Medicare and Medicaid Programs; CY 2019 Home Health Prospective Payment System Rate Update and CY 2020 Case-Mix Adjustment Methodology Refinements; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; Home Infusion Therapy Requirements; and Training Requirements for Surveyors of National Accrediting Organizations

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 424, 484, 486, and 488

[CMS-1689-P]

RIN 0938-AT29

Medicare and Medicaid Programs; CY 2019 Home Health Prospective Payment System Rate Update and CY 2020 Case-Mix Adjustment Methodology Refinements; Home Health Value-Based Purchasing Model; Home Health Quality Reporting Requirements; Home Infusion Therapy Requirements; and Training Requirements for Surveyors of National Accrediting Organizations

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) payment rates, including the national, standardized 60-day episode payment rates, the national per-visit rates, and the non-routine medical supply (NRS) conversion factor, effective for home health episodes of care ending on or after January 1, 2019. It also proposes updates to the HH PPS case-mix weights for calendar year (CY) 2019 using the most current, complete data available at the time of rulemaking; discusses our efforts to monitor the potential impacts of the rebasing adjustments that were implemented in CYs 2014 through 2017; proposes a rebasing of the HH market basket (which includes a decrease in the labor-related share); proposes the methodology used to determine rural add-on payments for CYs 2019 through 2022, as required by section 50208 of the Bipartisan Budget Act of 2018 hereinafter referred to as the “BBA of 2018”; proposes regulations text changes regarding certifying and recertifying patient eligibility for Medicare home health services; and proposes to define “remote patient monitoring” and recognize the cost associated as an allowable administrative cost. Additionally, it proposes case-mix methodology refinements to be implemented for home health services beginning on or after January 1, 2020, including a change in the unit of payment from 60-day episodes of care to 30-day periods of care, as required by section 51001 of the BBA of 2018; includes information on the implementation of temporary transitional payments for home infusion therapy services for CYs 2019 and 2020, as required by section 50401 of the BBA of 2018; solicits comments regarding payment for home infusion therapy services for CY 2021 and subsequent years; proposes health and safety standards for home infusion therapy; and proposes an accreditation and oversight process for home infusion therapy suppliers. This rule proposes changes to the Home Health Value-Based Purchasing (HHVBP) Model to remove two OASIS-based measures, replace three OASIS-based measures with two new proposed composite measures, rescore the maximum number of improvement points, and reweight the measures in the applicable measures set. Also, the Home Health Quality Reporting Program provisions include a discussion of the Meaningful Measures Initiative and propose the removal of seven measures to further the priorities of this initiative. In addition, the HH QRP offers a discussion on social risk factors and an update on implementation efforts for certain provisions of the IMPACT Act. This proposed rule clarifies the regulatory text to note that not all OASIS data is required for the HH QRP. Finally, it would require that accrediting organization surveyors take CMS-provided training.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on August 31, 2018.

ADDRESSES:

In commenting, please refer to file code CMS-1689-P. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission.

Comments, including mass comment submissions, must be submitted in one of the following three 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 “Submit a comment” instructions.

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-1689-P, P.O. Box 8013, Baltimore, MD 21244-8013. 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-1689-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

For general information about the Home Health Prospective Payment System (HH PPS), send your inquiry via email to:

HomehealthPolicy@cms.hhs.gov.

For general information about home infusion payment, send your inquiry via email to:

HomeInfusionPolicy@cms.hhs.gov.

For information about the Home Health Value-Based Purchasing (HHVBP) Model, send your inquiry via email to:

HHVBPquestions@cms.hhs.gov.

For information about the Home Health Quality Reporting Program (HH QRP) contact: Joan Proctor, (410) 786-0949.

For information about home infusion therapy health and safety standards, contact: Sonia Swancy, (410) 786-8445 or CAPT Jacqueline Leach, (410) 786-4282.

For information about health infusion therapy accreditation and oversight, contact: Caroline Gallaher (410) 786-8705.

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 website as soon as possible after they have been received:

http://www.regulations.gov.

Follow the search instructions on that website to view public comments.

Table of Contents

I. Executive Summary

A. Purpose

B. Summary of the Major Provisions

C. Summary of Costs and Benefits

D. Improving Patient Outcomes and Reducing Burden Through Meaningful Measures

II. Background

A. Statutory Background

B. Current System for Payment of Home Health Services

C. Updates to the Home Health Prospective Payment System

D. Advancing Health Information Exchange

III. Payment Under the Home Health Prospective Payment System (HH PPS)

A. Monitoring for Potential Impacts—Affordable Care Act Rebasing Adjustments

B. Proposed CY 2019 HH PPS Case-Mix Weights

C. Proposed CY 2019 Home Health Payment Rate Update

D. Proposed Rural Add-On Payments for CYs 2019 Through 2022

E. Proposed Payments for High-Cost Outliers Under the HH PPS

F. Proposed Implementation of the Patient-Driven Groupings Model (PDGM) for CY 2020

G. Proposed Regulations Text Changes Regarding Certifying and Recertifying Patient Eligibility for Medicare Home Health Services

H. The Role of Remote Patient Monitoring Under the Medicare Home Health Benefit

IV. Home Health Value-Based Purchasing (HHVBP) Model

A. Background

B. Quality Measures

C. Performance Scoring Methodology

D. Update on the Public Display of Total Performance Scores

V. Home Health Quality Reporting Program (HH QRP)

A. Background and Statutory Authority

B. General Considerations Used for the Selection of Quality Measures for the HH QRP

C. Proposed Removal Factors for Previously Adopted HH QRP Measures

D. Quality Measures Currently Adopted for the HH QRP

E. Proposed Removal of HH QRP Measures Beginning With the CY 2021 HH QRP

F. IMPACT Act Implementation Update

G. Form, Manner, and Timing of OASIS Data Submission

H. Proposed Policies Regarding Public Display for the HH QRP

I. HHCAHPS

VI. Medicare Coverage of Home Infusion Therapy Services

A. General Background

B. Proposed Health and Safety Standards for Home Infusion Therapy

C. Payment for Home Infusion Therapy Services

D. Approval and Oversight of Accrediting Organizations for Home Infusion Therapy (HIT) Suppliers

VII. Changes to the Accreditation Requirements for Certain Medicare Certified Providers and Suppliers

A. Background

B. Proposed Changes to Certain Requirements for Medicare-Certified Providers and Suppliers at Part 488

VIII. Requests for Information

A. Request for Information on Promoting Interoperability and Electronic Healthcare Information Exchange Through Possible Revisions to the CMS Patient Health and Safety Requirements for Hospitals and Other Medicare- and Medicaid-Participating Providers and Suppliers

B. Request for Information on Price Transparency: Improving Beneficiary Access to Home Health Agency Charge Information

IX. Collection of Information Requirements

A. Wage Estimates

B. ICRs Regarding the OASIS

C. ICRs Regarding Home Infusion Therapy

D. ICRs Regarding the Approval and Oversight of Accrediting Organizations for Home Infusion Therapy

X. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Anticipated Effects

D. Detailed Economic Analysis

E. Alternatives Considered

F. Accounting Statement and Tables

G. Regulatory Reform Analysis Under E.O. 13771

H. Conclusion

Regulation Text

I. Executive Summary

A. Purpose

1. Home Health Prospective Payment System (HH PPS)

This proposed rule would update the payment rates for home health agencies (HHAs) for calendar year (CY) 2019, as required under section 1895(b) of the Social Security Act (the Act). This proposed rule would also update the case-mix weights under section 1895(b)(4)(A)(i) and (b)(4)(B) of the Act for CY 2019. For home health services beginning on or after January 1, 2020, this rule proposes case-mix methodology refinements, which eliminate the use of therapy thresholds for case-mix adjustment purposes; and proposes to change the unit of payment from a 60-day episode of care to a 30-day period of care, as mandated by section 51001 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123) (hereinafter referred to as the “BBA of 2018”). This proposed rule also: Proposes the methodology used to determine rural add-on payments for CYs 2019 through 2022, as required by section 50208 of the BBA of 2018; proposes regulations text changes regarding certifying and recertifying patient eligibility for Medicare home health services under sections 1814(a) and 1835(a) of the Act; and proposes to define “remote patient monitoring” under the Medicare home health benefit and to include the costs of such monitoring as an allowable administrative cost. Lastly, this rule proposes changes to the Home Health Value Based Purchasing (HHVBP) Model under the authority of section 1115A of the Act, and the Home Health Quality Reporting Program (HH QRP) requirements under the authority of section 1895(b)(3)(B)(v) of the Act.

2. Home Infusion Therapy Services

This proposed rule would establish a transitional payment for home infusion therapy services for CYs 2019 and 2020, as required by section 50401 of the BBA of 2018. In addition, this rule proposes health and safety standards for home infusion therapy, proposes an accreditation and oversight process for qualified home infusion therapy suppliers, and solicits comments regarding payment for the home infusion therapy services benefit for CY 2021 and subsequent years, as required by section 5012 of the 21st Century Cures Act (Pub. L. 114-255).

3. Safety Standards for Home Infusion Therapy Services

This proposed rule would establish health and safety standards for qualified home infusion therapy suppliers as required by Section 5012 of the 21st Century Cures Act. These proposed standards would establish a foundation for ensuring patient safety and quality care by establishing requirements for the plan of care to be initiated and updated by a physician; 7-day-a-week, 24-hour-a-day access to services and remote monitoring; and patient education and training regarding their home infusion therapy care.

B. Summary of the Major Provisions

1. Home Health Prospective Payment System (HH PPS)

Section III.A. of this rule discusses our efforts to monitor for potential impacts due to the rebasing adjustments implemented in CY 2014 through CY 2017, as mandated by section 3131(a) of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148, enacted March 23, 2010) as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted March 30, 2010), collectively referred to as the “Affordable Care Act”. In the CY 2015 HH PPS final rule (79 FR 66072), we finalized our proposal to recalibrate the case-mix weights every year with the most current and complete data available at the time of rulemaking. In section III.B of this rule, we are recalibrating the HH PPS case-mix weights, using the most current cost and utilization data available, in a budget-neutral manner. In section III.C., we propose to rebase the home health market basket and update the payment rates under the HH PPS by the home health payment update percentage of 2.1 percent (using the proposed 2016-based Home Health Agency (HHA) market basket update of 2.8 percent, minus 0.7 percentage point for multifactor productivity) as required by section 1895(b)(3)(B)(vi)(I) of the Act. Also in section III.C. of this proposed rule, we propose to decrease the labor-related share from 78.5 to 76.1 percent of total costs on account of the rebasing of the home health market basket. Lastly, in

section III.C. of this rule, we propose to update the CY 2019 home health wage index using FY 2015 hospital cost report data. In section III.D. of this proposed rule, we are proposing a new methodology for applying rural add-on payments for CYs 2019 through 2022, as required by section 50208 of the BBA of 2018. In section III.E. of this rule, we are proposing to reduce the fixed-dollar loss ratio from 0.55 to 0.51 for CY 2019 in order to increase outlier payments as a percentage of total payments so that this percentage is closer to, but no more than, 2.5 percent.

In the CY 2018 HH PPS proposed rule, CMS proposed an alternative case-mix model, called the Home Health Groupings Model (HHGM). Ultimately the HHGM, including a proposed change in the unit of payment from 60 days to 30 days, was not finalized in the CY 2018 HH PPS final rule in order to allow CMS additional time to consider public comments for potential refinements to the model and other alternative case-mix models (82 FR 51676). In section III.F. of this proposed rule, we are again proposing to implement case-mix methodology refinements and a change in the unit of payment from a 60-day episode of care to a 30-day period of care; however, these changes would be effective January 1, 2020 and would be implemented in a budget neutral manner, as required by section 51001 of the BBA of 2018. Since the proposed case-mix methodology refinements represent a more patient-driven approach to payment we are renaming the proposed case-mix adjustment methodology refinements, formerly known as the Home Health Groupings Model or “HHGM”, as the “Patient-Driven Groupings Model” or PDGM. The proposed PDGM relies more heavily on clinical characteristics and other patient information to place patients into meaningful payment categories and eliminates the use of therapy service thresholds, as required by section 51001(a)(3) of the BBA of 2018, that are currently used to case-mix adjust payments under the HH PPS. There is also a proposal regarding how CMS would determine whether 30-day periods of care are subject to a Low-Utilization Payment Adjustment (LUPA). The LUPA add-on policy, the partial episode payment adjustment policy, and the methodology used to calculate payments for high-cost outliers would remain unchanged except for occurring on a 30-day basis rather than a 60-day basis.

In section III.G. of this proposed rule, we are proposing regulation text changes at 42 CFR 424.22(b)(2) to eliminate the requirement that the certifying physician must estimate how much longer skilled services will be needed as part of the recertification statement. In addition, in section III.G of this rule, consistent with section 51002 of the BBA of 2018, we are proposing to align the regulations text at 42 CFR 424.22(c) with current subregulatory guidance to allow medical record documentation from the HHA to be used to support the basis for certification and/or recertification of home health eligibility, if certain requirements are met.

In section III.H. of this proposed rule, we propose to define “remote patient monitoring” under the Medicare home health benefit as the collection of physiologic data (for example, ECG, blood pressure, glucose monitoring) digitally stored and/or transmitted by the patient and/or caregiver to the HHA. Additionally in this section of the rule, we propose changes to the regulations at 42 CFR 409.46 to include costs of remote patient monitoring as allowable administrative costs.

2. Home Health Value Based Purchasing

In section IV of this proposed rule, we are proposing changes to the Home Health Value Based Purchasing (HHVBP) Model implemented January 1, 2016. We are proposing, beginning with performance year (PY) 4, to: Remove two Outcome and Assessment Information Set (OASIS) based measures, Influenza Immunization Received for Current Flu Season and Pneumococcal Polysaccharide Vaccine Ever Received, from the set of applicable measures; replace three OASIS-based measures (Improvement in Ambulation-Locomotion, Improvement in Bed Transferring, and Improvement in Bathing) with two proposed composite measures on total normalized composite change in self-care and mobility; change how we calculate the Total Performance Scores by changing the weighting methodology for the OASIS-based, claims-based, and HHCAHPS measures; and change the scoring methodology by reducing the maximum amount of improvement points an HHA could earn, from 10 points to 9 points. While we are not making a specific proposal at this time, we are also providing an update on the progress towards developing public reporting of performance under the HHVBP Model and seeking comment on what information should be made publicly available.

3. Home Health Quality Reporting Program

In section V. of this proposed rule, we are proposing to update our policy for removing previously adopted Home Health (HH) Quality Reporting Program (QRP) measures and to adopt eight measure removal factors to align with other QRPs, to remove seven measures beginning with the CY 2021 HH QRP, and to update our regulations to clarify that not all OASIS data is required for the HH QRP. We are also providing an update on the implementation of certain provisions of the IMPACT Act, and a discussion of accounting for social risk factors in the HH QRP. Finally, we are proposing to increase the number of years of data used to calculate the Medicare Spending per Beneficiary measure for purposes of display from 1 year to 2 years.

4. Home Infusion Therapy

In section VI.A. of this proposed rule, we discuss general background of home infusion therapy services and how that will relate to the implementation of the new home infusion benefit. In section VI.B. of this proposed rule, we are proposing to add a new subpart I under the regulations at 42 CFR part 486 to incorporate health and safety requirements for home infusion therapy suppliers. The proposed regulations would provide a framework for CMS to approve home infusion therapy accreditation organizations. Proposed subpart I would include General Provisions (Scope and Purpose, and Definitions) and Standards for Home Infusion Therapy (Plan of Care and Required Services). In section VI.C. of this proposed rule, we include information on temporary transitional payments for home infusion therapy services for CYs 2019 and 2020 as mandated by section 50401 of the BBA of 2018, and solicits comments on the proposed regulatory definition of “Infusion Drug Administration Calendar Day”. Also in section VI.C. of this proposed rule, we solicit comments regarding payment for home infusion therapy services for CY 2021 and subsequent years as required by section 5012(d) of the 21st Century Cures Act.

In section VI.D. of this proposed rule, we discuss the requirements set forth in section 1861(iii)(3)(D)(III) of the Act, which mandates that suppliers of home infusion therapy receive accreditation from a CMS-approved Accrediting Organization (AO) in order to receive Medicare payment. The Secretary must designate AOs to accredit suppliers furnishing Home Infusion therapy (HIT) not later than January 1, 2021. Qualified

HIT suppliers are required to receive accreditation before receiving Medicare payment for services provided to Medicare beneficiaries.

At this time, no regulations exist to address the following elements of CMS' approval and oversight of the AOs that accredit suppliers of Home Infusion Therapy: (1) The required components to be included in a Home Infusion Therapy AO's initial or renewal accreditation program application; (2) regulations related to CMS' review and approval of the Home Infusion Therapy AOs application for approval of its accreditation program; and (3) the ongoing monitoring and oversight of CMS-approved Home Infusion Therapy AOs. Therefore in this rule, we propose to establish a set of regulations that will govern the CMS approval and oversight process for all HIT AOs.

We also propose to modify the regulations for oversight for AOs that accredit any Medicare-certified providers and suppliers at 42 CFR 488.5 by adding a requirement that the AOs must include a statement with their application acknowledging that all AO surveyors are required to complete the relevant program specific CMS online trainings initially, and thereafter, consistent with requirements established by CMS for state and federal surveyors. We would also add another requirement at § 488.5 that would require the AOs for Medicare certified providers and suppliers to provide a written statement with their application stating that if a fully accredited and facility deemed to be in good-standing provides written notification that they wish to voluntarily withdraw from the AO's CMS-approved accreditation program, the AO must continue the facility's current accreditation until the effective date of withdrawal identified by the facility or the expiration date of the term of accreditation, whichever comes first.

C. Summary of Costs, Transfers, and Benefits

Table 1—Summary of Costs, Transfers, and Benefits

Provision

description

Costs and cost savings

Transfers

Benefits

CY 2019 HH PPS Payment Rate Update

The overall economic impact of the HH PPS payment rate update is an estimated $400 million (2.1 percent) in increased payments to HHAs in CY 2019

To ensure home health payments are consistent with statutory payment authority for CY 2019.

CY 2019 Temporary Transitional Payments for Home Infusion Therapy Services

The overall economic impact of the temporary transitional payment for home infusion therapy services is an estimated $60 million in increased payments to home infusion therapy suppliers in CY 2019

To ensure temporary transitional payments for home infusion therapy are consistent with statutory authority for CY 2019.

CY 2019 HHVBP Model

The overall economic impact of the HHVBP Model provision for CY 2018 through 2022 is an estimated $378 million in total savings from a reduction in unnecessary hospitalizations and SNF usage as a result of greater quality improvements in the HH industry (none of which is attributable to the changes proposed in this proposed rule). As for payments to HHAs, there are no aggregate increases or decreases expected to be applied to the HHAs competing in the model

CY 2020 OASIS Changes

The overall economic impact of the HH QRP and the case-mix adjustment methodology changes is annual savings to HHAs of an estimated $60 million

A reduction in burden to HHAs of approximately 73 hours annually for a savings of approximately $5,150 annually per HHA.

CY 2020 Case-Mix Adjustment Methodology Changes, Including a Change in the Unit of Service from 60 to 30 days

The overall economic impact of the proposed case-mix adjustment methodology changes, including a change in the unit of service from 60 to 30 days, for CY 2020 results in no estimated dollar impact to HHAs, as section 51001(a) of the BBA of 2018 requires such change to be implemented in a budget-neutral manner

To ensure home health payments are consistent with statutory payment authority for CY 2020.

Accreditation for Home Infusion Therapy suppliers

The cost related to an AO obtaining CMS approval of a home infusion therapy accreditation program is estimated to be $8,014.50 per each AO, for AOs that have previously submitted an accreditation application to CMS. The cost across the potential 6 home infusion therapy AOs would be $48,087

The cost related to each home infusion therapy AO for obtaining CMS approval of a home infusion therapy accreditation program is estimated to be $12,453 per each AO, for AOs that

have not

previously submitted an accreditation application to CMS. The cost across the potential 6 home infusion therapy AOs would be $74,718

We further estimate that each home infusion therapy AO would incur an estimated cost burden in the amount of $23,258 for compliance with the proposed home infusion therapy AO approval and oversight regulations at §§ 488.1010 through 488.1050 (including the filing of an application). The cost across the 6 potential home infusion therapy AOs would be $139,548

D. Improving Patient Outcomes and Reducing Burden Through Meaningful Measures

Regulatory reform and reducing regulatory burden are high priorities for us. To reduce the regulatory burden on the healthcare industry, lower health care costs, and enhance patient care, in October 2017, we launched the Meaningful Measures Initiative.

1

This initiative is one component of our agency-wide Patients Over Paperwork Initiative

2

which is aimed at evaluating and streamlining regulations with a goal to reduce unnecessary cost and burden, increase efficiencies, and improve beneficiary experience. The Meaningful Measures Initiative is aimed at identifying the highest priority areas for quality measurement and quality improvement in order to assess the core quality of care issues that are most vital to advancing our work to improve patient outcomes. The Meaningful Measures Initiative represents a new approach to quality measures that fosters operational efficiencies, and will reduce costs including, the collection and reporting burden while producing quality measurement that is more focused on meaningful outcomes.

1

Meaningful Measures web page:

https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html

.

2

See Remarks by Administrator Seema Verma at the Health Care Payment Learning and Action Network (LAN) Fall Summit, as prepared for delivery on October 30, 2017

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html

.

The Meaningful Measures Framework has the following objectives:

• Address high-impact measure areas that safeguard public health;

• Patient-centered and meaningful to patients;

• Outcome-based where possible;

• Fulfill each program's statutory requirements;

• Minimize the level of burden for health care providers (for example, through a preference for EHR-based measures where possible, such as electronic clinical quality measures);

• Provide significant opportunity for improvement;

• Address measure needs for population based payment through alternative payment models; and

• Align across programs and/or with other payers.

In order to achieve these objectives, we have identified 19 Meaningful Measures areas and mapped them to six overarching quality priorities as shown in Table 2:

Table 2—Meaningful Measures Framework Domains and Measure Areas

Quality priority

Meaningful measure area

Making Care Safer by Reducing Harm Caused in the Delivery of Care

Healthcare-Associated Infections.

Preventable Healthcare Harm.

Strengthen Person and Family Engagement as Partners in Their Care

Care is Personalized and Aligned with Patient's Goals.

End of Life Care according to Preferences.

Patient's Experience of Care.

Patient Reported Functional Outcomes.

Promote Effective Communication and Coordination of Care

Medication Management.

Admissions and Readmissions to Hospitals.

Transfer of Health Information and Interoperability.

Promote Effective Prevention and Treatment of Chronic Disease

Preventive Care.

Management of Chronic Conditions.

Prevention, Treatment, and Management of Mental Health.

Prevention and Treatment of Opioid and Substance Use Disorders.

Risk Adjusted Mortality.

Work with Communities to Promote Best Practices of Healthy Living

Equity of Care.

Community Engagement.

Make Care Affordable

Appropriate Use of Healthcare.

Patient-focused Episode of Care.

Risk Adjusted Total Cost of Care.

By including Meaningful Measures in our programs, we believe that we can also address the following cross-cutting measure criteria:

• Eliminating disparities;

• Tracking measurable outcomes and impact;

• Safeguarding public health;

• Achieving cost savings;

• Improving access for rural communities; and

• Reducing burden.

We believe that the Meaningful Measures Initiative will improve outcomes for patients, their families, and health care providers while reducing burden and costs for clinicians and providers and promoting operational efficiencies.

II. Background

A. Statutory Background

1. Home Health Prospective Payment System

a. Background

The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, enacted August 5, 1997), significantly changed the way Medicare pays for Medicare home health services. Section 4603 of the BBA mandated the development of the HH PPS. Until the implementation of the 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 home health services provided under a plan of care (POC) that were paid on a reasonable cost basis by adding section 1895 of the Act, entitled “Prospective Payment For Home Health Services.” Section 1895(b)(1) of the Act requires the Secretary to establish a HH PPS for all costs of home health services paid under Medicare. Section 1895(b)(2) of the Act requires that, in defining a prospective payment amount, the Secretary will consider an appropriate unit of service and the number, type, and duration of visits provided within that unit, potential changes in the mix of services provided within that unit and their cost, and a general system design that provides for continued access to quality services.

Section 1895(b)(3)(A) of the Act requires the following: (1) The computation of a standard prospective payment amount that includes all costs for HH services covered and paid for on a reasonable cost basis, and that such amounts be initially based on the most recent audited cost report data available to the Secretary (as of the effective date of the 2000 final rule), 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 requires the standard prospective payment amounts be annually updated by the home health applicable percentage increase. Section 1895(b)(4) of the Act governs the payment computation. Sections 1895(b)(4)(A)(i) and (b)(4)(A)(ii) of the Act require the standard prospective payment amount to be adjusted for case-mix and geographic differences in wage levels. Section 1895(b)(4)(B) of the Act requires the establishment of an appropriate case-mix change adjustment factor for significant variation in costs among different units of services.

Similarly, section 1895(b)(4)(C) of the Act requires the establishment of wage adjustment factors that reflect the relative level of wages, and wage-related costs applicable to home health services furnished in a geographic area compared to the applicable national average level. 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)(2) of the Affordable Care Act 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 home health services as required by section 4603 of the BBA, as subsequently amended by section 5101 of the Omnibus Consolidated and Emergency Supplemental Appropriations Act for Fiscal Year 1999 (OCESAA), (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 of 1999, (BBRA) (Pub. L. 106-113, enacted November 29, 1999). The requirements include the implementation of a HH PPS for home health services, consolidated billing requirements, and a number of other related changes. The HH PPS described in that rule replaced the retrospective reasonable cost-based system that was used by Medicare for the payment of home health services under Part A and Part B. For a complete and full

description of the HH PPS as required by the BBA, see the July 2000 HH PPS final rule (65 FR 41128 through 41214).

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 linking the quality data submission to the annual applicable payment percentage increase. This data submission requirement is applicable for CY 2007 and each subsequent year. If an HHA does not submit quality data, the home health market basket percentage increase is reduced by 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 pay-for-reporting requirement was implemented on January 1, 2007.

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. Section 421(a) of the MMA, as amended by section 3131 of the Affordable Care Act, requires that the Secretary increase, by 3 percent, the payment amount otherwise made under section 1895 of the Act, 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.

Section 210 of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) (MACRA) amended section 421(a) of the MMA to extend the 3 percent rural add-on payment for home health services provided in a rural area (as defined in section 1886(d)(2)(D) of the Act) through January 1, 2018. In addition, section 411(d) of MACRA amended section 1895(b)(3)(B) of the Act such that CY 2018 home health payments be updated by a 1 percent market basket increase. This year, section 50208(a)(1) of the BBA of 2018 again extended the rural add-on through the end of 2018. In addition, this section of the BBA of 2018 made some important changes to the rural add-on for CYs 2019 through 2022, to be discussed below.

b. Current System for Payment of Home Health Services

Generally, Medicare currently makes payment under the HH PPS on the basis of a national, standardized 60-day episode payment rate that is adjusted for the applicable case-mix and wage index. The national, standardized 60-day episode rate includes the six home health disciplines (skilled nursing, home health aide, physical therapy, speech-language pathology, occupational therapy, and medical social services). Payment for non-routine supplies (NRS) is not part of the national, standardized 60-day episode rate, but is computed by multiplying the relative weight for a particular NRS severity level by the NRS conversion factor. 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. Therapy service use is measured by the number of therapy visits provided during the episode and can be categorized into nine visit level categories (or thresholds): 0 to 5; 6; 7 to 9; 10; 11 to 13; 14 to 15; 16 to 17; 18 to 19; and 20 or more visits.

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 Home Health Prospective Payment System

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 HH PPS for CY 2008. The CY 2008 HH PPS final rule included an analysis performed on CY 2005 home health 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 home health patients. 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, to the national, standardized 60-day episode payment rates. 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 and deferred finalizing a payment reduction for CY 2012 until further study of the case-mix change data and methodology was completed.

In the CY 2012 HH PPS final rule (76 FR 68526), we updated the 60-day national episode rates and the national per-visit rates. In addition, as discussed in the CY 2012 HH PPS 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. At that time, to fully account for the 19.03 percent nominal case-mix growth identified from 2000 to 2009, we finalized a 3.79 percent payment reduction in CY 2012 and a 1.32 percent payment reduction for CY 2013.

In the CY 2013 HH PPS final rule (77 FR 67078), we implemented the 1.32 percent reduction to the payment rates for CY 2013 finalized the previous year, to account for nominal case-mix growth from 2000 through 2010. When taking into account the total measure of case-mix change (23.90 percent) 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). To fully account for the remainder of the 20.08 percent increase in nominal case-mix beyond that which was accounted for in previous payment reductions, we estimated that the percentage reduction to the national, standardized 60-day episode rates for nominal case-mix change would be 2.18 percent. Although we considered proposing a 2.18 percent reduction to account for the remaining increase in measured nominal case-mix, we finalized the 1.32 percent payment reduction to the national, standardized 60-day episode rates in the CY 2012 HH PPS final rule (76 FR 68532). Section 3131(a) of the Affordable Care Act added new section 1895(b)(3)(A)(iii) to the Act, which required that, beginning in CY 2014, we apply an adjustment to the national, standardized 60-day episode rate and other amounts that reflect factors such as changes in the number of visits in an episode, the mix of services in an episode, the level of intensity of services in an episode, the average cost of providing care per episode, and other relevant factors. Additionally, we were required to phase in any adjustment over a 4-year period in equal increments, not to exceed 3.5 percent of the payment amount (or amounts) as of the date of enactment of the Affordable Care Act in 2010, and fully implement the rebasing adjustments by CY 2017. Therefore, in the CY 2014 HH PPS final rule (78 FR 72256) for each year, CY 2014 through CY 2017, we finalized a fixed-dollar reduction to the national, standardized 60-day episode payment rate of $80.95 per year, increases to the national per-visit payment rates per year, and a decrease to the NRS conversion factor of 2.82 percent per year. We also finalized three separate LUPA add-on factors for skilled nursing, physical therapy, and speech-language pathology and removed 170 diagnosis codes from assignment to diagnosis groups in the HH PPS Grouper. In the CY 2015 HH PPS final rule (79 FR 66032), we implemented the second year of the 4-year phase-in of the rebasing adjustments to the HH PPS payment rates and made changes to the HH PPS case-mix weights. In addition, we simplified the face-to-face encounter regulatory requirements and the therapy reassessment timeframes.

In the CY 2016 HH PPS final rule (80 FR 68624), we implemented the third year of the 4-year phase-in of the rebasing adjustments to the national, standardized 60-day episode payment amount, the national per-visit rates and the NRS conversion factor (as discussed previously). In the CY 2016 HH PPS final rule, we also recalibrated the HH PPS case-mix weights, using the most current cost and utilization data available, in a budget-neutral manner and finalized reductions to the national, standardized 60-day episode payment rate in CY 2016, CY 2017, and CY 2018 of 0.97 percent in each year to account for estimated case-mix growth unrelated to increases in patient acuity (that is, nominal case-mix growth) between CY 2012 and CY 2014. Finally, section 421(a) of the MMA, as amended by section 210 of the MACRA, extended the payment increase of 3 percent for HH services provided in rural areas (as defined in section 1886(d)(2)(D) of the Act) to episodes or visits ending before January 1, 2018.

In the CY 2017 HH PPS final rule (81 FR 76702), we implemented the last year of the 4-year phase-in of the rebasing adjustments to the national, standardized 60-day episode payment amount, the national per-visit rates and the NRS conversion factor (as outlined previously). We also finalized changes to the methodology used to calculate outlier payments under the authority of section 1895(b)(5) of the Act. Lastly, in accordance with section 1834(s) of the Act, as added by section 504(a) of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113, enacted December 18, 2015), we implemented changes in payment for furnishing Negative Pressure Wound Therapy (NPWT) using a disposable device for patients under a home health plan of care for which payment would otherwise be made under section 1895(b) of the Act.

2. Home Infusion Therapy

Section 5012 of the 21st Century Cures Act (“the Cures Act”) (Pub. L. 114-255), which amended sections 1861(s)(2) and 1861(iii) of the Act, established a new Medicare home infusion therapy benefit. The Medicare home infusion therapy benefit covers the professional services including nursing services furnished in accordance with the plan of care, patient training and education (not otherwise covered under the durable medical equipment benefit), remote monitoring, and monitoring services for the provision of home infusion therapy and home infusion drugs furnished by a qualified home infusion therapy supplier. This benefit will ensure consistency in coverage for home infusion benefits for all Medicare beneficiaries. Section 50401 of the BBA of 2018 amended section 1834(u) of the Act by adding a new paragraph (7) that establishes a home infusion therapy services temporary transitional payment for eligible home infusion suppliers for certain items and services furnished in coordination with the furnishing of transitional home infusion drugs beginning January 1, 2019. This temporary payment covers the cost of the same items and services, as defined in section 1861(iii)(2)(A) and (B) of the Act, related to the administration of home infusion drugs. The temporary transitional payment would begin on January 1, 2019 and end the day before the full implementation of the home infusion therapy benefit on January 1, 2021, as required by section 5012 of the 21st Century Cures Act.

Home infusion therapy is a treatment option for patients with a wide range of acute and chronic conditions, ranging from bacterial infections to more complex conditions such as late-stage heart failure and immune deficiencies. Home infusion therapy affords a patient independence and better quality of life, because it is provided in the comfort of the patient's home at a time that best fits his or her needs. This is significant, because generally patients can return to their daily activities after they receive their infusion treatments and, in many cases, they can continue their activities while receiving their treatments. In addition, home infusion therapy can provide improved safety and better outcomes. The home has been shown to be a safe setting for patients to receive infusion therapy.

3

Additionally, patients receiving treatment outside of the hospital setting may be at lower risk of hospital-acquired infections, which can be more difficult to treat because of multi-drug resistance than those that are community-acquired. This is particularly important for vulnerable patients such as those who are immunocompromised, as hospital-acquired infections are increasingly caused by antibiotic-resistant pathogens.

3

Bhole, M.V., Burton, J., & Chapel, H.M., (2008). Self-infusion programs for immunoglobulin replacement at home: Feasibility, safety and efficacy. Immunology and Allergy Clinics of North America, 28(4), 821-832. doi:10.1016/j.iac.2008.06.005.

Souayah, N., Hasan, A., Khan, H., et al. (2011). The safety profile of home infusion of intravenous immunoglobulin in patients with neuroimmunologic disorders. Journal of Clinical Neuromuscular Disease, 12(supp 4), S1-10. doi: 10.1097/CND.0b013e3182212589.

Infusion therapy typically means that a drug is administered intravenously, but the term may also refer to situations where drugs are provided through other non-oral routes, such as intramuscular injections and epidural routes (into the membranes surrounding the spinal cord). Diseases that may require infusion therapy include infections that are unresponsive to oral antibiotics, cancer and cancer-related pain,

dehydration, and gastrointestinal diseases or disorders which prevent normal functioning of the gastrointestinal system. Other conditions treated with specialty infusion therapies may include some forms of cancers, congestive heart failure, Crohn's Disease, hemophilia, hepatitis, immune deficiencies, multiple sclerosis and rheumatoid arthritis. Infusion therapy originates with a prescription order from a physician or another qualified prescriber who is overseeing the care of the patient. The prescription order is sent to a home infusion therapy supplier, which is a state-licensed pharmacy, physician, or other provider of services or suppliers licensed by the state.

A 2010 Government Accountability Office (GAO) report (10-426) found that most health insurers rely on credentialing, accreditation, or both to help ensure that plan members receive quality home infusion services from their network suppliers.

4

Home infusion AOs conduct on-site surveys to evaluate all components of the service, including medical equipment, nursing, and pharmacy. Accreditation standards can include such requirements as the CMS Conditions of Participation for home health services, other Federal government regulations, and industry best practices. All of the accreditation standards evaluate a range of provider competencies, such as having a complete plan of care, response to adverse events, and implementation of a quality improvement plan.

4

https://www.gao.gov/assets/310/305261.pdf

.

Sections 1861(iii)(3)(D)(III) and 1834(u)(5) of the Act, as amended by section 5012 of the Cures Act requires that, in order to participate in Medicare, home infusion therapy suppliers must select a CMS-approved AO and undergo an accreditation review process to demonstrate that the home infusion therapy program meets the accreditation organization's standards. Section 1861(iii) of the Act, as amended by section 5012 of the Cures Act, sets forth standards in three areas: (1) Ensuring that all patients have a plan of care established and updated by a physician that sets out the care and prescribed infusion therapy necessary to meet the patient-specific needs, (2) having procedures to ensure that remote monitoring services associated with administering infusion drugs in a patient's home are provided, and (3) having procedures to ensure that patients receive education and training on the effective use of medications and equipment in the home.

D. Advancing Health Information Exchange

The Department of Health and Human Services (HHS) has a number of initiatives designed to encourage and support the adoption of interoperable health information technology and to promote nationwide health information exchange to improve health care. The Office of the National Coordinator for Health Information Technology (ONC) and CMS work collaboratively to advance interoperability across settings of care, including post-acute care.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (Pub. L. 113-185) (IMPACT Act) requires assessment data to be standardized and interoperable to allow for exchange of the data among post-acute providers and other providers. To further interoperability in post-acute care, CMS is developing a Data Element Library to serve as a publically available centralized, authoritative resource for standardized data elements and their associated mappings to health IT standards. These interoperable data elements can reduce provider burden by allowing the use and reuse of healthcare data, support provider exchange of electronic health information for care coordination, person-centered care, and support real-time, data driven, clinical decision making. Once available, standards in the Data Element Library can be referenced on the CMS website and in the ONC Interoperability Standards Advisory (ISA).

The 2018 Interoperability Standards Advisory (ISA) is available at:

https://www.healthit.gov/standards-advisory

.

Most recently, the 21st Century Cures Act (Pub. L. 114-255), enacted in 2016, requires HHS to take new steps to enable the electronic sharing of health information ensuring interoperability for providers and settings across the care continuum. Specifically, Congress directed ONC to “develop or support a trusted exchange framework, including a common agreement among health information networks nationally.” This framework (

https://beta.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement

) outlines a common set of principles for trusted exchange and minimum terms and conditions for trusted exchange in order to enable interoperability across disparate health information networks. In another important provision, Congress defined “information blocking” as practices likely to interfere with, prevent, or materially discourage access, exchange, or use of electronic health information, and established new authority for HHS to discourage these practices. We invite providers to learn more about these important developments and how they are likely to affect HHAs.

III. Proposed Provisions for Payment Under the Home Health Prospective Payment System (HH PPS)

A. Monitoring for Potential Impacts—Affordable Care Act Rebasing Adjustments

1. Analysis of FY 2016 HHA Cost Report Data

As part of our efforts in monitoring the potential impacts of the rebasing adjustments finalized in the CY 2014 HH PPS final rule (78 FR 72293), we continue to update our analysis of home health cost report and claims data. Previous years' cost report and claims data analyses and results can be found in the CY 2018 HH PPS proposed rule (82 FR 35277-35278). For this proposed rule, we analyzed the 2016 HHA cost report data (the most recent, complete data available at the time of this proposed rule) and 2016 HHA claims data to obtain the average number of visits per episode that match to the year of cost report data analyzed. To determine the 2016 average cost per visit per discipline, we applied the same trimming methodology outlined in the CY 2014 HH PPS proposed rule (78 FR 40284) and weighted the costs per visit from the 2016 cost reports by size, facility type, and urban/rural location so the costs per visit were nationally representative according to 2016 claims data. The 2016 average number of visits was taken from 2016 claims data. We estimated the cost of a 60-day episode in CY 2016 to be $2,538.54 using 2016 cost report data (Table 2). However, the national, standardized 60-day episode payment amount in CY 2016 was $2,965.12. The difference between the 60-day episode payment rate and average cost per episode of care for CY 2016 was 16.8 percent.

Table 2—2016 Estimated Cost per Episode

Discipline

2016 Average costs per visit

2016 Average NRS costs per visit

2016 Average cost + NRS per visit

2016 Average number of

visits

2016 60-Day episode costs

Skilled Nursing

$132.83

$3.41

$136.24

8.81

$1,200.27

Physical Therapy

156.04

3.41

159.45

5.58

889.73

Occupational Therapy

153.53

3.41

156.94

1.56

244.83

Speech Pathology

170.06

3.41

173.47

0.32

55.51

Medical Social Services

219.73

3.41

223.14

0.14

31.24

Home Health Aides

60.50

3.41

63.91

1.83

116.96

Total

18.24

2,538.54

Source: Medicare cost reports pulled in March 2018 and Medicare claims data from 2015 and 2016 for episodes (excluding low-utilization payment adjusted episodes and partial-episode-payment adjusted episodes), linked to OASIS assessments for episodes ending in CY 2016.

2. Analysis of CY 2017 HHA Claims Data

In the CY 2014 HH PPS final rule (78 FR 72256), some commenters expressed concern that the rebasing of the HH PPS payment rates would result in HHA closures and would therefore diminish access to home health services. In addition to examining more recent cost report data, for this proposed rule we examined home health claims data from all four years during which rebasing adjustments were made (CY 2014, CY 2015, CY 2016, and CY 2017), the first calendar year of the HH PPS (CY 2001), and claims data for the year prior to the implementation of the rebasing adjustments (CY 2013). Preliminary analysis of CY 2017 home health claims data indicates that the number of episodes decreased by 5.3 percent and the number of home health users that received at least one episode of care decreased by 3.2 percent from 2016 to 2017, while the number of FFS beneficiaries decreased 0.1 percent from 2016 to 2017. Between 2013 and 2014 there appears to be a net decrease in the number of HHAs billing Medicare for home health services of 1.6 percent, a continued decrease of 1.7 percent from 2014 to 2015, a decrease of 3.4 percent from 2015 to 2016, and a decrease of 4.4 percent from 2016 to 2017. We note that in CY 2016 there were 2.9 HHAs per 10,000 FFS beneficiaries and 2.8 HHAs per 10,000 FFS beneficiaries in CY 2017, which remains markedly higher than the 1.9 HHAs per 10,000 FFS beneficiaries close to the inception of the HH PPS in 2001 (the HH PPS was implemented on October 1, 2000). The number of home health users, as a percentage of FFS beneficiaries, has decreased from 9.0 percent in 2013 to 8.4 percent in 2017.

Table 3—Home Health Statistics, CY 2001 and CY 2013 Through CY 2017

2001

2013

2014

2015

2016

2017

Number of episodes

3,896,502

6,708,923

6,451,283

6,340,932

6,294,234

5,963,780

Beneficiaries receiving at least 1 episode (Home Health Users)

2,412,318

3,484,579

3,381,635

3,365,512

3,350,174

3,242,346

Part A and/or B FFS beneficiaries

34,899,167

38,505,609

38,506,534

38,506,534

38,555,150

38,509,031

Episodes per Part A and/or B FFS beneficiaries

0.11

0.17

0.17

0.17

0.16

0.15

Home health users as a percentage of Part A and/or B FFS beneficiaries

6.9%

9.0%

8.8%

8.8%

8.7%

8.4%

HHAs providing at least 1 episode

6,511

11,889

11,693

11,381

11,102

10,612

HHAs per 10,000 Part A and/or B FFS beneficiaries

1.9

3.1

3.0

3.0

2.9

2.8

Source: National claims history (NCH) data obtained from Chronic Condition Warehouse (CCW)—Accessed on May 14, 2014 and August 19, 2014 for CY 2013 data; accessed on May 7, 2015 for CY 2001 and CY 2014 data; accessed on April 7, 2016 for CY 2015 data; accessed on March 20, 2017 for CY 2016 data; accessed on March 8, 2018 for CY 2017 data; and Medicare enrollment information obtained from the CCW Master Beneficiary Summary File. Beneficiaries are the total number of beneficiaries in a given year with at least 1 month of Part A and/or Part B Fee-for-Service coverage without having any months of Medicare Advantage coverage.

Note(s):

These results include all episode types (Normal, PEP, Outlier, LUPA) and also include episodes from outlying areas (outside of 50 States and District of Columbia). Only episodes with a through date in the year specified are included. Episodes with a claim frequency code equal to “0” (“Non-payment/zero claims”) and “2” (“Interim—first claim”) are excluded. If a beneficiary is treated by providers from multiple states within a year the beneficiary is counted within each state's unique number of beneficiaries served.

In addition to examining home health claims data from all four years of the implementation of rebasing adjustments required by the Affordable Care Act, we examined trends in home health utilization for all years starting in CY 2001 and up through CY 2017. Figure 1, displays the average number of visits per 60-day episode of care and the average payment per visit. While the average payment per visit has steadily increased from approximately $116 in CY 2001 to $170 for CY 2017, the average total number of visits per 60-day episode of care has declined, most notably between CY 2009 (21.7 visits per episode) and CY 2010 (19.8 visits per episode), which was the first year that the 10 percent agency-level cap on HHA outlier payments was implemented. The average of total visits per episode has steadily decreased from 21.7 in 2009 to 17.9 in 2017.

BILLING CODE 4120-01-P

EP12JY18.000

BILLING CODE 4120-01-C

Figure 2 displays the average number of visits by discipline type for a 60-day episode of care and shows that while the number of therapy visits per 60-day episode of care has increased steadily, the number of skilled nursing and home health aide visits have decreased between CY 2009 and CY 2017. The results of the Report to Congress, “Medicare Home Health Study: An Investigation on Access to Care and Payment for Vulnerable Patient Populations”, required by section 3131(d) of the Affordable Care Act, suggests that the current home health payment system may discourage HHAs from serving patients with clinically complex and/or poorly controlled chronic conditions who do not qualify for therapy but require a large number of skilled nursing visits.

5

The home health study results seem to be consistent with the recent trend in the decreased number of visits per episode of care driven by decreases in skilled nursing and home health aide services evident in Figures 1 and 2.

5

Report to Congress Medicare Home Health Study: An Investigation on Access to Care and Payment for Vulnerable Patient Populations (2014). Available at:

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Downloads/HH-Report-to-Congress.pdf.

EP12JY18.001

As part of our monitoring efforts, we also examined the trends in episode timing and service use over time. Specifically, we examined the percentage of early episodes with 0 to 19 therapy visits, late episodes with 0 to 19 therapy visits, and episodes with 20+ therapy visits from CY 2008 to CY 2017. In CY 2008, we implemented refinements to the HH PPS case-mix system. As part of those refinements, we added additional therapy thresholds and differentiated between early and late episodes for those episodes with less than 20+ therapy visits. Early episodes are defined as the 1st or 2nd episode in a sequence of adjacent covered episodes. Late episodes are defined as the 3rd and subsequent episodes in a sequence of adjacent covered episodes. Table 4 shows that the percentage of early and late episodes from CY 2008 to CY 2017 has remained relatively stable over time. There has been a decrease in the percentage of early episodes with 0 to 19 therapy visits from 65.9 percent in CY 2008 to 61.3 percent in CY 2017 and a slight increase in the percentage of late episodes with 0 to 19 therapy visits from 29.5 percent in CY 2008 to 31.2 percent in CY 2017. In 2015, the case-mix weights for the third and later episodes of care with 0 to 19 therapy visits decreased as a result of the CY 2015 recalibration of the case-mix weights. Despite the decreases in the case-mix weights for the later episodes, the percentage of late episodes with 0 to 19 therapy visits did not change substantially. However, episode timing is not a variable in the determination of the case-mix weights for those episodes with 20+ therapy visits and the percentage of episodes with 20+ therapy visits has increased from 4.6 percent in CY 2008 to 7.6 percent in CY 2017.

Table 4—Home Health Episodes by Episode Timing, CY 2008 Through CY 2017

Year

All episodes

Number of

early episodes

(excluding

episodes with

20+ visits)

% of early

episodes

(excluding

episodes with 20+ visits)

Number of

late episodes

(excluding

episodes with

20+ visits)

% of late

episodes

(excluding

episodes

with

20+ visits)

Number of

episodes with

20+ visits

% of episodes

with

20+ visits

2008

5,423,037

3,571,619

65.9

1,600,587

29.5

250,831

4.6

2009

6,530,200

3,701,652

56.7

2,456,308

37.6

372,240

5.7

2010

6,877,598

3,872,504

56.3

2,586,493

37.6

418,601

6.1

2011

6,857,885

3,912,982

57.1

2,564,859

37.4

380,044

5.5

2012

6,767,576

3,955,207

58.4

2,458,734

36.3

353,635

5.2

2013

6,733,146

4,023,486

59.8

2,347,420

34.9

362,240

5.4

2014

6,616,875

3,980,151

60.2

2,263,638

34.2

373,086

5.6

2015

6,644,922

4,008,279

60.3

2,205,052

33.2

431,591

6.5

2016

6,294,232

3,802,254

60.4

2,053,972

32.6

438,006

7.0

2017

5,963,778

3,655,636

61.3

1,857,840

31.2

450,302

7.6

Source: National claims history (NCH) data obtained from Chronic Condition Warehouse (CCW)—Accessed on March 6, 2018.

Note(s):

Only episodes with a through date in the year specified are included. Episodes with a claim frequency code equal to “0” (“Non-payment/zero claims”) and “2” (“Interim—first claim”) are excluded.

We also examined trends in admission source for home health episodes over time. Specifically, we examined the admission source for the “first or only” episodes of care (first episodes in a sequence of adjacent episodes of care or the only episode of care) from CY 2008 through CY 2017 (Figure 3). The percentage of first or only episodes with an acute admission source, defined as episodes with an inpatient hospital stay within the 14 days prior to a home health episode, has decreased from 38.6 percent in CY 2008 to 34.8 percent in CY 2017. The percentage of first or only episodes with a post-acute admission source, defined as episodes which had a stay at a skilled nursing facility (SNF), inpatient rehabilitation facility (IRF), or long term care hospital (LTCH) within 14 days prior to the home health episode, has slightly increased from 16.4 percent in CY 2008 to 17.6 percent in CY 2017. The percentage of first or only episodes with a community admission source, defined as episodes which did not have an acute or post-acute stay in the 14 days prior to the home health episode, increased from 37.4 percent in CY 2008 to 41.5 percent in CY 2017. Our findings on the trends in admission source show a similar pattern with MedPAC's as outlined in their 2015 Report to the Congress.

6

MedPAC concluded that there has been tremendous growth in the use of home health for patients residing in the community (that is, episodes not preceded by a prior hospitalization) and that these episodes have more than doubled since 2001. However, MedPAC examined admission source trends from 2002 up through 2013 and included first and subsequent episodes of care, whereas CMS analysis, as described above, included “first or only” episodes of care. Nonetheless, both analyses show a trend of increasing episodes of care without a preceding inpatient stay. MedPAC suggests there is significant potential for overuse, particularly since Medicare does not currently require any cost sharing for home health care.

6

Medicare Payment Advisory Commission (MedPAC). “Home Health Care Services.”

Report to the Congress: Medicare Payment Policy.

Washington, DC, March 2015. P. 214. Accessed on 3/28/2017 at:

http://www.medpac.gov/docs/default-source/reports/chapter-9-home-health-care-services-march-2015-report-.pdf?sfvrsn=0.

EP12JY18.002

We will continue to monitor for potential impacts due to the rebasing adjustments required by section 3131(a) of the Affordable Care Act and other policy changes in the future. Independent effects of any one policy may be difficult to discern in years where multiple policy changes occur in any given year.

B. Proposed CY 2019 HH PPS Case-Mix Weights

In the CY 2015 HH PPS final rule (79 FR 66072), we finalized a policy to annually recalibrate the HH PPS case-mix weights—adjusting the weights relative to one another—using the most current, complete data available. To recalibrate the HH PPS case-mix weights for CY 2018, we will use the same methodology finalized in the CY 2008 HH PPS final rule (72 FR 49762), the CY 2012 HH PPS final rule (76 FR 68526), and the CY 2015 HH PPS final rule (79 FR 66032). Annual recalibration of the HH PPS case-mix weights ensures that the case-mix weights reflect, as accurately as possible, current home health resource use and changes in utilization patterns.

To generate the proposed CY 2019 HH PPS case-mix weights, we used CY 2017 home health claims data (as of March 2, 2018) with linked OASIS data. These data are the most current and complete data available at this time. We will use CY 2017 home health claims data (as of June 30, 2018 or later) with linked OASIS data to generate the CY 2019 HH PPS case-mix weights in the CY 2019 HH PPS final rule. The process we used to calculate the HH PPS case-mix weights are outlined below.

Step 1:

Re-estimate the four-equation model to determine the clinical and functional points for an episode using wage-weighted minutes of care as our dependent variable for resource use. The wage-weighted minutes of care are determined using the CY 2016 Bureau of Labor Statistics national hourly wage plus fringe rates for the six home health disciplines and the minutes per visit from the claim. The points for each of the variables for each leg of the model, updated with CY 2017 home health claims data, are shown in Table 5. The points for the clinical variables are added together to determine an episode's clinical score. The points for the functional variables are added together to determine an episode's functional score.

BILLING CODE 4120-01-P

EP12JY18.014

EP12JY18.015

EP12JY18.016

BILLING CODE 4120-01-C

In updating the four-equation model for CY 2019, using 2017 home health claims data (the last update to the four-equation model for CY 2018 used CY 2016 home health claims data), there were few changes to the point values for the variables in the four-equation model. These relatively minor changes reflect the change in the relationship between the grouper variables and resource use between CY 2016 and CY 2017. The CY 2019 four-equation model resulted in 113 point-giving variables being used in the model (as compared to the 119 variables for the CY 2018 recalibration, which can be found in Table 2 of the CY 2018 HH PPS final rule (82 FR 51684)). There were 7 variables that were added to the model and 13 variables that were dropped from the model due to the absence of additional resources associated with the variable. Of the variables that were in both the four-equation model for CY 2019 and the four-equation model for CY 2018, the points for 10 variables increased in the CY 2019 four-equation model and the points for 67 variables decreased in the CY 2019 4-equation model. There were 29 variables with the same point values.

Step 2:

Re-defining the clinical and functional thresholds so they are reflective of the new points associated with the CY 2019 four-equation model. After estimating the points for each of the variables and summing the clinical and functional points for each episode, we look at the distribution of the clinical score and functional score, breaking the episodes into different steps. The categorizations for the steps are as follows:

• Step 1: First and second episodes, 0-13 therapy visits.

• Step 2.1: First and second episodes, 14-19 therapy visits.

• Step 2.2: Third episodes and beyond, 14-19 therapy visits.

• Step 3: Third episodes and beyond, 0-13 therapy visits.

• Step 4: Episodes with 20+ therapy visits.

We then divide the distribution of the clinical score for episodes within a step such that a third of episodes are classified as low clinical score, a third of episodes are classified as medium clinical score, and a third of episodes are classified as high clinical score. The same approach is then done looking at the functional score. It was not always possible to evenly divide the episodes within each step into thirds due to many episodes being clustered around one particular score.

7

Also, we looked at the average resource use associated with each clinical and functional score and used that as a guide for setting our thresholds. We grouped scores with similar average resource use within the same level (even if it meant that more or less than a third of episodes were placed within a level). The new thresholds, based off the CY 2019 four-equation model points are shown in Table 6.

7

For Step 1, 41% of episodes were in the medium functional level (All with score 13).

For Step 2.1, 86.7% of episodes were in the low functional level (Most with scores 6 to 7).

For Step 2.2, 81.5% of episodes were in the low functional level (Most with score 0).

For Step 3, 46.7% of episodes were in the medium functional level (Most with score 9).

For Step 4, 29.9% of episodes were in the medium functional level (Most with score 6).

Table 6—Proposed CY 2019 Clinical and Functional Thresholds

1st and 2nd Episodes

0 to 13

therapy visits

14 to 19

therapy visits

3rd+ Episodes

0 to 13

therapy visits

14 to 19

therapy visits

All Episodes

20+ therapy

visits

Grouping Step

1

2

3

4

5

Equations used to calculate points

(see Table 2)

1

2

3

4

(2&4)

Dimension

Severity Level

Clinical

C1

0 to 1

0 to 1

0 to 1

0 to 1

0 to 3.

C2

2 to 3

2 to 7

2

2 to 9

4 to 16.

C3

4+

8+

3+

10+

17+.

Functional

F1

0 to 12

0 to 7

0 to 6

0 to 2

0 to 2.

F2

13

8 to 12

7 to 10

3 to 7

3 to 6.

F3

14+

13+

11+

8+

7+.

Step 3:

Once the clinical and functional thresholds are determined and each episode is assigned a clinical and functional level, the payment regression is estimated with an episode's wage-weighted minutes of care as the dependent variable. Independent variables in the model are indicators for the step of the episode as well as the clinical and functional levels within each step of the episode. Like the four-equation model, the payment regression model is also estimated with robust standard errors that are clustered at the beneficiary level. Table 7 shows the regression coefficients for the variables in the payment regression model updated with CY 2017 home

health claims data. The R-squared value for the payment regression model is 0.5508 (an increase from 0.5095 for the CY 2018 recalibration).

Table 7—Payment Regression Model

Payment

regression

from

4-equation

model for

CY 2019

Step 1, Clinical Score Medium

$21.81

Step 1, Clinical Score High

54.06

Step 1, Functional Score Medium

70.54

Step 1, Functional Score High

99.78

Step 2.1, Clinical Score Medium

50.90

Step 2.1, Clinical Score High

118.77

Step 2.1, Functional Score Medium

25.36

Step 2.1, Functional Score High

31.96

Step 2.2, Clinical Score Medium

48.03

Step 2.2, Clinical Score High

187.73

Step 2.2, Functional Score Medium

50.06

Step 2.2, Functional Score High

0.00

Step 3, Clinical Score Medium

18.05

Step 3, Clinical Score High

83.67

Step 3, Functional Score Medium

56.10

Step 3, Functional Score High

81.90

Step 4, Clinical Score Medium

70.97

Step 4, Clinical Score High

245.97

Step 4, Functional Score Medium

4.60

Step 4, Functional Score High

17.77

Step 2.1, 1st and 2nd Episodes, 14 to 19 Therapy Visits

515.04

Step 2.2, 3rd+ Episodes, 14 to 19 Therapy Visits

510.26

Step 3, 3rd+ Episodes, 0-13 Therapy Visits

−60.34

Step 4, All Episodes, 20+ Therapy Visits

895.79

Intercept

375.32

Source: CY 2017 Medicare claims data for episodes ending on or before December 31, 2017 (as of March 2, 2018) for which we had a linked OASIS assessment.

Step 4:

We use the coefficients from the payment regression model to predict each episode's wage-weighted minutes of care (resource use). We then divide these predicted values by the mean of the dependent variable (that is, the average wage-weighted minutes of care across all episodes used in the payment regression). This division constructs the weight for each episode, which is simply the ratio of the episode's predicted wage-weighted minutes of care divided by the average wage-weighted minutes of care in the sample. Each episode is then aggregated into one of the 153 home health resource groups (HHRGs) and the “raw” weight for each HHRG was calculated as the average of the episode weights within the HHRG.

Step 5:

The raw weights associated with 0 to 5 therapy visits are then increased by 3.75 percent, the weights associated with 14-15 therapy visits are decreased by 2.5 percent, and the weights associated with 20+ therapy visits are decreased by 5 percent. These adjustments to the case-mix weights were finalized in the CY 2012 HH PPS final rule (76 FR 68557) and were done to address MedPAC's concerns that the HH PPS overvalues therapy episodes and undervalues non-therapy episodes and to better align the case-mix weights with episode costs estimated from cost report data.

8

8

Medicare Payment Advisory Commission (MedPAC

), Report to the Congress: Medicare Payment Policy.

March 2011, P. 176.

Step 6:

After the adjustments in step 5 are applied to the raw weights, the weights are further adjusted to create an increase in the payment weights for the therapy visit steps between the therapy thresholds. Weights with the same clinical severity level, functional severity level, and early/later episode status were grouped together. Then within those groups, the weights for each therapy step between thresholds are gradually increased. We do this by interpolating between the main thresholds on the model (from 0-5 to 14-15 therapy visits, and from 14-15 to 20+ therapy visits). We use a linear model to implement the interpolation so the payment weight increase for each step between the thresholds (such as the increase between 0-5 therapy visits and 6 therapy visits and the increase between 6 therapy visits and 7-9 therapy visits) are constant. This interpolation is identical to the process finalized in the CY 2012 HH PPS final rule (76 FR 68555).

Step 7:

The interpolated weights are then adjusted so that the average case-mix for the weights is equal to 1.0000.

9

This last step creates the proposed CY 2019 case-mix weights shown in Table 8.

9

When computing the average, we compute a weighted average, assigning a value of one to each normal episode and a value equal to the episode length divided by 60 for PEPs.

Table 8—Proposed Cy 2019 Case-Mix Payment Weights

Pay group

Description

Clinical and

functional

levels

(1 = low;

2 = medium;

3 = high)

Proposed

weights for

CY 2019

10111

1st and 2nd Episodes, 0 to 5 Therapy Visits

C1F1S1

0.5459

10112

1st and 2nd Episodes, 6 Therapy Visits

C1F1S2

0.6801

10113

1st and 2nd Episodes, 7 to 9 Therapy Visits

C1F1S3

0.8143

10114

1st and 2nd Episodes, 10 Therapy Visits

C1F1S4

0.9485

10115

1st and 2nd Episodes, 11 to 13 Therapy Visits

C1F1S5

1.0828

10121

1st and 2nd Episodes, 0 to 5 Therapy Visits

C1F2S1

0.6485

10122

1st and 2nd Episodes, 6 Therapy Visits

C1F2S2

0.7691

10123

1st and 2nd Episodes, 7 to 9 Therapy Visits

C1F2S3

0.8897

10124

1st and 2nd Episodes, 10 Therapy Visits

C1F2S4

1.0104

10125

1st and 2nd Episodes, 11 to 13 Therapy Visits

C1F2S5

1.1310

10131

1st and 2nd Episodes, 0 to 5 Therapy Visits

C1F3S1

0.6910

10132

1st and 2nd Episodes, 6 Therapy Visits

C1F3S2

0.8049

10133

1st and 2nd Episodes, 7 to 9 Therapy Visits

C1F3S3

0.9189

10134

1st and 2nd Episodes, 10 Therapy Visits

C1F3S4

1.0328

10135

1st and 2nd Episodes, 11 to 13 Therapy Visits

C1F3S5

1.1467

10211

1st and 2nd Episodes, 0 to 5 Therapy Visits

C2F1S1

0.5776

10212

1st and 2nd Episodes, 6 Therapy Visits

C2F1S2

0.7194

10213

1st and 2nd Episodes, 7 to 9 Therapy Visits

C2F1S3

0.8612

10214

1st and 2nd Episodes, 10 Therapy Visits

C2F1S4

1.0030

10215

1st and 2nd Episodes, 11 to 13 Therapy Visits

C2F1S5

1.1448

10221

1st and 2nd Episodes, 0 to 5 Therapy Visits

C2F2S1

0.6802

10222

1st and 2nd Episodes, 6 Therapy Visits

C2F2S2

0.8084

10223

1st and 2nd Episodes, 7 to 9 Therapy Visits

C2F2S3

0.9366

10224

1st and 2nd Episodes, 10 Therapy Visits

C2F2S4

1.0648

10225

1st and 2nd Episodes, 11 to 13 Therapy Visits

C2F2S5

1.1930

10231

1st and 2nd Episodes, 0 to 5 Therapy Visits

C2F3S1

0.7227

10232

1st and 2nd Episodes, 6 Therapy Visits

C2F3S2

0.8442

10233

1st and 2nd Episodes, 7 to 9 Therapy Visits

C2F3S3

0.9657

10234

1st and 2nd Episodes, 10 Therapy Visits

C2F3S4

1.0872

10235

1st and 2nd Episodes, 11 to 13 Therapy Visits

C2F3S5

1.2087

10311

1st and 2nd Episodes, 0 to 5 Therapy Visits

C3F1S1

0.6245

10312

1st and 2nd Episodes, 6 Therapy Visits

C3F1S2

0.7755

10313

1st and 2nd Episodes, 7 to 9 Therapy Visits

C3F1S3

0.9264

10314

1st and 2nd Episodes, 10 Therapy Visits

C3F1S4

1.0774

10315

1st and 2nd Episodes, 11 to 13 Therapy Visits

C3F1S5

1.2284

10321

1st and 2nd Episodes, 0 to 5 Therapy Visits

C3F2S1

0.7271

10322

1st and 2nd Episodes, 6 Therapy Visits

C3F2S2

0.8645

10323

1st and 2nd Episodes, 7 to 9 Therapy Visits

C3F2S3

1.0019

10324

1st and 2nd Episodes, 10 Therapy Visits

C3F2S4

1.1392

10325

1st and 2nd Episodes, 11 to 13 Therapy Visits

C3F2S5

1.2766

10331

1st and 2nd Episodes, 0 to 5 Therapy Visits

C3F3S1

0.7696

10332

1st and 2nd Episodes, 6 Therapy Visits

C3F3S2

0.9003

10333

1st and 2nd Episodes, 7 to 9 Therapy Visits

C3F3S3

1.0310

10334

1st and 2nd Episodes, 10 Therapy Visits

C3F3S4

1.1617

10335

1st and 2nd Episodes, 11 to 13 Therapy Visits

C3F3S5

1.2923

21111

1st and 2nd Episodes, 14 to 15 Therapy Visits

C1F1S1

1.2170

21112

1st and 2nd Episodes, 16 to 17 Therapy Visits

C1F1S2

1.3756

21113

1st and 2nd Episodes, 18 to 19 Therapy Visits

C1F1S3

1.5342

21121

1st and 2nd Episodes, 14 to 15 Therapy Visits

C1F2S1

1.2516

21122

1st and 2nd Episodes, 16 to 17 Therapy Visits

C1F2S2

1.4008

21123

1st and 2nd Episodes, 18 to 19 Therapy Visits

C1F2S3

1.5499

21131

1st and 2nd Episodes, 14 to 15 Therapy Visits

C1F3S1

1.2607

21132

1st and 2nd Episodes, 16 to 17 Therapy Visits

C1F3S2

1.4126

21133

1st and 2nd Episodes, 18 to 19 Therapy Visits

C1F3S3

1.5646

21211

1st and 2nd Episodes, 14 to 15 Therapy Visits

C2F1S1

1.2866

21212

1st and 2nd Episodes, 16 to 17 Therapy Visits

C2F1S2

1.4535

21213

1st and 2nd Episodes, 18 to 19 Therapy Visits

C2F1S3

1.6204

21221

1st and 2nd Episodes, 14 to 15 Therapy Visits

C2F2S1

1.3212

21222

1st and 2nd Episodes, 16 to 17 Therapy Visits

C2F2S2

1.4786

21223

1st and 2nd Episodes, 18 to 19 Therapy Visits

C2F2S3

1.6361

21231

1st and 2nd Episodes, 14 to 15 Therapy Visits

C2F3S1

1.3302

21232

1st and 2nd Episodes, 16 to 17 Therapy Visits

C2F3S2

1.4905

21233

1st and 2nd Episodes, 18 to 19 Therapy Visits

C2F3S3

1.6508

21311

1st and 2nd Episodes, 14 to 15 Therapy Visits

C3F1S1

1.3793

21312

1st and 2nd Episodes, 16 to 17 Therapy Visits

C3F1S2

1.5930

21313

1st and 2nd Episodes, 18 to 19 Therapy Visits

C3F1S3

1.8067

21321

1st and 2nd Episodes, 14 to 15 Therapy Visits

C3F2S1

1.4140

21322

1st and 2nd Episodes, 16 to 17 Therapy Visits

C3F2S2

1.6182

21323

1st and 2nd Episodes, 18 to 19 Therapy Visits

C3F2S3

1.8224

21331

1st and 2nd Episodes, 14 to 15 Therapy Visits

C3F3S1

1.4230

21332

1st and 2nd Episodes, 16 to 17 Therapy Visits

C3F3S2

1.6300

21333

1st and 2nd Episodes, 18 to 19 Therapy Visits

C3F3S3

1.8371

22111

3rd+ Episodes, 14 to 15 Therapy Visits

C1F1S1

1.2104

22112

3rd+ Episodes, 16 to 17 Therapy Visits

C1F1S2

1.3713

22113

3rd+ Episodes, 18 to 19 Therapy Visits

C1F1S3

1.5321

22121

3rd+ Episodes, 14 to 15 Therapy Visits

C1F2S1

1.2789

22122

3rd+ Episodes, 16 to 17 Therapy Visits

C1F2S2

1.4189

22123

3rd+ Episodes, 18 to 19 Therapy Visits

C1F2S3

1.5589

22131

3rd+ Episodes, 14 to 15 Therapy Visits

C1F3S1

1.2789

22132

3rd+ Episodes, 16 to 17 Therapy Visits

C1F3S2

1.4248

22133

3rd+ Episodes, 18 to 19 Therapy Visits

C1F3S3

1.5706

22211

3rd+ Episodes, 14 to 15 Therapy Visits

C2F1S1

1.2761

22212

3rd+ Episodes, 16 to 17 Therapy Visits

C2F1S2

1.4465

22213

3rd+ Episodes, 18 to 19 Therapy Visits

C2F1S3

1.6169

22221

3rd+ Episodes, 14 to 15 Therapy Visits

C2F2S1

1.3445

22222

3rd+ Episodes, 16 to 17 Therapy Visits

C2F2S2

1.4942

22223

3rd+ Episodes, 18 to 19 Therapy Visits

C2F2S3

1.6438

22231

3rd+ Episodes, 14 to 15 Therapy Visits

C2F3S1

1.3445

22232

3rd+ Episodes, 16 to 17 Therapy Visits

C2F3S2

1.5000

22233

3rd+ Episodes, 18 to 19 Therapy Visits

C2F3S3

1.6555

22311

3rd+ Episodes, 14 to 15 Therapy Visits

C3F1S1

1.4670

22312

3rd+ Episodes, 16 to 17 Therapy Visits

C3F1S2

1.6515

22313

3rd+ Episodes, 18 to 19 Therapy Visits

C3F1S3

1.8360

22321

3rd+ Episodes, 14 to 15 Therapy Visits

C3F2S1

1.5355

22322

3rd+ Episodes, 16 to 17 Therapy Visits

C3F2S2

1.6992

22323

3rd+ Episodes, 18 to 19 Therapy Visits

C3F2S3

1.8629

22331

3rd+ Episodes, 14 to 15 Therapy Visits

C3F3S1

1.5355

22332

3rd+ Episodes, 16 to 17 Therapy Visits

C3F3S2

1.7050

22333

3rd+ Episodes, 18 to 19 Therapy Visits

C3F3S3

1.8746

30111

3rd+ Episodes, 0 to 5 Therapy Visits

C1F1S1

0.4581

30112

3rd+ Episodes, 6 Therapy Visits

C1F1S2

0.6086

30113

3rd+ Episodes, 7 to 9 Therapy Visits

C1F1S3

0.7591

30114

3rd+ Episodes, 10 Therapy Visits

C1F1S4

0.9095

30115

3rd+ Episodes, 11 to 13 Therapy Visits

C1F1S5

1.0600

30121

3rd+ Episodes, 0 to 5 Therapy Visits

C1F2S1

0.5397

30122

3rd+ Episodes, 6 Therapy Visits

C1F2S2

0.6876

30123

3rd+ Episodes, 7 to 9 Therapy Visits

C1F2S3

0.8354

30124

3rd+ Episodes, 10 Therapy Visits

C1F2S4

0.9832

30125

3rd+ Episodes, 11 to 13 Therapy Visits

C1F2S5

1.1310

30131

3rd+ Episodes, 0 to 5 Therapy Visits

C1F3S1

0.5772

30132

3rd+ Episodes, 6 Therapy Visits

C1F3S2

0.7176

30133

3rd+ Episodes, 7 to 9 Therapy Visits

C1F3S3

0.8579

30134

3rd+ Episodes, 10 Therapy Visits

C1F3S4

0.9982

30135

3rd+ Episodes, 11 to 13 Therapy Visits

C1F3S5

1.1385

30211

3rd+ Episodes, 0 to 5 Therapy Visits

C2F1S1

0.4844

30212

3rd+ Episodes, 6 Therapy Visits

C2F1S2

0.6427

30213

3rd+ Episodes, 7 to 9 Therapy Visits

C2F1S3

0.8011

30214

3rd+ Episodes, 10 Therapy Visits

C2F1S4

0.9594

30215

3rd+ Episodes, 11 to 13 Therapy Visits

C2F1S5

1.1178

30221

3rd+ Episodes, 0 to 5 Therapy Visits

C2F2S1

0.5660

30222

3rd+ Episodes, 6 Therapy Visits

C2F2S2

0.7217

30223

3rd+ Episodes, 7 to 9 Therapy Visits

C2F2S3

0.8774

30224

3rd+ Episodes, 10 Therapy Visits

C2F2S4

1.0331

30225

3rd+ Episodes, 11 to 13 Therapy Visits

C2F2S5

1.1888

30231

3rd+ Episodes, 0 to 5 Therapy Visits

C2F3S1

0.6035

30232

3rd+ Episodes, 6 Therapy Visits

C2F3S2

0.7517

30233

3rd+ Episodes, 7 to 9 Therapy Visits

C2F3S3

0.8999

30234

3rd+ Episodes, 10 Therapy Visits

C2F3S4

1.0481

30235

3rd+ Episodes, 11 to 13 Therapy Visits

C2F3S5

1.1963

30311

3rd+ Episodes, 0 to 5 Therapy Visits

C3F1S1

0.5798

30312

3rd+ Episodes, 6 Therapy Visits

C3F1S2

0.7573

30313

3rd+ Episodes, 7 to 9 Therapy Visits

C3F1S3

0.9347

30314

3rd+ Episodes, 10 Therapy Visits

C3F1S4

1.1122

30315

3rd+ Episodes, 11 to 13 Therapy Visits

C3F1S5

1.2896

30321

3rd+ Episodes, 0 to 5 Therapy Visits

C3F2S1

0.6614

30322

3rd+ Episodes, 6 Therapy Visits

C3F2S2

0.8362

30323

3rd+ Episodes, 7 to 9 Therapy Visits

C3F2S3

1.0110

30324

3rd+ Episodes, 10 Therapy Visits

C3F2S4

1.1858

30325

3rd+ Episodes, 11 to 13 Therapy Visits

C3F2S5

1.3607

30331

3rd+ Episodes, 0 to 5 Therapy Visits

C3F3S1

0.6989

30332

3rd+ Episodes, 6 Therapy Visits

C3F3S2

0.8662

30333

3rd+ Episodes, 7 to 9 Therapy Visits

C3F3S3

1.0336

30334

3rd+ Episodes, 10 Therapy Visits

C3F3S4

1.2009

30335

3rd+ Episodes, 11 to 13 Therapy Visits

C3F3S5

1.3682

40111

All Episodes, 20+ Therapy Visits

C1F1S1

1.6929

40121

All Episodes, 20+ Therapy Visits

C1F2S1

1.6990

40131

All Episodes, 20+ Therapy Visits

C1F3S1

1.7165

40211

All Episodes, 20+ Therapy Visits

C2F1S1

1.7874

40221

All Episodes, 20+ Therapy Visits

C2F2S1

1.7935

40231

All Episodes, 20+ Therapy Visits

C2F3S1

1.8110

40311

All Episodes, 20+ Therapy Visits

C3F1S1

2.0204

40321

All Episodes, 20+ Therapy Visits

C3F2S1

2.0266

40331

All Episodes, 20+ Therapy Visits

C3F3S1

2.0441

To ensure the changes to the HH PPS case-mix weights are implemented in a budget neutral manner, we then apply a case-mix budget neutrality factor to the proposed CY 2019 national, standardized 60-day episode payment rate (see section III.C.3. of this proposed rule). The case-mix budget neutrality factor is calculated as the ratio of total payments when the CY 2019 HH PPS case-mix weights (developed using CY 2017 home health claims data) are applied to CY 2017 utilization (claims) data to total payments when CY 2018 HH PPS case-mix weights (developed using CY 2016 home health claims data) are applied to CY 2017 utilization data. This produces a case-mix budget neutrality factor for CY 2019 of 1.0163.

C. CY 2019 Home Health Payment 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 2019 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 HHA PPS payments, we used the home health market basket to update payments under the HHA PPS. We last rebased the home health market basket effective with the CY 2013 update (77 FR 67081).

The home health market basket is a fixed-weight, Laspeyres-type price index. A Laspeyres-type price index measures the change in price, over time, of the same mix of goods and services purchased in the base period. Any changes in the quantity or mix of goods and services (that is, intensity) purchased over time are not measured.

The index itself is constructed in three steps. First, a base period is selected (in this proposed rule, we are proposing to use 2016 as the base period) and total base period expenditures are estimated for a set of mutually exclusive and exhaustive spending categories, with the proportion of total costs that each category represents being calculated. These proportions are called “cost weights” or “expenditure weights.” Second, each expenditure category is matched to an appropriate price or wage variable, referred to as a “price proxy.” In almost every instance, these price proxies are derived from publicly available statistical series that are published on a consistent schedule (preferably at least on a quarterly basis). Finally, the expenditure weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the expenditure weights multiplied by their price index levels) for all cost categories yields the composite index level of the market basket in a given period. Repeating this step for other periods produces a series of market basket levels over time. Dividing an index level for a given period by an index level for an earlier period produces a rate of growth in the input price index over that timeframe.

As noted previously, the market basket is described as a fixed-weight index because it represents the change in price over time of a constant mix (quantity and intensity) of goods and services needed to provide HHA services. The effects on total expenditures resulting from changes in the mix of goods and services purchased

subsequent to the base period are not measured. For example, a HHA hiring more nurses to accommodate the needs of patients would increase the volume of goods and services purchased by the HHA, but would not be factored into the price change measured by a fixed-weight home health market basket. Only when the index is rebased would changes in the quantity and intensity be captured, with those changes being reflected in the cost weights. Therefore, we rebase the market basket periodically so that the cost weights reflect recent changes in the mix of goods and services that HHAs purchase (HHA inputs) to furnish inpatient care between base periods.

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 2010 data. We are proposing to rebase and revise the home health market basket to reflect 2016 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, 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 2010 to CY 2016) 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 are rebasing the detailed wages and salaries and benefits cost weights to reflect 2016 BLS Occupational Employment Statistics (OES) data on HHAs. The 2010-based home health market basket used 2010 BLS OES data on HHAs. We are also proposing to break out the All Other (residual) cost category weight into more detailed cost categories, based on the 2007 Benchmark U.S. Department of Commerce, Bureau of Economic Analysis (BEA) Input-Output (I-O) Table for HHAs. The 2010-based home health market basket used the 2002 I-O data. Finally, due to its small weight, we are proposing to eliminate the cost category `Postage' and include these expenses in the `All Other Services' cost weight.

c. Derivation of the Proposed 2016-Based Home Health Market Basket Cost Weights

The major cost weights for this proposed revised and rebased home health market basket are derived from the Medicare Cost Reports (MCR; CMS Form 1728-94) data for freestanding HHAs whose cost reporting period began on or after October 1, 2015 and before October 1, 2016. Of the 2016 Medicare cost reports for freestanding HHAs, approximately 84 percent of the reports had a begin date on January 1, 2016, approximately 6 percent had a begin date on July 1, 2016, and approximately 4 percent had a begin date on October 1, 2015. Using this methodology allowed our sample to include HHAs 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 2016.

We propose to maintain our policy of using data from freestanding HHAs, which account for over 90 percent of HHAs (82 FR 35383), 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.

We are proposing to derive eight major expense categories (Wages and Salaries, Benefits, Contract Labor, Transportation, Professional Liability Insurance (PLI), Fixed Capital, Movable Capital, and a residual “All Other”) from the 2016 Medicare HHA cost reports. Due to its small weight, we are proposing to eliminate the cost category `Postage' and include these expenses in the “All Other (residual)” cost weight. These major expense categories are based on those cost centers that are reimbursable under the HHA PPS, specifically Skilled Nursing Care, Physical Therapy, Occupational Therapy, Speech Pathology, Medical Social Services, Home Health Aide, and Supplies. These are the same cost centers that were used in the 2014 base payment rebasing (78 FR 72276), which are described in the Abt Associates Inc. June 2013, Technical Paper, “Analyses In Support of Rebasing and Updating Medicare Home Health Payment Rates” (

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Downloads/Analyses-in-Support-of-Rebasing-and-Updating-the-Medicare-Home-Health-Payment-Rates-Technical-Report.pdf

). Total costs for the HHA PPS reimbursable services reflect overhead allocation. We provide detail on the calculations for each major expense category.

(1) Wages and Salaries: Wages and Salaries costs reflect direct patient care wages and salaries costs as well as wages and salaries costs associated with Plant Operations and Maintenance, Transportation, and Administrative and General. Specifically, we are proposing to calculate Wages and Salaries by summing costs from Worksheet A, column 1, lines 3 through 12 and subtracting line 5.03 (A&G Nonreimbursable costs).

(2) Benefits: Benefits costs reflect direct patient care benefit costs as well as benefit costs associated with Plant Operations and Maintenance, Transportation, and Administrative and General. Specifically, we are proposing to calculate Benefits by summing costs from Worksheet A, column 2, lines 3 through 12 and subtracting line 5.03 (A&G Nonreimbursable costs).

(3) Direct Patient Care Contract Labor: Contract Labor costs reflect direct patient care contract labor. Specifically, we are proposing to calculate Contract Labor by summing costs from Worksheet A, column 4, lines 6 through 11.

(4) Transportation: Transportation costs reflect direct patient care costs as well as transportation costs associated with Capital Expenses, Plant Operations and Maintenance, and Administrative and General. Specifically, we are proposing to calculate Transportation by summing costs from Worksheet A, column 3, lines 1 through 12 and subtracting line 5.03 (A&G Nonreimbursable costs).

(5) Professional Liability Insurance: Professional Liability Insurance reflects premiums, paid losses, and self-insurance costs. Specifically we are proposing to calculate Professional Liability Insurance by summing costs from Worksheet S2, lines 27.01, 27.02 and 27.03.

(6) Fixed Capital: Fixed Capital-related costs reflect the portion of Medicare-allowable costs reported in “Capital Related Buildings and Fixtures” (Worksheet A, column 5, line 1). We calculate this Medicare allowable portion by first calculating a ratio for each provider that reflects fixed capital costs as a percentage of HHA reimbursable services. Specifically this ratio is calculated as the sum of costs from Worksheet B, column 1, lines 6 through 12 divided by the sum of costs from Worksheet B, column 1, line 1 minus lines 3 through 5. This percentage is then applied to the sum of the costs from Worksheet A, column 5, line 1.

(7) Movable Capital: Movable Capital-related costs reflect the portion of Medicare-allowable costs reported in “Capital Related Moveable Equipment” (Worksheet A, column 5, line 2). We calculate this Medicare allowable portion by first calculating a ratio for each provider that reflects movable capital costs as a percentage of HHA reimbursable services. Specifically this ratio is calculated as the sum of costs from Worksheet B, column 2, lines 6 through 12 divided by the sum of costs from Worksheet B, column 2, line 2 minus lines 3 through 5. This percentage is then applied to the sum of the costs from Worksheet A, column 5, line 2.

(8) All Other (residual): The “All Other” cost weight is a residual, calculated by subtracting the major cost weight percentages (Wages and Salaries, Benefits, Direct Patient Care Contract Labor, Transportation, Professional Liability Insurance, Fixed Capital, and Movable Capital) from 1.

As prescription drugs and DME are not payable under the HH PPS, we continue to exclude those items from the home health market basket. Totals within each of the major 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 Medicare allowable costs that each category represents. For all of the major cost categories except the “residual” All Other cost weight, we then removed those providers whose derived cost weights fall in the top and bottom five percent of provider-specific cost weights to ensure the removal of outliers. After the outliers were removed, we summed the costs for each category across all remaining providers. We then divided this by the sum of total Medicare allowable costs across all remaining providers to obtain a cost weight for the proposed 2016-based home health market basket for the given category.

Table 9 shows the major cost categories and their respective cost weights as derived from the Medicare cost reports for this proposed rule.

Table 9—Major Cost Categories as Derived From the Medicare Cost Reports

Major cost categories

2010 based

Proposed

2016 based

Wages and Salaries (including allocated direct patient care contract labor)

66.3

65.1

Benefits (including allocated direct patient care contract labor)

12.2

10.9

Transportation

2.5

2.6

Professional Liability Insurance (Malpractice)

0.4

0.3

Fixed Capital

1.5

1.4

Moveable Capital

0.6

0.6

“All Other” residual

16.5

19.0

* Figures may not sum to 100.0 due to rounding.

The decrease in the wages and salaries cost weight of 1.2 percentage points and the decrease in the benefits cost weight of 1.3 percentage points is attributable to both employed compensation and direct patient care contract labor costs as reported on the MCR data. Our analysis of the MCR data shows that the decrease in the compensation cost weight of 2.4 percentage points (calculated by combining wages and salaries and benefits) from 2010 to 2016 occurred among for-profit, nonprofit, and government providers and among providers serving only rural beneficiaries, only urban beneficiaries, or both rural and urban beneficiaries.

Over the 2010 to 2016 time period, the average number of FTEs per provider decreased considerably. This corresponds with the HHA claims analysis published on page 35279 of the CY 2018 proposed rule (

https://www.gpo.gov/fdsys/pkg/FR-2017-07-28/pdf/2017-15825.pdf

), which shows that the number of visits per 60-day episode has decreased from 19.8 visits in 2010 to 17.9 visits in 2016 for Medicare PPS. Medicare visits account for approximately 60 percent of total visits.

The direct patient care contract labor costs are contract labor costs for skilled nursing, physical therapy, occupational therapy, speech therapy, and home health aide cost centers. We allocated these direct patient care contract labor costs to the Wages and Salaries and Benefits cost categories based on each provider's relative proportions of both employee wages and salaries and employee benefits costs. For example, the direct patient care contract labor costs that are allocated to wages and salaries is equal to: (A) The employee wages and salaries costs as a percent of the sum of employee wages and salaries costs and employee benefits costs times; and (B) direct patient care contract labor costs. Nondirect patient care contract labor costs (such as contract labor costs reported in the Administrative and General cost center of the MCR) are captured in the “All Other” residual cost weight and later disaggregated into more detail as described below. This is a similar methodology that was implemented for the 2010-based home health market basket.

We further divide the “All Other” residual cost weight estimated from the 2016 Medicare cost report data into more detailed cost categories. To divide this cost weight we are proposing to use the 2007 Benchmark I-O “Use Tables/Before Redefinitions/Purchaser Value” for NAICS 621600, Home Health Agencies, published by the BEA. These data are publicly available at

http://www.bea.gov/industry/io_annual.htm.

The BEA Benchmark I-O data are generally scheduled for publication every five years. The most recent data available at the time of rebasing was for 2007. The 2007 Benchmark I-O data are derived from the 2007 Economic Census and are the building blocks for BEA's economic accounts. Therefore, they represent the most comprehensive and complete set of data on the economic processes or mechanisms by which output is produced and distributed.

10

Besides Benchmark I-O estimates, BEA also produces Annual I-O estimates. While based on a similar methodology, the Annual I-O estimates reflect less comprehensive and less detailed data sources and are subject to revision when benchmark data become available. Instead of using the less detailed Annual I-O data, we are proposing to inflate the detailed 2007 Benchmark I-O data forward to 2016 by applying the annual price changes from the respective price proxies to the appropriate market basket cost categories that are obtained from the 2007 Benchmark I-O data. We repeated this practice for each year. We then calculated the cost shares that each cost

category represents of the 2007 data inflated to 2016. These resulting 2016 cost shares were applied to the “All Other” residual cost weight to obtain the detailed cost weights for the proposed 2016-based home health market basket. For example, the cost for Operations and Maintenance represents 8.0 percent of the sum of the “All Other” 2007 Benchmark I-O HHA Expenditures inflated to 2016. Therefore, the Operations and Maintenance cost weight represents 8.0 percent of the proposed 2016-based home health market basket's “All Other” cost category (19.0 percent), yielding an Operations and Maintenance proposed cost weight of 1.5 percent in the proposed 2016-based home health market basket (0.080 × 19.0 percent = 1.5 percent). For the 2010-based home health market basket, we used the same methodology utilizing the 2002 Benchmark I-O data (aged to 2010).

10

http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.

Using this methodology, we are proposing to derive nine detailed cost categories from the proposed 2016-based home health market basket “All Other” residual cost weight (19.0 percent). These categories are: (1) Operations and Maintenance; (2) Administrative Support; (3) Financial Services; (4) Medical Supplies; (5) Rubber and Plastics; (6) Telephone; (7) Professional Fees; (8) Other Products; and (9) Other Services. The 2010-based home health market basket included a separate cost category for Postage; however, due to its small weight for the 2016-based home health market basket, we propose to eliminate the stand-alone cost category for Postage and include these expenses in the Other Services cost category.

Table 10 lists the proposed 2016-based home health market basket cost categories, cost weights, and price proxies.

Table 10—Cost Categories, Weights, and Price Proxies

in Proposed 2016-Based Home Health Market Basket

Cost categories

Weight

Price proxy

Compensation, including allocated contract services' labor

76.1

Wages and Salaries, including allocated contract services' labor

65.1

Proposed Home Health Blended Wages and Salaries Index (2016).

Benefits, including allocated contract services' labor

10.9

Proposed Home Health Blended Benefits Index (2016).

Operations & Maintenance

1.5

CPI-U for Fuel and utilities.

Professional Liability Insurance

0.3

CMS Physician Professional Liability Insurance Index.

Administrative & General & Other Expenses including allocated contract services' labor

17.4

Administrative Support

1.0

ECI for Total compensation for Private industry workers in Office and administrative support.

Financial Services

1.9

ECI for Total compensation for Private industry workers in Financial activities.

Medical Supplies

0.9

PPI Commodity data for Medical, surgical & personal aid devices.

Rubber & Plastics

1.6

PPI Commodity data for Rubber and plastic products.

Telephone

0.7

CPI-U for Telephone services.

Professional Fees

5.3

ECI for Total compensation for Private industry workers in Professional and related.

Other Products

2.8

PPI Commodity data for Finished goods less foods and energy.

Other Services

3.2

ECI for Total compensation for Private industry workers in Service occupations.

Transportation

2.6

CPI-U for Transportation.

Capital-Related

2.1

Fixed Capital

1.4

CPI-U for Owners' equivalent rent of residences.

Movable Capital

0.6

PPI Commodity data for Machinery and equipment.

Total

* 100.0

* Figures may not sum due to rounding.

d. Proposed 2016-Based Home Health Market Basket Price Proxies

After we computed the CY 2016 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 Professional Liability 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 rebase the home health blended Wages and Salaries index and the home health blended Benefits index. We propose to use these blended indexes as price proxies for the Wages and Salaries and the Benefits portions of the proposed 2016-based home health market basket, as we did in the 2010-based home health market basket. A more detailed discussion is provided below.

•

Wages and Salaries:

For measuring price growth in the 2016-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 2010-based index. We use a blended wage proxy because there is not a published wage proxy specific to the home health industry.

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 blended wage and benefits proxy. This is the same data source that was used for the 2010-based HHA blended wage and benefit proxies; however, we are proposing to use the May 2016 estimates in place of the May 2010 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 (Health-Related Professional and Technical, Non Health-Related Professional and Technical, Management, Administrative, Health and Social Assistance Service, and Other Service Workers) for the wages and salaries component were tabulated from the May 2016 OES data for NAICS 621600, Home Health Care Services. Table 11 compares the proposed 2016 occupational assignments to the 2010 occupational assignments of the six CMS designated subcategories. If an OES occupational classification does not exist in the 2010 or 2016 data we use “n/a.”

Table 11—Proposed 2016 Occupational Assignments Compared to 2010 Occupational Assignments for CMS Home Health Wages and Salaries Blend

2016 proposed occupational groupings

Group 1

Health-related professional and technical

2010 occupational groupings

Group 1

Health-related professional and technical

n/a

n/a

29-1021

Dentists, General.

29-1031

Dietitians and Nutritionists

29-1031

Dietitians and Nutritionists.

29-1051

Pharmacists

29-1051

Pharmacists.

29-1062

Family and General Practitioners

29-1062

Family and General Practitioners.

29-1063

Internists, General

29-1063

Internists, General.

29-1065

Pediatricians, General

n/a

n/a.

29-1066

Psychiatrists

n/a

n/a.

29-1069

Physicians and Surgeons, All Other

29-1069

Physicians and Surgeons, All Other.

29-1071

Physician Assistants

29-1071

Physician Assistants.

n/a

n/a

29-1111

Registered Nurses.

29-1122

Occupational Therapists

29-1122

Occupational Therapists.

29-1123

Physical Therapists

29-1123

Physical Therapists.

29-1125

Recreational Therapists

29-1125

Recreational Therapists.

29-1126

Respiratory Therapists

29-1126

Respiratory Therapists.

29-1127

Speech-Language Pathologists

29-1127

Speech-Language Pathologists.

29-1129

Therapists, All Other

29-1129

Therapists, All Other.

29-1141

Registered Nurses

n/a

n/a.

29-1171

Nurse Practitioners

n/a

n/a.

29-1199

Health Diagnosing and Treating Practitioners, All Other

29-1199

Health Diagnosing and Treating Practitioners, All Other.

2016 proposed occupational groups

Group 2

Non health related professional & technical

2010 occupational groupings

Group 2

Non health related professional & technical

13-0000

Business and Financial Operations Occupations

13-0000

Business and Financial Operations Occupations.

15-0000

Computer and Mathematical Occupations

15-0000

Computer and Mathematical Science Occupations.

n/a

n/a

17-0000

Architecture and Engineering Occupations.

19-0000

Life, Physical, and Social Science Occupations

19-0000

Life, Physical, and Social Science Occupations.

n/a

n/a

23-0000

Legal Occupations.

25-0000

Education, Training, and Library Occupations

25-0000

Education, Training, and Library Occupations.

27-0000

Arts, Design, Entertainment, Sports, and Media Occupations

27-0000

Arts, Design, Entertainment, Sports, and Media Occupations.

Group 3

Management

Group 3

Management

11-0000

Management Occupations

11-0000

Management Occupations.

Group 4

Administrative

Group 4

Administrative

43-0000

Office and Administrative Support Occupations

43-0000

Office and Administrative Support Occupations.

Group 5

Health and social assistance services

Group 5

Health and social assistance services

21-0000

Community and Social Service Occupations

21-0000

Community and Social Services Occupations.

29-2011

Medical and Clinical Laboratory Technologists

29-2011

Medical and Clinical Laboratory Technologists.

29-2012

Medical and Clinical Laboratory Technicians

29-2012

Medical and Clinical Laboratory Technicians.

29-2021

Dental Hygienists

29-2021

Dental Hygienists.

29-2032

Diagnostic Medical Sonographers

29-2032

Diagnostic Medical Sonographers.

29-2034

Radiologic Technologists

29-2034

Radiologic Technologists and Technicians.

29-2041

Emergency Medical Technicians and Paramedics

29-2041

Emergency Medical Technicians and Paramedics.

29-2051

Dietetic Technicians

29-2051

Dietetic Technicians.

29-2052

Pharmacy Technicians

29-2052

Pharmacy Technicians.

29-2053

Psychiatric Technicians

n/a

n/a.

29-2054

Respiratory Therapy Technicians

29-2054

Respiratory Therapy Technicians.

29-2055

Surgical Technologists

n/a

n/a.

29-2061

Licensed Practical and Licensed Vocational Nurses

29-2061

Licensed Practical and Licensed Vocational Nurses.

29-2071

Medical Records and Health Information Technicians

29-2071

Medical Records and Health Information Technicians.

29-2099

Health Technologists and Technicians, All Other

29-2099

Health Technologists and Technicians, All Other.

n/a

n/a

29-9012

Occupational Health and Safety Technicians.

29-9099

Healthcare Practitioners and Technical Workers, All Other

29-9099

Healthcare Practitioner and Technical Workers, All Other.

31-0000

Healthcare Support Occupations

31-0000

Healthcare Support Occupations.

Group 6

Other service workers

Group 6

Other service workers

33-0000

Protective Service Occupations

33-0000

Protective Service Occupations.

35-0000

Food Preparation and Serving Related Occupations

35-0000

Food Preparation and Serving Related Occupations.

37-0000

Building and Grounds Cleaning and Maintenance Occupations

37-0000

Building and Grounds Cleaning and Maintenance Occupations.

39-0000

Personal Care and Service Occupations

39-0000

Personal Care and Service Occupations.

41-0000

Sales and Related Occupations

41-0000

Sales and Related Occupations.

47-0000

Construction and Extraction Occupations

n/a

n/a.

49-0000

Installation, Maintenance, and Repair Occupations

49-0000

Installation, Maintenance, and Repair Occupations.

51-0000

Production Occupations

51-0000

Production Occupations.

53-0000

Transportation and Material Moving Occupations

53-0000

Transportation and Material Moving Occupations.

Total expenditures by occupation were calculated by taking the OES number of employees multiplied by the OES annual average salary for each subcategory, and then calculating the proportion of total wage costs that each subcategory represents. The proportions listed in Table 12 represent the Wages and Salaries blend weights.

Table 12—Comparison of the Proposed 2016-Based Home Health Wages and Salaries Blend and the 2010-Based Home Health Wages and Salaries Blend

Cost subcategory

Proposed

2016 weight

2010 weight

Price proxy

BLS series ID

Health-Related Professional and Technical

33.7

33.4

ECI for Wages and salaries for All Civilian workers in Hospitals

CIU1026220000000I.

Non Health-Related Professional and Technical

2.3

2.3

ECI for Wages and salaries for Private industry workers in Professional, scientific, and technical services

CIU2025400000000I.

Management

7.6

8.3

ECI for Wages and salaries for Private industry workers in Management, business, and financial

CIU2020000110000I.

Administrative

6.7

7.7

ECI for Wages and salaries for Private industry workers in Office and administrative support

CIU2020000220000I.

Health and Social Assistance Services

35.3

35.8

ECI for Wages and salaries for All Civilian workers in Health care and social assistance

CIU1026200000000I.

Other Service Occupations

14.4

12.6

ECI for Wages and salaries for Private industry workers in Service occupations

CIU2020000300000I.

Total *

100.0

100.0

* Totals may not sum due to rounding.

A comparison of the yearly changes from CY 2016 to CY 2019 for the 2010-based home health Wages and Salaries blend and the proposed 2016-based home health Wages and Salaries blend is shown in Table 13. The annual increases in the two price proxies are the same when rounded to one decimal place.

Table 13—Annual Growth in Proposed 2016 and 2010 Home Health Wages and Salaries Blend

2016

2017

2018

2019

Wage Blend 2016

2.3

2.5

2.6

3.0

Wage Blend 2010

2.3

2.5

2.6

3.0

Source: IHS Global Insight Inc. 1st Quarter 2018 forecast with historical data through 4th Quarter 2017.

•

Benefits:

For measuring Benefits price growth in the proposed 2016-based home health market basket, we are proposing to apply applicable price proxies to the six occupational subcategories that are used for the Wages and Salaries blend. The proposed six categories in Table 14 are the same as those in the 2010-based home health market basket and include the same occupational mix as listed in Table 14.

Table 14—Comparison of the Proposed 2016-Based Home Health Benefits Blend and 2010-Based Home Health Benefits Blend

Cost category

Proposed

2016 weight

2010 weight

Price proxy

Health-Related Professional and Technical

33.9

33.5

ECI for Benefits for All Civilian workers in Hospitals.

Non Health-Related Professional and Technical

2.3

2.2

ECI for Benefits for Private industry workers in Professional, scientific, and technical services.

Management

7.3

8.0

ECI for Benefits for Private industry workers in Management, business, and financial.

Administrative

6.7

7.8

ECI for Benefits for Private industry workers in Office and administrative support.

Health and Social Assistance Services

35.5

35.9

ECI for Benefits for All Civilian workers in Health care and social assistance.

Other Service Workers

14.2

12.5

ECI for Benefits for Private industry workers in Service occupations.

Total *

100.0

100.0

* Totals may not sum due to rounding.

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 benefits blend we calculated the ratio of benefits to wages and salaries for CY 2016 for the six ECI series we are proposing to use in the blended `wages and salaries' and `benefits' indexes. To derive the relevant benefits weight, we applied the benefit-to-wage ratios to each of the six occupational subcategories from the 2016 OES wage and salary weights, and normalized. For example, the ratio of benefits to wages from the 2016 home health wages and salaries blend and the benefits blend for the management category is 0.984. We apply this ratio to the 2016 OES weight for wages and salaries for management, 7.6 percent, and then normalize those weights relative to the other five benefit occupational categories to obtain a benefit weight for management of 7.3 percent.

A comparison of the yearly changes from CY 2016 to CY 2019 for the 2010-based home health Benefits blend and the proposed 2016-based home health Benefits blend is shown in Table 15. With the exception of a 0.1 percentage point difference in 2019, the annual increases in the two price proxies are the same when rounded to one decimal place.

Table 15—Annual Growth in the Proposed 2016 Home Health Benefits Blend and the 2010 Home Health Benefits Blend

2016

2017

2018

2019

Benefits Blend 2016

1.7

1.9

2.4

3.0

Benefits Blend 2010

1.7

1.9

2.4

2.9

Source: IHS Global Insight Inc. 1st Quarter 2018 forecast with historical data through 4th Quarter 2017.

•

Operations and Maintenance:

We are proposing to use CPI U.S. city average for Fuel and utilities (BLS series code #CUUR0000SAH2) to measure price growth of this cost category. The same proxy was used for the 2010-based home health 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 same proxy was used for the 2010-based home health market basket.

To accurately reflect the price changes associated with physician PLI, each year we collect PLI premium data for physicians from a representative sample of commercial carriers and publically available rate filings as maintained by each State's Association of Insurance Commissioners. 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, the level of liability coverage is held constant from year to year. To accomplish this, 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 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.

•

Administrative and Support:

We are proposing to use the ECI for Total compensation for Private industry workers in Office and administrative support (BLS series code #CIU2010000220000I) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Financial Services:

We are proposing to use the ECI for Total compensation for Private industry workers in Financial activities (BLS series code #CIU201520A000000I) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Medical Supplies:

We are proposing to use the PPI Commodity data for Miscellaneous products-Medical, surgical & personal aid devices (BLS series code #WPU156) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Rubber and Plastics:

We are proposing to use the PPI Commodity data for Rubber and plastic products (BLS series code #WPU07) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Telephone:

We are proposing to use CPI U.S. city average for Telephone services (BLS series code #CUUR0000SEED) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Professional Fees:

We are proposing to use the ECI for Total compensation for Private industry workers in Professional and related (BLS series code #CIS2010000120000I) to measure price growth of this category. The same proxy was used for the 2010-based home health market basket.

•

Other Products:

We are proposing to use the PPI Commodity data for Final demand-Finished goods less foods and energy (BLS series code #WPUFD4131) to measure price growth of this category. The same proxy was used for the 2010-based home health market basket.

•

Other Services:

We are proposing to use the ECI for Total compensation for Private industry workers in Service occupations (BLS series code #CIU2010000300000I) to measure price growth of this category. The same proxy was used for the 2010-based home health market basket.

•

Transportation:

We are proposing to use the CPI U.S. city average for Transportation (BLS series code #CUUR0000SAT) to measure price growth of this category. The same proxy was used for the 2010-based home health market basket.

•

Fixed capital:

We are proposing to use the CPI U.S. city average for Owners' equivalent rent of residences (BLS series code #CUUS0000SEHC) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

•

Movable Capital:

We are proposing to use the PPI Commodity data for Machinery and equipment (BLS series code #WPU11) to measure price growth of this cost category. The same proxy was used for the 2010-based home health market basket.

e. Rebasing Results

A comparison of the yearly changes from CY 2014 to CY 2021 for the 2010-based home health market basket and the proposed 2016-based home health market basket is shown in Table 16.

Table 16—Comparison of the 2010-Based Home Health Market Basket and the Proposed 2016-Based Home Health Market Basket, Percent Change, 2014-2021

Home health

market

basket,

2010-based

Proposed

home health

market

basket,

2016-based

Difference

(proposed

2016-based

less

2010-based)

Historical data:

CY 2014

1.6

1.6

0.0

CY 2015

1.6

1.5

−0.1

CY 2016

2.0

2.0

0.0

CY 2017

2.3

2.3

0.0

Average CYs 2014-2017

1.9

1.9

0.0

Forecast:

CY 2018

2.5

2.5

0.0

CY 2019

2.8

2.8

0.0

CY 2020

3.0

3.0

0.0

CY 2021

3.0

3.0

0.0

Average CYs 2018-2021

2.8

2.8

0.0

Source: IHS Global Inc. 1st Quarter 2018 forecast with historical data through 4th Quarter 2017.

Table 16 shows that the forecasted rate of growth for CY 2019 for the proposed 2016-based home health market basket is 2.8 percent, the same rate of growth as estimated using the 2010-based home health market basket; other forecasted years also show a similar increase. Similarly, the historical estimates of the growth in the 2016-based and 2010-based home health market basket are the same except for CY 2015 where the 2010-based home health market basket is 0.1 percentage point higher. We note that if more recent data are subsequently available (for example, a more recent estimate of the market basket), we would use such data to determine the market basket increases in the final rule.

f. Labor-Related Share

Effective for CY 2019, we are proposing to revise the labor-related share to reflect the proposed 2016-based home health market basket Compensation (Wages and Salaries plus Benefits) cost weight. The current labor-related share is based on the Compensation cost weight of the 2010-based home health market basket. Based on the proposed 2016-based home health market basket, the labor-related share would be 76.1 percent and the proposed non-labor-related share would be 23.9 percent. The labor-related share for the 2010-based home health market basket was 78.5 percent and the non-labor-related share was 21.5 percent. As explained earlier, the decrease in the compensation cost weight of 2.4 percentage points is attributable to both employed compensation (wages and salaries and benefits for employees) and direct patient care contract labor costs as reported in the MCR data. Table 17 details the components of the labor-related share for the 2010-based and proposed 2016-based home health market baskets.

Table 17—Labor-Related Share of Current and Proposed Home Health Market Baskets

Cost category

2010-based

market basket

weight

Proposed

2016-based

market basket

weight

Wages and Salaries

66.3

65.1

Employee Benefits

12.2

11.0

Total Labor-Related

78.5

76.1

Total Non Labor-Related

21.5

23.9

We propose to implement the proposed revision to the labor-related share of 76.1 percent in a budget neutral manner. This proposal would be consistent with our policy of implementing the annual recalibration of the case-mix weights and update of the home health wage index in a budget neutral manner.

g. Multifactor Productivity

In the CY 2015 HHA PPS final rule (79 FR 38384 through 38384), we finalized our methodology for calculating and applying the MFP adjustment. As we explained in that rule, section 1895(b)(3)(B)(vi) of the Act, requires that, in CY 2015 (and in subsequent calendar years, except CY 2018 (under section 411(c) of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted April 16, 2015)), the market basket percentage under the HHA prospective payment system as described in section 1895(b)(3)(B) of the Act be annually adjusted by changes in economy-wide productivity. Section 1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment to be equal to the 10-year moving average of change in annual economy-wide private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10-year period ending with the applicable fiscal year, calendar year, cost reporting period, or other annual period) (the “MFP adjustment”). The Bureau of Labor Statistics (BLS) is the agency that publishes the official measure of private nonfarm business MFP. Please see

http://www.bls.gov/mfp,

to obtain the BLS historical published MFP data.

Based on IHS Global Inc.'s (IGI's) first quarter 2018 forecast with history through the fourth quarter of 2017, the projected MFP adjustment (the 10-year moving average of MFP for the period ending December 31, 2019) for CY 2019 is 0.7 percent. IGI is a nationally recognized economic and financial forecasting firm that contracts with CMS to forecast the components of the market baskets. We note that if more recent data are subsequently available (for example, a more recent estimate of the MFP adjustment), we would use such data to determine the MFP adjustment in the final rule.

2. Proposed CY 2019 Market Basket Update for HHAs

Using IGI's first quarter 2018 forecast, the MFP adjustment for CY 2019 is projected to be 0.7 percent. In accordance with section 1895(b)(3)(B)(iii) of the Act, we propose to base the CY 2019 market basket update, which is used to determine the applicable percentage increase for HHA payments, on the most recent estimate of the proposed 2016-based home health market basket. Based on IGI's first quarter 2018 forecast with history through the fourth quarter of 2017, the projected increase of the proposed 2016-based home health market basket for CY 2019 is 2.8 percent. We propose to then reduce this percentage increase by the current estimate of the MFP adjustment for CY 2019 of 0.7 percentage point in accordance with 1895(b)(3)(B)(vi) of the Act. Therefore, the current estimate of the CY 2019 HHA payment update is 2.1 percent (2.8 percent market basket update, less 0.7 percentage point MFP adjustment). Furthermore, we note that if more recent data are subsequently available (for example, a more recent estimate of the market basket and MFP adjustment), we would use such data to determine the CY 2019 market basket update and MFP adjustment in the final rule.

Section 1895(b)(3)(B)(v) of the Act requires that the home health update be decreased by 2 percentage points for those HHAs that do not submit quality data as required by the Secretary. For HHAs that do not submit the required quality data for CY 2019, the home health payment update will be 0.1 percent (2.1 percent minus 2 percentage points).

3. CY 2019 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 HH services. Since the inception of the HH PPS, we have used inpatient hospital wage data in developing a wage index to be applied to HH payments. We propose to continue this practice for CY 2019, as we continue to believe that, in the absence of HH-specific wage data that accounts for area differences, using inpatient hospital wage data is appropriate and reasonable for the HH PPS. Specifically, we propose to continue to use the pre-floor, pre-reclassified hospital wage index as the wage adjustment to the labor portion of the HH PPS rates. For CY 2019, the updated wage data are for hospital cost reporting periods beginning on or after October 1, 2014, and before October 1, 2015 (FY 2015 cost report data). We 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).

To address those geographic areas in which there are no inpatient hospitals, and thus, no hospital wage data on which to base the calculation of the CY 2019 HH PPS wage index, we propose to continue to use the same methodology discussed in the CY 2007 HH PPS final rule (71 FR 65884) to address those geographic areas in which there are no inpatient hospitals. For rural areas that do not have inpatient hospitals, we propose to use the average wage index from all contiguous Core Based Statistical Areas (CBSAs) as a reasonable proxy. Currently, the only rural area without a hospital from which hospital wage data could be derived is Puerto Rico. However, for rural Puerto Rico, we do not apply this methodology due to the distinct economic circumstances that exist there (for example, due to the close proximity to one another of almost all of Puerto Rico's various urban and non-urban areas, this methodology would produce a wage index for rural Puerto Rico that is higher than that in half of its urban areas). Instead, we propose to continue to use the most recent wage index previously available for that area. For urban areas without inpatient 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 2019, the only urban area without inpatient hospital wage data is Hinesville, GA (CBSA 25980).

On February 28, 2013, OMB issued Bulletin No. 13-01, announcing revisions to the delineations of MSAs, Micropolitan Statistical Areas, and CBSAs, and guidance on uses of the delineation of these areas. In the CY 2015 HH PPS final rule (79 FR 66085 through 66087), we adopted the OMB's new area delineations using a 1-year transition.

On August 15, 2017, OMB issued Bulletin No. 17-01 in which it announced that one Micropolitan Statistical Area, Twin Falls, Idaho, now qualifies as a Metropolitan Statistical Area. The new CBSA (46300) comprises the principal city of Twin Falls, Idaho in Jerome County, Idaho and Twin Falls County, Idaho. The CY 2019 HH PPS wage index value for CBSA 46300, Twin Falls, Idaho, will be 0.8335. Bulletin No. 17-01 is available at

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf

.

11

11

“Revised Delineations of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and Guidance on Uses of the Delineations of These Areas”. OMB BULLETIN NO. 17-01. August 15, 2017.

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/bulletins/2017/b-17-01.pdf

.

The most recent OMB Bulletin (No. 18-03) was published on April 10, 2018 and is available at

https://www.whitehouse.gov/wp-content/uploads/2018/04/OMB-BULLETIN-NO.-18-03-Final.pdf

.

12

The revisions contained in OMB Bulletin No. 18-03 have no impact on the geographic area delineations that are used to wage adjust HH PPS payments.

12

“Revised Delineations of Metropolitan Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and Guidance on Uses of the Delineations of These Areas”. OMB BULLETIN NO. 18-03. April 10, 2018.

https://www.whitehouse.gov/wp-content/uploads/2018/04/OMB-BULLETIN-NO.-18-03-Final.pdf

.

The CY 2019 wage index is available on the CMS website at

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices.html

.

4. CY 2019 Annual Payment Update

a. Background

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 payment rate. As set forth in § 484.220, we adjust the national, standardized 60-day episode payment rate by a case-mix relative weight and a wage index value based on the site of service for the beneficiary.

To provide appropriate adjustments to the proportion of the payment amount under the HH PPS to account for area wage differences, we apply the appropriate wage index value to the labor portion of the HH PPS rates. As discussed in section III.C.1 of this proposed rule, based on the proposed 2016-based home health market basket, the proposed labor-related share would be 76.1 percent and the proposed non-labor-related share would be 23.9 percent for CY 2019. The CY 2019 HH PPS rates use the same case-mix methodology as set forth in the CY 2008 HH PPS final rule with comment period (72 FR 49762) and will be adjusted as described in section III.B of this proposed rule. The following are the steps we take to compute the case-mix

and wage-adjusted 60-day episode rate for CY 2019:

• Multiply the national 60-day episode rate by the patient's applicable case-mix weight.

• Divide the case-mix adjusted amount into a labor (76.1 percent) and a non-labor portion (23.9 percent).

• Multiply the labor portion by the applicable wage index based on the site of service of the beneficiary.

• Add the wage-adjusted portion to the non-labor portion, yielding the case-mix and wage adjusted 60-day episode rate, subject to any additional applicable adjustments.

In accordance with section 1895(b)(3)(B) of the Act, we propose the annual update of the HH PPS rates. Section 484.225 sets forth the specific annual percentage update methodology. In accordance with § 484.225(i), for a HHA that does not submit HH 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 HH market basket index amount minus 2 percentage points. Any reduction of the percentage change would apply only to the calendar year involved and would not be considered in computing the prospective payment amount for a subsequent calendar year.

Medicare pays the national, standardized 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 (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 will 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 adjustment (LUPA) is provided on a per-visit basis as set forth in §§ 484.205(c) and 484.230.

• A partial episode payment (PEP) 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. CY 2019 National, Standardized 60-Day Episode Payment Rate

Section 1895(b)(3)(A)(i) of the Act requires that the 60-day episode base rate and other applicable amounts be standardized in a manner that eliminates the effects of variations in relative case-mix and area wage adjustments among different home health agencies in a budget neutral manner. To determine the CY 2019 national, standardized 60-day episode payment rate, we apply a wage index budget neutrality factor and a case-mix budget neutrality factor described in section III.B of this proposed rule; and the home health payment update percentage discussed in section III.C.2 of this proposed rule.

To calculate the wage index budget neutrality factor, we simulated total payments for non-LUPA episodes using the CY 2019 wage index (including the application of the proposed labor-related share of 76.1 percent and the proposed non-labor-related share of 23.9 percent) and compared it to our simulation of total payments for non-LUPA episodes using the CY 2018 wage index and CY 2018 (including the application of the current labor-related share of 78.535 percent and the non-labor-related of 21.465). By dividing the total payments for non-LUPA episodes using the CY 2019 wage index by the total payments for non-LUPA episodes using the CY 2018 wage index, we obtain a wage index budget neutrality factor of 0.9991. We would apply the wage index budget neutrality factor of 0.9991 to the calculation of the CY 2019 national, standardized 60-day episode payment rate.

As discussed in section III.B of this proposed rule, to ensure the changes to the case-mix weights are implemented in a budget neutral manner, we propose to apply a case-mix weight budget neutrality factor to the CY 2019 national, standardized 60-day episode payment rate. The case-mix weight budget neutrality factor is calculated as the ratio of total payments when CY 2019 case-mix weights are applied to CY 2017 utilization (claims) data to total payments when CY 2018 case-mix weights are applied to CY 2017 utilization data. The case-mix budget neutrality factor for CY 2019 is 1.0163 as described in section III.B of this proposed rule.

Next, we would update the payment rates by the CY 2019 home health payment update percentage of 2.1 percent as described in section III.C.2 of this proposed rule. The CY 2019 national, standardized 60-day episode payment rate is calculated in Table 18.

Table 18—CY 2019 60-Day National, Standardized 60-Day Episode Payment Amount

CY 2018 national, standardized 60-day episode payment

Wage index

budget

neutrality

factor

Case-mix

weights

budget

neutrality

factor

CY 2019 HH

payment

update

CY 2019

National,

standardized

60-day

episode

payment

$3,039.64

× 0.9991

× 1.0163

× 1.021

$3,151.22

The CY 2019 national, standardized 60-day episode payment rate for an HHA that does not submit the required quality data is updated by the CY 2019 home health payment update of 2.1 percent minus 2 percentage points and is shown in Table 19.

Table 19—CY 2019 National, Standardized 60-Day Episode Payment Amount for HHAs That Do Not Submit the Quality Data

CY 2018 national, standardized 60-day episode payment

Wage index

budget

neutrality

factor

Case-mix

weights

budget

neutrality

factor

CY 2019

HH payment

update minus

2 percentage

points

CY 2019

National,

standardized

60-day

episode

payment

$3,039.64

× 0.9991

× 1.0163

× 1.001

$3,089.49

c. CY 2019 National Per-Visit Rates

The national per-visit rates are used to pay LUPAs (episodes with four or fewer visits) and are also used to compute imputed costs in outlier calculations. The per-visit rates are paid by type of visit or HH discipline. The six HH disciplines are as follows:

• Home health aide (HH aide).

• Medical Social Services (MSS).

• Occupational therapy (OT).

• Physical therapy (PT).

• Skilled nursing (SN).

• Speech-language pathology (SLP).

To calculate the CY 2019 national per-visit rates, we started with the CY 2018 national per-visit rates. Then we applied a wage index budget neutrality factor to ensure budget neutrality for LUPA per-visit payments. We calculated the wage index budget neutrality factor by simulating total payments for LUPA episodes using the CY 2019 wage index and comparing it to simulated total payments for LUPA episodes using the CY 2018 wage index. By dividing the total payments for LUPA episodes using the CY 2019 wage index by the total payments for LUPA episodes using the CY 2018 wage index, we obtained a wage index budget neutrality factor of 1.0000. We apply the wage index budget neutrality factor of 1.0000 in order to calculate the CY 2019 national per-visit rates.

The LUPA per-visit rates are not calculated using case-mix weights. Therefore, no case-mix weights budget neutrality factor is needed to ensure budget neutrality for LUPA payments. Lastly, the per-visit rates for each discipline are updated by the CY 2019 home health payment update percentage of 2.1 percent. The national per-visit rates are adjusted by the wage index based on the site of service of the beneficiary. The per-visit payments for LUPAs are separate from the LUPA add-on payment amount, which is paid for episodes that occur as the only episode or initial episode in a sequence of adjacent episodes. The CY 2019 national per-visit rates for HHAs that submit the required quality data are updated by the CY 2019 HH payment update percentage of 2.1 percent and are shown in Table 20.

Table 20—CY 2019 National Per-Visit Payment Amounts for HHAs That Do Submit the Required Quality Data

HH Discipline

CY 2018

per-visit

payment

Wage index

budget

neutrality

factor

CY 2019

HH payment

update

CY 2019

per-visit

payment

Home Health Aide

$64.94

× 1.0000

× 1.021

$66.30

Medical Social Services

229.86

× 1.0000

× 1.021

234.69

Occupational Therapy

157.83

× 1.0000

× 1.021

161.14

Physical Therapy

156.76

× 1.0000

× 1.021

160.05

Skilled Nursing

143.40

× 1.0000

× 1.021

146.41

Speech-Language Pathology

170.38

× 1.0000

× 1.021

173.96

The CY 2019 per-visit payment rates for HHAs that do not submit the required quality data are updated by the CY 2019 HH payment update percentage of 2.1 percent minus 2 percentage points and are shown in Table 21.

Table 21—CY 2019 National Per-Visit Payment Amounts for HHAs That Do Not Submit the Required Quality Data

HH Discipline

CY 2018

per-visit rates

Wage index

budget

neutrality

factor

CY 2019

HH payment

update minus

2 percentage

points

CY 2019

per-visit rates

Home Health Aide

$64.94

× 1.0000

× 1.001

$65.00

Medical Social Services

229.86

× 1.0000

× 1.001

230.09

Occupational Therapy

157.83

× 1.0000

× 1.001

157.99

Physical Therapy

156.76

× 1.0000

× 1.001

156.92

Skilled Nursing

143.40

× 1.0000

× 1.001

143.54

Speech-Language Pathology

170.38

× 1.0000

× 1.001

170.55

d. Low-Utilization Payment Adjustment (LUPA) Add-On Factors

LUPA episodes that occur as the only episode or as an initial episode in a sequence of adjacent episodes are adjusted by applying an additional amount to the LUPA payment before adjusting for area wage differences. In the CY 2014 HH PPS final rule (78 FR 72305), we changed the methodology for calculating the LUPA add-on amount by finalizing the use of three LUPA add-on factors: 1.8451 for SN; 1.6700 for PT; and 1.6266 for SLP. We multiply the per-visit payment amount for the first SN, PT, or SLP visit in LUPA episodes that occur as the only episode or an initial episode in a sequence of adjacent episodes by the appropriate factor to determine the LUPA add-on payment amount. For example, in the case of HHAs that do submit the required quality data, for LUPA episodes that occur as the only episode or an initial episode in a sequence of adjacent episodes, if the first skilled visit is SN, the payment for that visit will be $270.14 (1.8451 multiplied by $146.41), subject to area wage adjustment.

e. CY 2019 Non-Routine Medical Supply (NRS) Payment Rates

All medical supplies (routine and nonroutine) must be provided by the HHA while the patient is under a home health plan of care. Examples of supplies that can be considered non-routine include dressings for wound care, I.V. supplies, ostomy supplies, catheters, and catheter supplies. Payments for NRS are computed by multiplying the relative weight for a particular severity level by the NRS conversion factor. To determine the CY 2019 NRS conversion factor, we updated the CY 2018 NRS conversion factor ($53.03) by the CY 2019 home health payment update percentage of 2.1 percent. We did not apply a standardization factor as the NRS payment amount calculated from the conversion factor is not wage or case-mix adjusted when the final claim payment amount is computed. The proposed NRS conversion factor for CY 2019 is shown in Table 22.

Table 22—CY 2019 NRS Conversion Factor for HHAs That Do Submit the Required Quality Data

CY 2018 NRS conversion factor

CY 2019

HH payment

update

CY 2019

NRS

conversion

factor

$53.03

× 1.021

$54.14

Using the CY 2019 NRS conversion factor, the payment amounts for the six severity levels are shown in Table 23.

Table 23—CY 2019 NRS Payment Amounts for HHAs That Do Submit the Required Quality Data

Severity level

Points

(scoring)

Relative

weight

CY 2019

NRS payment

amounts

1

0

0.2698

$ 14.61

2

1 to 14

0.9742

52.74

3

15 to 27

2.6712

144.62

4

28 to 48

3.9686

214.86

5

49 to 98

6.1198

331.33

This text is long and has been trimmed here. Open the source document for the complete record.