 5 
percent statutory limit on estimated outlier expenditures. Therefore, 
we focused our analysis on whether a broader policy change to our 
outlier payment policy might also be warranted, to mitigate possible 
billing vulnerabilities associated with excessive outlier payments, and 
to adhere to our statutory limit on outlier payments. Our analysis 
revealed that a 10 percent per-agency cap in outlier payments would 
mitigate potential inappropriate outlier billing vulnerabilities while 
minimizing the access to care risk for high needs patients.
    Therefore, to mitigate possible billing vulnerabilities associated 
with excessive outlier payments, and to adhere to our statutory limit 
on outlier payments, we proposed to implement an agency level outlier 
cap such that in any given calendar year, an individual HHA would 
receive no more than 10 percent of its total HH PPS payments in outlier 
payments. Additionally, we proposed to reduce the FDL ratio to 0.67 for 
CY 2010. This combination of a 10 percent agency level outlier cap, and 
reduced FDL ratio of 0.67, and allowing for future growth in outlier 
payments, resulted in a projected target outlier payment outlay of 
approximately 2.5 percent of total HH PPS payments in outlier payments.
    Currently, we reduce the national standardized 60-day episode 
payment rates, the national per-visit rates, the LUPA add-on amount, 
and the NRS conversion factor by 5 percent in order to create an 
outlier pool that accommodates estimated outlier payments of 5 percent 
of total HH PPS payments. Targeting the percentage of outlier payments 
at approximately 2.5 percent would allow us to create a smaller outlier 
pool and return the remaining 2.5 percent to the HH PPS rates. In the 
proposed rule, we proposed to retain a 2.5 percent reduction to the 
national standardized 60-day episode rates, the national per-visit 
rates, the LUPA add-on payment amount, and the NRS conversion factor to 
fund the proposed target of approximately 2.5 percent of total 
estimated HH PPS payments in outlier payments, adhering to the 
statutory requirement in section 1895(b)(3) of the Act.
    Comment: Most commenters were very supportive, and in favor of the 
overall proposed HH PPS outlier policy. Commenters stated that 
anomalous outlier trends in recent years are compelling evidence that 
abusive and possibly fraudulent practices are widespread in many areas 
of the country and that increased safeguards are necessary to curb 
inappropriate activity as it relates to the billing of outlier episodes 
under the HH PPS. Commenters further stated that the proposed changes 
were reasonable areas of focus for additional safeguards against fraud 
and abuse in the area of billing for outliers in the HH PPS. Other 
commenters stated that they strongly supported CMS in its efforts to 
curb fraud and abuse and are not opposed to the proposed implementation 
of these changes to the outlier policy. Several commenters found the 
proposed outlier policy to be fair and expect the policy to be 
effective.
    Response: We appreciate the overwhelming support from commenters 
that we received on our proposed HH PPS outlier policy. We would like 
to point out that fraudulent activity is not widespread in many areas 
of the country. These sort of fraudulent activities are occurring in a 
few discrete areas of the country. We continue to believe that an 
agency-level outlier cap is the appropriate policy, at this time, to 
mitigate possible billing vulnerabilities associated with excessive 
outlier payments and to adhere to our statutory limit on outlier 
payments. As such, in conjunction with the 10 percent agency level 
outlier policy, we proposed to target a new 2.5 percent outlier pool 
(as opposed to the existing 5 percent outlier pool), and return 2.5 
percent back into the national standardized 60-day episode rates, the 
national per-visit rates, the LUPA add-on payment amount, and the NRS 
conversion factor,

[[Page 58081]]

with a 0.67 FDL ratio. For reasons outlined later in this final rule, 
we are finalizing this outlier policy for CY 2010 only.
    Comment: Several commenters supported the new, lower, outlier 
target of approximately 2.5 percent, and applauded CMS for restoring 
dollars to the HH PPS payment rates. A commenter commended CMS for 
thoughtfully considering the negative impact on patient access, should 
outlier payments be completely eliminated. A few commenters urged CMS 
to monitor outlier expenditures and further reduce the FDL if outlier 
payments drop below the new 2.5 percent target. A commenter asked CMS 
to explain the methods that would be used to monitor these outlier 
payments.
    Response: We appreciate the support of the proposed outlier target 
of approximately 2.5 percent and returning 2.5 percent back into the HH 
PPS rates. As a commenter stated, CMS did give thoughtful consideration 
to eliminating the outlier policy altogether, and although we reserve 
the right to eliminate the outlier policy in the future, should 
circumstances make that necessary, we believe that an outlier target of 
approximately 2.5 percent and returning 2.5 percent back into the HH 
PPS rates, for CY 2010, is the appropriate policy at this time. As part 
of our final outlier policy, in addition to returning 2.5 percent back 
into the HH PPS rates, because of the 10 percent cap on outlier 
payments, CMS is also lowering the FDL from 0.89 to 0.67, making it 
easier for episodes to qualify for outlier payments. Thus, in addition 
to the fact that few non-fraudulent providers are expected to be 
impacted by the 10 percent cap, all providers will benefit from the 2.5 
percent increase in the base rate and will also be helped by the 
lowering of the FDL ratio. As stated above, CMS plans to analyze 
overall national spending on outlier payments relative to the new 2.5 
percent outlier pool by geographic area and provider type. CMS also 
plans on looking at outlier payments, per HHA, relative to the 10 
percent cap on outlier payments at the agency level by geographic area 
and provider type.
    Comment: There was a commenter who was opposed to returning a 
portion of the current 5 percent pool to the HH PPS rates, stating that 
doing so would reduce resources to provide for sicker patients and 
increase funds paid for lost-cost/low-utilization patients who are 
already well provided for. Another commenter was concerned about 
reducing the outlier pool to 2.5 percent, stating that it would hurt 
providers that accept difficult and hard-to-place patients.
    Response: For the past several years, CMS has updated the FDL ratio 
in attempts to estimate outlier dollars to be no more than 5 percent. 
However, because outlier payments in certain areas of the country 
continue to increase at alarming rates, updating the FDL on an annual 
basis has proven to not be enough to keep outlier dollars at no more 
than 5 percent of total HH PPS payments. As we described in the 
proposed rule, our analyses show that when we remove from our analyses 
HHAs in areas of the country with high suspect outlier payments, as 
well as small agencies that are not representative of the types of 
agencies we suspect of suspicious billing activities, outlier payments 
for the rest of the country account for less than 2 percent of total HH 
PPS payments. As described in the proposed rule, our analyses have 
shown that in simulating payment for CY 2010, imposing an outlier cap 
of 10 percent at the agency level, we would pay approximately 2.32 
percent of total HH PPS payments in outlier payments.
    Additionally, in our separate analysis of CMS data using provider 
numbers from a major home health agency association's agencies, which 
claim to service a sicker, more costly population, only one of these 
agencies was estimated to exceed a 10 percent outlier cap. Further 
analysis shows us that approximately 70 percent of all HHAs receive 
between 0 percent and 1 percent in outlier dollars as a percentage of 
their total HH PPS payments. Consequently, we believe that a final 
outlier policy for CY 2010 that includes a 10 percent agency level 
outlier cap, a target of approximately 2.5 percent for outlier dollars 
as a percentage of total HH PPS payments, returning 2.5 percent back 
into the HH PPS rates, and a 0.67 FDL ratio is the appropriate policy, 
and that it appropriately pays for legitimate outlier episodes as well 
as all other types of episodes under the HH PPS. Because our trend 
analysis shows that outlier expenditures continue to grow, we proposed 
and are finalizing as part of our final outlier policy, an outlier 
target of approximately 2.5 percent.
    Comment: Most commenters were in support of lowering the FDL ratio 
to that of 0.67, but urged CMS to carefully monitor the effects of 
reducing the FDL ratio to gauge whether there is an increase in 
inappropriate outliers and if increasing the FDL ratio might be 
necessary in the future. A commenter asked CMS to keep the FDL ratio at 
0.89 because lowering it to 0.67 would make it easier for episodes to 
become outliers, thereby making it difficult for HHAs that are trying 
to stay under a 10 percent cap to meet the requirement and still 
deliver care. Another commenter stated that the proposal to reduce the 
FDL to 0.67, which would increase the number of episodes that qualify 
for outlier payments, is a ``futile gesture'' in the face of a 10 
percent cap.
    Response: We appreciate commenters' support of lowering the FDL 
ratio to 0.67. As stated above, CMS plans to analyze overall national 
spending on outlier payments relative to the new 2.5 percent outlier 
pool by geographic area and provider type. CMS also plans on looking at 
outlier payments per HHA relative to the 10 percent cap on outlier 
payments at the agency level by geographic area and provider type. At 
the same time, we will be looking at how the FDL ratio of 0.67 affects 
the percentage of outliers, and consider adjustments to the FDL ratio 
(up or down) if appropriate. We are decreasing the FDL ratio from 0.89 
to 0.67 because the latest data and best analysis available tell us 
that in conjunction with an outlier policy that invokes a 10 percent 
agency level outlier cap and a target outlier pool of approximately 2.5 
percent (returning 2.5 percent to the HH PPS rates), a FDL ratio of 
0.67 is appropriate. As we stated in the proposed rule and throughout 
this final rule, if we are unable to see measurable improvements with 
respect to suspected fraudulent billing practices as they relate to HHA 
outlier payments, CMS may consider eliminating the outlier policy 
entirely in future rulemaking.
    Comment: A number of commenters supported the ``rolling basis'' in 
determining whether outlier payments should be made at any given time 
during the year. However, another commenter cautioned CMS not to create 
a tracking nightmare for fiscal intermediaries and providers that is 
overly burdensome or complicated to administer. Yet another commenter 
was concerned about a delay in payments to HHAs, for services that have 
already been provided, and expenses that have already been incurred. 
That same commenter suggested that to address cash flow issues, CMS 
should delay the process of identifying and withholding outlier 
payments until the end of the first or second quarter of the calendar 
year, making it easier to HHAs to absorb early outlier cases. Another 
commenter was concerned that the ``rolling cap'' would result in 
accounting challenges, and suggested a quarterly look-back with a lump 
sum whenever outlier payments exceeded the 10 percent cap. A commenter 
stated that a rolling method could create excessive outlier

[[Page 58082]]

down-scores until the next calculation. The commenter believed that a 
retrospective adjustment would be fairer and would enable HHAs to 
reconcile revenue. Another commenter expressed concern about a 
retrospective recoupment, particularly an annual one, and the impact 
such a recoupment could have on the cash flow of smaller agencies and 
agencies with lower Medicare margins.
    Response: Implementing the cap by a post-payment recoupment 
process, either quarterly or annual, would delay impact of the cap on 
HHAs that are billing outlier episodes inappropriately. Under a lump 
sum recoupment, there could be a total disruption to an HHA's cash 
flow. That is, if the amount of outlier dollars paid in excess of the 
cap and scheduled for recoupment is greater than the amount due to the 
HHA for other claims, the HHA's payment could stop completely for a 
time while the recoupment was made. We believe this sort of payment 
disruption is undesirable.
    Under our planned implementation approach, for each home health 
provider, the claims processing system will maintain a running tally of 
the year-to-date (YTD) total home health payments. The claims 
processing system will ensure that each time an outlier claim for an 
agency is processed, actual outlier payments will never exceed 10 
percent of the agency's YTD total payments. While an agency will always 
receive its base episode payment timely, the outlier portion of the 
claim will be paid on a rolling basis, as the agency's YTD payments 
support payment of the outlier. We plan to have a periodic 
reconciliation process under which outlier payments that were withheld 
are subsequently paid if the HHA's total payments have increased to the 
point that their outlier payments can be made. This reconciliation 
process will always result in additional cash flow to HHAs, and so we 
believe it is preferable. With regard to revenue tracking, distinct 
coding will be used on the HHA's remittance advice when outlier 
payments are withheld, assisting receivables accountants to identify 
and account for the differences between expected and actual payments. 
For these reasons, we agree with the commenter that supported a rolling 
implementation of the cap and will finalize this proposal.
    Comment: A number of commenters encouraged CMS to take more 
aggressive actions through program integrity activities. One commenter 
recommended that a high rate of outliers for a particular HHA should 
trigger medical review, creating a greater/more effective deterrent to 
fraudulent behavior. In general, the commenter supported more 
aggressive enforcement. A commenter stated that reference areas with 
fraud should have much higher incidence of additional document requests 
(ADRs) and phone calls to beneficiaries from fiscal intermediaries. 
Documentation should be closely reviewed for medical necessity, 
qualifications, and homebound status.
    Response: As we stated in the proposed rule, so far as activities 
related to high levels of suspicious outlier payments, CMS is 
continuing with program integrity efforts including possible payment 
suspensions for HHAs with questionable outlier billing activities.
    Comment: Commenters asked that CMS clarify that while outlier 
payments would be capped at 10 percent, at the agency level, that the 
non-outlier portion of the payment would still be paid.
    Response: We thank the commenters for this comment, and apologize 
if we were not clear as to what portion of the HH PPS payment would be 
subject to the 10 percent cap. As stated in the proposed rule (at 74 FR 
40957),the outlier policy, finalized for CY 2010 only, will include a 
10 percent cap on outlier payments at the agency level. That is to say, 
an agency's outlier payments are to be capped at 10 percent of its 
total HH PPS payments (of which outlier payments are a part). For any 
claim with an outlier payment, if it were determined that paying the 
outlier portion of the total HH PPS payment for that claim would result 
in the HHA exceeding the 10 percent cap in outlier payments, only the 
outlier portion of the claim would not be paid at that time. However, 
the regular HH PPS payment (based on the HHRG that applies to that 
claim) is not subject to that 10 percent outlier cap, and thus would be 
paid. Any HH PPS payment adjustments other than the outlier payment 
(that is, PEP, recoding for therapy visits, etc.), would also continue 
to apply to the claim.
    Comment: CMS' analysis in the proposed rule started by first 
identifying ``all providers who receive outlier payments'' but excluded 
agencies with greater than 15 percent outlier episodes for one reason 
or another. Such exclusion skews analysis in favor of the 10 percent 
cap at the agency level, without considering that HHAs are shouldering 
the burden of serving sicker, more costly patients, represented by the 
excluded agencies with greater than 15 percent outlier episodes.
    Response: The purpose of our analyses was to show the impact of the 
outlier cap policy on agencies not likely to be receiving inappropriate 
outlier payments. It is clear that a 10 percent agency outlier cap 
would have a major effect on agencies in certain areas of the country 
involved in suspect inappropriate billing practices. As such, we did 
not want to have data from those agencies skewing the results. To 
clarify, we did not exclude agencies with either outlier payments or 
outlier episodes greater than 15 percent. We did exclude agencies from 
our analysis that received sizeable outlier payments (totaling at least 
$100,000), had high ratio of outlier payments to total HH PPS payments 
(30 percent or more), and were located in the counties in Florida, 
Texas and California where program integrity issues had been 
identified. Those agencies simultaneously satisfying all three of these 
exclusion criteria were considered highly suspect for inappropriate 
billing practices. We also excluded a small number of agencies that had 
fewer than 20 Medicare HH PPS episodes, believing that Medicare 
beneficiaries account for such a small part of their business that they 
are not representative of the types of agencies we are most concerned 
about disadvantaging with an outlier cap policy. Finally, we excluded a 
few additional agencies because they, too, were located in those same 
counties experiencing program integrity issues, and thus we did not 
want to have data from those agencies skewing the results either.
    Comment: Some commenters suggested that the proposed outlier 
policies will put small HHAs out of business, while larger HHAs will be 
impacted only slightly. A commenter suggested that small HHAs will have 
to transfer their complex patients to larger HHAs that generate enough 
income to receive outlier patients, leaving small HHAs with limited 
service offerings and more competitive disadvantages. The commenter 
further asked CMS to further research the impact that the 10 percent 
cap will have on HHAs that generate $2 million or less. Another 
commenter stated that special consideration should be given to smaller 
HHAs with fewer than 50 patients with low socioeconomic status (SES). 
The commenter also stated that CMS should take into account that there 
are cultural and racial reasons why certain areas may have more home 
health chronic patients. Another commenter stated that our proposed 
outlier policies would eliminate a safety net for HHAs that typically 
treat higher needs patients. Some commenters cautioned CMS to analyze 
carefully the effects of such an outlier policy to ensure that HHAs and

[[Page 58083]]

beneficiaries and rural and under-served areas are not adversely 
affected. A number of commenters urged CMS to ensure that HHAs that 
legitimately serve sicker/more clinically complex patients are not 
penalized or put out of business, causing access issues for 
beneficiaries. Another commenter suggested that in some areas lacking 
of other post acute settings available to beneficiaries, HHAs may have 
higher outlier costs. There was, however, a commenter who stated that 
the proposed outlier policy assumes some financial loss from outlier 
episodes, but that the commenter's analysis on freestanding HHAs 
indicates that some HHAs have lower costs than those costs assumed in 
the proposed policy. Consequently, these HHAs with lower costs may be 
able to profit from abusing the outlier policy, even with a smaller 
outlier pool and provider level cap.
    Response: Our analysis (see proposed rule at 74 FR 40956) shows 
that when the counties with program integrity problems are removed, the 
vast majority of the remaining providers have outlier dollars below 10% 
of their total home health expenditures and thus will not be affected 
by the policy. Further mitigating the effects of the outlier policy is 
that the base rates for all episodes are being increased by 2.5%. An 
alternative, as was discussed in the proposed rule, would be to 
eliminate the outlier policy altogether, an option that some providers 
might find even less appealing. While we continue to believe that our 
proposed outlier policy would not negatively impact the access to home 
health care, we believe it prudent to carefully monitor the impact that 
this new policy may have on access to home health care. Therefore, we 
are finalizing our proposed outlier policy, but for CY 2010 only. We 
will closely monitor data trends and we may make this policy, or some 
variation of this policy, permanent in future rulemaking. We believe 
that a final outlier policy for CY 2010 that includes a 10 percent 
agency level outlier cap, a target of approximately 2.5 percent for 
outlier dollars as a percentage of total HH PPS payments, returning 2.5 
percent back into the HH PPS rates, and a 0.67 FDL ratio is the 
appropriate policy at this time.
    Comment: Some commenters opposed the proposed outlier policy, 
stating that it penalized HHAs that treat insulin-dependent diabetes 
mellitus (IDDM) patients. These commenters stated that this policy 
would ultimately end up causing patients with IDDM to be denied 
treatment, and thus jeopardizing their lives. The same commenter stated 
that IDDM patients have always been the exception to the rule, ``end in 
sight''. The commenter went on to say that this policy would be life 
threatening to insulin dependent diabetics because they would have no 
one to administer their insulin. The commenter stated that they were 
one of the few HHAs that accepted these types of patients, and that if 
the 10 percent outlier cap were implemented, there would be no HHA to 
take these patients, resulting in insulin mismanagement, increased 
hospitalizations, and complications (including death). The commenter 
stated that Houston has a high population of IDDM patients, and that 
CMS should consider regions/geography as to how an outlier cap should 
appropriately be applied.
    A few commenters wanted to see exceptions for certain types of 
patients, while other commenters wanted to see exceptions for HHAs 
specializing in treating certain types of patients. One commenter 
proposed that HHAs specializing in chronic disease management 
(diabetes, congestive heart failure (CHF), wound care, etc.), with 
criteria to safeguard against fraud, should be exempt from the 10 
percent outlier cap policy. The commenter stated that criteria may 
include having specialty providers working with the HHA and that 
enhanced services (placing the patient as an outlier) are necessary. 
The commenter pointed out that, in their State, an association of 
diabetes educators was working towards being able to certify HHAs with 
a ``Diabetes Education Program'' which could also be a requirement for 
those with outlier diabetics. HHAs providing that specialty care should 
be willing to collect and report data on outcomes to assure quality 
care is being provided. A commenter stated that while a 10 percent 
outlier cap may be appropriate in most cases, episodes in which IDDM 
patients are being served should be exempt from that policy. Another 
commenter suggested that an exemption for those HHAs willing to follow 
criteria for specialty care to safeguard against fraud should be 
excluded from the cap.
    Another commenter adamantly opposed the 10 percent outlier cap, as 
they specialize in diabetic care, and such a policy would affect the 
way they do business and their cash flow. The commenter stated that 
they would be forced to transfer IDDM patients to other HHAs. The 
commenter stated that such patients should not be punished by forcing 
them to change providers due to government policy rather than choice. 
The commenter also suggested that CMS do more research on the impact of 
such a change and the effects that such a change would have on 
competitive dynamics as well as ways to ``even the playing field.'' 
Another commenter suggested that CMS allow higher cap percentages for 
counties with high IDDM populations.
    Another commenter was opposed to the 10 percent outlier cap, 
stating that it would put their patients in jeopardy. The commenter 
went on to say that they see elderly and mentally disabled adults 
through Diabetic Outreach Services (DOS). The commenter stated that 
many patients in DOS have vision disturbances, cognitive impairment, or 
dexterity issues and are on the Medicare home health benefit for 
multiple daily insulin injections. Without the HHA, or a willing/able 
caregiver, these patients would likely dose incorrectly or not at all, 
leading to hospitalization, SNF placement, or death. The commenter 
further stated that those IDDM patients receiving services from home 
health agencies have fewer hospitalizations or urgent use of the 
medical system.
    A few commenters were opposed to the proposed outlier policy, 
stating that they take the ``difficult cases'' such as the unwanted 
children with psychiatric issues, low SES, IV, wound-care, and other 
diabetic cases, many of whom do not have caregivers. Many of their 
homebound patients are also vision impaired, have dexterity issues, or 
have dementia and/or Alzheimer's disease and require someone to be 
involved in their care. Those in assisted living facilities have even 
more specialized needs. The commenter stated that assisted living 
facilities are not always able to check glucose levels, and some are 
prohibited from administering insulin. The commenter stated that many 
patients cannot administer insulin safely, and families are unable to 
do so due to work schedules. The commenter wrote that incorrectly 
administered insulin can cause frequent calls to 911 and visits to the 
emergency room, and that poorly managed diabetes can cause 
hyperglycemia, hypoglycemia, and death. The commenter stated that if 
this outlier policy were to be implemented, their patients would end up 
in the hospital, only redirecting Medicare costs to high hospital 
bills. The commenter went on to say that their agency sees patients in 
the homes and assisted living facilities for ``house call'' diabetic 
services, and that patients who are homebound and residing in assisted 
living facilities would be adversely affected by this proposal. The 
commenter stated that putting a cap on outliers will force HHAs to 
``dump'' IDDM patients, causing concern about these patients losing 
access to quality care.
    Response: Excessive billing for IDDM patients in counties with 
program

[[Page 58084]]

integrity concerns is one of the main reasons necessitating the new 
outlier policy. However, we are sensitive to the commenter's concerns 
that homebound IDDM patients receive diabetes management support; 
likewise, we are sensitive to the support and disease management needs 
of patients with chronic diseases such as other types of diabetes, CHF, 
and wound care. Under Medicare's home health benefit, agencies are 
expected to provide education and training to help IDDM (and other 
diabetic) patients self-manage their diabetes. Many homebound patients 
with diabetes require short-term management for skilled observation, 
assessment, teaching and training activities. If the patient is unable 
to learn to self-manage, including self-administer medication, the home 
health agency would be expected to provide the teaching and training to 
a care-giver or family member. There will always be a subgroup of 
patients who cannot learn self-management, do not have a willing and 
able caregiver, and/or have no community support. However, as discussed 
in the proposed rule, our analysis shows us that after excluding HHAs 
in certain areas of the country where fraudulent billing practices are 
suspected, we expect that less than 2 percent of all Medicare HHAs 
would be affected by a 10 percent cap on outlier payments, and that of 
that less than 2 percent of HHAs, almost all are located in urban areas 
where beneficiaries have other choices. We also expect that the ability 
of agencies to receive 10 percent of their total payment in outliers 
would partially compensate agencies for the care associated with this 
subgroup. The outlier policy in the HH PPS was never intended to fully 
compensate HHAs for episodes that incur unusually high costs due to 
patient home health care needs. Rather, the intent of the outlier 
policy is to mitigate the negative financial impact that unusually high 
cost patients have on HHAs. We believe that our final outlier policy 
for this rule, that includes a 10 percent per-agency cap on outlier 
payments, is consistent with that intent. Our analysis shows us that 
approximately 70 percent of HHAs receive between 0 percent and 1 
percent in outlier payments. Therefore, we believe our final outlier 
policy (which includes a 10 percent cap on outlier payments at the 
agency level) is reasonable and responsible. We also encourage home 
health agencies to take advantage of the help and support available 
from organizations such as the American Diabetes Association, the 
Indian Health Service, and the American Association of Diabetic 
Educators regarding innovative techniques associated with diabetes self 
management training (DSMT). Collaborating with these organizations may 
allow agencies to achieve greater success in enabling IDDM patients 
and/or their caregivers to better achieve self-management, and may 
provide the agencies with innovative care suggestions regarding their 
IDDM patients. CMS will closely monitor utilization trends of IDDM home 
health patients to assess the impact this policy may have on their 
access to care. Specifically, we plan to look at pre-2010 data to 
analyze trends of home health usage by IDDM patients, looking also at 
patterns of their Medicare utilization prior to the home health 
episode, and will compare those patterns with current usage.
    Comment: A commenter stated that while MedPac may have reported 
that beneficiaries have access to an adequate number of HHAs, the 
reality is that many HHAs limit acceptance of high- utilization 
patients due to lack of resources or to protect their bottom line. The 
commenter also stated that they accept referrals for patients that 
other agencies will not admit. Another commenter stated that they would 
not be able to accept these types of patients if the proposed outlier 
policy were implemented, stating that they already take a 20 percent 
loss on these patients, which they offset with the few low-utilization 
short episodes they receive. The commenter stated that their agency 
will be restricted in the number of high utilization, sicker patients 
that they will accept. The commenter stated that many HHAs will not 
gamble with reimbursement calculations, timing, and cash flow issues 
that would be associated with a 10 percent cap. Consequently, the 
commenter believed that there would be no agency for many of the 
patients to turn to, and therefore this would likely result in an 
access to care issue.
    Response: While experience varies from year to year, on average, 
the increased cost of sicker patients should generally be offset by the 
decreased cost for other patients. As stated in an earlier response to 
comments, based on our analysis (which excludes HHAs in certain areas 
of the country involved in potentially fraudulent billing practices), 
we expect that less than 2 percent of all Medicare HHAs may be affected 
by a 10 percent cap on outlier payments, and of this group of HHAs who 
may be affected by the 10 percent outlier cap, a vast majority are 
located in urban areas where beneficiaries have other choices. That 
being stated, an overwhelming majority of HHAs will not be affected by 
the 10 percent outlier cap, and thus will be in a position to accept 
patients who legitimately need home health services, and meet the 
eligibility requirements for the Medicare home health benefit.
    Comment: A few commenters generally supported the proposed outlier 
policy, but recommended modifications to the policy. Generally 
speaking, some commenters requested that an appeals process be created 
for HHAs that CMS initially determined to have exceeded the 10 percent 
cap. The concern here was that such a cap could potentially affect 
legitimate outlier cases. As such, a commenter stated that situations 
could evolve in which high needs patients receiving care at one HHA are 
forced to change agencies during a potentially critical time. This 
commenter also found it concerning that we would have a cap policy that 
could potentially not allow for reimbursement for a valid outlier case. 
Another commenter suggested that CMS target areas where the data 
indicate the overutilization of outliers, rather than applying the 
policy to all HHAs in the country. We also received the following 
recommended modifications: (1) The cap should be put in place no 
earlier than 2011 (different versions of a delay included that of a 
delay until it is clear that Congress has addressed the issue, while 
another version suggested phasing-in the 10 percent cap by starting 
with a higher cap of 15 or 20 percent); (2) CoPs should be amended to 
allow agencies to discharge outlier patients when it can be estimated 
that a HHA will exceed the cap; similarly, CoPs should be amended to 
permit a HHA to deny admission to an outlier patient when its estimated 
cap will be exceeded. CoP amendments should also address patient notice 
rights; (3) During pendency of cap discharges, allow an exception to 
the cap if a HHA can show that it took all reasonable measures to 
secure alternative care for qualified patients; (4) Establish an 
exemption if the provider exceeding cap can show that patients served 
are qualified and that no other HHA is available to admit them; (5) 
Establish a registry of HHAs that report availability to accept outlier 
patients; (6) Issue ``best-practice'' guidelines for dealing with 
outlier patients; (7) The Secretary of HHS should coordinate regulatory 
efforts with current proposals in Congress that would modify outlier 
standards. Not doing so could result in piecemeal enactment which could 
put HHAs at higher risk; (8) Clarify that the application of the cap 
calculation is based solely on outlier adjustments.

[[Page 58085]]

    Response: An appeals process would be cumbersome and difficult to 
implement for such a small percentage of situations. HHAs should be 
able to predict whether they will be affected by a 10 percent outlier 
cap policy based on past utilization and, in legitimate situations, be 
able to point the beneficiaries to alternatives. CMS is moving forward 
with implementation of the 10 percent outlier cap for CY 2010, 
effective January 1, 2010. With suspect fraudulent outlier billing 
practices continuing to increase, we believe it crucial to implement 
this policy now (CY 2010) rather than delay. Additionally, a delay, 
while maintaining the current FDL ratio of 0.89, would not be possible. 
In such a scenario (that is, a delay), CMs would have to either 
eliminate the outlier pool altogether, or raise the FDL ratio 
significantly (see CY 2009 HH PPS Update Notice at 73 FR 65357), so as 
to maintain a 5 percent outlier pool, if the 10 percent outlier cap 
were not implemented this year. However, CMS does not believe that 
eliminating the outlier policy or raising the FDL ratio is the 
appropriate policy at this time. Revisions to existing CoPs do not need 
to take place in order to implement this outlier policy. CoPs do not, 
and are not intended to, address or restrict the ability of HHAs to 
discharge patients. The HHA is required to accept patients with a 
reasonable expectation that the patient's medical, nursing, and social 
needs can be adequately met by the agency at the patient's place of 
residence (42 CFR 484.18). The CoPs already address patients' rights at 
42 CFR 484.10. Given the availability of HHAs, and the estimated 
infrequency of circumstances where legitimate cases might exist, we do 
not believe that exemptions are necessary. As noted in a previous 
response to comments, as stated in the proposed rule (at 74 FR 40957) 
and finalized in this rule for CY 2010 only, the outlier policy will 
include a 10 percent cap on outlier payments at the agency level. That 
is to say, an agency's outlier payments are to be capped at 10 percent 
of its total HH PPS payments (of which outlier payments are a 
component). For any claim with an outlier payment, if it is determined 
that paying the outlier portion of the total HH PPS payment for that 
claim would result in the HHA exceeding the 10 percent cap in outlier 
payments, the outlier portion of the claim would not be paid at that 
time. However, the regular HH PPS payment (based on the HHRG that 
applied to that claim) would not be subject to that 10 percent outlier 
cap, and thus would be paid. Any HH PPS payment adjustment (that is, 
PEP, recoding for therapy visits, etc.) other than the outlier payment, 
would also continue to apply to the claim.
    Comment: A commenter agreed with the approach, but stated that the 
overarching problem is that beneficiary needs have increased and that 
the flaw is not in the outlier policy but in low reimbursement. The 
commenter suggested that CMS develop more accurate methods to deal with 
HHAs that ``gamed'' the outlier policy, versus putting forward the 
proposed policy. The commenter asked CMS to consider something akin to 
the hospice cap, but with a modifier to allow for HHAs with sicker 
patients.
    Response: We disagree that the flaw is in the low reimbursement 
rates. The newly refined 153-HHRG case-mix model now reflects different 
resource costs for early home health episodes versus later home health 
episodes and expanded the case-mix variables included in the payment 
model. The newly refined model also replaced the previous single 10-
therapy threshold with three therapy thresholds (6, 14, and 20 therapy 
visits), with gradual payment increases between the first and third 
therapy thresholds. The newly refined model also includes six severity 
levels at which it pays for non routine medical supplies (NRS). We 
believe that the new model has addressed the areas identified by the 
industry as ``not being accounted for'' in the previous 80-HHRG case-
mix model. Sicker patients are accounted for in the more detailed 153-
HHRG case-mix model. Home health margins, even by industry standards, 
have been generous.
    Comment: Several commenters whose parents are Medicare HHA patients 
were opposed to the proposed outlier policy, stating that their parents 
are diabetic and unable to administer insulin; that the children's work 
schedules are not flexible, and consequently the adult children are not 
consistently available to assist their parents. These commenters stated 
that they rely on the HHA to administer the insulin to their parents. 
These commenters emphasized that their parents have paid into the 
Medicare program and that it should be available to them in their time 
of need. The commenters also stated that changing this would be a 
horrible burden on them, as they would have to have their parents move 
into their homes, which would be a difficult situation. Commenters 
stated that their parent's independence would be lost forever and that 
their overall health would suffer. These commenters stated that they 
may have to change jobs, which was not an option at this time; 
otherwise their parents would not get their insulin regularly. The 
commenters stated that if their parents would not move in with them, 
their parents would go into a nursing home. Commenters believed this 
was an attempt by CMS to save money while risking the lives of 
patients. These commenters urged CMS to reconsider the outlier policy. 
One commenter, an insulin patient, stated that he/she was unable to 
give himself/herself shots and did not have family to do so on a 
regular basis. The commenter went on to say that if nurses cannot come 
to their home, he/she would end up in the hospital or nursing facility. 
The commenter stated that the cost to be in a nursing facility would be 
more than the cost of a home health nurse who comes to his/her home. 
The commenter requested that CMS not change how it pays the home health 
nurse.
    Response: CMS is sympathetic to the fact that some beneficiaries 
who need help administering insulin. The new outlier policy is intended 
to address the inappropriate, potentially fraudulent billing practices 
that we are seeing. In our view, there is no reason to expect a large 
number of insulin patients unable to treat themselves would all be 
utilizing a single provider, and this is, in fact, generally the case 
in all areas of the country except those with severe program integrity 
issues. We believe that by implementing such a policy, in conjunction 
with the continued program integrity efforts, including possible 
payment suspensions for HHAs with questionable outlier billing 
activities, Medicare beneficiaries will continue to receive the 
services they need, while providers receive appropriate payment for the 
services they provide. We are committed to addressing potentially 
fraudulent activities, especially those in areas where we see 
suspicious outlier payments, and will monitor and aggressively pursue 
actions towards agencies where inappropriate billing of outlier 
payments is identified.
    Comment: One commenter urged CMS to re-examine the outlier policy 
in its entirety, as some HHRGs have more underlying cost variation than 
others. Another commenter recommended that CMS modify use of HHRG 
scores and related payment in PPS for diabetic episode and outlier 
payments, rather than limit the number of diabetic patients that an HHA 
can care for and be paid for. A commenter suggested we re-examine the 
outlier payment policy in its entirety. This commenter wrote that some 
HHRGs have significantly more underlying variation in costs than 
others. Additionally, he wrote that high therapy cases are unlikely to 
have

[[Page 58086]]

outliers because of therapy dominance. He added that agencies with a 
high proportion dual eligibles have different visit profiles due to the 
more acute needs of dual eligibles. This commenter believes that these 
issues suggest that a uniform fixed loss threshold and loss ratio 
across all HHRGs may not be appropriate policy. The commenter suggested 
that a more customized policy should be examined and may obviate the 
need for a cap altogether. Another commenter suggested that good HHAs 
may easily exceed the cap, but fraudulent HHAs may use outlier clients 
as a method of getting cross-referrals from other fraudulent HHAs for 
non-outlier patients. The commenter stated that the proposed policy 
will not eliminate fraud/abuse or save Medicare dollars because most 
outlier patients would be spread to all providers in an area. CMS would 
still be paying for just as many outlier cases, but they would be 
spread amongst more providers. The commenter suggested that a better 
approach would be to increase the FDL ratio so that estimated outlier 
dollars were close to the 5 percent allowed under statute. The 
commenter also suggested that another approach could be to cap payment 
based on the published per visit rates, multiplied by the number of 
visits billed, or the outlier payment, whichever is lower. Another 
commenter recommended grandfathering in current patients, as HHAs 
shouldn't abandon patients already receiving services. The commenter 
also recommended grandfathering in each HHA's current percentage of 
outliers and using that percentage as the cap for that HHA. A few 
commenters also suggested that in setting caps, CMS should consider the 
population of the county.
    Response: The premise of the new outlier policy is not that the 
case-mix model is not accurately capturing the cost of resources in 
providing care for these patients. Rather, the new outlier policy is 
being implemented due to the frequency of inappropriate and possibly 
fraudulent billing practices. The commenter's suggestion of increasing 
the FDL to pay 5 percent in outlier dollars is precisely what CMS had 
been doing in past years, before the highly suspect, and possibly 
fraudulent, billing activities became so prevalent. As we stated in a 
previous response to comments, our analysis shows us that minus the 
suspect fraudulent activity, we believe that 2.5 percent is a more 
appropriate target for outlier payments as a percentage of total HH PPS 
payments. As such, we do not believe that simply increasing the FDL to 
pay outlier payments at 5 percent of total HH PPS payments is the 
appropriate policy at this time. Increasing the FDL ratio would prevent 
many legitimate outlier cases from being considered as such, 
essentially hurting the larger majority of HHAs that are billing 
appropriately. The commenter's suggestion that we pay HHAs the lower of 
the published per-visit rates multiplied by the number of visits 
billed, or the current calculated outlier payment, would not be an 
acceptable alternative, as the end result would be to pay the outlier 
payments as currently calculated. Using a HHA's current outlier 
percentage as the cap for that HHA would ignore the problematic billing 
that has been occurring, and would do nothing to control the problem 
that exists today with outliers in home health.
    Comment: A commenter stated that there exist a number of negative 
effects, which are significant and should be modified/addressed, if the 
proposed outlier policy were implemented, which include: (1) Legitimate 
benefits would decrease due to lack of access resulting in a poorer 
quality of care due to the incentives to restrict care to diabetics to 
avoid