# Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2013, Hospice Quality Reporting Requirements, and Survey and Enforcement Requirements for Home Health Agencies > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2012-16836 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** July 13, 2012 - **Citation:** 77 FR 41548 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 409, 424, 431, 484, 488, 489, and 498 [CMS-1358-P] RIN 0938-AR18 Medicare Program; Home Health Prospective Payment System Rate Update for Calendar Year 2013, Hospice Quality Reporting Requirements, and Survey and Enforcement Requirements for Home Health Agencies AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Proposed rule. SUMMARY: This proposed rule would update the Home Health Prospective Payment System (HH PPS) rates, including the national standardized 60-day episode rates, the national per-visit rates, the low-utilization payment amount (LUPA), and outlier payments under the Medicare prospective payment system for home health agencies effective January 1, 2013. This rule also proposes requirements for the Hospice quality data reporting program. This proposed rule would also establish requirements for unannounced, standard and extended surveys of home health agencies (HHAs) and provide a number of alternative (or intermediate) sanctions that could be imposed if HHAs were out of compliance with Federal requirements. This proposed rule would set forth alternative sanctions that could be imposed instead of or in addition to termination of the HHA's participation in the Medicare program, which could remain in effect up to a maximum of 6 months, until the HHA achieved compliance with the HHA Conditions of Participation (CoPs), or until the HHA's provider agreement was terminated. DATES: To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on September 4, 2012. ADDRESSES: In commenting, please refer to file code CMS-1358-P. Because of staff and resource limitations, we cannot accept comments by facsimile (Fax) transmission. You may submit comments in one of four ways (please choose only one of the ways listed): 1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov . Follow the instructions under the “More Search Options” tab. 2. By regular mail. You may mail written comments to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1358-P, P.O. Box 8016, Baltimore, MD 21244-8016. Please allow sufficient time for mailed comments to be received before the close of the comment period. 3. By express or overnight mail. You may send written comments to the following address only: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1358-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850. 4. By hand or courier. If you prefer, you may deliver (by hand or courier) your written comments before the close of the comment period to either of the following addresses: a. For delivery in Washington, DC— Centers for Medicare & Medicaid Services, Department of Health and Human Services, Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 20201. (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp-in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD— Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850. If you intend to deliver your comments to the Baltimore address, please call (410) 786-7195 in advance to schedule your arrival with one of our staff members. Comments mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period. For information on viewing public comments, see the beginning of the SUPPLEMENTARY INFORMATION section. FOR FURTHER INFORMATION CONTACT: Kristine Chu, (410) 786-8953, for information about the HH payment reform study and report. Robin Dowell, (410) 786-0060, for information about HH and Hospice quality improvement and reporting. Kim Evans, (410) 786-0009, for information about HH therapy policies. Mollie Knight, (410) 786-7948, for information about the HH market basket. Hillary Loeffler, (410) 786-0456, for information about the HH PPS. Lori Teichman, (410) 786-6684, for information about HHCAHPS. Patricia Sevast, 410-786-8135 and Peggye Wilkerson, 410-786-4857, for survey and enforcement requirements for HHAs. SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post all comments received before the close of the comment period on the following Web site as soon as possible after they have been received: http://www.regulations.gov . Follow the search instructions on that Web site to view public comments. Comments received timely will also be available for public inspection as they are received, generally beginning approximately 3 weeks after publication of a document, at the headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. EST. To schedule an appointment to view public comments, phone 1-800-743-3951. Table of Contents I. Executive Summary A. Purpose B. Summary of the Major Provisions C. Summary of Costs and Benefits II. Background A. Statutory Background B. System for Payment of Home Health Services C. Updates to the HH PPS III. Provisions of the Proposed Rule A. Case-Mix Measurement B. Outlier Policy C. CY 2013 Rate Update D. Home Health Face-to-Face Encounter E. Therapy Coverage and Reassessments F. Payment Reform: Home Health Study and Report G. International Classification of Diseases, 10th Edition (ICD-10) Transition Plan and Grouper Enhancements IV. Quality Reporting for Hospices A. Background and Statutory Authority B. Public Availability of Data Submitted C. Quality Measures for Hospice Quality Reporting Program and Data Submission Requirements for Payment Year FY 2014 D. Quality Measures for Hospice Quality Reporting Program for Payment Year FY 2015 and Beyond E. Additional Measures Under Consideration and Standardization of Data Collection V. Survey and Enforcement Requirements for Home Health Agencies A. Background and Statutory Authority B. Provisions of the Proposed Rule C. Provider Agreements and Supplier Approval D. Solicitation of Comments VI. Collection of Information Requirements VII. Response to Comments VIII. Regulatory Impact Analysis IX. Federalism Analysis Regulations Text Acronyms In addition, because of the many terms to which we refer by abbreviation in this proposed rule, we are listing these abbreviations and their corresponding terms in alphabetical order below: ACH LOS Acute Care Hospital Length of Stay ADL Activities of Daily Living APU Annual Payment Update BBA Balanced Budget Act of 1997, Pub. L. 105-33 BBRA Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999, Pub. L. 106-113 CAD Coronary Artery Disease CAH Critical Access Hospital CBSA Core-Based Statistical Area CHF Congestive Heart Failure CMI Case-Mix Index CMS Centers for Medicare and Medicaid Services CoPs Conditions of Participation COPD Chronic Obstructive Pulmonary Disease CVD  Cardiovascular Disease CY Calendar Year DM Diabetes Mellitus DRA Deficit Reduction Act of 2005, Pub. L. 109-171, enacted February 8, 2006 FDL Fixed Dollar Loss FI Fiscal Intermediaries FR Federal Register FY Fiscal Year HCC Hierarchical Condition Categories HCIS Health Care Information System HH Home Health HHCAHPS Home Health Care Consumer Assessment of Healthcare Providers and Systems Survey HH PPS Home Health Prospective Payment System HHAs Home Health Agencies HHRG Home Health Resource Group HIPPS Health Insurance Prospective Payment System IH Inpatient Hospitalization IRF Inpatient Rehabilitation Facility LTCH Long-Term Care Hospital LUPA Low Utilization Payment Amount MEPS Medical Expenditures Panel Survey MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173, enacted December 8, 2003 MSA Metropolitan Statistical Areas MSS Medical Social Services NRS Non-Routine Supplies OBRA Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-2-3, enacted December 22, 1987 OCESAA Omnibus Consolidated and Emergency Supplemental Appropriations Act, Pub. L. 105-277, enacted October 21, 1998 OES Occupational Employment Statistics OIG Office of Inspector General OT Occupational Therapy OMB Office of Management and Budget PAC-PRD Post-Acute Care Payment Reform Demonstration PEP Partial Episode Payment Adjustment PT Physical Therapy QAP Quality Assurance Plan PRRB Provider Reimbursement Review Board RAP Request for Anticipated Payment RF Renal Failure RFA Regulatory Flexibility Act, Pub. L. 96-354 RHHIs Regional Home Health Intermediaries RIA Regulatory Impact Analysis SLP Speech Language Pathology Therapy SNF Skilled Nursing Facility UMRA Unfunded Mandates Reform Act of 1995. I. Executive Summary A. Purpose This rule proposes updates to the payment rates for home health agencies (HHAs) for Calendar Year (CY) 2013 as required under section 1895(b) of the Social Security Act (the Act). The proposed update to the prospective payment system addresses the market basket update, case-mix adjustments due to variation in costs among different units of services, adjustments for geographic differences in wage levels, outlier payments, the submission of quality data, and additional payments for services provided in rural areas. B. Summary of the Major Provisions In this proposed rule, we use the methods described in the CY 2012 HH PPS final rule (76 FR 68526) to update the prospective payment rates for CY 2013 using a proposed rebased and revised market basket described in section III.C.1 of this rule. This rule discusses the proposed case-mix up-coding adjustment. In addition, we propose additional regulatory flexibility regarding therapy documentation and reassessments as well as face-to-face encounter requirements. We also provide an update on the transition plan for ICD-10 and the home health study concerning home health care access. In addition, this rule proposes new requirements concerning the hospice quality reporting program. Lastly, this proposed rule would establish requirements concerning HHAs. C. Summary of Costs and Benefits Provision description Total costs Total benefits Transfers CY 2013 HH PPS payment rate update N/A The benefits of this proposed rule include paying more accurately for the delivery of Medicare home health services, providing additional regulatory flexibility for HHAs to comply with therapy requirements and face-to-face encounter documentation requirements, and establishing alternative (or intermediate) sanctions that may be imposed when HHAs are out of compliance with Federal requirements The overall economic impact of this proposed rule is an estimated $20 million in decreased payments to HHAs. Survey and Certification Requirements The components of the rule which address survey and certification requirements do not represent new costs with the exception of the Informal Dispute Resolution process (IDR). These requirements codify Survey and Certification policies which were implemented between 1987 and 2011. We estimate that the costs associated with the IDRs will not be significantly greater than current actions related to termination actions The overall benefit of this rule is the expected increase in provider participation in discussions with the State Survey Agency or CMS Regional Offices related to survey findings via the IDR Enforcement Requirements We estimate a onetime $2 million expense to modify internal systems to monitor Civil Monetary Penalties. There will also be annual operating expenses associated with maintaining the system, training surveyors and troubleshooting issues of $335,972 HHAs will be provided incentives to maintain or regain compliance with the HHA Conditions of Participation through measures other than termination CMP Disbursement and Cost of Surveys This proposed rule would provide that State Medicaid programs share in the cost of HHA surveys. The cost ratio would be calculated at 63 percent for the Medicare program and 37 percent for the Medicaid program. The projected HHA survey budget for FY 2013 is $39.9 million and FY 2014 at $45.7 million. The anticipated State Medicaid share is $3.7 million and $4.2 million respectively (minus Federal match) This is in compliance with OMB Circular A-87 II. Background A. Statutory Background The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted August 5, 1997), significantly changed the way Medicare pays for Medicare HH services. Section 4603 of the BBA mandated the development of the HH PPS. Until the implementation of a HH PPS on October 1, 2000, HHAs received payment under a retrospective reimbursement system. Section 4603(a) of the BBA mandated the development of a 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 a 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 include 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 levels 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 gives the Secretary the option to make additions or adjustments to the payment amount otherwise paid in the case of outliers due to unusual variations in the type or amount of medically necessary care. Section 3131(b) of the Patient Protection and Affordable Care Act of 2010 (the Affordable Care Act) (Pub. L. 111-148, enacted March 23, 2010) revised section 1895(b)(5) of the Act so that total outlier payments in a given year would not exceed 2.5 percent of total payments projected or estimated. The provision also made 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 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 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 November 29, 1999). The requirements include the implementation of a 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 § 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 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 HH disciplines (skilled nursing, HH 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 II.D.4.e). Payment for durable medical equipment covered under the HH benefit is made outside the HH PPS payment system. To adjust for case-mix, the HH PPS uses a 153-category case-mix classification system to assign patients to a home health resource group (HHRG). The clinical severity level, functional severity level, and service utilization are computed from responses to selected data elements in the OASIS assessment instrument and are used to place the patient in a particular HHRG. Each HHRG has an associated case-mix weight which is used in calculating the payment for an episode. For episodes with four or fewer visits, Medicare pays national per-visit rates based on the discipline(s) providing the services. 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. The CY 2008 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. Case-mix represents the variations in conditions of the patient population served by the HHAs. Subsequently, a more detailed analysis was performed on the 2005 case-mix data to evaluate if any portion of the 12.78 percent 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 expenditures to predict the average case-mix weight for 2005. We identified 8.03 percent of the total case-mix change as real, and therefore, decreased the 12.78 percent of total case-mix change by 8.03 percent to get a final nominal case-mix increase measure of 11.75 percent (0.1278 * (1−0.0803) = 0.1175). To account for the changes in case-mix that were not related to an underlying change in patient health status, we 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. In the CY 2011 HH PPS final rule (76 FR 68532) we updated our analyses of case-mix change and finalized a reduction of 3.79 percent, instead of 2.71 percent, for CY 2011. For CY 2012, we published the November 4, 2011 final rule (76 FR 68526) (hereinafter referred to as the CY 2012 HH PPS final rule) 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 HH services. In addition, as discussed in the CY 2012 final rule (76 FR 68528), our analysis indicated that there was a 22.59 percent increase in overall case-mix from 2000 to 2009 and that only 15.76 percent of that overall observed case-mix percentage increase was due to real case-mix change. As a result of our analysis, we identified a 19.03 percent nominal increase in case-mix. To fully account for the 19.03 percent nominal case-mix growth which was identified from 2000 to 2009, we finalized a 3.79 percent payment reduction in CY 2012 and 1.32 percent payment reduction for CY 2013. III. Provisions of the Proposed Rule A. Case-Mix Measurement Every year since the HH PPS CY 2008 proposed rule, we have stated in HH PPS rulemaking that we would continue to monitor case-mix changes in the HH PPS and to update our analysis to measure change in case-mix, both real changes in case-mix and changes which are unrelated to changes in patient acuity (nominal). We have continued to monitor case-mix changes, and our latest analysis continues to support the need to make payment adjustments to account for nominal case-mix growth. Before measuring nominal case-mix growth, we examined the total case-mix growth every year from 2000 to 2010. Our latest analysis indicates that there was about a 1 percent increase in the average case-mix weight from 2009 to 2010. Specifically, the 2009 average case-mix was 1.3435 and the 2010 average case-mix was 1.3578. We also examined the change in the reporting of secondary diagnoses on OASIS from 2009 to 2010 and have observed an increase in the reporting of secondary diagnoses from 2009 to 2010, thereby contributing to the growth in total case-mix. In addition, we looked at the change in the distribution of episodes by number of therapy visits from 2009 to 2010 and saw that the percentage of non-therapy episodes decreased by 1.56 percentage points and the percentage of episodes with therapy increased at all levels of therapy, thereby contributing to the growth in overall case-mix from 2009 to 2010. Our analysis also showed a continued increase in the percentage of episodes with 14-19 and 20+ therapy visits. For the remainder of this section, we will discuss our latest analysis of real and nominal case-mix change. Section 1895(b)(3)(B)(iv) of the Act gives CMS the authority to implement payment reductions for nominal case-mix growth, changes in case-mix that are not related to actual changes in patient characteristics over time. Nominal case-mix growth was assessed and reported in CY 2008, CY 2011, and CY 2012 rulemaking, and payment reductions to the base rate were implemented to account for the nominal case-mix growth observed. In CY 2008 rulemaking, to assess nominal case-mix growth, we first estimated real case-mix growth, changes in case-mix which are related to changes in patient characteristics, using a regression-based, predictive model of individual case-mix weights. The predictive model contained measures of patients' demographic characteristics, clinical status, inpatient history, and Part A Medicare costs in the time period leading up to their home health episodes. The regression coefficients for the predictive model were developed using 2000 as a base year and were applied to episodes from 2005, allowing for estimation of the change in real case-mix. We then determined the nominal case-mix growth from 2000 to 2005 using the regression model-predicted real case-mix change and the total case-mix change for the time period of interest. Our analysis indicated that there was a 12.78 percent increase in overall case-mix from 2000 to 2005 and 8.03 percent of that overall observed case-mix change was identified as real case-mix change. As a result of our analysis, we adjusted the 12.78 percent of total change in case-mix downward by 8.03 percent to get a final nominal case-mix change measure of 11.75 percent (0.1278 * (1−0.0803) = 0.1175). To account for the 11.75 percent increase in nominal case-mix, we implemented a payment reduction of 2.75 percent each year for 3 years, beginning in 2008, and we planned to implement a payment reduction of 2.71 percent in CY 2011. Since the publication of the HH PPS CY 2008 proposed rule (72 FR 25395), we have continued to monitor case-mix changes in the HH PPS, and in CY 2011 rulemaking we updated our analysis to measure more recent changes in real and nominal case-mix. In CY 2011 rulemaking, to accommodate the shift to the 153-group system in 2008, we developed two regression-based models to assess nominal case-mix growth from 2000 to 2008. One model was developed using 2000 as a base year and the 80 grouper case-mix system. The regression coefficients in the model were applied to 2007 data to determine the change in real case-mix from 2000 to 2007. The second model was developed using 2008 as a base year and the 153 grouper case-mix system. The regression coefficients in the model were applied to 2007 data to determine the change in real case-mix from 2007 to 2008. The data from both of the models were then used to calculate the overall real case-mix change from 2000 to 2008. Our analysis indicated that there was a 19.40 percent increase in overall case-mix from 2000 to 2008 and 10.07 percent of that overall observed case-mix change was identified as real case-mix change. Consequently, as a result of our analysis, we identified a 17.45 percent nominal increase in case-mix (0.1940 * (1−0.1007) = 0.1745) from 2000 to 2008. In other words, there was a growth in case-mix of 17.45 percent that was unrelated to differences in patient characteristics, reflecting changes in coding documentation and other behavioral responses to the home health prospective payment system rather than the treatment of more resource-intensive patients. To fully account for the 17.45 percent nominal case-mix growth identified from 2000 to 2008, in the CY 2011 proposed rule, we proposed a 3.79 percent payment reduction (replacing the planned 2.71 percent payment reduction) in CY 2011 and an additional 3.79 percent payment reduction in CY 2012. We received many comments on our CY 2011 HH PPS proposed rule that criticized our methodology for assessing real and nominal case-mix change. In the CY 2011 HH PPS final rule, we implemented the proposed payment reduction of 3.79 percent to the national standardized episode rate in CY 2011. However, due to the extensive comments we received, we deferred finalizing a payment reduction for CY 2012 until further study of the case-mix data and methodology was completed. To assess the validity of the criticisms we received about our models to measure real and nominal case-mix change, we procured an independent review of our methodology by a team at Harvard University led by Dr. David Grabowski. The review included an examination of the predictive regression models and data used in CY 2011 rulemaking, and further analysis consisting of extensions of the model to allow a closer look at nominal case-mix growth by categorizing the growth according to provider types and subgroups of patients. When reviewing the model, the Harvard team found that overall, our models were robust. However, one area of potential refinement to our models that the Harvard team suggested was to incorporate variables derived from Hierarchical Condition Categories (HCC) data, which is used by CMS to risk-adjust payments to managed care organizations in the Medicare program. During CY 2012 rulemaking, based on Dr. Grabowski and his team's recommendation and our previous consideration to incorporate HCC data in our models to assess real case-mix change, we explored the effects of adding HCC patient classification data into our models. For our analysis of real and nominal case-mix growth from 2000 to 2009, we incorporated the HCC community scores, HCC demographic variables, and disease indicator variables into our models. It should be noted that we enhanced our models with HCC data starting in 2005 due to the availability of HCC data in our analytic files. To use the HCC data as well as accommodate the shift to the 153-group system in 2008, we analyzed real case-mix change for 3 different periods, from 2000 to 2005, from 2005 to 2007, and from 2007 to 2009. The real case-mix change from 2000 to 2005 was assessed using the same variables used in the model described in the CY 2011 HH PPS proposed rule (75 FR 43238). The real case-mix change from 2005 to 2007 and from 2007 to 2009 was assessed using the pre-existing variable set plus additional information from the HCC variables. To determine the amount of real case-mix change from 2000 to 2009 (0.0390 case-mix units), we added the measured real change in case-mix units for each of the 3 periods (0.0207 case-mix units for 2000 to 2005, 0.0061 case-mix units for 2005 to 2007, and 0.0122 case-mix units for 2007 to 2009). We then compared the real change in case-mix (0.0390 case-mix units) for 2000 to 2009 to the total change in case-mix from 2000 to 2009 (0.2476 case-mix units). The total change in case-mix from 2000 to 2009 was calculated as the difference between the average case-mix in 2000 (1.0959) and the average case-mix in 2009 (1.3435). Based on the results from our models, we estimated 15.76 percent (0.0390/0.2476 = 0.1576) of the total case-mix change as real. It should be noted that there is a 0.01 percentage point difference between the calculated and actual value due to the fact that 0.0390 and 0.2476 are rounded figures. When taking into account the total case-mix change from 2000 to 2009 of 22.59 percent ((1.3435 − 1.0959)/1.0959 = 0.2259) and the 15.76 percent of total case-mix change estimated as real from 2000 to 2009, we obtained a final nominal case-mix change measure of 19.03 percent (0.2259 * (1 − 0.1576) = 0.1903) from 2000 to 2009. This year, we updated our estimates of real and nominal case-mix growth using 2010 data. To determine the amount of real case-mix growth from 2000 to 2010, we needed to obtain an estimate of real case-mix change for 2007 to 2010. We obtained this value using the same model as the one described in CY 2012 rulemaking, which was developed using 2009 data. We note that when developing an estimate of real case-mix change for 2007 to 2010, we used 2010 data for all of the variables in the model except for the living arrangement variables. A crosswalk could not be built from OASIS C to OASIS B1 for the living arrangement variables and therefore we predicted the 2010 value based on trends from 2007 to 2009. After obtaining the estimate of real case-mix change for 2007 to 2010 (0.0150 case-mix units), we added this estimate to the 2000 to 2005 estimate of real case-mix change (0.0207 case-mix units) and the 2005 to 2007 estimate of real case-mix change (0.0061 case-mix units). After adding together the estimated real case-mix change in case-mix units for the three periods, the total estimated change in real case-mix from 2000 to 2010 was 0.0418 (0.0207 + 0.0061 + 0.0150 = 0.0418). Given that the total change in case-mix from 2000 to 2010 was 0.2619 case-mix units (1.3578 − 1.0959 = 0.2619), we estimate that 15.97 percent of the total percentage change in the national average case-mix weight since the interim payment system baseline through 2010 is due to change in real case-mix (0.0418/0.2619 = 0.1597). It should be noted that there is a 0.01 percentage point difference between the calculated and actual value due to the fact that 0.0418 and 0.2619 are rounded figures. When taking into account the total measure of case-mix change (23.90 percent; see Table 1) and the 15.97 percent of total case-mix change estimated as real from 2000 to 2010, we obtained a final nominal case-mix change measure of 20.08 percent from 2000 to 2010 (0.2390 * (1 − 0.1597) = 0.2008). Please see Table 1 for additional information about the calculations used to make the real and nominal case-mix change estimates from 2000 to 2010. Our estimates of real and nominal case-mix change are consistent with past results. Most of the case-mix change has been due to improved coding, coding practice changes, and other behavioral responses to the prospective payment system, such as increased use of high therapy treatment plans. Table 1—Summary of Real and Nominal Case-Mix Change Estimates: 2000-2010 Measure Model Actual case-mix: 2000 1.0959 Actual case-mix: 2010 1.3578 Total change in case-mix 0.2619 Total percentage change 23.90% Estimated real change in case-mix 0.0418 Percent of total change estimated as real 15.97% Percent of total change estimated as nominal (creep) 84.03% Real case-mix percent increase 3.82% Nominal case-mix percent increase 20.08% As we described earlier in this proposed rule, our CY 2008 HH PPS final rule finalized a reduction over 4 years in the national standardized 60-day episode payment rates to account for a large increase in case-mix from 2000 to 2005 which we determined was not related to treatment of more intense patients. We implemented a 2.75 percent reduction each year for 2008, 2009, and 2010 and planned to reduce payments by 2.71 percent in 2011. In CY 2011 rulemaking, we updated our analysis of nominal case-mix growth through 2008 and determined that there was 17.45 percent nominal case-mix growth from 2000 to 2008. Therefore, we proposed and finalized an increase in the planned 2.71 percent reduction to 3.79 percent for CY 2011. For the CY 2012 proposed rule, after updating our models to incorporate HCC data, we determined that there was a 19.03 percent nominal case-mix change from 2000 to 2009. To account for the nominal case-mix growth through 2009, we finalized a 3.79 percent payment reduction to the national standardized 60-day episode rates for nominal case-mix change for CY 2012 and a 1.32 percent payment reduction to the rates in CY 2013. When including the latest data available, we determined that there was a 20.08 percent nominal case-mix change from 2000 to 2010. To fully account for the remainder of the 20.08 percent increase in nominal case-mix beyond that which has been accounted for in previous payment reductions, we estimate that the percentage reduction to the national standardized 60-day episode rates for nominal case-mix change would be 2.18 percent. We considered proposing a 2.18 percent reduction to account for the remaining increase in measured nominal case-mix, and seek comments on that proposal, rather than moving forward with the 1.32 percent reduction promulgated in last year's CY 2012 HH PPS final rule. However for CY 2013, we propose to move forward with the 1.32 percent payment reduction to the national standardized 60-day episode rates as promulgated in the CY 2012 HH PPS Final Rule (76 FR 68532). Analysis, to date, would seem to indicate a high likelihood of continued growth in nominal case-mix going forward. As such, we will continue to monitor both real and nominal case-mix change and make updates as appropriate. CMS will consider any and all analyses as it continues to address the issue of the increase in nominal case-mix in future rulemaking. B. Outlier Policy 1. Background Section 1895(b)(5) of the Act allows for the provision of an addition or adjustment to the national standardized 60-day case-mix and wage-adjusted episode payment amounts in the case of episodes that incur unusually high costs due to patient home health (HH) care needs. Prior to the enactment of the Affordable Care Act, this section of the Act stipulated that projected total outlier payments could not exceed 5 percent of total projected or estimated HH payments in a given year. In the July 2000 final rule (65 FR 41188 through 41190), we described the method for determining outlier payments. Under this system, outlier payments are made for episodes whose estimated costs exceed a threshold amount for each Home Health Resource Group (HHRG). The episode's estimated cost is the sum of the national wage-adjusted per-visit payment amounts for all visits delivered during the episode. The outlier threshold for each case-mix group or partial episode payment (PEP) adjustment is defined as the 60-day episode payment or PEP adjustment for that group plus a fixed dollar loss (FDL) amount. The outlier payment is defined to be a proportion of the wage-adjusted estimated cost beyond the wage-adjusted threshold. The threshold amount is the sum of the wage and case-mix adjusted PPS episode amount and wage-adjusted fixed dollar loss amount. The proportion of additional costs paid as outlier payments is referred to as the loss-sharing ratio. 2. Regulatory Update In the CY 2010 HH PPS final rule (74 FR 58080 through 58087), we discussed excessive growth in outlier payments, primarily the result of unusually high outlier payments in a few areas of the country. Despite program integrity efforts associated with excessive outlier payments in targeted areas of the country, we discovered that outlier expenditures still exceeded the 5 percent, target and, in the absence of corrective measures, would have continued do to so. Consequently, we assessed the appropriateness of taking action to curb outlier abuse. To mitigate possible billing vulnerabilities associated with excessive outlier payments and adhere to our statutory limit on outlier payments, we adopted an outlier policy that included a 10 percent agency level cap on outlier payments. This cap was implemented in concert with a reduced FDL ratio of 0.67. These policies resulted in a projected target outlier pool of approximately 2.5 percent. (The previous outlier pool was 5 percent of total HH expenditures.) For CY 2010, we first returned 5 percent of these dollars back into the national standardized 60-day episode rates, the national per-visit rates, the low utilization payment adjustment (LUPA) add-on payment amount, and the non-routine supplies (NRS) conversion factor. Then, we reduced the CY 2010 rates by 2.5 percent to account for the new outlier pool of 2.5 percent. This outlier policy was adopted for CY 2010 only. 3. Statutory Update As outlined in the CY 2011 HH PPS final rule (75 FR 70397 through 70399), section 3131(b)(1) of the Affordable Care Act amended section 1895(b)(3)(C) of the Act, “Adjustment for outliers,” states that “The Secretary shall reduce the standard prospective payment amount (or amounts) under this paragraph applicable to HH services furnished during a period by such proportion as will result in an aggregate reduction in payments for the period equal to 5 percent of the total payments estimated to be made based on the prospective payment system under this subsection for the period.” In addition, section 3131(b)(2) of the Affordable Care Act amended section 1895(b)(5) of the Act by redesignating the existing language as section 1895(b)(5)(A) of the Act, and revising it to state that the Secretary, “may provide for an addition or adjustment to the payment amount otherwise made in the case of outliers because of unusual variations in the type or amount of medically necessary care. The total amount of the additional payments or payment adjustments made under this paragraph with respect to a fiscal year or year may not exceed 2.5 percent of the total payments projected or estimated to be made based on the prospective payment system under this subsection in that year.” As such, beginning in CY 2011, our HH PPS outlier policy is that we reduce payment rates by 5 percent and target up to 2.5 percent of total estimated HH PPS payments to be paid as outliers. To get there, we first returned the 2.5 percent held for the target CY 2010 outlier pool to the national standardized 60-day episode rates, the national per visit rates, the LUPA add-on payment amount, and the NRS conversion factor for CY 2010. We then reduced the rates by 5 percent as required by section 1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) of the Affordable Care Act. For CY 2011 and subsequent calendar years we target up to 2.5 percent of estimated total payments to be paid as outlier payments, and apply a 10 percent agency-level outlier cap. 4. Loss-Sharing Ratio and Fixed Dollar Loss (FDL) Ratio For a given level of outlier payments, there is a trade-off between the values selected for the FDL ratio and the loss-sharing ratio. A high FDL ratio reduces the number of episodes that can receive outlier payments, but makes it possible to select a higher loss-sharing ratio and, therefore, increase outlier payments for outlier episodes. Alternatively, a lower FDL ratio means that more episodes can qualify for outlier payments, but outlier payments per episode must then be lower. The FDL ratio and the loss-sharing ratio must be selected so that the estimated total outlier payments do not exceed the 2.5 percent aggregate level (as required by section 1895(b)(5)(A) of the Act). In the past, we have used a value of 0.80 for the loss-sharing ratio, which is relatively high, but preserves incentives for agencies to attempt to provide care efficiently for outlier cases. With a loss-sharing ratio of 0.80, Medicare pays 80 percent of the additional estimated costs above the outlier threshold amount. We are not proposing a change to the loss-sharing ratio in this proposed rule. In the CY 2011 HH PPS final rule (75 FR 70398), in targeting total outlier payments as 2.5 percent of total HH PPS payments, we implemented an FDL ratio of 0.67, and we maintained that ratio in CY 2012. The national standardized 60-day episode payment amount is multiplied by the FDL ratio. That amount is wage-adjusted to derive the wage-adjusted FDL, which is added to the case-mix and wage-adjusted 60-day episode payment amount to determine the outlier threshold amount that costs have to exceed before Medicare will pay 80 percent of the additional estimated costs. Based on simulations using CY 2010 claims data, we estimate that outlier payments in 2012 will comprise approximately 2.12 percent of total HH PPS payments. Simulations based on CY 2009 claims data completed for the CY 2012 HH PPS final rule (76 FR 68528) suggested that outlier payments in 2011 would comprise approximately 2.14 percent of total HH PPS payments. As such, our simulations suggest outlier payments as a percentage total HH payments holding steady in CY 2009 and CY 2010. However, we are proposing no change to the FDL, in part because we have not been able to verify these projections in our paid claims files since we implemented the 10 percent agency-level cap on outlier payments on January 1, 2010. Two claims processing errors were identified in our implementation of the 10 percent agency-level cap on outlier payments. These errors resulted in inaccuracies in outlier payment amounts in our paid claims files for CY 2010 and 2011. One error allows for certain HHAs to be paid beyond the cap, resulting in overpayments. The other applies the cap to HHAs who have not reached it yet, resulting in underpayments. System changes are currently underway, and thus the CY 2010 data file used in our analysis for this proposed rule reflects outlier payments with these claims processing errors. Furthermore, another consideration in proposing no change to the FDL is our implementation in the CY 2012 HH PPS final rule of changes to the case-mix weights. The changes put more weight on non-therapy cases that typically are more likely to receive outlier payments. The data showing the effects of the changes to the case-mix weights on outlier payments will not be available for analysis until next year. In the final rule, we will update our estimate of the FDL ratio using the best analysis the most current and complete year of HH PPS data. 5. Outlier Relationship to the HH Payment Study As we discuss later in this proposed rule, section 3131(d) of the Affordable Care Act requires CMS to conduct a study and report on developing HH payment revisions that will ensure access to care and payment for HH patients with high severity of illness. Our Report to Congress containing this study's recommendations is due no later than March 1, 2014. Section 3131(d)(1)(A)(iii) of the Affordable Care Act, in particular, states that this study may include analysis of potential revisions to outlier payments to better reflect costs of treating Medicare beneficiaries with high levels of severity of illness. C. CY 2013 Rate Update 1. Rebasing and Revising of the Home Health Market Basket a. Background Section 1895(b)(3)(B) of the Act requires that the standard prospective payment amounts for CY 2013 be increased by a factor equal to the applicable home health market basket update for those HHAs that submit quality data as required by the Secretary. Effective for cost reporting periods beginning on or after July 1, 1980, we developed and adopted an HHA input price index (that is, the home health “market basket”). Although “market basket” technically describes the mix of goods and services used to produce home health care, this term is also commonly used to denote the input price index derived from that market basket. Accordingly, the term “home health market basket” used in this document refers to the HHA input price index. The percentage change in the home health market basket reflects the average change in the price of goods and services purchased by HHAs in providing an efficient level of home health care services. We first used the home health market basket to adjust HHA cost limits by an amount that reflected the average increase in the prices of the goods and services used to furnish reasonable cost home health care. This approach linked the increase in the cost limits to the efficient utilization of resources. For a greater discussion on the home health market basket, see the notice with comment period published in the February 15, 1980 Federal Register (45 FR 10450, 10451), the notice with comment period published in the February 14, 1995 Federal Register (60 FR 8389, 8392), and the notice with comment period published in the July 1, 1996 Federal Register (61 FR 34344, 34347). Beginning with the FY 2002 HH PPS payments, we used the home health market basket to update payments under the HH PPS. We last rebased the home health market basket effective with the CY 2008 update. For more information on the HH PPS home health market basket, see our proposed rule published in the May 4, 2007 Federal Register (72 FR 25435-25442). The home health market basket is a fixed-weight Laspeyres-type price index; its weights reflect the cost distribution for the base year while current period price changes are measured. The home health market basket is constructed in three major steps. First, a base period is selected and total base period expenditures are estimated for mutually exclusive and exhaustive spending categories based upon the type of expenditure. Then the proportion of total costs that each spending category represents is determined. These proportions are called cost or expenditure weights. The second step essential for developing an input price index is to match each expenditure category to an appropriate price/wage variable, called a price proxy. These proxy variables are mainly drawn from publicly available statistical series published on a consistent schedule, preferably at least quarterly. In the third and final step, the price level for each spending category is multiplied by the expenditure weight for that category. The sum of these products for all cost categories yields the composite index level in the market basket in a given year. Repeating the third step for other years will produce a time series of market basket index levels. Dividing one index level by an earlier index level will produce rates of growth in the input price index. We describe the market basket as a fixed-weight index because it answers the question of how much more or less it would cost, at a later time, to purchase the same mix of goods and services that was purchased in the base period. As such, it measures “pure” price changes only. The effects on total expenditures resulting from changes in the quantity or mix of goods and services purchased subsequent to the base period are, by design, not considered. b. Rebasing and Revising the Home Health Market Basket We believe that it is desirable to rebase the home health market basket periodically so that the cost category weights reflect changes in the mix of goods and services that HHAs purchase in furnishing home health care. We based the cost category weights in the current home health market basket on CY 2003 data. We are proposing to rebase and revise the home health market basket to reflect CY 2010 Medicare cost report (MCR) data, the latest available and most complete data on the actual structure of HHA costs. The terms “rebasing” and “revising,” while often used interchangeably, actually denote different activities. The term “rebasing” means moving the base year for the structure of costs of an input price index (that is, in this exercise, we are proposing to move the base year cost structure from CY 2003 to CY 2010) without making any other major changes to the methodology. The term “revising” means changing data sources, cost categories, and/or price proxies used in the input price index. For this proposed rebasing and revising, we modified the wages and salaries and benefits cost categories to reflect revised occupational groupings of BLS Occupational Employment Statistics (OES) data of HHAs. As a result of the revised groupings, we are also proposing changes to the wage and benefit price proxies used in the HH market basket. We are also proposing to break out the Administration and General (A&G), Operations and Maintenance, and All Other (residual) cost category weight into more detailed cost categories, based on the 2002 Benchmark U.S. Department of Commerce, Bureau of Economic Analysis (BEA) Input-Output (I-O) Table for HHAs. We are proposing to revise the price proxies for the Insurance and Transportation cost categories. Finally, we are proposing the use of four new price proxies for the four additional cost categories. The major cost weights for this proposed revised and rebased home health market basket are derived from the Medicare Cost Reports (MCR) data for freestanding HHAs, whose cost reporting period began on or after January 1, 2010 and before January 1, 2011. Using this methodology allowed our sample to include HHA facilities with varying cost report years including, but not limited to, the Federal fiscal or calendar year. We refer to the market basket as a calendar year market basket because the base period for all price proxies and weights are set to CY 2010. We propose to maintain our policy of using data from freestanding HHAs because we have determined that they better reflect HHAs' actual cost structure. Expense data for hospital-based HHAs can be affected by the allocation of overhead costs over the entire institution. Due to the method of allocation, total expenses will be correct, but the individual components' expenses may be skewed; therefore, if data from hospital-based HHAs were included, the resulting cost structure could be unrepresentative of the average HHA costs. Data on HHA expenditures for nine major expense categories (Wages and Salaries, Employee Benefits, Transportation, Operation and Maintenance, A&G, Professional Liability Insurance (PLI), Fixed Capital, Movable Capital, and a residual “All Other”) were tabulated from the CY 2010 Medicare HHA cost reports. As prescription drugs and DME are not payable under the HH PPS, we excluded those items from the home health market basket and from the expenditures. Expenditures for contract services were also tabulated from these CY 2010 Medicare HHA cost reports and allocated to Wages and Salaries, Employee Benefits, A&G, and Other Expenses. After totals for these cost categories were edited to remove reports where the data were deemed unreasonable (for example, when total costs were not greater than zero), we then determined the proportion of total costs that each category represents. The proportions represent the major rebased home health market basket weights. Next, we disaggregated the costs for the A&G, Operations and Maintenance and “All Other” cost weights using the latest available (2002 Benchmark) U.S. Department of Commerce, Bureau of Economic Analysis (BEA) Input-Output (I-O) Table, from which we extracted data for HHAs. The BEA I-O data, which are updated at 5-year intervals, were most recently described in the Survey of Current Business article, “Benchmark Input-Output Accounts of the U.S., 2002” (December 2002). These data were aged from 2002 to 2010 using relevant price changes. The methodology we used to age the data applied the annual price changes from the price proxies to the appropriate cost categories. We repeated this practice for each year. This methodology reflects a slight revision from the methodology used to derive the 2003-based HHA market basket index. For the 2003-based index, we only disaggregated the A&G and “All Other” cost categories using BEA I-O data. For the 2010-based index, we are proposing to also disaggregate the Operations and Maintenance cost categories using the BEA I-O data. Our proposal is based on our examination of the MCR data which indicated that some providers may be including some operations and maintenance costs in the A&G category and/or other cost categories. The Operations and Maintenance cost category (which we previously proxied with the CPI for Fuel and Other Utilities) from the MCR showed a decrease in the cost weight obtained directly from the MCR data from 2003 to 2010, despite rapid increases in utility costs over this time period. The revised method would rely on the 2002 I-O data, aged by the relevant price proxy, to determine the Utilities cost weight. The resulting methodology shows an increase in the Utilities cost weight over the same time period, which we believe to be a more reasonable result. We believe this change in the methodology for estimating utility costs for HHAs better reflects the 2010 cost structures of HHAs. This process resulted in the identification of 16 separate cost categories, which is four more cost categories than presented in the 2003-based home health market basket. The additional cost categories (Administrative and Support Services, Financial Services, Medical Supplies, and Rubber and Plastics) stem from further disaggregating the Other Products and Other Services cost categories presented in the 2003-based index into more detail. The Administrative and Support Services cost weight would include expenses for a range of day-to-day office administrative services including but not limited to billing, recordkeeping, mail routing, and reception services. The Financial Services cost weight would reflect expenses for services including but not limited to banking services and security and commodity brokering. The Medical Supplies cost weight would reflect expenses for medical and surgical instruments as, well as laboratory analysis equipment. The Rubber and Plastics cost weight would reflect expenses for products such as plastic trash cans, and carpeting. We are proposing these additional cost categories in order to proxy price inflation in a more granular fashion. We provide our proposed price proxies in more detail below. The differences between the major categories for the proposed 2010-based index and those used for the current 2003-based index are summarized in Table 2. We have allocated the Contract Services weight to the Wages and Salaries Employee Benefits, A&G, and Other Expenses cost categories in the proposed 2010-based index as we did in the 2003-based index. Table 2—Comparison of 2003-Based and Proposed 2010-Based Home Health Market Baskets Major Cost Categories and Weights Cost categories 2003-Based home health market basket Proposed 2010-based home health market basket Wages and Salaries, including allocated contract services' labor 64.484 66.325 Employee Benefits, including allocated contract services' labor 12.598 12.210 All Other Expenses including allocated contract services' labor 22.918 21.465 Total 100.000 100.000 The complete proposed 2010-based cost categories and weights are listed in Table 3. Table 3—Cost Categories, Weights, and Price Proxies in Proposed 2010-Based Home Health Market Basket Cost categories Weight Price proxy Compensation, including allocated contract services' labor 78.535 Wages and Salaries, including allocated contract services' labor 66.325 Proposed Home Health Occupational Wage Index (2010). Employee Benefits, including allocated contract services' labor 12.210 Proposed Home Health Occupational Benefits Index (2010). Operations & Maintenance 1.002 CPI-U Fuel & Other Utilities. Professional Liability Insurance 0.375 CMS Physician Professional Liability Insurance Index. Administrative & General & Other Expenses including allocated contract services' labor 15.381 Administrative Support 0.699 ECI for Compensation for Office and Administrative Services (Private). Financial Services 1.398 ECI for Compensation for Financial Services (Private). Medical Supplies 1.278 PPI for Medical Surgical & Personal Aid Devices. Rubber & Plastics 1.226 PPI for Rubber & Plastic Products. Telephone 0.881 CPI-U Telephone Services. Postage 0.279 CPI-U Postage. Professional Fees 5.811 ECI for Compensation for Professional and Related Workers (Private). Other Products 1.439 PPI Finished Goods less Food and Energy. Other Services 2.370 ECI for Compensation for Service Occupations (Private). Transportation 2.545 CPI-U Transportation. Capital-Related 2.162 Fixed Capital 1.532 CPI-U Owner's Equivalent Rent. Movable Capital 0.630 PPI Machinery & Equipment. Total 100.000 * * ** Figures may not sum to total due to rounding. After we computed the CY 2010 cost category weights for the proposed rebased home health market basket, we selected the most appropriate wage and price indexes to proxy the rate of change for each expenditure category. With the exception of the price index for insurance costs, the proposed price proxies are based on Bureau of Labor Statistics (BLS) data and are grouped into one of the following BLS categories: • Employment Cost Indexes —Employment Cost Indexes (ECIs) measure the rate of change in employee wage rates and employer costs for employee benefits per hour worked. These indexes are fixed-weight indexes and strictly measure the change in wage rates and employee benefits per hour. They are not affected by shifts in skill mix. ECIs are superior to average hourly earnings as price proxies for input price indexes for two reasons: (a) They measure pure price change; and (b) they are available by occupational groups, not just by industry. • Consumer Price Indexes —Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by the typical consumer. Consumer price indexes are used when the expenditure is more similar to that of a purchase at the retail level rather than at the wholesale level, or if no appropriate Producer Price Indexes (PPIs) were available. • Producer Price Indexes —PPIs measures average changes in prices received by domestic producers for their goods and services. PPIs are used to measure price changes for goods sold in other than retail markets. For example, a PPI for movable equipment is used rather than a CPI for equipment. PPIs in some cases are preferable price proxies for goods that HHAs purchase at wholesale levels. These fixed-weight indexes are a measure of price change at the producer or at the intermediate stage of production. We evaluated the price proxies using the criteria of reliability, timeliness, availability, and relevance. Reliability indicates that the index is based on valid statistical methods and has low sampling variability. Widely accepted statistical methods ensure that the data were collected and aggregated in way that can be replicated. Low sampling variability is desirable because it indicates that sample reflects the typical members of the population. (Sampling variability is variation that occurs by chance because a sample was surveyed rather than the entire population.) Timeliness implies that the proxy is published regularly, preferably at least once a quarter. The market baskets are updated quarterly and therefore it is important the underlying price proxies be up-to-date, reflecting the most recent data available. We believe that using proxies that are published regularly helps ensure that we are using the most recent data available to update the market basket. We strive to use publications that are disseminated frequently because we believe that this is an optimal way to stay abreast of the most current data available. Availability means that the proxy is publicly available. We prefer that our proxies are publicly available because this will help ensure that our market basket updates are as transparent to the public as possible. In addition, this enables the public to be able to obtain the price proxy data on a regular basis. Finally, relevance means that the proxy is applicable and representative of the cost category weight to which it is applied. The CPIs, PPIs, and ECIs selected by us to be proposed in this regulation meet these criteria. Therefore, we believe that they continue to be the best measure of price changes for the cost categories to which they would be applied. As part of the revising and rebasing of the home health market basket, we are proposing to revise and rebase the home health blended Wage and Salary index and the home health blended Benefits index. We would use these blended indexes as price proxies for the Wages and Salaries and the Employee Benefits portions of the proposed 2010-based home health market basket, as we did in the 2003-based home health market basket. A more detailed discussion is provided below. c. Price Proxies Used To Measure Cost Category Growth • Wages and Salaries For measuring price growth in the 2010-based home health market basket, we are proposing to apply six price proxies to six occupational subcategories within the Wages and Salaries component, which would reflect the HHA occupational mix. This is the same approach used for the 2003-based index as there is not a published wage proxy for home health care workers that reflects only wage changes and not both wage and skill mix changes. The 2003-based blended wage index was comprised of four occupational subcategories proxied by five wage proxies. For the 2010 blended wage index, we are proposing to further disaggregate the service workers occupations into health and social assistance service and other service occupational groups. We are also proposing to explicitly disaggregate professional and technical (P&T) workers into health-related P&T and non health-related P&T workers. We are proposing to continue to use the National Industry-Specific Occupational Employment and Wage estimates for North American Industrial Classification System (NAICS) 621600, Home Health Care Services, published by the BLS Office of Occupational Employment Statistics (OES) as the data source for the cost shares of the home health specific blended wage and benefits proxy. This is the same data source that was used for the 2003-based HHA blended wage and benefit proxies; however, we are proposing to use the May 2010 estimates in place of the November 2003 estimates. Detailed information on the methodology for the national industry-specific occupational employment and wage estimates survey can be found at http://www.bls.gov/oes/current/oes_tec.htm. The needed data on HHA expenditures for the six occupational subcategories (managerial, health-related P&T, non health-related P&T, health and social assistance service, other service occupations, and administrative/clerical) for the wages and salaries component were tabulated from the May 2010 OES data for NAICS 621600, Home Health Care Services. This is a refinement to the four categories used for the 2003-based wage proxy. Table 4 compares the proposed 2010 occupational assignments of the six CMS designated subcategories to the 2003 occupational assignments of the four CMS designated subcategories. Table 4—Proposed 2010 Occupational Assignments Compared to 2003 Occupational Assignments for CMS HH Wage Composite Index 2010 Proposed Occupational Groupings 2003 Occupational Groupings Group 1 Management Group 1 Management 11-0000 Management Occupations 11-0000 Management Occupations. Group 2 Non-Health Professional & Technical Group 2 Professional & Technical 13-0000 Business and Financial Operations Occupations 13-0000 Business and Financial Operations Occupations. 15-0000 Computer and Mathematical Science Occupations 15-0000 Computer and Mathematical Science Occupations. 17-0000 Architecture and Engineering Occupations 17-0000 Architecture and Engineering Occupations. 19-0000 Life, Physical, and Social Science Occupations 19-0000 Life, Physical, and Social Science Occupations. 23-0000 Legal Occupations 21-0000 Community and Social Services Occupations. 25-0000 Education, Training, and Library Occupations 23-0000 Legal Occupations. 27-0000 Arts, Design, Entertainment, Sports, and Media Occupations 25-0000 Education, Training, and Library Occupations. Group 3 Health-Related Professional & Technical 27-0000 Arts, Design, Entertainment, Sports, and Media Occupations. 29-1021 Dentists, General 29-0000 Healthcare Practitioners and Technical Occupations. 29-1031 Dietitians and Nutritionists 33-0000 Protective Service Occupations. 29-1051 Pharmacists 35-0000 Food Preparation and Serving Related Occupations. 29-1062 Family and General Practitioners 37-0000 Building and Grounds Cleaning and Maintenance Occupations. 29-1063 Internists, General 41-0000 Sales and Related Occupations. 29-1069 Physicians and Surgeons, All Other 49-0000 Installation, Maintenance, and Repair Occupations. 29-1071 Physician Assistants 51-0000 Production Occupations. 29-1111 Registered Nurses 53-0000 Transportation and Material Moving Occupations. 29-1122 Occupational Therapists 29-1123 Physical Therapists 29-1125 Recreational Therapists 29-1126 Respiratory Therapists 29-1127 Speech-Language Pathologists 29-1129 Therapists, All Other 29-1199 Health Diagnosing and Treating Practitioners, All Other Group 4 Other Service Workers Group 3 Service Workers 33-0000 Protective Service Occupations 31-0000 Healthcare Support Occupations. 35-0000 Food Preparation and Serving Related Occupations 39-0000 Personal Care and Service Occupations. 37-0000 Building and Grounds Cleaning and Maintenance Occupations 39-0000 Personal Care and Service Occupations 41-0000 Sales and Related Occupations 49-0000 Installation, Maintenance, and Repair Occupations 51-0000 Production Occupations 53-0000 Transportation and Material Moving Occupations 2010 Proposed Occupational Groupings 2003 Occupational Groupings Group 5 Health & Social Service Workers 21-0000 Community and Social Services Occupations 29-2011 Medical and Clinical Laboratory Technologists 29-2012 Medical and Clinical Laboratory Technicians 29-2021 Dental Hygienists 29-2032 Diagnostic Medical Sonographers 29-2034 Radiologic Technologists and Technicians 29-2041 Emergency Medical Technicians and Paramedics 29-2051 Dietetic Technicians 29-2052 Pharmacy Technicians 29-2054 Respiratory Therapy Technicians 29-2061 Licensed Practical and Licensed Vocational Nurses 29-2071 Medical Records and Health Information Technicians 29-2099 Health Technologists and Technicians, All Other 29-9012 Occupational Health and Safety Technicians 29-9099 Healthcare Practitioner and Technical Workers, All Other 31-0000 Healthcare Support Occupations Group 6 Administrative Group 4 Administrative 43-0000 Office and Administrative Support Occupations 43-0000 Office and Administrative Support Occupations. Total expenditures by occupation were calculated by taking the OES number of employees multiplied by the OES annual average salary. The wage and salary expenditures were aggregated based on the groupings in Table 5. We determined the proportion of total wage costs that each subcategory represents. These proportions listed in Table 5 represent the major rebased and revised home health blended Wage and Salary index weights. Table 5—Proposed Home Health Occupational Wages and Salaries Index (Wages and Salaries Component of the Proposed 2010 Based Home Health Market Basket) Cost category 2003 Weight Proposed 2010 weight Price proxy BLS Series ID Health-Related Professional and Technical (P&T) 50.812 33.373 ECI for Wages & Salaries for Civilian Hospital Workers CIU10262200 00000I Non Health-Related P&T 2.253 ECI for Wages & Salaries in Private Industry for Professional, Specialty & Technical Workers CIU20254000 00000I Managerial/Supervisory 9.007 8.260 ECI for Wages & Salaries in Private Industry for Executive, Administrative & Managerial Workers CIU20200001 10000I Administrative/Clerical 7.596 7.720 ECI for Wages & Salaries in Private Industry for Administrative Support, Including Clerical Workers CIU20200002 20000I Health and Social Assistance Services 32.584 35.772 ECI for Wages & Salaries for Civilian Healthcare and Social Assistance CIU10262000 00000I Other Service Occupations 12.622 ECI for Wages & Salaries in Private Industry Service Occupations CIU20200003 00000I Total 100.000 100.000 A comparison of the yearly changes from CY 2010 to CY 2013 for the 2003-based HH wage and salary blend and the proposed 2010-based home health wage and salary blend is shown in Table 6. The average annual increase in the two price proxies is similar, and in no year is the difference greater than 0.3 percentage point. Table 6—Annual Growth in Proposed 2010 HH Wage Blend and 2003 HH Wage Blend 2010 2011 2012 2013 HH Wage Blend 2010 1.6 1.5 2.1 2.7 HH Wage Blend 2003 1.5 1.5 1.8 2.4 Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. • Employee benefits: For measuring employee benefits price growth in the 2010-based home health market basket, we are proposing to apply applicable price proxies to the six occupational subcategories that are used for the wage blend listed in Table 7. The percentage change in the blended price of home health employee benefits is applied to this component, which is described in Table 7. Table 7—Proposed Home Health Occupational Benefits Index (Employee Benefits Component of the Proposed 2010-Based Home Health Market Basket) Cost category 2003 Weight Proposed 2010 weight Price proxy Health-Related Professional and Technical (P&T) 50.506 33.506 ECI for Benefits for Civilian Hospital Workers. Non Health-Related P&T 2.246 ECI for Benefits in Private Industry for Professional, Specialty & Technical Workers. Managerial/Supervisory 8.766 8.029 ECI for Benefits in Private Industry for Executive, Administrative & Managerial Workers. Administrative/Clerical 7.698 7.789 ECI for Benefits in Private Industry for Administrative Support, Including Clerical Workers. Health and Social Assistance 33.024 35.887 ECI for Benefits for Civilian Healthcare and Social Assistance Workers. Other Service Occupations 12.542 ECI for Benefits in Private Industry Service Occupations. Total 100.000 100.000 There is no available data source that exists for benefit expenditures by occupation for the home health industry. Thus, to construct weights for the home health occupational benefits index we calculated the ratio of benefits to wages and salaries for CY 2010 for the six BLS ECI series we are proposing to use in the blended wage and benefit indexes. To derive the relevant benefit weight, we applied the benefit-to-wage ratios to each of the six occupational subcategories from the 2010 OES wage and salary weights, and normalized. For example, the ratio of benefits to wages from the 2010 home health occupational wage and benefit indexes for home health managers is 0.976. We apply this ratio to the 2010 OES weight for wages and salaries for home health managers, 8.260, and then normalize those weights relative to the other five benefit occupational categories to obtain a benefit weight for home health managers of 8.029. A comparison of the yearly changes from CY 2010 to CY 2013 for the 2003-based HH benefit blend and the proposed 2010-based home health benefit blend is shown in Table 8. The average annual increase in the two price proxies is similar, and in no year is the difference greater than 0.3 percentage point. Table 8—Annual Growth in Proposed 2010 HH Benefits Blend and 2003 HH Benefits Blend 2010 2011 2012 2013 HH Benefits Blend 2010 2.6 2.7 2.7 2.8 HH Benefits Blend 2003 2.4 3.0 2.5 2.9 Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. • Administrative and Support: We are proposing to use the ECI for Compensation for Office and Administrative Support Services (private industry) (BLS series code # CIU2010000220000I) to measure price growth of this cost category. The 2003-based index did not reflect this detailed cost category. • Financial Services: We are proposing to use the ECI for Compensation for Financial Activities (private industry) (BLS series code # CIU201520A000000I) to measure price growth of this cost category. The 2003-based index did not reflect this detailed cost category. • Medical Supplies: We are proposing to use the PPI for Medical Surgical & Personal Aid Devices (BLS series code # WPU156) to measure price growth of this cost category. The 2003-based index did not reflect this detailed cost category. • Rubber and Plastics: We are proposing to use the PPI for Rubber and Plastic Products (BLS series code # WPU07) to measure price growth of this cost category. The 2003-based index did not reflect this detailed cost category. • Operations and Maintenance: We are proposing to use CPI for Fuel and Utilities (BLS series code # CUUR0000SAH2) to measure price growth of this cost category. The same proxy was used for the 2003-based market basket. • Professional Liability Insurance: We are proposing to use the CMS Physician Professional Liability Insurance price index to measure price growth of this cost category. The 2003-based index used the CPI for Household Insurance as the price proxy for this component. We are proposing to revise the price proxy for this category as we believe that it is more technically appropriate to proxy PLI price changes by an index specific to medical liability insurance. CMS currently does not have a PLI index specific to the HHA industry so we are proposing to use the CMS Physician Liability Insurance Index as we believe this would reasonably reflect the price changes associated with medical liability insurance purchased by home health agencies. To accurately reflect the price changes associated with physician PLI, each year, we solicit PLI premium data for physicians from a sample of commercial carriers. This information is not collected through a survey form, but instead is requested directly from, and provided by (on a voluntary basis), several national commercial carriers. As we require for our other price proxies, the PLI price proxy is intended to reflect the pure price change associated with this particular cost category. Thus, it does not include changes in the mix or level of liability coverage. To accomplish this result, we obtain premium information from a sample of commercial carriers for a fixed level of coverage, currently $1 million per occurrence and a $3 million annual limit. This information is collected for every State by physician specialty and risk class. Finally, the State-level, physician-specialty data are aggregated by effective premium date to compute a national total, using counts of physicians by State and specialty as provided in the AMA publication, Physician Characteristics and Distribution in the U.S. • Telephone: We are proposing to use CPI for Telephone Services (BLS series code # CUUR0000SEED) to measure price growth of this cost category. The same proxy was used for the 2003-based market basket. • Postage: We are proposing to use CPI for Postage (BLS series code # CUUR0000SEEC01) to measure price growth of this cost category. The same proxy was used for the 2003-based market basket. • Professional Fees: We are proposing to use the ECI for Compensation for Professional and Related Workers (private industry) (BLS series code # CIS2010000120000I) to measure price growth of this category. The same proxy was used for the 2003-based market basket. • Other Products: We are proposing to use the PPI for Finished Goods Less Food and Energy (BLS series code #) to measure price growth of this category. For the 2003-based market basket we used the CPI for All Items Less Food and Energy to proxy this category. We believe that the PPI better reflects business input costs than the CPI index which better reflects cost faced by consumers. • Other Services: We are proposing to use the ECI for Compensation for Service Occupations (private) (BLS series code # CIU2010000300000I) to measure price growth of this category. The same proxy was used for the 2003-based market basket. • Transportation: We are proposing to use the CPI for Transportation (BLS series code # CUUR00000SAT) to measure price growth of this category. The 2003-based market basket used the CPI for Private Transportation (BLS series code # CUUS0000SAT1). We are proposing to revise the price proxy to reflect price inflation of both private and public transportation costs. We are proposing this change as further investigation of the MCR instructions request providers to include both private and public transportation costs. • Fixed capital: We are proposing to use the CPI for Owner's Equivalent Rent (BLS series code # CUUS0000SEHC) to measure price growth of this cost category. The same proxy was used for the 2003-based market basket. • Movable Capital: We are proposing to use the PPI for Machinery and Equipment (BLS series code # WPU11) to measure price growth of this cost category. The same proxy was used for the 2003-based market basket. As we did in the 2003-based home health market basket, we allocated the Contract Services' share of home health agency expenditures among Wages and Salaries, Employee Benefits, A&G and Other Expenses. d. Rebasing Results A comparison of the yearly changes from CY 2010 to CY 2013 for the 2003-based home health market basket and the proposed 2010-based home health market basket is shown in Table 9. Table 9—Comparison of the 2003-Based Home Health Market Basket and the Proposed 2010-Based Home Health Market Basket, Percent Change, 2010-2013 Home health market basket, 2003-based Proposed home health market basket, 2010-based Difference (proposed 2010-based less 2003-based) Historical: CY 2010 1.7 1.8 0.1 Historical CY 2011 2.0 2.0 0.0 CY 2012 1.9 2.1 0.2 CY 2013 2.3 2.5 0.2 Average Change: 2010-2013 2.0 2.1 0.1 Source: IHS Global Insight, Inc, 2nd Quarter 2012 forecast with historical data through 1st Quarter 2012. Table 9 shows that the forecasted rate of growth for CY 2013, beginning January 1, 2013, for the proposed rebased and revised home health market basket is 2.5 percent, while the forecasted rate of growth for the current 2003-based home health market basket is 2.3 percent. The higher growth rate for the 2010-based HHA market basket for CY 2013 is attributable to the proposed wage and benefit blended price proxies, as well as the relatively faster price growth for the A&G cost category. The revised wage and benefit blended index reflects a larger weight associated with health P&T occupations (which is proxied by the ECIs for Hospital Workers) compared to the 2003-based index. The wage and benefit ECIs for hospital workers are currently projected to grow faster than the other ECIs in the blended indexes. e. Labor-Related Share In the 2003-based home health market basket the labor-related share was 77.082 percent while the remaining non-labor-related share was 22.918 percent. In the proposed revised and rebased home health market basket, the labor-related share would be 78.535 percent. The labor-related share includes wages and salaries and employee benefits, as well as allocated contract labor costs. The proposed non-labor-related share would be 21.465 percent. The increase in the labor-related share using the 2010-based HH market basket is primarily due to the increase in costs associated with contract labor. Table 10 details the components of the labor-related share for the 2003-based and proposed 2010-based home health market baskets. Table 10—Labor-Related Share of Current and Proposed Home Health Market Baskets Cost category 2003-based market basket weight Proposed 2010- based market basket weight Wages and Salaries 64.484 66.325 Employee Benefits 12.598 12.210 Total Labor-Related 77.082 78.535 Total Non Labor-Related 22.918 21.465 f. Proposed CY 2013 Market Basket Update for HHAs For CY 2013, we are proposing to use an estimate of the proposed 2010-based HHA market basket to update payments to HHAs based on the best available data. Consistent with historical practice, we estimate the HHA market basket update for the HHA PPS based on IHS Global Insight, Inc.'s (IGI's) forecast using the most recent available data. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of the market baskets. Based on IGI's second quarter 2012 forecast with history through the first quarter of 2012, the projected HHA market basket update for CY 2013 is 2.5 percent. Therefore, consistent with our historical practice of estimating market basket increases based on the best available data, we are proposing a market basket update of 2.5 percent for CY 2013. Furthermore, because the proposed CY 2013 annual update is based on the most recent market basket estimate for the 12-month period (currently 2.5 percent), we also are proposing that if more recent data are subsequently available (for example, a more recent estimate of the market basket), we would use such data, if appropriate, to determine the CY 2013 annual update in the final rule. 2. CY 2013 Home Health Payment Update Percentage Section 3401(e) of the Affordable Care Act amended section 1895(b)(3)(B) of the Act by adding a new clause (vi) which states, “After determining the home health market basket percentage increase * * * the Secretary shall reduce such percentage * * * for each of 2011, 2012, and 2013, by 1 percentage point. The application of this clause may result in the home health market basket percentage increase under clause (iii) being less than 0.0 for a year, and may result in payment rates under the system under this subsection for a year being less than such payment rates for the preceding year.” Therefore, the proposed CY 2013 market basket update of 2.5 percent must be reduced by 1 percentage point. Thus, the proposed CY 2013 home health payment update is 1.5 percent. 3. Home Health Quality Reporting Program (QRP) a. Background and Quality Reporting Requirements Section 1895(b)(3)(B)(v)(II) of the Act states that “each home health agency shall submit to the Secretary such data that the Secretary determines are appropriate for the measurement of health care quality. Such data shall be submitted in a form and manner, and at a time, specified by the Secretary for purposes of this clause.” In addition, section 1895(b)(3)(B)(v)(I) of the Act states that “for 2007 and each subsequent year, in the case of a HHA that does not submit data to the Secretary in accordance with subclause (II) with respect to such a year, the HH market basket percentage increase applicable under such clause for such year shall be reduced by 2 percentage points.” This requirement has been codified in regulations at § 484.225(i). HHAs that meet the quality data reporting requirements are eligible for the full home health market basket percentage increase. HHAs that do not meet the reporting requirements are subject to a 2 percentage point reduction to the home health market basket increase. Section 1895(b)(3)(B)(v)(III) of the Act further states that “[t]he Secretary shall establish procedures for making data submitted under sub clause (II) available to the public. Such procedures shall ensure that a home health agency has the opportunity to review the data that is to be made public with respect to the agency prior to such data being made public.” As codified at § 484.250(a), we established that the quality reporting requirements could be met by the submission of OASIS assessments and Home Health CAHPS. In the CY 2012 HH PPS final rule (76 FR 68576), we listed selected measures for the HH QRP and also established procedures for making the information available to the public by placing the information on the Home Health Compare Web site. The selected measures that are made available to the public can be viewed on the Home Health Compare Web site located at http://www.medicare.gov/HHCompare/Home.asp. In the CY 2012 HH PPS final rule (76 FR 68575), we finalized that we would also use measures derived from Medicare claims data to measure home health quality. b. OASIS Data Submission and OASIS Data for Annual Payment Update The Home Health Conditions of Participation (CoPs) at § 484.55(d) require that the comprehensive assessment must be updated and revised (including the administration of the OASIS) no less frequently than: (1) The last five days of every 60 days beginning with the start-of-care date, unless there is a beneficiary elected transfer, significant change in condition, or discharge and return to the same HHA during the 60-day episode; (2) within 48 hours of the patient's return to the home from a hospital admission of 24 hours or more for any reason other than diagnostic tests; and (3) at discharge. It is important to note that to calculate quality measures from OASIS data, there must be a complete quality episode, which requires both a Start of Care or Resumption of Care OASIS assessment and a Transfer or Discharge OASIS assessment. Failure to submit sufficient OASIS assessments to allow calculation of quality measures, including transfer and discharge assessments, is failure to comply with the CoPs. Home Health Agencies do not need to submit OASIS data for those patients who are excluded from the OASIS submission requirements under the Home Health Conditions of Participation (CoPs) § 484.1 through § 484.265. As described in the Medicare and Medicaid Programs: Reporting Outcome and Assessment Information Set Data as Part of the Conditions of Participation for Home Health Agencies Final Rule (CMS-3006-F) (70 FR 76202), these are: • Those patients receiving only nonskilled services; • Those patients for whom neither Medicare nor Medicaid is paying for home health care (patients receiving care under a Medicare or Medicaid Managed Care Plan are not excluded from the OASIS reporting requirement); • Those patients receiving pre- or post-partum services; or • Those patients under the age of 18 years. As set forth in the Medicare Program; Home Health Prospective Payment System Refinement and Rate Update for Calendar Year 2008 Final Rule (CMS-1541-CF) (72 FR 49863), HHAs that become Medicare-certified on or after May 31 of the preceding year are not subject to the OASIS quality reporting requirement nor any payment penalty for quality reporting purposes for the following year. For example, HHAs certified on or after May 31, 2012 are not subject to the 2 percentage point reduction to their market basket update for CY 2013. These exclusions only affect quality reporting requirements and do not affect the HHA's reporting responsibilities under the Conditions of Participation and Conditions of Payment (70 FR 76202). c. Home Health Care Quality Reporting Program Requirements for CY 2014 Payment and Subsequent Years (1) Submission of OASIS data For CY 2013, we propose to consider OASIS assessments submitted by HHAs to CMS in compliance with HHA Conditions of Participation and Conditions for Payment for episodes beginning on or after July 1, 2011 and before July 1, 2012 as fulfilling one portion of the quality reporting requirement for CY 2013. This time period would allow for 12 full months of data collection and would provide us with the time necessary to analyze and make any necessary payment adjustments to the payment rates for CY 2013. We propose to continue this pattern for each subsequent year beyond CY 2013, considering OASIS assessments submitted in the time frame between July 1 of the calendar year two years prior to the calendar year of the Annual Payment Update (APU) effective date and July 1 of the calendar year one year prior to the calendar year of the APU effective date as fulfilling the OASIS portion of the quality reporting requirement for the subsequent APU. (2) Acute Care Hospitalization Claims-Based Measure We have determined that claims data are a more robust source of data for accurately measuring acute care hospitalizations than other data sources. We propose that the claims-based Acute Care Hospitalization measure replace the OASIS-based measure on Home Health Compare. The OASIS-based measure will continue to be reported on the agency-specific Certification and Survey Provider Enhanced Reporting system (CASPER) reports. Due to technical issues with Home Health Compare files, we will delay the reporting of both “Emergency Department Use Without Hospitalization” and “Acute Care Hospitalization” until such time as the technical issues are resolved. The OASIS-based Acute Care Hospitalization measure will continue to be made available to the public via Home Health Compare until it is replaced with the claims-based measure. To summarize, for the CY 2013 payment update and for subsequent annual payment updates, we propose to continue to use a HHA's submission of OASIS assessments between July 1 and June 30 as fulfilling one portion of the quality reporting requirement for each payment year. Medicare claims data and HHCAHPS data will also be used to measure home health care quality. d. Home Health Care CAHPS Survey (HHCAHPS) In the HH PPS Rate Update for CY 2012 HH PPS final rule (76 FR 68577), we stated that the expansion of the home health quality measures reporting requirements for Medicare-certified agencies includes the Consumer Assessment of Healthcare Providers and Systems (CAHPS®) Home Health Care (HHCAHPS) Survey for the CY 2012 annual payment update (APU). In CY 2012 we moved forward with the HHCAHPS linkage to the pay-for-reporting (P4R) requirements affecting the HH PPS rate update for CY 2012. We are maintaining the stated HHCAHPS data requirements for CY 2013 that were set out in the CY 2012 HH PPS final rule, for the continuous monthly data collection and quarterly data submission of HHCAHPS data. Background and Description of HHCAHPS As part of the United States Department of Health and Human Services' (DHHS) Transparency Initiative, we have implemented a process to measure and publicly report patient experiences with home health care, using a survey developed by the Agency for Healthcare Research and Quality's (AHRQ's) CAHPS® program, and endorsed by the National Quality Forum (NQF). The HHCAHPS survey is part of a family of CAHPS® surveys that asks patients to report on and rate their experiences with health care. The HHCAHPS survey presents home health patients with a set of standardized questions about their home health care providers and about the quality of their home health care. Prior to this survey, there was no national standard for collecting information about patient experiences that would enable valid comparisons across all home health agencies (HHAs). The history and development process for HHCAHPS has been given in previous rules, but it is also available on our Web site https://homehealthcahps.org and also, in the annually-updated HHCAHPS Protocols and Guidelines Manual, which is downloadable from https://homehealthcahps.org. For public reporting purposes, we present five measures—three composite measures and two global ratings of care—from the questions on the HHCAHPS survey. The publicly reported data are adjusted for differences in patient mix across home health agencies. Each composite measure consists of four or more questions regarding one of the following related topics: • Patient care (Q9, Q16, Q19, and Q24); • Communications between providers and patients (Q2, Q15, Q17, Q18, Q22, and Q23); and • Specific care issues on medications, home safety, and pain (Q3, Q4, Q5, Q10, Q12, Q13, and Q14). The two global ratings are the overall rating of care given by the HHA's care providers (Q20), and the patient's willingness to recommend the HHA to family and friends (Q25). The HHCAHPS survey is not supposed to measure the aspects of home health clinical care that can be captured through a medical record. Rather, the HHCAHPS survey focuses on areas where the home health patient is the best or only source for the information. We believe that the HHCAHPS survey is a valid measure of patient's perspectives of home health care. The developmental work for the HHCAHPS survey began in mid-2006, and the first HHCAHPS survey was field-tested (to validate the length and content of the survey) in 2008 by the AHRQ and the CAHPS® grantees, and the final HHCAHPS survey was used in a national randomized mode experiment in 2009 through 2010. The HHCAHPS survey is currently available in several languages. At the time of the CY 2010 HH PPS final rule, HHCAHPS was only available in English and Spanish translations. In the proposed rule for CY 2010, we stated that we would provide additional translations of the survey over time in response to suggestions for any additional language translations. We now offer HHCAHPS in English, Spanish, Chinese, Russian, and Vietnamese languages. We will continue to consider additional translations of the HHCAHPS in response to the needs of the home health patient population. All of the requirements about home health patient eligibility for the HHCAHPS survey and conversely, which home health patients are ineligible for the HHCAHPS survey are delineated and detailed in the HHCAHPS Protocols and Guidelines Manual, which is downloadable from https://homehealthcahps.org. Home health patients are eligible for HHCAHPS if they received at least two skilled home health visits in the past two months, and are paid for by Medicare or Medicaid. Home health patients are ineligible for inclusion in HHCAHPS surveys if one of these conditions pertains to them: • Are under the age of 18; • Are deceased prior to pulling sample; • Receive hospice care; • Received routine maternity care only; • Are not considered survey eligible because the state in which the patient lives restricts release of patient information for a specific condition or illness that the patient has; or • Requested that their names not be released to anyone. We stated in previous rules that Medicare-certified agencies are required to contract with an approved HHCAHPS survey vendor. This requirement is also codified. Beginning in summer 2009, interested vendors applied to become approved HHCAHPS survey vendors. HHCAHPS survey vendors are required to attend introductory and all update trainings conducted by CMS and the HHCAHPS Survey Coordination Team, as well as to pass a post-training certification test. We now have approximately 40 approved HHCAHPS survey vendors. The list of approved HHCAHPS survey vendors is available at https://homehealthcahps.org. HHCAHPS Oversight Activities We stated in prior final rules that vendors and HHAs would be required to participate in HHCAHPS oversight activities to ensure compliance with HHCAHPS protocols, guidelines, and survey requirements. The purpose of the oversight activities is to ensure that HHAs and approved survey vendors follow the HHCAHPS Protocols and Guidelines Manual. As stated previously in the CY 2010, CY 2011, and CY 2012 final rules, all approved survey vendors must develop a Quality Assurance Plan (QAP) for survey administration in accordance with the HHCAHPS Protocols and Guidelines Manual. An HHCAHPS survey vendor's first QAP must be submitted within 6 weeks of the data submission deadline date after the vendor's first quarterly data submission. The QAP must be updated and submitted annually thereafter and at any time that changes occur in staff or vendor capabilities or systems. A model QAP is included in the HHCAHPS Protocols and Guidelines Manual. The QAP should include the following: • Organizational Background and Staff Experience • Work Plan • Sampling Plan • Survey Implementation Plan • Data Security, Confidentiality and Privacy Plan • Questionnaire Attachments As part of the oversight activities, the HHCAHPS Survey Coordination Team conducts on-site visits to the approved HHCAHPS survey vendors. The purpose of the site visits is to allow the HHCAHPS Coordination Team to observe the entire Home Health Care CAHPS Survey implementation process, from the sampling stage through file preparation and submission, as well as to assess how the HHCAHPS data are stored. The HHCAHPS Survey Coordination Team reviews the survey vendor's survey systems, and assesses administration protocols based on the HHCAHPS Protocols and Guidelines Manual posted at https://homehealthcahps.org. The systems and program review includes, but is not limited to the following: • Survey management and data systems; • Printing and mailing materials and facilities; • Telephone call center facilities; • Data receipt, entry and storage facilities; and • Written documentation of survey processes. After the site visits, HHCAHPS vendors are given a defined time period in which to correct any identified issues and provide follow-up documentation of corrections for review. HHCAHPS survey vendors are subject to follow-up site visits on an as-needed basis. We are proposing to codify the current guideline that all approved HHCAHPS survey vendors fully comply with all HHCAHPS oversight activities. We are proposing to include this survey requirement at § 484.250(c). HHCAHPS Requirements for CY 2014 For the CY 2014 APU, we propose to continue monthly HHCAHPS data collection and reporting for four quarters. The data collection period for CY 2014 would include second quarter 2012 through first quarter 2013 (the months of April 2012 through March 2013). HHAs would be required to submit their HHCAHPS data files to the Home Health CAHPS Data Center for CY 2014 for the second quarter 2012 by 11:59 p.m., Eastern Time on October 18, 2012; for the third quarter 2012 by 11:59 p.m., Eastern Time on January 17, 2013; for the fourth quarter 2012 by 11:59 p.m., Eastern Time on April 18, 2013; and for the first quarter 2013 by 11:59 p.m., Eastern Time on July 18, 2013. As noted, we exempt HHAs receiving Medicare certification on or after April 1, 2012 from the full HHCAHPS reporting requirement for the CY 2014 APU, because these HHAs were not Medicare-certified in the period of April 1, 2011 through March 31, 2012. These HHAs would not need to complete a Participation Exemption Request Form for the CY 2014 Annual Payment Update. We propose to maintain this stated exemption for new HHAs. As noted, HHAs that had fewer than 60 HHCAHPS-eligible unduplicated or unique patients in the period of April 1, 2011 through March 31, 2012 would be exempt from the HHCAHPS data collection and submission requirements for the CY 2014 APU. Such agencies would be required to submit their patient counts for the period of April 1, 2011 through March 31, 2012 on the Participation Exemption Request form posted at https://homehealthcahps.org by 11:59 p.m., Eastern Time on January 17, 2013. This deadline would be firm, as would be all of the quarterly data submission deadlines. HHCAHPS Requirements for CY 2015 For the CY 2015 APU, we propose to continue to require the continuous monthly HHCAHPS data collection and reporting for four quarters. The data collection period for CY 2015 would include second quarter 2013 through first quarter 2014 (the months of April 2013 through March 2014). HHAs would be required to submit their HHCAHPS data files to the Home Health CAHPS Data Center for CY 2014 for the second quarter 2013 by 11:59 p.m., Eastern Time on October 17, 2013; for the third quarter 2013 by 11:59 p.m., Eastern Time on January 16, 2014; for the fourth quarter 2013 by 11:59 p.m., Eastern Time on April 17, 2014; and for the first quarter 2014 by 11:59 p.m., Eastern Time on July 17, 2014. We propose to continue to exempt HHAs receiving Medicare certification after the period in which HHAs do their patient count (April 1, 2012 through March 31, 2013) on or after April 1, 2013 from the full HHCAHPS reporting requirement for the CY 2015 APU, because these HHAs would not have been Medicare-certified throughout the period of April 1, 2012 through March 31, 2013. These HHAs do not need to complete a Participation Exemption Request Form for the CY 2015 Annual Payment Update. We propose to maintain this stated exemption for new HHAs. Likewise, we would require that all HHAs that had fewer than 60 HHCAHPS-eligible unduplicated or unique patients in the period of April 1, 2012 through March 31, 2013 would be exempt from the HHCAHPS data collection and submission requirements for the CY 2015 APU. Agencies with fewer than 60 HHCAHPS-eligible, unduplicated or unique patients in the period of April 1, 2012 through March 31, 2013 would be required to submit their patient counts on the Participation Exemption Request form for CY 2015 posted at https://homehealthcahps.org by 11:59 p.m., Eastern Time on January 16, 2014. This deadline would be firm, as would be all of the quarterly data submission deadlines. HHCAHPS Reconsiderations and Appeals Process We believe that HHAs should monitor their respective HHCAHPS survey vendors to ensure that vendors submit their HHCAHPS data on time, by accessing their HHCAHPS Data Submission Reports on https://homehealthcahps.org. This will help HHAs ensure that their data are submitted in the proper format for data processing to the HHCAHPS Data Center. We believe that the reconsiderations process for HHCAHPS should not be burdensome to HHAs. We have modeled the HHCAHPS reconsiderations process after the one that is used for Hospital CAHPS, in use for nearly 7 years. We have described the HHCAHPS reconsiderations process requirements in the notification memorandum that the RHHIs/MACs sent to the affected HHAs, on behalf of CMS. HHAs have 30 days to send their reconsiderations to CMS. CMS has and will continue to fully examine all HHA reconsiderations. Summary of Proposed Changes in CY 2013 We are proposing only one change for the CY 2013 rule—to codify the HHCAHPS guideline that HHAs ensure that survey vendors fully comply with all HHCAHPS requirements. For Further Information on the HHCAHPS Survey We strongly encourage HHAs to learn about the survey and view the HHCAHPS Survey Web site at the official Web site for the HHCAHPS at https://homehealthcahps.org. Home health agencies can also send an email to the HHCAHPS Survey Coordination Team at HHCAHPS@rti.org, or telephone toll-free (1-866-354-0985) for more information about HHCAHPS. 4. Home Health Wage Index Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the Secretary to provide appropriate adjustments to the proportion of the payment amount under the HH PPS that account for area wage differences, using adjustment factors that reflect the relative level of wages and wage-related costs applicable to the furnishing of home health services. For CY 2013, as in previous years, we are proposing to base the wage index adjustment to the labor portion of the HH PPS rates on the most recent pre-floor and pre-reclassified hospital wage index. We would apply the appropriate wage index value to the labor portion of the HH PPS rates based on the site of service for the beneficiary (defined by section 1861(m) of the Act as the beneficiary's place of residence). Previously, we determined each HHA's labor market area based on definitions of Metropolitan Statistical Areas (MSAs) issued by the Office of Management and Budget (OMB). We have consistently used the pre-floor, pre-reclassified hospital wage index data to adjust the labor portion of the HH PPS rates. We believe the use of the pre-floor, pre-reclassified hospital wage index data results in an appropriate adjustment to the labor portion of the costs, as required by statute. In the CY 2006 HH PPS final rule (70 FR 68132), we began adopting revised labor market area definitions as discussed in the Office of Management and Budget (OMB) Bulletin No. 03-04 (June 6, 2003). This bulletin announced revised definitions for Metropolitan Statistical Areas (MSAs) and the creation of Micropolitan Statistical Areas and Core-Based Statistical Areas (CBSAs). The bulletin is available online at www.whitehouse.gov/omb/bulletins/b03-04.html. In addition, OMB published subsequent bulletins regarding CBSA changes, including changes in CBSA numbers and titles. This rule incorporates the CBSA changes published in the most recent OMB bulletin. The OMB bulletins are available at http://www.whitehouse.gov/omb/bulletins/index.html. Finally, we would continue to use the methodology discussed in the CY 2007 HH PPS final rule (71 FR 65884) to address those geographic areas in which there were no IPPS hospitals and, thus, no hospital wage data on which to base the calculation of the HH PPS wage index. For rural areas that do not have IPPS hospitals, and therefore, lack hospital wage data on which to base a wage index, we would use the average wage index from all contiguous CBSAs as a reasonable proxy. For rural Puerto Rico, we do not apply this methodology due to the distinct economic circumstances that exist there, but instead continue using the most recent wage index previously available for that area (from CY 2005). For urban areas without IPPS hospitals, we use the average wage index of all urban areas within the State as a reasonable proxy for the wage index for that CBSA. For CY 2012, the only urban area without IPPS hospital wage data is Hinesville-Fort Stewart, Georgia (CBSA 25980). The wage index values for rural areas and the CBSAs and their associated wage index values are available via the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices.html 5. Proposed CY 2013 Payment Update a. National Standardized 60-Day Episode Rate The Medicare HH PPS has been in effect since October 1, 2000. As set forth in the July 3, 2000 final rule (65 FR 41128), the base unit of payment under the Medicare HH PPS is a national standardized 60-day episode rate. As set forth in § 484.220, we adjust the national standardized 60-day episode rate by a case-mix relative weight and a wage index value based on the site of service for the beneficiary. In the CY 2008 HH PPS final rule with comment period, we refined the case-mix methodology and also rebased and revised the home health market basket. To provide appropriate adjustments to the proportion of the payment amount under the HH PPS to account for area wage difference, we apply the appropriate wage index value to the labor portion of the HH PPS rates. As discussed in section III.C.1, we have proposed a labor-related share of the case-mix adjusted 60-day episode rate of 78.535 percent and a non-labor-related share of 21.465 percent. The proposed CY 2013 HH PPS rates use the same case-mix methodology and application of the wage index adjustment to the labor portion of the HH PPS rates as set forth in the CY 2008 HH PPS final rule with comment period. Following are the steps we take to compute the case-mix and wage adjusted 60-day episode rate: (1) Multiply the national 60-day episode rate by the patient's applicable case-mix weight. (2) Divide the case-mix adjusted amount into a labor (78.535 percent) and a non-labor portion (21.465 percent). (3) Multiply the labor portion by the applicable wage index based on the site of service of the beneficiary. (4) Add the wage-adjusted portion to the non-labor portion, yielding the case-mix and wage adjusted 60-day episode rate, subject to any additional applicable adjustments. In accordance with section 1895(b)(3)(B) of the Act, this document constitutes the annual update of the HH PPS rates. The HH PPS regulations at § 484.225 set forth the specific annual percentage update methodology. In accordance with § 484.225(i), for a HHA that does not submit home health quality data, as specified by the Secretary, the unadjusted national prospective 60-day episode rate is equal to the rate for the previous calendar year increased by the applicable home health market basket index amount minus two percentage points. Any reduction of the percentage change will apply only to the calendar year involved and will not be considered in computing the prospective payment amount for a subsequent calendar year. For CY 2013, we propose to update the national per-visit rates for each discipline by the applicable home health payment update percentage of 1.5 percent. We propose to adjust the national per-visit rate by the appropriate wage index based on the site of service for the beneficiary, as set forth in § 484.230. As discussed in the July 3, 2000 HH PPS final rule, for episodes with four or fewer visits, Medicare pays the national per-visit amount by discipline, referred to as a low utilization payment amount (LUPA). We propose to adjust the labor portion of the updated national per-visit rates used to calculate LUPAs by the most recent pre-floor and pre-reclassified hospital wage index. We are also proposing to update the LUPA add-on payment amount and the NRS conversion factor by the applicable home health payment update of 1.5 percent for CY 2013. Medicare pays the 60-day case-mix and wage-adjusted episode payment on a split percentage payment approach. The split percentage payment approach includes an initial percentage payment and a final percentage payment as set forth in § 484.205(b)(1) and § 484.205(b)(2). We may base the initial percentage payment on the submission of a request for anticipated payment (RAP) and the final percentage payment on the submission of the claim for the episode, as discussed in § 409.43. The claim for the episode that the HHA submits for the final percentage payment determines the total payment amount for the episode and whether we make an applicable adjustment to the 60-day case-mix and wage-adjusted episode payment. The end date of the 60-day episode as reported on the claim determines which calendar year rates Medicare would use to pay the claim. We may also adjust the 60-day case-mix and wage-adjusted episode payment based on the information submitted on the claim to reflect the following: • A low utilization payment provided on a per-visit basis as set forth in § 484.205(c) and § 484.230. • A partial episode payment adjustment as set forth in § 484.205(d) and § 484.235. • An outlier payment as set forth in § 484.205(e) and § 484.240. b. Proposed Updated CY 2013 National Standardized 60-Day Episode Payment Rate In calculating the annual update for the CY 2012 national standardized 60-day episode payment rates, we first look at the CY 2012 rates as a starting point. The CY 2012 national standardized 60-day episode payment rate is $2,138.52. Next, we update the payment amount by the proposed CY 2013 home health payment update of 1.5 percent. As previously discussed in section III.A. (“Case-Mix Measurement”) of this proposed rule, our updated analysis of the change in case-mix that is not due to an underlying change in patient health status reveals an additional increase in nominal change in case-mix. Therefore, we propose to reduce rates by 1.32 percent in CY 2013. The national 60-day episode payment amount is adjusted by the case-mix weight of the patient and by the wage index of the geographic area in which the beneficiary is located. The proposed CY 2013 national standardized 60-day episode payment rate for an HHA that submits the required quality data is shown in Table 11. The proposed CY 2013 national standardized 60-day episode payment rate for an HHA that does not submit the required quality data is updated by the proposed CY 2013 home health payment update (1.5 percent) minus 2 percentage points and is shown in Table 12. Table 11—Proposed CY 2013 National 60-Day Episode Payment Amount CY 2012 National standardized 60-day episode payment rate Multiply by the proposed CY 2013 home health payment update of 1.5 percent Reduce by 1.32 percent for nominal change in case-mix Proposed CY 2013 National standard- ized 60-day episode payment rate $2,138.52 × 1.015 × 0.9868 $2,141.95 Table 12—For HHAs That Do Not Submit the Quality Data—Proposed CY 2013 National 60-Day Episode Payment Amount CY 2012 National standardized 60-day episode payment rate Multiply by the proposed CY 2013 home health payment update of 1.5 percent minus 2 percentage points (−0.5 percent) Reduce by 1.32 percent for nominal change in case-mix Proposed CY 2013 national standardized 60-day episode payment rate $2,138.52 × 0.995 × 0.9868 $2099.74 c. National Per-Visit Rates The national per-visit rates are used to pay LUPAs and are also used to compute imputed costs in outlier calculations. The per-visit rates are paid by type of visit or home health discipline. The six home health disciplines are as follows: • Home Health Aide (HH aide); • Medical Social Services (MSS); • Occupational Therapy (OT); • Physical Therapy (PT); • Skilled Nursing (SN); and • Speech Language Pathology Therapy (SLP). In order to calculate the CY 2013 national per-visit rates, the CY 2012 national per-visit rates for each discipline are updated by the proposed CY 2013 home health payment update of 1.5 percent. The national per-visit rates are adjusted by the wage index based on the site of service of the beneficiary. The per-visit rates are not case-mix adjusted nor are they subject to the 1.32 percent reduction related to the nominal increase in case-mix. The per-visit payment amounts for LUPAs are separate from the LUPA Add-On amount which is paid for episodes that occur as the only episode or initial episode in a sequence of adjacent episodes. The CY 2013 national per-visit rates are shown in Table 13. Table 13—Proposed CY 2013 National Per-Visit Payment Amounts Home health discipline type CY 2012 per-visit amounts per 60-day episode For HHAs that DO submit the required quality data Multiply by the proposed CY 2013 payment update of 1.5 percent Proposed CY 2013 per-visit payment For HHAs that DO NOT submit the required quality data Multiply by the proposed CY 2013 payment update of 1.5 percent minus 2 percentage points (−0.5 percent) Proposed CY 2013 per-visit payment HH Aide $51.13 × 1.015 $51.90 × 0.995 $50.87 MSS 180.96 × 1.015 183.67 × 0.995 180.06 OT 124.26 × 1.015 126.12 × 0.995 123.64 PT 123.43 × 1.015 125.28 × 0.995 122.81 SN 112.88 × 1.015 114.57 × 0.995 112.32 SLP 134.12 × 1.015 136.13 × 0.995 133.45 d. LUPA Add-on Payment Amount Update Beginning in CY 2008, LUPA episodes that occur as the only episode or initial episode in a sequence of adjacent episodes are adjusted by adding an additional amount to the LUPA payment before adjusting for area wage differences. We update the LUPA payment amount by the proposed CY 2013 home health payment update of 1.5 percent. The LUPA add-on payment amount is not subject to the 1.32 percent reduction related to the nominal increase in case-mix. For CY 2013, we propose that the add-on to the LUPA payment to HHAs that submit the required quality data be updated by the proposed CY 2013 home health payment update of 1.5 percent. The proposed CY 2013 LUPA add-on payment amount is shown in Table 14. We propose that the add-on to the LUPA payment to HHAs that do not submit the required quality data would be updated by the proposed CY 2013 home health payment update (1.5 percent) minus two percentage points. Table 14—Proposed CY 2013 LUPA Add-On Amounts CY 2012 LUPA add-on amount For HHAs that DO submit the required quality data Multiply by the proposed CY 2013 payment update of 1.5 percent Proposed CY 2013 LUPA add-on amount For HHAs that DO NOT submit the required quality data Multiply by the proposed CY 2013 payment update of 1.5 percent minus 2 percentage points (−0.5 percent) Proposed CY 2013 LUPA add-on amount $94.62 × 1.015 $96.04 × 0.995 $94.15 e. Nonroutine Medical Supply Conversion Factor Update Payments for nonroutine medical supplies (NRS) are computed by multiplying the relative weight for a particular severity level by the NRS conversion factor. We first increase CY 2012 NRS conversion factor ($53.28) by the proposed payment update of 1.5 percent. The final updated CY 2013 NRS conversion factor for 2013 appears in Table 15. Table 15—Proposed CY 2013 NRS Conversion Factor for HHAs That DO Submit the Required Quality Data CY 2012 NRS conversion factor Multiply by the proposed CY 2013 payment update of 1.5 percent Proposed CY 2013 NRS conversion factor $53 [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2012-16836. Public record. Not legal advice.