Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2011; Changes in Certification Requirements for Home Health Agencies and Hospices, 70372-70486 [2010-27778]

Agencies

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

[Federal Register Volume 75, Number 221 (Wednesday, November 17, 2010)]
[Rules and Regulations]
[Pages 70372-70486]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27778]



[[Page 70371]]

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Part II





Department of Health and Human Services





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Center for Medicare & Medicaid Services



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42 CFR Parts 409, 418, 424 et al.



Medicare Program; Home Health Prospective Payment System Rate Update 
for Calendar Year 2011; Changes in Certification Requirements for Home 
Health Agencies and Hospices; Final Rule

Federal Register / Vol. 75 , No. 221 / Wednesday, November 17, 2010 / 
Rules and Regulations

[[Page 70372]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 418, 424, 484, and 489

[CMS-1510-F]
RIN 0938-AP88


Medicare Program; Home Health Prospective Payment System Rate 
Update for Calendar Year 2011; Changes in Certification Requirements 
for Home Health Agencies and Hospices

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

ACTION: Final rule.

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SUMMARY: This final rule sets forth an update to the Home Health 
Prospective Payment System (HH PPS) rates, including: the national 
standardized 60-day episode rates, the national per-visit rates, the 
nonroutine medical supply (NRS) conversion factors, and the low 
utilization payment amount (LUPA) add-on payment amounts, under the 
Medicare prospective payment system for HHAs effective January 1, 2011. 
This rule also updates the wage index used under the HH PPS and, in 
accordance with the Patient Protection and Affordable Care Act of 2010 
(Affordable Care Act), updates the HH PPS outlier policy. In addition, 
this rule revises the home health agency (HHA) capitalization 
requirements. This rule further adds clarifying language to the 
``skilled services'' section. The rule finalizes a 3.79 percent 
reduction to rates for CY 2011 to account for changes in case-mix, 
which are unrelated to real changes in patient acuity. Finally, this 
rule incorporates new legislative requirements regarding face-to-face 
encounters with providers related to home health and hospice care.

DATES: Effective Date: These regulations are effective on January 1, 
2011.

FOR FURTHER INFORMATION CONTACT:

Frank Whelan, (410) 786-1302, for information related to payment 
safeguards.
Elizabeth Goldstein, (410) 786-6665, for CAHPS issues.
Mary Pratt, (410) 786-6867, for quality issues.
Randy Throndset, (410) 786-0131, for overall HH PPS issues.
Kathleen Walch, (410) 786-7970, for skilled services requirements and 
clinical issues.

Table of Contents

I. Background
    A. Statutory Background
    B. System for Payment of Home Health Services
    C. Updates to the HH PPS
    D. Comments Received
II. Provisions of the Proposed Rule and Response to Comments
    A. Case-Mix Measurement
    B. Therapy Clarifications
    C. Outlier Policy
    1. Background
    2. Regulatory Update
    3. Statutory Update
    4. Outlier Cap
    5. Loss Sharing Ratio and Fixed Dollar Ratio (FDL)
    6. Imputed Costs
    D. CY 2011 Rate Update
    1. Home Health Market Basket Update
    2. Home Health Care Quality Improvement
    a. OASIS
    b. Home Health Care CAHPS Survey (HHCAHPS)
    3. Home Health Wage Index
    4. CY 2011 Annual Payment Update
    a. National Standardized 60-Day Episode Rate
    b. Updated CY 2011 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. Nonroutine Medical Supply Conversion Factor Update
    5. Rural Add-on
    E. Enrollment Provisions for HHAs
    1. HHA Capitalization
    2. HHA Changes of Ownership
    F. Home Health Face-to-Face Encounter
    G. Future Plans to Group HH PPS Claims Centrally During Claims 
Processing
    H. New Requirements Affecting Hospice Certifications and 
Recertifications
III. Collection of Information Requirements
IV. Regulatory Impact Analysis

SUPPLEMENTARY INFORMATION: 

I. Background

A. Statutory Background

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted on 
August 5, 1997) significantly changed the way Medicare pays for 
Medicare home health (HH) services. Section 4603 of the BBA mandated 
the development of the home health prospective payment system (HH PPS). 
Until the implementation of an HH PPS on October 1, 2000, home health 
agencies (HHAs) received payment under a retrospective reimbursement 
system.
    Section 4603(a) of the BBA mandated the development of an HH PPS 
for all Medicare-covered HH 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 an HH PPS for all costs of HH services paid 
under Medicare.
    Section 1895(b)(3)(A) of the Act requires the following: (1) The 
computation of a standard prospective payment amount includes all costs 
for HH services covered and paid for on a reasonable cost basis and 
that such amounts be initially based on the most recent audited cost 
report data available to the Secretary; and (2) the standardized 
prospective payment amount be adjusted to account for the effects of 
case-mix and wage level differences among HHAs.
    Section 1895(b)(3)(B) of the Act addresses the annual update to the 
standard prospective payment amounts by the HH 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 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 HH services 
furnished in a geographic area compared to the applicable national 
average level. Under section 1895(b)(4)(C) of the Act, 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, as amended by section 3131 of the 
Patient Protection and Affordable Care Act of 2010 (The Affordable Care 
Act) (Pub. L. 111-148, enacted on March 23, 2010) 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. Section 3131(b) of the 
Affordable Care Act revised section 1895(b)(5) of the Act so that the 
standard payment amount is reduced by 5 percent and the total outlier 
payments in a given fiscal year (FY) or year may not exceed 2.5 percent 
of total payments projected or estimated. The provision also makes 
permanent a 10 percent agency level outlier payment cap.
    In accordance with the statute, as amended by the BBA, we published 
a final rule in the July 3, 2000 Federal Register (65 FR 41128) to 
implement the

[[Page 70373]]

1997 HH PPS legislation. The July 2000 final rule established 
requirements for the new HH PPS for HH 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 an HH PPS for HH 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 HH 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).
    Section 5201(c) of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) added new section 1895(b)(3)(B)(v) 
to the Act, requiring HHAs to submit data for purposes of measuring 
health care quality, and links the quality data submission to the 
annual applicable percentage increase. This data submission requirement 
is applicable for CY 2007 and each subsequent year. If an HHA does not 
submit quality data, the HH market basket percentage increase is 
reduced 2 percentage points. In the November 9, 2006 Federal Register 
(71 FR 65884, 65935), we published a final rule to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.  
484.225(h) and (i) in accordance with the statute.
    The Affordable Care Act made additional changes to the HH PPS. One 
of the changes in section 3131 of the Affordable Care Act is the 
amendment to section 421(a) of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173, 
enacted on December 8, 2003) as amended by section 5201(b) of the DRA. 
The amended section 421(a) of the MMA now requires, for HH services 
furnished in a rural area (as defined in section 1886(d)(2)(D) of the 
Act) with respect to episodes and visits ending on or after April 1, 
2010, and before January 1, 2016, that the Secretary increase by 3 
percent the payment amount otherwise made under section 1895 of the 
Act.

B. System for Payment of Home Health Services

    Generally, Medicare makes payment under the HH PPS based on 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 HH disciplines (skilled nursing, HH 
aide, physical therapy, speech-language pathology, occupational 
therapy, and medical social services). Payment for nonroutine medical 
supplies (NRS) is no longer part of the national standardized 60-day 
episode rate and is computed by multiplying the relative weight for a 
particular NRS severity level by the NRS conversion factor (See section 
III.C.4.e. of this final rule). Payment for durable medical equipment 
covered under the HH benefit is made 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 based on 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.

C. 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. 
The August 29, 2007 final rule with comment period set forth an update 
to the 60-day national episode rates and the national per-visit rates 
under the Medicare prospective payment system for HHAs for CY 2008.
    That rule included an analysis performed on CY 2005 HH claims data, 
which indicated a 12.78 percent increase in the observed case-mix since 
2000. The case-mix represented the variations in conditions of the 
patient population served by the HHAs. Subsequently, a more detailed 
analysis was performed on the 12.78 percent increase in case-mix to 
evaluate if any portion of the increase was associated with a change in 
the actual clinical condition of HH patients. We examined data on 
demographics, family severity, and non-HH Part A Medicare expenditure 
data to predict the average case-mix weight for 2005. As a result of 
the subsequent detailed analysis, we recognized that an 11.75 percent 
increase in case-mix was due to changes in coding practices and 
documentation, and not to treatment of more resource-intensive 
patients.
    To account for the changes in case-mix that were not related to an 
underlying change in patient health status, CMS implemented a reduction 
over 4 years in the national standardized 60-day episode payment rates 
and the NRS conversion factor. That reduction was to be 2.75 percent 
per year for 3 years beginning in CY 2008 and 2.71 percent for the 
fourth year in CY 2011. We indicated that we would continue to monitor 
for any further increase in case-mix that was not related to a change 
in patient status, and would adjust the percentage reductions and/or 
implement further case-mix change adjustments in the future.
    For CY 2010, we published a final rule in the November 10, 2009 
Federal Register (74 FR 58077) (hereinafter referred to as the CY 2010 
HH PPS final rule) that sets forth the update to the 60-day national 
episode rates and the national per-visit rates under the Medicare 
prospective payment system for HH services.

D. Comments Received

    In response to the publication of the CY 2011 HH PPS proposed rule, 
we received approximately 500 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.
General (Miscellaneous)
    Comment: A commenter stated that multiple policy changes and 
payment reductions have led to the industry's inability to apply 
``cause-and-effect'' analysis when HH care access becomes critical. The 
commenter recommends applying changes one at a time and phasing them in 
to allow time to determine the impact of those individual changes. 
Another commenter stated that as an HHA owner, she is

[[Page 70374]]

willing to accept cuts to the Medicare HH benefit but that the cuts 
need to be incremental so agencies have the time and the resources to 
implement adjustments in response to payment changes. In addition, 
there is the growing concern of the ``unknown'' costs associated with 
implementation of the Affordable Care Act. Another commenter stated 
that the health insurance costs for their employees have skyrocketed 
over the past 3 years, and that in conjunction with these cuts, it 
hinders their ability to hire staff.
    Response: We have, in fact, been phasing in the reductions to the 
HH PPS rates for the increase in nominal case-mix. As a result of the 
CY 2008 final rule, we have reduced HH PPS rates by 2.75 percent for 
2008, 2009, and 2010 to account for the increase in nominal case-mix, 
that is an increase in case-mix not due to actual changes in patient 
characteristics. However, there still exists significant nominal case-
mix increase in the payment system that has not yet been addressed. 
Consequently, we believe that the case-mix adjustments continue to be 
necessary in order to address the residual increase in the nominal 
change in case-mix that has not yet been accounted for in the payment 
system. As such, we are moving forward with phasing in our case-mix 
reductions and will be applying a 3.79 percent reduction to the HH PPS 
rates in CY 2011 (as discussed in the July 23, 2010 proposed rule). In 
response to comments that we received on our case-mix model and its 
measurement of real case-mix, we will further study the concerns raised 
and are not finalizing the proposed 3.79 percent reduction to the HH 
PPS rates for CY 2012 at this time. Therefore, in addition to our 
continuous monitoring of nominal case-mix increase, we plan to perform 
a review of our case-mix and NRS models, and address any reductions to 
the CY 2012 HH PPS payments in next year's rulemaking. The other policy 
changes and reductions addressed in this rule (that is, outlier 
provisions and reductions to the market basket update) were mandated by 
the Affordable Care Act. We are uncertain of the meaning of ``unknown'' 
costs as referenced by the commenter and therefore are unable to 
address the particular concern.
    Comment: A commenter stated that he receives calls from providers 
who are confused with the language that is used by CMS in determining 
billing requirements. He believes the proposed changes are a step in 
the right direction.
    Response: We appreciate the comment and will continue to work 
towards providing the industry/public with clear policies, 
instructions, and guidance as they relate to our payment policies.
    Comment: With the increased use of technology and telehealth, funds 
should be made available to HHAs to include such monitoring to allow 
patients and their families to be more proactive in the management of 
their illnesses and to reduce ER visits, primary care physician 
appointments and hospital stays. Home Health is the area to fund, not 
to cut, and that medical spending in other areas should be reduced.
    Response: We are not opposed to improvements in technology, or the 
use of telehealth in the HH setting and certainly do not discourage the 
use of these advances in medicine. However, under section 1895(e) of 
the Act, telehealth services cannot substitute for in-person HH 
services ordered as part of a plan of care. However, telehealth can be 
used to supplement traditional HH services.
    Section 1895(b)(3)(B) of the Act dictates how HH PPS rates are to 
be updated annually, and section 3131(a) of the Affordable Care Act, 
amending this provision, requires the Secretary to rebase HH payments 
beginning in 2014. At that time, more up-to-date costs will be used to 
rebase payments to HHAs.
    Comment: A commenter stated that the impact analysis in the 
proposed rule is useless in that the analysis simply quantifies the 
percentage cut in rates on a geographic basis. Further, the impact 
analysis offers little substantive understanding of the individual cost 
impact of such proposed provisions as the physician face-to-face 
encounter requirement, the revisions to therapy assessment, coverage 
and documentation standards, coding change proposals, and CAHPS 
compliance. The estimated costs are vastly understated because they do 
not include the sizeable administrative expenses that HHAs will incur 
to implement any of the changes beyond the cost of some of the form 
revisions.
    A valid and useful impact analysis starts with an understanding of 
the results of the combination of rate cuts and cost increases that the 
proposed policies will bring to HHAs. The commenter further asserts 
that once these results are fairly and accurately determined, the 
impact analysis must begin with the highest of priority concerns--
impact on access to care--as that is the central purpose of Medicare. 
Second, the commenter believes that the impact analysis should continue 
with an evaluation of the effect of the proposed policies on total 
spending for the Medicare program, not just the effect on HH services 
spending.
    The commenter provided the example that if the analysis of the 
proposed policies' impact on access to care shows that thousands of 
Medicare beneficiaries would no longer have HH care available or that 
provision of HH services would be significantly delayed, Medicare 
spending would rise as a result of a shift to higher cost care such as 
skilled nursing facility services or extended inpatient stays.
    The commenter also proposed that the impact analysis should 
evaluate the impact of the proposed policies on another stakeholder--
HHAs as businesses. Such evaluation should start with the ongoing 
viability of the individual businesses and the industry as a whole. 
Among the many elements that should be reviewed is whether the business 
will be paid less than the cost of the delivery of care. Another 
element is the workforce impact--will health care workers take their 
talents to other care sectors because of reductions in compensation and 
benefits. Access to capital is also an important factor to evaluate. If 
the proposed rule changes restrict access to capital, there may be 
reduced use of efficiency-related technologies or business expansions 
to achieve economies of scale. Lack of access to capital could also 
mean an inability to meet ongoing payroll obligations because of cash 
flow problems.
    The commenter also claimed there is another flaw in the CMS impact 
analysis, which is its limited review to a single year. This is 
particularly concerning to the commenter because the proposed rule 
extends rate cuts into a second year. An impact analysis that does not 
evaluate the impact of cuts in payment rates for both of the years as 
proposed is invalid and in violation of CMS obligations under the 
Regulatory Flexibility Act.
    The commenter strongly recommends that CMS conduct a thorough and 
valid impact analysis, consistent with the concerns referenced above. 
Another commenter states that in the proposed rule CMS concluded that 
the proposed rule would not have a significant impact on a substantial 
number of small entities. Section 605 of the Regulatory Flexibility Act 
(RFA) requires that if the regulatory agency certifies that the rule 
will not have a significant impact on a substantial number of small 
businesses, it must include a statement providing the factual basis 
supporting the certification. The commenter suggests that CMS failed to 
provide an adequate factual basis for its certification that there 
would be no significant impact. In fact, there is no language in the 
RFA section of the proposed rule that

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discloses the reasons why CMS concluded that there would be no 
substantial impact on small HHAs. CMS should at a minimum have provided 
the public with information on the number of HHAs and other health care 
entities likely to be affected by the rule. Further, CMS has guidelines 
(usually based on small business revenues) in place that the agency 
uses to determine whether a rule will have a significant impact on a 
substantial number of small entities. CMS failed to discuss how the 
impacts of this rule fall within those guidelines. Such a discussion is 
vital for the purposes of transparency, as affected small entities can 
use this information to provide CMS with economic impact information on 
the rule's projected impact on their business. Based on the public 
input, the commenter asserts that CMS could determine the validity of 
their decision to certify the rule in the publication of the final 
regulation.
    The commenter is concerned that while CMS has certified that the 
rule will not have a significant impact, the affected HHAs still 
believe that the regulation will result in a significant burden on 
their businesses. The commenter believes that there is merit in 
bringing these small business concerns to the attention of CMS in the 
hope that they will add to the transparency of the RFA contained in the 
final rule.
    Response: The RFA requires agencies to analyze options for 
regulatory relief of small entities, if a rule has a significant impact 
on a substantial number of small entities for that year. As such, there 
is no requirement under the RFA to provide impacts for any year(s) 
beyond that which the rule is updating the rates. For purposes of the 
RFA, small entities include small businesses, nonprofit organizations, 
and small governmental jurisdictions. Most hospitals and most other 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of $7 million to $34.5 million in any 1 year. For 
purposes of the RFA, approximately 95 percent of HHAs are considered 
small businesses according to the Small Business Administration's size 
standards, with total revenues of $13.5 million or less in any one 
year. Individuals and States are not included in the definition of a 
small entity. As such, this rule is estimated to have an overall 
negative effect upon small entities (see section IV.B. of this final 
rule, ``Anticipated Effects'', for supporting analysis).
    The last section of Table 19 shows the percentage change in 
payments by agency size, as determined by the number of first episodes. 
The agency size categories, for this rule, are based on the number of 
first episodes in a random 20 percent beneficiary sample of CY 2008 
claims data. Initial episodes, under the HH PPS, are defined as the 
first episode in a series of adjacent episodes (contiguous episodes 
that are separated by no more than a 60-day period between episodes) 
for a given beneficiary. Initial, or first, episodes are a good 
estimate of agency size, because this method approximates the number of 
admissions experienced by the agency based on approximately one-fifth 
of the total annual data. The size categories were set to have roughly 
equal numbers of agencies, except that the highest category has 
somewhat more agencies because added detail amongst the large size 
category was not needed.
    Because our model does not have the data to account for the 
``total'' revenue of an HHA, in the proposed rule, and again in this 
final rule, we have used the number of first episodes as a proxy for 
agency size. As such, using the facility size categories (based on the 
number of first episodes), the impact table shows that the difference 
in impact between smaller and larger HHAs is small and within a 0.05 
percentage point range. In fact, smaller agencies have a smaller 
reduction and fare slightly better than larger agencies represented by 
the ``200 or more first episodes'' category.
    In an effort to better demonstrate the impact on small HHAs, as it 
relates to total revenue, we supplemented our impact analysis by 
linking to Medicare cost report data, which has total revenues for 
HHAs. Using total revenues and the $13.5 million threshold of the RFA, 
we categorized an HHA as being either small or large. To perform this 
analysis, we were able to match approximately 72 percent of the cost 
report data to our model. For the remainder of the agencies in the 
model, we proxy for large agencies as those agencies with at least 750 
first episodes. This results in approximately 95 percent of agencies 
being classified as small and 5 percent of agencies being large, which 
is reflective of what our cost report files show us. This analysis 
provides similar results to the one using first episodes as a measure 
of an agency's size in that small HHAs fare slightly better, -4.84 
percent impact, than do large HHAs, which are estimated to experience a 
-5.01 percent (see section IV.B. of this final rule, ``Anticipated 
Effects'', for supporting analysis).
    In a separate, supplemental analysis, as merely an indicator of 
possible access to care issues, we looked at estimated margins of HHAs, 
by county, and the estimated effect that the provisions of this rule 
might have on HHAs. In particular, we look to identify counties that 
might not be served by at least one HHA with a positive margin as a 
result of the finalized policies of this rule. The analysis demonstrate 
that occurrence of such counties is very infrequent; thus, we do not 
believe that access to care is an issue (see section IV.B. of this 
final rule, ``Anticipated Effects'', for supporting analysis). Given 
the profit margins of HHAs that we and MedPAC are seeing in our 
analyses, we believe that the reductions of this final rule can be 
absorbed by the majority of HHAs, and that access to care will not be 
compromised. However, we will continue to monitor the situation to 
identify any unintended consequences of our policies in this final 
rule.
Comments Regarding Access to Care
    Comment: A commenter stated that additional regulatory 
responsibilities of oversight, documentation, education, choosing 
survey vendors, etc., would result in increased costs to HHAs. There is 
an inherent risk for decreased quality of care and volume of services 
provided by HHAs. It is possible that HHAs may become more selective in 
their acceptance of medically difficult patients who are likely to 
utilize more services.
    Response: We assume that the commenter is referring to the therapy 
provisions of this rule. We believe that our clarifications to our 
therapy coverage requirements do not constitute additional 
responsibilities, but rather clarify the existing responsibilities of 
the qualified therapist and the HHA. Similarly, we are clarifying the 
existing supervision/oversight requirements of qualified therapists in 
the HH setting. We are also clarifying our coverage requirements for 
education of the patient and/or family members, and our documentation 
requirements. We do not consider any of these clarifications to be 
beyond the current responsibilities of an HHA.
    We are, as part of this final rule, requiring qualified therapists 
to perform the needed therapy service, assess patients and measure and 
document therapy effectiveness at what we consider key points of the 
episode. We believe that all HH patients who need therapy services 
would benefit from those services being delivered by a qualified 
therapist, instead of an assistant, at key points in the course of 
treatment. We will continue to monitor for unintended consequences of 
the provisions of this final rule.
    Comment: Several commenters stated that the payment reductions 
would result in decreased access to care and force HHAs out of 
business. The

[[Page 70376]]

commenters assert that patients who are moved from acute care 
facilities to their homes and have major medical problems would not be 
able to get HH services for their illnesses. These proposed changes 
would not only endanger access to care but also impede efforts to 
transition patients to the home and cripple essential community HHAs. 
Several commenters stated that HH patients would be forced into costly 
institutional care and increase Medicare spending. Another commenter 
stated that if these proposed cuts were implemented, many senior 
citizens who have paid taxes in to the Medicare system for years would 
be forced to go into assisted living facilities and nursing homes or 
simply not receive the healthcare they deserve. In addition, their 
quality of life would be compromised.
    Response: As discussed in a previous response to a comment, in a 
separate analysis in the regulatory impact section of this rule, we 
looked at margins of HHAs, by county, and the estimated effect that the 
provisions of this rule would have on HHAs. In particular, we studied 
the number of counties that would not be served by at least one HHA 
with a positive margin. Our analysis concluded that there were few 
counties in which no HHAs had positive margins; therefore, we do not 
believe that access to care will be adversely affected by these case-
mix adjustments. Given the data on profit margins that we and MedPAC 
saw in our analyses, we believe that the reimbursement rate reductions 
set forth in this final rule can be absorbed by the majority of HHAs, 
and that access to care will not be compromised.

II. Provisions of the Proposed Rule and Response to Comments

A. Case-Mix Measurement

    As stated in the proposed rule published on July 23, 2010, analysis 
of HH PPS claims shows total average case-mix grew at a rate of about 1 
percent each year from 2000 to 2007, with 4 percent growth in 2008. 
Based on our analysis of the proportion of total case-mix change due to 
changes in real case-mix severity of the HH user population, the total 
amount of case-mix growth unrelated to real changes in patient severity 
(nominal case-mix) is 17.45 percent between 2000 and 2008. In each of 
the years 2008, 2009, and 2010, we reduced payment rates by 2.75 
percent as recoupment for nominal case-mix change. A payment-rate 
reduction of 7.43 percent would be needed to account for the 
outstanding amount of nominal case-mix change we intend to recoup based 
on the real case-mix change analysis updated through 2008. In the 
proposed rule, we proposed to increase the planned 2.71 percent 
reduction in CY 2011 to 3.79 percent, and to make another 3.79 percent 
reduction in CY 2012. Doing so would enable us to account for the 7.43 
percent nominal case-mix residual, while minimizing access to care 
risks. Iteratively implementing the case-mix reduction over two years 
gives HH providers more time to adjust to the intended reduction of 
7.43 percent than would be the case were we to account for the residual 
in a single year.
    For a complete description of the proposed case-mix refinements 
model and the underlying research, we refer readers to the CY 2011 HH 
PPS proposed rule (75 FR 43238 through 43244) published in the July 23, 
2010, Federal Register.
    Comment: Commenters stated that we should suspend or drop case-mix 
reductions because the proposal is based on the assumption that 
agencies intentionally gamed the system.
    Response: As we have stated in previous regulations, changes and 
improvements in coding are important in bringing about nominal coding 
change. We believe nominal coding change results mostly from changed 
coding practices, including improved understanding of the ICD-9 coding 
system, more comprehensive coding, changes in the interpretation of 
various items on the OASIS and in formal OASIS definitions, and other 
evolving measurement issues. Our view of the causes of nominal coding 
change does not emphasize the idea that HHAs in general gamed the 
system. However, since our goal is to pay increased costs associated 
with changes in patient severity, and nominal coding change does not 
necessarily demonstrate that underlying changes in patient severity 
occurred, we believe it is necessary to recoup overpayments due to 
nominal coding change.
    Comment: Commenters stated that all of the HHAs are being penalized 
for the corrupt actions of a few HHAs. Many commenters indicated that 
their agency had case-mix weights below the national average. 
Commenters stated that nominal case-mix change reductions should be 
limited to certain types of agencies (for example, those with high 
average case-mix index (CMI) or large weight increases or for-profit 
providers) or that CMS should implement different payment reductions by 
state or by geographical region, suggesting that their region has a 
lower nominal case-mix change than the national average. Other 
commenters recommended that reductions be proportional to an individual 
agency's CMI. For example, some commenters suggested that payment 
reductions be applied to those HHAs with an average case-mix above 
1.20. Commenters stated that we should not implement payment reductions 
to all HHAs merely because that policy is easier to implement.
    Response: For a variety of reasons, as we have noted in previous 
regulations, we have not proposed targeted reductions for nominal case-
mix change. We have not conducted analysis of how and whether 
individual agencies' coding practices have changed over time because 
this is not feasible. One reason is that many agencies have small 
patient populations, which would make it practically impossible to 
measure nominal case-mix change reliably. Another reason is that we 
believe changes and improvements in coding have been widespread, so 
that such targeting would likely not separate agencies clearly into 
high and low coding-change groups.
    Table 1A shows average case-mix by type of agency in 2000 and 2008. 
All types of agencies, regardless of region or profit status or size or 
affiliation, have substantial increases in their average case-mix. 
While for-profit agencies' case-mix grew approximately 19 percent, the 
case-mix average for non-profit agencies also grew considerably (16.6 
percent). Case-mix grew just over 19.5 percent for freestanding 
agencies while case-mix for facility-based agencies grew just short of 
15 percent. For rural agencies, case-mix grew almost 16 percent, while 
case-mix for urban agencies grew just under 19 percent. Rural agencies 
will receive an additional 3 percent rural add-on to their payments, 
which will help offset the case-mix reductions. It should be noted that 
the agency groups start from different base year values, but in general 
the percentage change in case-mix is roughly similar across these 
groups, with the possible exception of the Midwest, for which the 
percentage change is somewhat higher than the other changes--about 23 
percent. No group could be said to have trivial case-mix change. 
Therefore, we believe our proposal to make across the board payment 
reductions is consistent with the data, and making distinctions by type 
of agency would be inappropriate.

[[Page 70377]]



                             Table 1A--Estimates of Case-Mix Change by Provider Type
                                                   [2000-2008]
----------------------------------------------------------------------------------------------------------------
                                                          Actual case-mix                 Case-mix change
                                                 ---------------------------------------------------------------
                                                    2000  (IPS
                                                      period)          2008            Total        Percentage
----------------------------------------------------------------------------------------------------------------
                                                     Overall
----------------------------------------------------------------------------------------------------------------
All Agencies....................................          1.0959          1.3085          0.2126            19.4
----------------------------------------------------------------------------------------------------------------
                                                 Ownership Type
----------------------------------------------------------------------------------------------------------------
Non-profit......................................          1.0840          1.2641          0.1801            16.6
Government......................................          1.0672          1.2291          0.1619            15.2
For-profit......................................          1.1202          1.3332          0.2130            19.0
----------------------------------------------------------------------------------------------------------------
                                                   Agency Type
----------------------------------------------------------------------------------------------------------------
Facility-based..................................          1.0834          1.2433          0.1599            14.8
Freestanding....................................          1.1035          1.3200          0.2165            19.6
----------------------------------------------------------------------------------------------------------------
                                                     Region
----------------------------------------------------------------------------------------------------------------
North...........................................          1.0422          1.2459          0.2037            19.6
South...........................................          1.1251           1.337          0.2118            18.8
Midwest.........................................          1.0865          1.3431          0.2566            23.6
West............................................          1.0956          1.2648          0.1692            15.5
----------------------------------------------------------------------------------------------------------------
                                     Facility Size (Number of 1st Episodes)
----------------------------------------------------------------------------------------------------------------
< 99 episodes...................................          1.0898          1.2499          0.1602            14.7
100 or more.....................................          1.1057          1.3266          0.2209            20.0
----------------------------------------------------------------------------------------------------------------
                                                   Urban/Rural
----------------------------------------------------------------------------------------------------------------
Urban...........................................          1.1097          1.3184          0.2087            18.8
Rural...........................................          1.0478          1.2136          0.1657            15.8
----------------------------------------------------------------------------------------------------------------

    Although we have stated in past regulations that a targeted system 
would be administratively burdensome, the reasons we have just 
presented go beyond administrative complexity. Certain comments seem to 
assume that the level of case-mix can precisely identify those agencies 
practicing abusive coding. We do not agree with the comments, which 
seem to assume that agency-specific case-mix levels can precisely 
differentiate agencies practicing abusive coding from others. System 
wide, case-mix levels have risen over time while patient 
characteristics data indicate little change in patient severity over 
time. That is, the main problem is the amount of change in the billed 
case-mix weights not attributable to underlying changes in actual 
patient severity. Moreover, we believe that a policy of varying payment 
levels according to regional differences in nominal case-mix change 
would be perceived as inequitable by beneficiaries. That is, 
beneficiaries who might have access only to agencies subject to larger 
payment reductions might believe Medicare's policies disadvantage them 
unfairly.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because they will cause financial distress/bankruptcy among 
agencies, particularly ``safety-net'' agencies that take patients other 
agencies reject. Commenters further stated that the proposed payment 
reductions will cause ``safety net'' providers to have a ``negative 
operating margin'' and/or cause not-for-profit agencies to go out of 
business.
    Response: Our analysis of the potential effect of the 2011 payment 
rate reductions suggests that while negative-margin agencies may 
increase in number, almost all such agencies are located in counties 
with other agencies predicted to have positive margins. We also note 
that predicting the size of the increase in negative-margin agencies is 
difficult to do because many agencies may find ways to cut costs or 
increase revenues so that margins do not deteriorate. Identifying the 
agencies that commenters call ``safety-net'' agencies is not feasible 
with our administrative data, so we cannot provide any evidence either 
to support or refute assertions that safety-net agencies are at 
greatest risk. Our analysis of margins of not-for-profit agencies shows 
that they tend to have lower margins than for-profit agencies. However, 
we do not agree that not-for-profit agencies will necessarily be more 
likely to exit the HH business than a for-profit agency. We believe the 
business decision is a complex one with many considerations, such as 
the organization's mission, the availability of alternate sources of 
funding, and whether or not the organization is embedded in a larger 
one. These influential factors are not necessarily associated with the 
non-profit or for-profit status of an agency, and therefore, we cannot 
accurately predict the business decision of an agency based solely on 
their status.
    Comment: Commenters stated that we should suspend or drop case-mix 
adjustments because access would be reduced, particularly among hard-
to-place patients. Commenters predicted that the payment reductions 
would have a ``destabilizing effect'' on HHAs and negatively impact 
patient access to HH care.
    Response: MedPac has previously recommended to the Congress that HH 
rates be reduced by 5 percent. (MedPac, Report to Congress: Medicare 
Payment

[[Page 70378]]

Policy, March 2009). We believe HH industry margins are sufficient to 
support a rate reduction of that size. For example, MedPac projected 
2011 margins would remain high, at 13.7 percent (assuming the 
previously planned rate reduction of -2.71 percent in 2011). MedPac 
also reported that the number of agencies continues to grow, reaching 
in excess of 10,400 in 2009. This is a 50 percent increase since 2002, 
although growth in new agencies has been highly uneven geographically. 
Notably, access to care was sufficient in 2001, when the number of 
agencies nationally was much lower than it is today (Office of the 
Inspector General, Access to Home Health Care after Hospital Discharge, 
July 2001, and Office of the Inspector General, Medicare Home Health 
Care Community Beneficiaries, October 2001). Our analysis of cost 
reports submitted by the end of 2008 indicates that 99 percent of 
beneficiaries are in counties served by at least two agencies, with 
more than half of beneficiaries in counties served by at least 11 
agencies. Predictions about the number of bankruptcies and effects on 
access are highly uncertain. Furthermore, we have no indications that 
payment reductions implemented since 2008 have led to access problems 
among beneficiaries. During the succeeding period, the total number of 
agencies has continued to grow, which is indirect evidence that access 
levels have not deteriorated. We intend to request that the Office of 
the Inspector General resume investigations of the access impacts of 
payment reductions. We will continue to monitor access to care in order 
to identify any unintended consequences of our policies in this final 
rule. We emphasize that the justification for the nominal case-mix 
payment reductions is not HHA margins but rather is the increase in 
billed case-mix weights, which our analysis indicates, is unrelated to 
changes in underlying patient health characteristics.
    Comment: Commenters suggested that we provide funding to HHAs that 
admit patients that other agencies avoid.
    Response: We have received comments of this nature over the years. 
We are unable to definitively characterize such a categorization of 
HHAs using administrative data. While we welcome information as to the 
characteristics and identity of such agencies, so that we can study 
their performance, we would also need to study carefully the 
implications of making such distinctions on a permanent basis in our 
payment system. We expect many issues would arise. In future rulemaking 
we will solicit comment on the various challenges that might arise in 
administering payments differently to what some commenters called 
``full access organizations'' and potentially other categories of 
agencies that might be capable of mitigating access problems, should 
they arise.
    Comment: Some commenters suggested that CMS focus its efforts on 
the study, which will assess possible changes to the HH PPS in order to 
ensure access to care.
    Response: Section 3131(d) of the Affordable Care Act mandates that 
the Secretary conduct a study to evaluate costs related to providing 
care to low-income beneficiaries, beneficiaries in medically 
underserved areas, and beneficiaries with varying levels of severity of 
illness. The section directs the study to be focused on ensuring access 
to care for patients with characteristics associated with especially 
high costs. We are preparing to launch the mandated study in FY 2011.
    Comment: Commenters stated that CMS should suspend or drop nominal 
case-mix change reductions because those payment reductions are 
contrary to congressional intent in the Affordable Care Act, which 
implemented payment reductions on a separate basis. Furthermore, 
commenters stated that the 3.79 percent case-mix payment reduction 
should count as the ``5 percent cut mandated by the [Affordable Care 
Act]'' and the proposed payment decreases should not be implemented in 
addition to the Affordable Care Act-mandated payment reductions.
    Response: Section 3401(e) of the Affordable Care Act mandated a 
market basket reduction and future productivity adjustments. In the 
Affordable Care Act, Congress did not make any changes to the pre-
existing provision authorizing CMS to reduce payment rates in response 
to nominal case-mix change. Nor did the Congress authorize a 
substitution of the case-mix payment reduction for the Affordable Care 
Act's five percent payment reduction related to outlier payments 
(Section 3131(b) of the Affordable Care Act). Therefore, the reductions 
for nominal case-mix changes comply with current law.
    Comment: Commenters stated that CMS should suspend or drop case-mix 
reductions because CMS should give specific proposals such as therapy 
documentation and comorbidity case-mix weight changes time to work.
    Response: Our proposals are intended to recoup excess outlays that 
have already been made through 2008, outlays that were not justified by 
changes in patient severity. Going forward, beginning with 2011, we 
would expect to see a moderation of nominal case-mix growth because of 
the proposals mentioned by the commenters. Such moderation would 
decrease recoupment, if any, proposed in the future.
    Comment: A commenter stated that the need for payment reductions in 
HH care is ``consistent with the experience of coding changes in other 
payment systems.'' However, the methodology ``used to establish the 
reduction percentage'' in the inpatient system was flawed and, 
therefore, the methodology used to establish the payment reduction for 
HH is probably flawed as well.
    Response: The payment systems, institutional conditions, data 
resources, case-mix assignment procedures, and many other aspects 
differ across care settings. Therefore, methodologies must each be 
judged on their own individual merits. We have explained and justified 
the methodology in this and in previous regulations cited elsewhere in 
this preamble.
    Comment: We received a comment recommending that we focus the 
application of the case-mix change adjustment only to visits beyond the 
13th day by changing the OASIS scoring and rate calculation for the 
extended cases rather than reducing the base rate and affecting all 
visits as a result.
    Response: We are unsure of the specific change recommended in this 
comment, but we would be concerned that any approach to rate reduction 
based on the length of time in treatment within the 60-day episode 
would affect fundamental assumptions of the HH PPS system. Most 
notably, the system assumes that the amount of resources within the 60-
day period, rather than the timing of their expenditure within that 
period, is the appropriate variable use to determine payments in the 
case-mix-adjusted payment system.
    Comment: One commenter stated that a recent study that used data 
from a nationally representative survey (the Medical Expenditures Panel 
Survey--MEPS) found a change in real case-mix between 2000 and 2007.
    Response: We thank the commenter for the comments. However, we note 
that the MEPs analysis appears to be based on all Medicare 
beneficiaries, not just the subset of HH patients. Home health users 
are less than 10 percent of the fee for service enrolled Medicare 
population, so it is not certain that the MEPS study of the entire 
Medicare population is relevant to the question of worsening health 
status of HH users.
    Comment: Commenters stated that CMS should suspend or drop case-mix 
reductions because the data used to determine the reductions do not

[[Page 70379]]

recognize real increases in severity due to earlier and sicker hospital 
discharges.
    Response: While we recognize that average lengths of stay in acute 
care are in decline, our analysis shows that agencies are, in fact, 
caring for fewer, not more, post-acute patients. Since 2001, the 
average length of stay in acute care preceding HH has declined by about 
one day, from 7 days to 6 days. However, agencies are caring for fewer 
highly acute patients in their caseloads. The proportion of non-LUPA 
episodes in which the patient went from acute care directly to HH 
within 14 days of acute hospital discharge declined substantially 
between 2001 and 2008, from 32 percent to 23 percent. In addition, the 
median acute hospital length of stay for these non-LUPA episodes with a 
14-day lookback period has remained unchanged at 5 days since 2002 (see 
Table 1B, 50th percentile). Since 2005, the distribution has been 
stable, except for a 1-day shortening of lengths of stay at the 5th, 
80th, and 99th percentiles. We believe the declining prevalence of 
recent acute discharges is due in part to more patients incurring 
recertifications after admission to HH care, and due to more patients 
entering care from the community. The shortening lengths of stay at the 
right tail (high percentiles) of the distribution may reflect changing 
utilization of long-term-care hospitals during recent years. The 
conclusion we draw from these data is that while patients on average 
have shorter hospital stays, agencies are also facing a smaller 
proportion of HH episodes in which the patient has been acutely ill in 
the very recent past. Also, the detailed data on the distribution of 
stay lengths suggest that for the most part lengths of stay for such 
patients remained stable through 2008, particularly since around 2005.

                                              Table 1B--Percentiles of Acute Hospital Length of Stay (days)
                                                                       [2001-2008]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Year                            5th      10th     20th     30th     40th     50th     60th     70th     80th     90th     99th
--------------------------------------------------------------------------------------------------------------------------------------------------------
2001.................................................        2        2        3        4        5        6        7        8       10       14       32
2002.................................................        2        2        3        4        5        5        6        8       10       14       31
2003.................................................        2        2        3        4        4        5        6        8       10       13       30
2004.................................................        2        2        3        4        4        5        6        7        9       13       29
2005.................................................        2        2        3        3        4        5        6        7        9       12       28
2006.................................................        1        2        3        3        4        5        6        7        9       12       28
2007.................................................        1        2        3        3        4        5        6        7        9       12       27
2008.................................................        1        2        3        3        4        5        6        7        8       12       25
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Based on a 10 percent random beneficiary sample of FFS HH users; excludes LUPA episodes and includes only episodes where acute hospital discharge
  occurred within 14 days of the from-date of the 60-day episode claim and the patient's first destination post-discharge under Part A was HH care.

    Furthermore, we think that acuity of patients has been increasingly 
mitigated by lengthening post-acute stays for the substantial number of 
HH patients who use residential post-acute care (PAC) prior to an 
episode. Our data show that patients who enter residential PAC before 
HH admission have experienced increasing lengths of stay in PAC since 
2001. Using a 10 percent random beneficiary sample, we computed the 
total days of stay (including both acute and PAC days) for HH episodes 
with common patterns of pre-admission utilization during the 60 days 
preceding the beginning of the episode. We included patients whose last 
stay was acute, or whose next-to-last stay was acute with a follow-on 
residential PAC stay, or whose third from last stay was acute followed 
by two PAC stays. These common patterns accounted for 55 percent of the 
initial episodes in 2001 and 42 percent in 2008. We found that total 
days of stay during the 60 days leading up to the episode averaged 12.6 
days in 2001, and rose to 12.8 days in 2008. This small change in total 
days of stay during a period when acute LOS was declining was due to 
increasing lengths of stay in residential PAC for these patients. For 
example, within the 30 days before admission, average length of stay in 
the PAC setting for episodes preceded by an acute stay that was the 
next-to-last stay, and where the PAC stay was the very last stay before 
the claim-from date, increased from 12.7 to 14.3 days. Our 
interpretation of these statistics is that patient acuity has been 
increasingly mitigated by longer post-acute stays for the substantial 
number of HH patients that use residential PAC prior to the start of a 
HH episode. Patient acuity also was mitigated by growing numbers of HH 
recertifications.
    Comment: A commenter stated the data and analysis we used to 
measure real case-mix change do not recognize that technology 
improvements in recent years enable patients with more complex 
conditions to be cared for at home.
    Response: We appreciate this comment but possess limited 
information to evaluate it. The data we do have, from OASIS, suggest 
that episodes for patients using technological treatments at home are 
not increasing. OASIS data show that the proportion of episodes 
involving enteral nutrition has declined from 2.9 percent to 1.6 
percent between 2001 and 2008; the proportion of episodes involving 
intravenous therapy or infusion therapy has stayed stable at around 2.2 
percent; and the proportion of episodes involving parenteral nutrition 
remains at 0.2 percent or less during that period. The proportion of 
episodes with none of those treatments has increased from 94.8 percent 
to 96.2 percent. These data are inconsistent with the commenter's 
assertion, but we solicit commenters to provide us in the future with 
other types of reliable data on this aspect of patient case-mix.
    Comment: Many commenters cited improvements in the accuracy of 
OASIS coding which could more precisely measure patient severity as a 
reason why we should drop its proposal to address nominal case-mix 
growth by reducing payments.
    Response: Comments referencing coding improvements, such as 
increasing accuracy, do not recognize that such improvements are an 
inappropriate basis for payment. Measurable changes in patient severity 
and patient need are an appropriate basis for changes in payment. Our 
analysis continues to find only small changes in patient severity and 
need.
    Comment: Commenters stated that the increase in case-mix is due to 
the HHA's diligence in ensuring proper coding; CMS's implementation of 
payment reductions would therefore penalize HHAs for proper coding, 
while the agencies who were not ethical or diligent in their coding 
would not be affected as much. Furthermore, a commenter suggested that 
part of the

[[Page 70380]]

``nominal'' case-mix changes were due to HHAs' past failures to code 
properly. The commenter stated that when the HH PPS system was first 
implemented in 2000, HHAs undercoded in a manner that generated 
insufficient resources to adequately care for the patient. After 
modifications were made to the HH PPS system in 2008, coding was still 
not adequate for the patient. The commenter stated that, for these 
reasons, the baseline average case-mix is much lower than the actual 
value.
    Response: We agree with the commenter's explanation of previous 
undercoding as a cause of nominal case-mix growth. Over the years, we 
have issued and revised instructions for OASIS to reinforce the 
importance of complete and accurate coding. As we have stated in 
previous regulations, however, Medicare should not inappropriately make 
greater reimbursements for a patient population whose level of severity 
has changed relatively little over the years, notwithstanding more-
comprehensive documentation of the health status of these patients.
    Comment: A commenter stated that much of the increase in case-mix 
weights is due to HHAs complying with Medicare instructions regarding 
patient coding consistent with the 2008 version of the HH PPS.
    Response: This comment is difficult to address because the 
commenter does not cite specifically which documents constitute CMS-
issued Medicare instructions ``consistent with the 2008 version of the 
HH PPS.'' Nor does the comment explain how the increase in case-mix 
weights was driven by such CMS instructions. However, we believe our 
release in late 2008 of a revision of Attachment D of the OASIS 
Instruction Manual would not have had the effect suggested by the 
comment. (Attachment D was intended to provide guidance on diagnosis 
reporting and coding in the context of the HH PPS.) First, Attachment D 
reiterated traditional CMS guidance about how to select diagnoses in 
home health. Attachment D did not deviate from the fundamental and 
longstanding instruction that reported diagnoses must be relevant to 
the treatment plan and the progress or outcome of care. Second, 
Attachment D's release late in the year suggests it would not have had 
much impact on the 2008 data.
    Comment: We received a number of comments stating that HH patients 
now have more complex conditions than previous populations of HH 
patients and that such patients previously would have been referred to 
health care facilities, but are now being cared for at home. Moreover, 
the commenters stated that other healthcare settings have developed 
stricter admission requirements, thereby increasing the number of HHA 
patients with high severity levels. One commenter cited as evidence 
diversion of patients to home care from inpatient rehabilitation 
facilities due to the CMS 60 percent rule and skilled nursing 
facilities' (SNFs') technology increases. The commenters point to such 
changes as evidence that policy incentives favor the home setting over 
institutional care, and therefore, case-mix increases are warranted.
    Response: We appreciate the comment, but we have little information 
with which to evaluate the claim regarding diversion to the home care 
setting. Possibly relevant is that the proportion of initial non-LUPA 
episodes preceded by acute care within the previous 60 days has 
declined between 2001 and 2008, from 70.0 percent to 62.7 percent. This 
indicates more patients are being admitted from non-institutional 
settings, for example, the community. However, our data do not indicate 
whether the patients coming into home care without recent care in a 
Part A setting were diverted from entering such settings in favor of 
home-based care. Post-acute institutional utilization data perhaps 
consistent with the comment suggest a decline in inpatient 
rehabilitation facilities (IRFs) as a source of HH patients, but this 
decline may have been partly offset by an increase in SNF utilization 
as a source. For example, the proportion of initial episodes preceded 
by an IRF stay that ended sometime during the 30 days before HH 
admission suddenly declined by more than a percentage point in 2005 and 
declined another 1.5