Medicare Program; Calendar Year (CY) 2024 Home Health (HH) Prospective Payment System Rate Update; HH Quality Reporting Program Requirements; HH Value-Based Purchasing Expanded Model Requirements; Home Intravenous Immune Globulin Items and Services; Hospice Informal Dispute Resolution and Special Focus Program Requirements, Certain Requirements for Durable Medical Equipment Prosthetics and Orthotics Supplies; and Provider and Supplier Enrollment Requirements

Federal RegisterJul 10, 2023

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 409, 410, 414, 424, 484, 488, and 489

[CMS-1780-P]

RIN 0938-AV03

Medicare Program; Calendar Year (CY) 2024 Home Health (HH) Prospective Payment System Rate Update; HH Quality Reporting Program Requirements; HH Value-Based Purchasing Expanded Model Requirements; Home Intravenous Immune Globulin Items and Services; Hospice Informal Dispute Resolution and Special Focus Program Requirements, Certain Requirements for Durable Medical Equipment Prosthetics and Orthotics Supplies; and Provider and Supplier Enrollment Requirements

AGENCY:

Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS).

ACTION:

Proposed rule.

SUMMARY:

This proposed rule would set forth routine updates to the Medicare home health payment rates for calendar year (CY) 2024 in accordance with existing statutory and regulatory requirements. This rule would—provide information on home health utilization trends and solicits comments regarding access to home health aide services; implement home health payment-related changes; rebase and revise the home health market basket and revise the labor-related share; codify statutory requirements for disposable negative pressure wound therapy (dNPWT); and implement the new items and services payment for the home intravenous immune globulin (IVIG) benefit. In addition, it proposes—changes to the Home Health Quality Reporting Program (HH QRP) requirements and the expanded Home Health Value-Based Purchasing (HHVBP) Model; to implement the new Part B benefit for lymphedema compression treatment items, codify the Medicare definition of brace, and make other codification changes based on recent legislation; to add an informal dispute resolution (IDR) and special focus program (SFP) for hospice programs; to codify DMEPOS refill policy; and to revise Medicare provider and supplier enrollment requirements.

DATES:

To be assured consideration, comments must be received at one of the addresses provided in the

ADDRESSES

section, no later than 5 p.m. EDT on August 29, 2023.

ADDRESSES:

In commenting, please refer to file code CMS-1780-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):

Electronically.

You may (and we encourage you to) submit electronic comments on this regulation to

https://www.regulations.gov.

Follow the instructions under the “submit a comment” tab.

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-1780-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.

By express or overnight mail.

You may send written comments via express or overnight mail to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-1780-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, we refer readers to the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Brian Slater, (410) 786-5229, for home health and home IVIG payment inquiries.

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

HomeHealthPolicy@cms.hhs.gov.

For information about the Home Health Quality Reporting Program (HH QRP), send your inquiry via email to

HHQRPquestions@cms.hhs.gov

Frank Whelan (410) 786-1302, for Medicare provider and supplier enrollment inquiries.

For more information about the expanded Home Health Value-Based Purchasing Model, please visit the Expanded HHVBP Model web page at

https://innovation.cms.gov/innovation-models/expanded-home-health-value-based-purchasing-model.

For more information about the hospice informal dispute resolution and special focus program, send your inquiry to

QSOG_hospice@cms.hhs.gov.

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:

https://www.regulations.gov/.

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

Table of Contents

I. Executive Summary

A. Purpose and Legal Authority

B. Summary of the Provisions of This Proposed Rule

C. Summary of Costs, Transfers, and Benefits

II. Home Health Prospective Payment System

A. Overview of the Home Health Prospective Payment System

B. Monitoring the Effects of the Implementation of PDGM

C. Proposed Provisions for CY 2024 Payment Under the HH PPS

III. 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. Quality Measures Currently Adopted for the CY 2024 HH QRP

D. HH QRP Quality Measure Proposals Beginning With the CY 2025 HH QRP

E. Form, Manner, and Timing of Data Submission Under the HH QRP

F. Policies Regarding Public Display of Measure Data for the HH QRP

G. Health Equity Update

H. Proposal To Codify HH QRP Data Completion Thresholds

I. Principles for Selecting and Prioritizing HH QRP Quality Measures and Concepts Under Consideration for Future Years: Request for Information (RFI)

IV. Proposed Changes to the Expanded Home Health Value-Based Purchasing (HHVBP) Model

A. Background

B. Proposed Changes to the Applicable Measure Set

C. Proposed Changes to the Appeals Process

D. Public Reporting Reminder

E. Health Equity Update

V. Medicare Home Intravenous Immune Globulin (IVIG) Items and Services

A. General Background

B. Proposed Scope of Expanded IVIG Benefit

C. Proposed IVIG Administration Items and Services Payment

D. Proposed Home IVIG Items and Services Payment Rate

E. Billing Procedures for Home IVIG Items and Services

VI. Hospice Informal Dispute Resolution and Special Focus Program

A. Background and Statutory Authority

B. Proposed Regulatory Provisions

VII. Proposed Changes Regarding Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

A. Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP)

B. Scope of the Benefit and Payment for Lymphedema Compression Treatment Items

C. Definition of Brace

D. Documentation Requirements for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Products Supplied as Refills to the Original Order

VIII. Proposed Changes to the Provider and Supplier Enrollment Requirements

A. Background

B. Proposed Provisions

IX. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

B. Information Collection Requirements (ICRs)

C. Submission of PRA-Related Comments

X. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Detailed Economic Analysis

D. Regulatory Review Cost Estimation

E. Alternatives Considered

F. Accounting Statements and Tables

G. Regulatory Flexibility Act (RFA)

H. Unfunded Mandates Reform Act (UMRA)

I. Federalism

J. Conclusion

Regulations Text

I. Executive Summary

A. Purpose and Legal Authority

1. Home Health Prospective Payment System (HH PPS)

As required under section 1895(b) of the Social Security Act (the Act), this proposed rule would update the payment rates for home health agencies (HHAs) for CY 2024. In this proposed rule we include analysis on home health utilization and solicit comments related to access to home health aide services. This rule also provides analysis determining the difference between assumed versus actual behavior change on estimated aggregate expenditures for home health payments as result of the change in the unit of payment to 30 days and the implementation of the PDGM case-mix adjustment methodology, and proposes a permanent prospective adjustment to the CY 2024 home health payment rate. In addition, this rule proposes to recalibrate the PDGM case-mix weights and update the LUPA thresholds, functional impairment levels, and comorbidity adjustment subgroups under section 1895(b)(4)(A)(i) and (b)(4)(B) of the Act for 30-day periods of care in CY 2024. This rule proposes to rebase and revise the home health market basket and proposes to revise the labor-related share. Additionally, this rule proposes to codify statutory requirements for dNPWT and updates the CY 2024 fixed-dollar loss ratio (FDL) for outlier payments (so that outlier payments as a percentage of estimated total payments are not to exceed 2.5 percent, as required by section 1895(b)(5)(A) of the Act).

2. Home Health (HH) Quality Reporting Program (QRP)

In accordance with the statutory authority at section 1895(b)(3)(B)(v) of the Act, we are proposing updated policies, the codification of the previously finalized 90 percent Outcome and Assessment Information Set (OASIS) data completion threshold policy in the Code of Federal Regulations (CFR) and the public reporting of four measures. We are also including a request for information on future HH QRP measure concepts and an update on health equity in the HH QRP.

3. Expanded Home Health Value-Based Purchasing (HHVBP) Model

In accordance with the statutory authority at section 1115A of the Act, we are proposing updated policies, including the codification of previously finalized measure removal factors, changes to the applicable measure set, updating the Model baseline year, and an amendment to the appeals process for the expanded HHVBP Model. We are also including updates on health equity and public reporting.

4. Home Intravenous Immune Globulin (IVIG) Items and Services

As required under Division FF, section 4134 of the Consolidated Appropriations Act, 2023 (CAA, 2023), this proposed rule would implement coverage and payment for items and services related to the administration of IVIG in the home of a patient with a diagnosed primary immune deficiency disease (PIDD).

5. Hospice Informal Dispute Resolution and Special Focus Program

As required under Division CC, section 407 of the Consolidated Appropriations Act of 2021 (CAA 2021), this proposed rule would implement a special focus program (SFP) for poor performing hospices that includes the SFP algorithm (including data sources) to identify indicators of hospice poor performance, the criteria for selection and completion of the SFP, hospice termination from Medicare, and public reporting of the SFP. We are also proposing regulations to implement an informal dispute resolution (IDR) process to provide hospice programs an informal opportunity to resolve disputes related to condition-level survey findings for those hospice programs that are seeking recertification for continued participation in Medicare.

6. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Products and CAA 2023-Related Changes

Section 3712 of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act (Pub. L. 116-136, March 27, 2020)

https://www.govinfo.gov/link/plaw/116/public/136

requires that Medicare payment rates for durable medical equipment (DME) in areas other than rural and noncontiguous areas during the coronavirus disease 2019 (COVID-19) public health emergency (PHE) be equal to 75 percent of the adjusted payment amounts (based on the DME competitive bidding program information), and 25 percent of the unadjusted fee schedule amounts. The regulations at § 414.210(g)(9)(v) codified these payment rates for the duration of the PHE. Section 4139 of the Consolidated Appropriations Act (CAA), 2023 (Pub. L. 117-328, December 29, 2022) requires payment based on these rates through the end of the COVID-19 PHE or December 31, 2023, whichever is later. We are proposing to make changes to the regulations to codify these payment rates through the end of the COVID-19 PHE or unless otherwise specified by law.

The scope of the benefit and payment for lymphedema compression treatment items in section 4133 of the CAA, 2023 adds section 1861(s)(2)(JJ) to the Act, adding the Medicare Part B benefit for lymphedema compression treatment items effective January 1, 2024. This rule would address the scope of the new benefit by defining what constitutes a standard or custom fitted gradient compression garment and determining what other compression items may exist that are used for the treatment of lymphedema and would fall under the new benefit.

This rule would also implement section 1834(z) of the Act in establishing payment amounts for items covered under the new benefit and frequency limitations for lymphedema compression treatment items. CMS expects to conduct outreach for individuals with Medicare and issue provider education regarding this benefit.

The definition of brace in section 1861(s)(9) of the Act provides coverage

under Part B for leg, arm, back, and neck braces. This rule would codify the existing definition of a brace found in the Medicare Benefit Policy Manual (CMS 100-02) and clarify that this definition encompasses newer, technology-powered devices.

7. Documentation Requirements for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Products Supplied as Refills to the Original Order

Section 1893(b)(1) of the Act, authorizes “[r]eview of activities of providers of services or other individuals and entities furnishing items and services for which payment may be made under this title . . . including medical and utilization review . . .”. The requirement for documentation to support DMEPOS refills originally arose in response to concerns related to auto-shipments and delivery of DMEPOS products that may no longer be needed or not needed at the same level of frequency/volume. We are proposing to codify our long-standing refill policy, with some changes. We propose to require documentation indicating that the beneficiary confirmed the need for the refill within the 30-day period prior to the end of the current supply. We propose to codify our requirement that delivery of DMEPOS items (that is, date of service) be no sooner than 10 calendar days before the expected end of the current supply. We seek comments for consideration in future rulemaking on ways to balance beneficiary burden with the potential risks/burdens of not verifying the beneficiary's actual need for recurring supplies for certain individuals with permanent conditions.

8. Provider and Supplier Enrollment Requirements

The purpose of our provider enrollment provisions is to strengthen and clarify certain aspects of the provider enrollment process. This includes, but is not limited to: (1) subjecting a greater number of providers and suppliers, such as hospices, to the highest level of screening, which includes fingerprinting all 5 percent or greater owners of these providers and suppliers; (2) applying the change in majority ownership (CIMO) provisions in 42 CFR 424.550(b) to hospices; and (3) reducing the period of Medicare non-billing for which a provider or supplier can be deactivated under § 424.540(a)(1) from 12 months to 6 months. These changes are necessary to help ensure that payments are made only to qualified providers and suppliers and/or that owners of these entities are carefully screened. We believe that fulfilling both of these objectives would assist in protecting the Trust Funds and Medicare beneficiaries.

B. Summary of the Provisions of This Proposed Rule

1. Home Health Prospective Payment System (HH PPS)

In section II.B.1. of this proposed rule, we provide monitoring and data analysis on PDGM utilization for CYs 2020, 2021, and 2022. In this section we also solicit comments related to access to home health aide services. In section II.C.1. of this rule, we provide analysis determining the difference between assumed versus actual behavior change on estimated aggregate expenditures for home health payments as result of the change in the unit of payment to 30 days and the implementation of the PDGM case-mix adjustment methodology; and a proposal to apply a permanent prospective adjustment of −5.653 percent to the CY 2024 home health payment rate.

In section II.C.2. of this proposed rule, we explain plans to recalibrate the PDGM case-mix weights, LUPA thresholds, functional levels, and comorbidity adjustment subgroups for CY 2024.

In section II.C.3. of this rule we set out proposals to rebase and revise the home health market basket to reflect a 2021 base year. We propose to use this 2021-based home health market basket to calculate the home health payment update percentage for CY 2024 as well as to revise the labor-related share.

In section II.C.4. of this rule, we detail proposals to update the home health wage index, the CY 2024 national, standardized 30-day period payment rates, and the CY 2024 national per-visit payment amounts by the home health payment update percentage. The proposed home health payment update percentage for CY 2024 is 2.7 percent. Additionally, this rule proposes the CY 2024 FDL ratio to ensure that aggregate outlier payments do not exceed 2.5 percent of the total aggregate payments, as required by section 1895(b)(5)(A) of the Act.

In section II.C.5 of this rule, we discuss our proposal to codify statutory payment changes for negative pressure wound therapy using a disposable device (dNPWT).

2. Home Health Quality Reporting Program (HH QRP)

In section III. of this proposed rule, we are proposing the adoption of the measure “COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date” (Patient/Resident COVID-19 Vaccine) to the HH QRP beginning with the CY 2025 HH QRP. CMS also proposes to adopt the “Functional Discharge Score” (DC Function) measure to the HH QRP beginning with the CY 2025 HH QRP. With the addition of the Discharge Function measure, we propose to remove the measure “Application of Percent of Long-Term Care Hospital (LTCH) Patients with an Admission and Discharge Functional Assessment and a Care Plan That Addresses Function” (Application of Functional Assessment/Care Plan) from the HH QRP beginning with the CY 2025 HH QRP. CMS additionally propose the removal of two OASIS items no longer necessary for collection, the M0110—Episode Timing and M2220—Therapy Needs items. We are also proposing technical changes to § 484.245(b) to codify our requirement that HHAs must meet or exceed a data submission threshold set at 90 percent of all required OASIS and submit the data through the CMS designated data submission systems. Lastly, we seek input on future HH QRP measure concepts and provide updates on HH QRP health equity initiatives.

3. Expanded Home Health Value Based Purchasing (HHVBP) Model

In section IV. of this proposed rule, we discuss our proposal to codify the HHVBP measure removal factors at § 484.380. We are proposing to remove five and add three quality measures to the applicable measure set. Along with the proposed revisions to the current measure set, we propose to revise the weights of the individual measures within the OASIS-based measure category and within the claims-based measure category starting in the CY 2025 performance year. We are proposing to update the Model baseline year from CY 2022 to CY 2023 starting in the CY 2025 performance year to enable CMS to measure competing HHAs performance on benchmarks and achievement thresholds that are more current for all applicable measures. Additionally, we are amending the appeals process such that reconsideration decisions may be reviewed by the Administrator. We are including an update to the RFI,

Future Approaches to Health Equity in the Expanded HHVBP Model,

that was published in the CY 2023 HH PPS rule. We will also include an update that reminds stakeholders that we will begin public reporting of HHVBP performance data on or after December 1, 2024.

4. Home Intravenous Immune Globulin (IVIG) Items and Services

As required under Division FF, section 4134 of the Consolidated Appropriations Act, 2023 (CAA, 2023), section V. of this rule proposes regulations to implement coverage and payment of items and services related to administration of IVIG in a patient's home for a patient with PIDD.

5. Hospice Informal Dispute Resolution and Special Focus Program

In section VI. of this proposed rule, we discuss our proposal for a new hospice informal dispute resolution (IDR) process at § 488.1130 to align with the process that is available for home health agencies (HHAs). We are proposing the hospice IDR to address disputes related to condition-level survey findings following a hospice program's receipt of the official survey statement of deficiencies. The IDR will provide hospice programs an informal opportunity to resolve disputes in the survey findings for those hospice programs that are seeking recertification from the State Survey Agency (SA) or reaccreditation from an accrediting organization (AO) for continued participation in Medicare. Additionally, the IDR may be initiated for those hospice programs that are currently under SA monitoring (either through a complaint investigation or validation survey) and those in the SFP. In section VII we discuss our proposal to add the hospice Special Focus Program (SFP) at § 488.1135. In the proposed rule, we include the SFP algorithm (including data sources) to identify indicators of hospice poor performance, the criteria for selection and completion of the SFP, hospice termination from Medicare, and public reporting of the SFP. In response to previous comments urging CMS to seek technical expert panel (TEP) recommendations to better inform the development of the SFP, a TEP was convened to gain input from key stakeholders on various aspects of the SFP proposed in this rule. We propose the hospice SFP will commence beginning the effective date of the rule with implementation during CY 2024. We propose to periodically review the effectiveness of the methodology and the algorithm.

6. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Products and CAA 2023 Related Changes

In section VII.A.3. of this rule, we discuss our proposal to make conforming changes to § 414.210(g)(9), consistent with section 4139(a) and 4139(b) of the CAA, 2023. First, section 4139 of the CAA, 2023 does not change the current policy under § 414.210(g)(9)(iii) of paying for DMEPOS items and services furnished in rural and non-contiguous non-competitive bidding areas (CBAs) based on a 50/50 blend of adjusted and unadjusted fee schedule amounts through the duration of the PHE for COVID-19.

As a result, we are proposing to revise § 414.210(g)(9)(iii), to state that for items and services furnished in rural areas and non-contiguous areas (Alaska, Hawaii, and U.S. territories) with dates of service from June 1, 2018 through the duration of the emergency period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)) or December 31, 2023, whichever is later, based on the fee schedule amount for the area is equal to 50 percent of the adjusted payment amount established under this section and 50 percent of the unadjusted fee schedule amount.

We are proposing to revise § 414.210(g)(9)(v) to state that for items and services furnished in areas other than rural or noncontiguous areas with dates of service from March 6, 2020 through December 31, 2023 or through the remainder of the duration of the emergency period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), whichever is later, the fee schedule amount for the area is equal to 75 percent of the adjusted payment amount established under this section and 25 percent of the unadjusted fee schedule amount.

We are proposing to remove outdated text from § 414.210(g)(9)(v) that states “for items and services furnished in areas other than rural or noncontiguous areas with dates of service from the expiration date of the emergency period described in section 1135(g)(1)(B) of the Act (42 U.S.C. 1320b-5(g)(1)(B)), through December 31, 2020, the fee schedule amount for the area is equal to 100 percent of the adjusted payment amount established under this section.”

We are proposing to revise § 414.210(g)(9)(vi) to state that for items and services furnished in all areas with dates of service on or after January 1, 2024, or the date immediately following the duration of the emergency period described in section 1135(g)(1)(B) of the Act, whichever is later, the fee schedule amount for the area is equal to the adjusted payment amount established under paragraph (g) of this section.

We are proposing to make conforming changes to § 414.210(g)(2) for the rural and non-contiguous areas in order to specify the December 31, 2023 date specified in section 4139 of the CAA, 2023.

In section VII.B.8. of this rule, we discuss our proposal to amend 42 CFR 410.36(a) to add paragraph (4) and the following new category of medical supplies, appliances, and devices covered under Medicare Part B; Lymphedema compression items including: standard and custom fitted gradient compression garments; gradient compression wraps with adjustable straps; compression bandaging systems; and other items determined to be lymphedema compression treatment items under the process established under § 414.1670. Other covered items would include accessories such as zippers in garments, liners worn under garments or wraps with adjustable straps, and padding or fillers that are necessary for the effective use of a gradient compression garment or wrap with adjustable straps.

We are proposing to modify and add to the existing HCPCS codes for lymphedema compression treatment items.

We are proposing to add § 414.1670 under new subpart Q and use the same process described in § 414.240 to obtain public consultation on preliminary benefit category determinations and payment determinations for new lymphedema compression treatment items.

We are proposing to add a new subpart Q under the regulations at 42 CFR part 414 titled, “Payment for Lymphedema Compression Treatment Items” to implement the provisions of section 1834(z) of the Act.

We are proposing to add § 414.1600 to explain the purpose and definitions found in subpart Q.

We are also proposing to add § 414.1660 to address continuity of pricing when HCPCS codes for lymphedema compression treatment items are divided or combined.

We are proposing to add § 414.1680 and the following frequency limitations for lymphedema compression treatment items

We are proposing to revise the regulations for competitive bidding under at 42 CFR part 414, subpart F to include lymphedema compression treatment items under the competitive bidding program as mandated by section 1847(a)(2)(D) of the Act. We propose to add lymphedema compression treatment items to the definition of item at § 414.402. We are proposing to revise § 414.408 to indicate that payment for these items would be calculated on a lump sum purchase basis and payment under the program would be made in accordance with any frequency

limitations established under subpart Q in accordance with section 1834(z)(2) of the Act. We are also proposing to add lymphedema compression treatment items to § 414.412 to address limiting bids submitted under the program using the payment established under subpart Q.

We are proposing to add § 414.1690 indicating that the payment amounts established under § 414.1650(b) may be adjusted using information on the payment determined for lymphedema compression treatment items as part of implementation of the competitive bidding programs under subpart F using the methodologies set forth at § 414.210(g).

In section VII.C.3. of this rule, we discuss our proposal to amend the regulations at 42 CFR 410.2 to add the definition of brace and to add clarification at § 410.36(a)(3)(i) for the purpose of determining the Medicare Part B benefit and scope for leg, arm, back, and neck braces and making benefit category determinations regarding specific items in accordance with the review process for benefit category and payment determinations under § 414.240.

7. Documentation Requirements for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies Products Supplied as Refills to the Original Order

We propose updating the refill documentation requirements such that a beneficiary affirmation would need to be documented by the supplier. We propose to require documentation indicating that the beneficiary confirmed the need for the refill within the 30-day period prior to the end of the current supply. We propose to codify our requirement that delivery of DMEPOS items (that is, date of service) be no sooner than 10 calendar days before the expected end of the current supply. There is no associated paperwork burden as the burden is already accounted for and approved by the Office of Management and Budget under OMB control number 0938-0969 (CMS-10417).

8. Provider and Supplier Enrollment Requirements

We are proposing a number of changes to our Medicare provider and supplier enrollment requirements. These include, but are not limited to: (1) provisions related to hospice enrollment and ownership; and (2) deactivation of providers and suppliers.

C. Summary of Costs, Transfers, and Benefits

BILLING CODE 4120-01-P

EP10JY23.003

EP10JY23.004

BILLING CODE 4120-01-C

II. Home Health Prospective Payment System

A. Overview of the Home Health Prospective Payment System

1. Statutory Background

Section 1895(b)(1) of the Act requires the Secretary to establish a Home Health Prospective Payment System (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. In accordance with the statute, as amended by the Balanced Budget Act of 1997 (BBA), (Pub. L. 105-33, enacted August 5, 1997) we published a final rule in the July 3, 2000

Federal Register

(65 FR 41128) to implement the HH PPS legislation.

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 home health agencies (HHAs) to submit data for purposes of measuring health care quality, and linking the quality data submission to the annual applicable home health payment update 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 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.

Section 51001(a)(1)(B) of the Bipartisan Budget Act of 2018 (BBA of 2018) (Pub. L. 115-123) amended section 1895(b) of the Act to require a change to the home health unit of payment to 30-day periods beginning January 1, 2020. Section 51001(a)(2)(A) of the BBA of 2018 added a new subclause (iv) under section 1895(b)(3)(A) of the Act, requiring the Secretary to calculate a standard prospective payment amount (or amounts) for 30-day units of service furnished that end during the 12-month period beginning January 1, 2020, in a budget neutral manner, such that estimated aggregate expenditures under the HH PPS during CY 2020 are equal to the estimated aggregate expenditures that otherwise would have been made under the HH PPS during CY 2020 in the absence of the change to a 30-day unit of service. Section 1895(b)(3)(A)(iv) of the Act requires that the calculation of the standard prospective payment amount (or amounts) for CY 2020 be made before the application of the annual update to the standard prospective payment amount as required by section 1895(b)(3)(B) of the Act.

Additionally, section 1895(b)(3)(A)(iv) of the Act requires that in calculating the standard prospective payment amount (or amounts), the Secretary must make assumptions about behavior changes that could occur as a result of the implementation of the 30-day unit of service under section 1895(b)(2)(B) of the Act and case-mix adjustment factors established under section 1895(b)(4)(B) of the Act. Section 1895(b)(3)(A)(iv) of the Act further requires the Secretary to provide a description of the behavior assumptions made in notice and comment rulemaking. CMS finalized these behavior assumptions in the CY 2019 HH PPS final rule with comment period (83 FR 56461).

Section 51001(a)(2)(B) of the BBA of 2018 also added a new subparagraph (D) to section 1895(b)(3) of the Act. Section 1895(b)(3)(D)(i) of the Act requires the Secretary annually to determine the impact of differences between assumed behavior changes, as described in section 1895(b)(3)(A)(iv) of the Act, and actual behavior changes on estimated aggregate expenditures under the HH PPS with respect to years beginning with 2020 and ending with 2026. Section 1895(b)(3)(D)(ii) of the Act requires the Secretary, at a time and in a manner determined appropriate, through notice and comment rulemaking, to provide for one or more permanent increases or decreases to the standard prospective payment amount (or amounts) for applicable years, on a prospective basis, to offset for such increases or decreases in estimated aggregate expenditures, as determined under section 1895(b)(3)(D)(i) of the Act. Additionally, section 1895(b)(3)(D)(iii) of the Act requires the Secretary, at a time and in a manner determined appropriate, through notice and comment rulemaking, to provide for one or more temporary increases or decreases to the payment amount for a unit of home health services for applicable years, on a prospective basis, to offset for such increases or decreases in estimated aggregate expenditures, as determined under section 1895(b)(3)(D)(i) of the Act. Such a temporary increase or decrease shall apply only with respect to the year for which such temporary increase or decrease is made, and the Secretary shall not take into account such a temporary increase or decrease in computing the payment amount for a unit of home health services for a subsequent year. Finally, section 51001(a)(3) of the BBA of 2018 amends section 1895(b)(4)(B) of the Act by adding a new clause (ii) to require the Secretary to eliminate the use of therapy thresholds in the case-mix system for CY 2020 and subsequent years.

Division FF, section 4136 of the Consolidated Appropriations Act, 2023 (CAA, 2023) amended section 1834(s)(3)(A) of the Act to require that, beginning with 2024, the separate payment for furnishing negative pressure wound therapy (NPWT) be for just the device and not for nursing and therapy services. Payment for nursing and therapy services are to be included as part of payments under the HH PPS. The separate payment for 2024 is to be equal to the supply price used to determine the relative value for the service under the Medicare Physician Fee Schedule (as of January 1, 2022) for the applicable disposable device updated by the percentage increase in the Consumer Price Index for All Urban Consumers (CPI-U). The separate payment for 2025 and each subsequent year is to be the payment amount for the previous year updated by the percentage increase in the CPI-U (United States city average) for the 12-month period ending in June of the previous year minus the productivity adjustment as described in section 1886(b)(3)(B)(xi)(II) for such year. The CAA, 2023 also added section 1834(s)(4) of the Act to require that beginning with 2024, as part of submitting claims for the separate payment, the Secretary shall accept and process claims submitted using the type of bill that is most commonly used by home health agencies to bill services under a home health plan of care.

2. Current System for Payment of Home Health Services

For home health periods of care beginning on or after January 1, 2020, Medicare makes payment under the HH PPS on the basis of a national, standardized 30-day period payment rate that is adjusted for case-mix and area wage differences in accordance with section 51001(a)(1)(B) of the BBA of 2018. The national, standardized 30-day period payment rate includes payment for 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 also part of the national, standardized 30-day period rate. Durable medical equipment (DME) provided as a home health service, as defined in section 1861(m) of the Act, is paid the fee schedule amount or is paid through the competitive bidding program and such payment is not included in the national, standardized 30-day period payment amount. Additionally, the 30-day period payment rate does not include payment for certain injectable osteoporosis drugs and negative pressure wound therapy (NPWT) using a disposable device (though this rule is proposing changes to this provision pursuant to section 4136 of the CAA, 2023), but such drug and services must be billed by the HHA while a patient is under a home health plan of care, as the law requires consolidated billing of osteoporosis drugs and NPWT using a disposable device.

To better align payment with patient care needs and to better ensure that clinically complex and ill beneficiaries have adequate access to home health care, in the CY 2019 HH PPS final rule with comment period (83 FR 56406), we finalized case-mix methodology refinements through the Patient-Driven Groupings Model (PDGM) for home health periods of care beginning on or after January 1, 2020. The PDGM did not change eligibility or coverage criteria for Medicare home health services, and as long as the individual meets the criteria for home health services as described at 42 CFR 409.42, the individual can receive Medicare home health services, including therapy services. For more information about the role of therapy services under the PDGM, we refer readers to the Medicare Learning Network (MLN) Matters article SE20005 available at

https://www.cms.gov/

regulations-and-guidanceguidancetransmittals2020-transmittals/se20005.

To adjust for case-mix for 30-day periods of care beginning on and after January 1, 2020, the HH PPS uses a 432-category case-mix classification system to assign patients to a home health resource group (HHRG) using patient characteristics and other clinical information from Medicare claims and the Outcome and Assessment Information Set (OASIS) assessment instrument. These 432 HHRGs represent the different payment groups based on five main case-mix categories under the PDGM, as shown in Figure B1. Each HHRG has an associated case-mix weight that is used in calculating the payment for a 30-day period of care. For periods of care with visits less than the low-utilization payment adjustment (LUPA) threshold for the HHRG, Medicare pays national per-visit rates based on the discipline(s) providing the services. Medicare also adjusts the national standardized 30-day period payment rate for certain intervening events that are subject to a partial payment adjustment. For certain cases that exceed a specific cost threshold, an outlier adjustment may also be available.

Under this case-mix methodology, case-mix weights are generated for each of the different PDGM payment groups by regressing resource use for each of the five categories (admission source, timing, clinical grouping, functional impairment level, and comorbidity adjustment) using a fixed effects model. A detailed description of each of the case-mix variables under the PDGM have been described previously, and we refer readers to the CY 2021 HH PPS final rule (85 FR 70303 through 70305).

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B. Monitoring the Effects of the Implementation of PDGM

1. Routine PDGM Monitoring

CMS routinely analyzes Medicare home health benefit utilization, including but not limited to, overall total 30-day periods of care and average periods of care per HHA user; distribution of the type of visits in a 30-day period of care; the percentage of periods that receive the LUPA; estimated costs; the percentage of 30-day periods of care by clinical group, comorbidity adjustment, admission source, timing, and functional impairment level; and the proportion of 30-day periods of care with and without any therapy visits, nursing visits, and/or aide/social worker visits. For the monitoring included in this rule, we examine simulated data for CYs 2018 and 2019 and actual data for CYs 2020, 2021, and 2022 for 30-day periods of care. We refer readers to the CY 2022 HH PPS final rule (86 FR 35881) for discussion about simulated data for CYs 2018 and 2019.

(a) Utilization

Table B1 shows the overall utilization of home health services and Table B2 shows the average utilization of visits per 30-day period of care by home health discipline. This data indicates the average number of 30-day periods of care per unique HHA user is similar between CY 2021 and CY 2022. The data also indicates that the number of 30-day periods of care decreased between CY 2018 and CY 2022. Table B3 shows the proportion of 30-day periods of care that are LUPAs and the average number of visits per discipline of those LUPA 30-day periods of care over time.

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(b) Analysis of 2021 Cost Report Data for 30-Day Periods of Care

In the CY 2023 HH PPS proposed rule (87 FR 37607), we provided a summary of analysis on FY 2020 HHA Medicare cost report data, as this was the most recent and complete cost report data at the time of rulemaking, and CY 2021 home health claims to estimate 30-day period of care costs. Our analysis showed that the CY 2021 national, standardized 30-day period payment rate of $1,901.12 was approximately 34 percent more than the estimated CY 2021 estimated 30-day period cost of $1,420.35. In MedPAC's March 2023 Report to Congress,

their review of home health payment adequacy found that “access is more than adequate in most areas and that Medicare payments are substantially in excess of costs”.

Report to Congress, Medicare Payment Policy. Home Health Care Services, Chapter 8. MedPAC. March 2023

https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf.

Using this same process in this proposed rule to compare home health payment to costs, we examined 2021 HHA Medicare cost reports (CMS Form 1728-20, OMB No. 0938-0222), as this is the most recent and complete cost report data at the time of rulemaking, and CY 2022 home health claims, to estimate 30-day period of care costs. We excluded LUPAs and partial payment adjustments in the average number of visits. The 2021 average NRS costs per visit is $6.71. To update the estimated 30-day period of care costs, we begin with the 2021 average costs per visit with NRS for each discipline and multiply that amount by the CY 2022 home health payment update percentage of 2.6 percent. That amount for each discipline is then multiplied by the 2022 average number of visits by discipline to determine the 2022 estimated 30-day period costs. Table B4 shows the estimated average costs for 30-day periods of care by discipline with NRS and the total 30-day period of care costs with NRS for CY 2022.

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The CY 2022 national, standardized 30-day period payment rate was $2,031.64, which is approximately 45 percent more than the estimated CY 2022 estimated 30-day period cost of $1,402.27. Note that in the CY 2023 HH PPS proposed rule (87 FR 37608), the average number of visits for non-LUPA, non- partial payment adjustments 30-day periods of care in 2021 was 8.81 visits. Using actual CY 2022 claims data, the average number of visits for a non-LUPA, non-partial payment adjustments 30-day periods of care was 8.6 visits—a decrease of approximately 2.4 percent. Note that in the CY 2020 HH PPS final rule with comment period (84 FR 60484), the average number of visits for non-LUPA, non- partial payment adjustments 30-day periods of care in 2017 was estimated to be 10.5 visits. Therefore, the average number of visits for non-LUPA, non- partial payment adjustments, 30-day periods of care in CY 2022 represents a decrease of 18 percent from the average number of visits for non-LUPA, non- partial payment adjustments 30-day periods of care in CY 2017. In its March 2023 Report to Congress, MedPAC assumed a cost growth of 4.1 percent for CY 2023.

Furthermore, MedPAC noted that for more than a decade, payments under the HH PPS have significantly exceeded HHAs' costs primarily due to two factors. First, agencies have reduced the average number of visits per period to reduce period costs. Second, cost growth in recent years has been lower than the annual home health payment update percentages. As shown in Table B4 in this proposed rule, HHAs have reduced visits under the PDGM in CY 2022.

Report to Congress, Medicare Payment Policy. Home Health Care Services, Chapter 8. MedPAC. March 2023

https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf

Each 30-day period of care is grouped into one of 12 clinical groups, which describe the primary reason for which a patient is receiving home health services under the Medicare home health benefit. The clinical grouping is based on the principal diagnosis reported on the home health claim. Table B5 shows the distribution of the 12 clinical groups over time.

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Thirty-day periods of care will receive a comorbidity adjustment category based on the presence of certain secondary diagnoses reported on home health claims. These diagnoses are based on a home health specific list of clinically and statistically significant secondary diagnosis subgroups with similar resource use. We refer readers to section II.B.4.c. of this proposed rule and the CY 2020 HH PPS final rule with comment period (84 FR 60493) for further information on the comorbidity adjustment categories. Home health 30-day periods of care can receive a low or a high comorbidity adjustment, or no comorbidity adjustment. Table B6 shows the distribution of 30-day periods of care by comorbidity adjustment category for all 30-day periods.

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(d) Admission Source and Timing

Each 30-day period of care is classified into one of two admission source categories—community or institutional—depending on what healthcare setting was utilized in the 14 days prior to receiving home health care. Thirty-day periods of care for beneficiaries with any inpatient acute care hospitalizations, inpatient psychiatric facility (IPF) stays, skilled nursing facility (SNF) stays, inpatient rehabilitation facility (IRF) stays, or long-term care hospital (LTCH) stays within 14-days prior to a home health admission will be designated as institutional admissions. The institutional admission source category will also include patients that had an acute care hospital stay during a previous 30-day period of care and within 14 days prior to the subsequent, contiguous 30-day period of care and for which the patient was not discharged from home health and readmitted.

Thirty-day periods of care are classified as “early” or “late” depending on when they occur within a sequence of 30-day periods of care. The first 30-day period of care is classified as early and all subsequent 30-day periods of care in the sequence (second or later) are classified as late. A subsequent 30-day period of care would not be considered early unless there is a gap of more than 60 days between the end of one previous period of care and the start of another. Information regarding the timing of a 30-day period of care comes from Medicare home health claims data and not the OASIS assessment to determine if a 30-day period of care is “early” or “late”. Table B7 shows the distribution of 30-day periods of care by admission source and period timing.

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(e) Functional Impairment Level

Each 30-day period of care is placed into one of three functional impairment levels (low, medium, or high) based on responses to certain OASIS functional items associated with grooming, bathing, dressing, ambulating, transferring, and risk for hospitalization. The specific OASIS items that are used for the functional impairment level are found in Table B7 in the CY 2020 HH PPS final rule with comment period (84 FR 60490).

Responses to these OASIS items are grouped together into response categories with similar resource use and each response category has associated points. A more detailed description as to how these response categories were

established can be found in the technical report, “Overview of the Home Health Groupings Model” posted on the HHA webpage.

The sum of these points results in a functional impairment score used to group 30-day periods of care into a functional impairment level with similar resource use. The scores associated with the functional impairment levels vary by clinical group to account for differences in resource utilization. A patient's functional impairment level will remain the same for the first and second 30-day periods of care unless there is a significant change in condition that warrants an “other follow-up” assessment prior to the second 30-day period of care. For each 30-day period of care, the Medicare claims processing system will look for occurrence code 50 on the claim to correspond to the M0090 date of the applicable assessment. Table B8 shows the distribution of 30-day periods by functional impairment level.

CMS continues to use the M1800-1860 items to determine functional impairment level for case-mix purposes while we continue to analyze the relationship between the analogous GG items (required as standardized patient assessment data) and the M1800 items used for payment.

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/HH-PDGM.

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(f) Therapy Visits

Beginning in CY 2020, section 1895(b)(4)(B)(ii) of the Act eliminated the use of therapy thresholds in calculating payments for CY 2020 and subsequent years. Prior to implementation of the PDGM, HHAs could receive an adjustment to payment based on the number of therapy visits provided during a 60-day episode of care. We examined the proportion of actual 30-day periods of care with and without therapy visits. To be covered as skilled therapy, the services must require the skills of a qualified therapist (that is, PT, OT, or SLP) or qualified therapist assistant and must be reasonable and necessary for the treatment of the patient's illness or injury.

As shown in Table B2, we monitor the number of visits per 30-day period of care by each home health discipline. Any 30-day period of care can include both therapy and non-therapy visits. If any 30-day period of care consisted of only visits for PT, OT, or SLP, then this 30-day period of care is considered “therapy only”. If any 30-day period of care consisted of only visits for skilled nursing, home health aide, or social worker, then this 30-day period of care is considered “no therapy”. If any 30-day period of care consisted of at least one therapy visit and one non-therapy, then this 30-day period of care is considered “therapy + non-therapy”. Table B9 shows the proportion of 30-day periods of care with only therapy visits, at least one therapy visit and one non-therapy visit, and no therapy visits. Figure B2 shows the proportion of 30-day periods of care by the number of therapy visits (excluding zero) provided during 30-day periods of care.

Medicare Benefit Policy Manual, Chapter 7 Home Health Services, Section 40.2 Skilled Therapy Services

https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c07.pdf.

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Both Table B9 and Figure B2, as previously discussed, indicate there have been changes in the distribution of both therapy and non-therapy visits in CY 2022 compared to CY 2021. For example, the percent of 30-day periods with one through seven therapy visits during a 30-day period increased in CY 2022 compared to CY 2021. Comparing therapy utilization from before the PDGM (CYs 2018 and 2019) to after the implementation of the PDGM (CYs 2020-2022), we have also seen a decline in therapy visits across all clinical groups, as shown in Figure B3.

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We also examined the proportion of 30-day periods of care with and without skilled nursing, social work, or home health aide visits. Table B10 shows the number of 30-day periods of care with only skilled nursing visits, at least one skilled nursing visit and one other visit type (therapy or non-therapy), and no skilled nursing visits. Table B11 shows the number of 30-day periods of care with and without home health aide or social worker visits.

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Finally, we looked at home health aide utilization during CYs 2018-2022. Figure B4 shows the total and average of home health aide visits by 30-day periods of care.

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We will continue to monitor the provision of home health services, including any changes in the number and duration of home health visits, composition of the disciplines providing such services, and overall home health payments to determine if refinements to the case-mix adjustment methodology may be needed in the future.

2. Request for Information (RFI) for Access to Home Health Aide Services

Medicare covers intermittent/part-time personal care services and assistance with activities of daily living (ADL) provided by home health aides if a Medicare beneficiary is certified as needing a skilled

service

(§ 409.45). All home health services, including aide services, are to be furnished in accordance with a physician-established plan of care. For home health services to be covered, the individualized plan of care must specify the services necessary to meet the patient-specific needs identified in the comprehensive assessment. In addition, the plan of care must include the identification of the responsible discipline(s) and the frequency and duration of all visits as well as those items listed in § 484.60(a) that establish the need for such services. As the population ages, the prevalence of chronic disease increases and the need for home-based dependent services is on the rise.

For eligible beneficiaries, home health aides can provide a necessary adjunct to medical care in managing medical conditions; assisting with ADLs (help with tasks such as bathing, grooming, dressing and toileting allows beneficiaries, particularly those with physical disabilities or chronic health conditions, to maintain their independence); assisting with medication management and adherence (help with reminders for beneficiaries to take their medications as prescribed and monitoring for adverse reactions or side effects); taking vital signs (home health aides can take vital signs such as blood pressure and heart rate, and report changes to the beneficiary's health care provider); and supplementing socialization (instances of social interaction during prescribed visits can help to improve the mental health and well-being of beneficiaries).

Intermittent skilled nursing care, physical therapy, speech language pathology, or a continuing need for occupational therapy.

Maresova, P., Javanmardi, E., Barakovic, S. et al. Consequences of chronic diseases and other limitations associated with old age—a scoping review. BMC Public Health 19, 1431 (2019).

https://doi.org/10.1186/s12889-019-7762-5

Russell D, Rosati RJ, Peng TR, Barrón Y, Andreopoulos E. Continuity in the Provider of Home Health Aide Services and the Likelihood of Patient Improvement in Activities of Daily Living. Home Health Care Management & Practice. 2013;25(1):6-12. doi:10.1177/1084822312453046

Anecdotally, CMS has heard that beneficiaries have had difficulty receiving home health aide visits under the Medicare home health benefit. Additionally, our monitoring has shown that home health aide visits have decreased, as exhibited in Table B2 and Figure B4. CMS wants to ensure that all Medicare beneficiaries receiving care under the home health benefit are afforded all covered services for which they qualify. Therefore, in an effort to better understand any challenges facing Medicare beneficiaries in accessing home health aide services, CMS solicits public comment on the following:

• Why is utilization of home health aides continuing to decline as shown in Table B2 and Figure B4 if the need for these services remains strong?

• To what extent are higher acuity individuals eligible for Medicare (for example, individuals with multiple co-morbidities or impairments of multiple activities of daily living) having more difficulty accessing home health care services, specifically home health aide services?

• What are notable barriers or obstacles that home health agencies experience relating to recruiting and retaining home health aides? What steps could home health agencies take to improve the recruitment and retention of home health aides?

• Are HHAs paying home health aides less than equivalent positions in other care settings (for example, are aides in the inpatient hospital setting or nursing home setting paid more than in home health)? What are the reasons for the disparity in hourly wages or total pay for equivalent services?

• In what ways could HHAs ensure that home health aides are consistently paid wages that are commensurate with the impact they have on patient care that they provide to Medicare beneficiaries?

• How effective is the coordination between Medicare and Medicaid to ensure adequate access to home health aide services? Please share insights on the level of utilization of Medicaid benefits by dually eligible beneficiaries for additional home health aide services that are not being provided by Medicare.

• Are physicians' plans of care less reliant on home health aide services in the past, or are HHAs less willing/able to provide these services? If so, what are the primary reasons for why such services are not provided?

• What are the consequences of beneficiary difficulty in accessing home health aide services?

C. Proposed Provisions for CY 2024 Payment Under the HH PPS

1. Proposed Behavior Assumption Adjustments Under the HH PPS

(a) Background

As discussed in section II.A.1. of this rule, starting in CY 2020, the Secretary was statutorily required by Section 1895 (b)(2)(B) of the Act, to change the unit of payment under the HH PPS from a 60-day episode of care to a 30-day period of care. CMS was also required to make assumptions about behavior changes that could occur as a result of the implementation of the 30-day unit of payment and the case-mix adjustment factors that eliminated the use of therapy thresholds. In the CY 2019 HH PPS final rule with comment period (83 FR 56455), we finalized three behavior change assumptions which were also described in the CY 2022 and 2023 HH PPS rules (86 FR 35890, 87 FR 37614, and 87 FR 66795 through 66796). In the CY 2020 HH PPS final rule with comment period (84 FR 60519), we included these behavior change assumptions in the calculation of the 30-day budget neutral payment amount for CY 2020, finalizing a negative 4.36 percent behavior change assumption adjustment (“assumed behaviors”). We did not propose any changes for CYs 2021 and 2022 relating to the behavior assumptions finalized in the CY 2019 HH PPS final rule with comment period, or to the negative 4.36 percent behavior change assumption adjustment, finalized in the CY 2020 HH PPS final rule with comment period.

In the CY 2023 HH PPS final rule (87 FR 66796), we stated, based on our annual monitoring at that time, the three assumed behavior changes did occur as a result of the implementation of the PDGM and that other behaviors, such as changes in the provision of therapy and changes in functional impairment levels also occurred. We also reminded readers that in the CY 2020 HH PPS final rule with comment period (84 FR 60513) we stated we interpret actual behavior changes to encompass both behavior changes that were previously outlined as assumed by CMS, and other behavior changes not identified at the time the budget-neutral 30-day payment rate for CY 2020 was established. In the CY 2023 HH PPS final rule (87 FR 66796) we provided supporting evidence that indicated the number of therapy visits declined in CYs 2020 and 2021, as well as a slight decline in therapy visits beginning in CY 2019 after the finalization of the removal of therapy thresholds, but prior to implementation of the PDGM. In section II.B.1. of this rule, our analysis continues to show overall the actual 30-day periods are similar to the simulated 30-day periods and there continues to be a decline in therapy visits, indicating that HHAs changed their behavior to reduce therapy visits. Although the analysis demonstrates evidence of individual behavior changes (for example, in the volume of visits for LUPAs, therapy sessions, etc.), we use the entirety of the behaviors in order to calculate estimated aggregate expenditures. The law instructs us to ensure that estimated aggregate expenditures under the PDGM are equal to the estimated aggregate expenditures that otherwise would have been made under the prior system.

Section 4142(a) of the CAA, 2023, required CMS to present, to the extent practicable, a description of the actual behavior changes occurring under the HH PPS from CYs 2020-2026. This subsection of the CAA, 2023, also required CMS to provide datasets underlying the simulated 60-day episodes, and discuss and provide time for stakeholders to provide input and ask questions on the payment rate development for CY 2023. CMS complied with these requirements by posting online both the supplemental LDS and descriptive files and the description of actual behavior changes that affected CY 2023 payment rate development. Additionally, on March 29, 2023, CMS conducted a webinar entitled

Medicare Home Health Prospective Payment System (HH PPS) Calendar Year (CY) 2023 Behavior Change Recap, 60-Day Episode Construction Overview, and Payment Rate Development.

The webinar was open to the public and discussed the actual behavior changes that occurred upon implementation of the PDGM, our approach used to construct simulated 60-day episodes using 30-day periods, payment rate development for CY 2023, and information on the supplemental data files containing information on the simulated 60-day episodes and actual 30-day periods used in calculating the permanent adjustment to the payment rate. Materials from the webinar, including the presentation and the CY 2023 descriptive statistics from the supplemental LDS files, containing information on the number of simulated 60-day episodes and actual 30-day periods in CY 2021 that were used to construct the permanent adjustment to the payment rate, as well as information such as the number of episodes and periods by case-mix group, case-mix weights, and simulated payments, can be found on the Home Health Patient-Driven Groupings Model web page at

https://www.cms.gov/medicare/medicare-fee-for-service-payment/homehealthpps/hh-pdgm.

(b) Method To Annually Determine the Impact of Differences Between Assumed Behavior Changes and Actual Behavior Changes on Estimated Aggregate Expenditures

In the CY 2023 HH PPS final rule (87 FR 66804), we finalized the methodology to evaluate the impact of the differences between assumed and actual behavior changes on estimated aggregate expenditures. For CYs 2020 through 2026, we will evaluate if the 30-day budget neutral payment rate and resulting aggregate expenditures are equal under the PDGM to what they

would have been under the 153-group case-mix system and 60-day unit of payment. An overview of the methodology is listed in this section, followed by detailed instructions on each step.

• Create simulated 60-day episodes from 30-day periods

• Price out the simulated 60-day episodes and determine aggregate expenditures

• Price out only the 30-day periods which were used to create the simulated 60-day episodes and determine aggregate expenditures

• Compare aggregate expenditures between the simulated 60-day episodes and actual 30-day periods

• Determine what the 30-day payment rate should have been to equal aggregate expenditures

(1) Create Simulated 60-Day Episodes From 30-Day Periods

The first step in our methodology is to determine which PDGM 30-day periods of care could be grouped together to form simulated 60-day episodes of care. To facilitate grouping, we made some exclusions and assumptions as described later in this section prior to pricing out the simulated 60-day episodes of care. We note in the early months of CY 2020, there were 60-day episodes which started in 2019 and ended in 2020 and therefore, some of these exclusions and assumptions may be specific to the first year of the PDGM. We identify, through footnotes, if an exclusion or assumption is specific to CY 2020 only.

(a) Exclusions

• Claims where the claim occurrence code 50 date (OASIS assessment date) occurred on or after October 31 of that year. This exclusion was applied to ensure the simulated 60-day episodes contained both 30-day periods from the same year and would not overlap into the following year (for example, 2021, 2022, 2023). This is done because any 30-day periods with an OASIS assessment date in November or December might be part of a simulated 60-day episode that would continue into the following year and where payment would have been made based on the “through” date. For CYs 2021 through 2026, we also excluded claims with an OASIS assessment date before January 1 of that year.

Again, this is to ensure a simulated 60-day episode (simulated from two 30-day periods) does not overlap years.

There are no 30-day PDGM claims which started in CY 2019 and ended in CY 2020, and therefore this exclusion would not apply to the CY 2020 dataset.

• Beneficiaries and all of their claims if they have overlapping claims from the same provider (as identified by CCN).

Claims are dropped from the same provider that extend into the following calendar year to ensure episode timing is accurate for simulated 60-day episodes. All of a beneficiary's claims are dropped, rather then only a subset, so as not to create a conflict in assigning episode timing.

• Beneficiaries and all of their claims if three or more claims from the same provider are linked to the same occurrence code 50 date.

This is done because if three or more claims link to the same OASIS it would not be clear which claims should be joined to simulate a 60-day episode.

(b) Assumptions

• If two 30-day periods of care from the same provider reference the same OASIS assessment date (using occurrence code 50), then we assume those two 30-day periods of care would have been billed as a 60-day episode of care under the 153-group system.

• If two 30 day-periods of care reference different OASIS assessment dates and each of those assessment dates is referenced by a single 30-day period of care, and those two 30-day periods of care occur together close in time (that is, the “from”date of the later 30-day period of care is between 0 to 14 days after the “through”date of the earlier 30-day period of care), then we assume those two 30-day periods of care also would have been billed as a 60-day episode of care under the 153-group system.

• For all other 30-day periods of care, we assume that they would not be combined with another 30-day period of care and would have been billed as a single 30-day period.

(2) Price Out the Simulated 60-Day Episodes and Determine Aggregate Expenditures

After application of the exclusions and assumptions described previously, we have the simulated 60-day episodes dataset for each year. We assign each simulated 60-day episode of care as a normal episode, PEP, LUPA, or outlier based on the payment parameters established in the CY 2020 HH PPS final rule with comment period (84 FR 60478) for 60-day episodes of care. Next, using the October 2019 3M Home Health Grouper (v8219)

we assign a HIPPS code to each simulated 60-day episode of care using the 153-group methodology. Finally, we price the simulated 60-day episodes of care using the payment parameters described in the CY 2020 final rule with comment period (84 FR 60537) for 60-day episodes of care.

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/CaseMixGrouperSoftware.

For CYs 2021 through 2026, we adjust the simulated 60-day base payment rate to align with current payments for the analysis year (that is, wage index budget neutrality factor and home health payment update). For example, to calculate the CY 2021 simulated 60-day episode base payment rate, we started with the final CY 2020 60-day base payment rate ($3,220.79) and multiplied by the final CY 2021 wage index budget neutrality factor (0.9999) and the CY 2021 home health payment update (1.020) to get an adjusted 60-day base payment rate ($3,284.88) for CY 2021. We used that adjusted 60-day base payment rate ($3,284.88) to price out the CY 2021 simulated 60-day claims. Once each claim is priced under the pre-PDGM HH PPS, that is each claim is adjusted from the base payment rate by case-mix, wage index, etc., we calculate the estimated aggregate expenditures for all simulated 60-day episodes in CY 2021. This method is then replicated to price out the simulated 60-day episodes for each year of claims data through CY 2026.

(3) Price Out the 30-Day Periods and Determine Aggregate Expenditures

Next, we calculated the PDGM aggregate expenditures for CY 2020 using those specific 30-day periods that were used to create the simulated 60-day episodes. Therefore, both the actual PDGM expenditures and the simulated pre-PDGM aggregate expenditures are based on the exact same claims for the permanent adjustment calculation.

(4) Compare Aggregate Expenditures Between the Simulated 60-Day Episodes and Actual 30-Day Periods

We determine if the total aggregate expenditures under the PDGM were higher or lower than under the 153-case mix group system in each year beginning with CY 2020 through CY 2026. If expenditures were higher under the PDGM (that is, we paid more than we would have if the 153-group payment system was in place), then the actual base payment rate we implemented was too high. If the expenditures were lower under the PDGM (that is, we paid less than we would have if the 153-group payment system was in place), then the actual base payment rate we implemented was too low.

(5) Determine What the 30-Day Payment Rate Should Have Been

Using an iterative process, we determine what the 30-day base payment rate should have been, in order to achieve the same estimated aggregate expenditures as obtained from the simulated 60-day episodes. This is our recalculated (“repriced”) base payment rate.

To offset prospectively for such increases or decreases in estimated aggregate expenditures as a result of the impact of differences between assumed behavior changes and actual behavior changes, in any given year, we calculate a permanent prospective adjustment by calculating the percent change between the actual 30-day base payment rate and the recalculated 30-day base payment rate. This percent change is converted into a behavior adjustment factor and applied in the annual rate update process.

To offset retrospectively for such increases or decreases in estimated aggregate expenditures as a result of the impact of differences between assumed behavior changes and actual behavior changes in any given year, we calculate a temporary prospective adjustment by calculating the dollar amount difference between the estimated aggregate expenditures from all 30-day periods using the recalculated 30-day base payment rate, and the aggregate expenditures for all 30-day periods using the actual 30-day base payment rate for the same year. In other words, when determining the temporary retrospective dollar amount, we use the full dataset of actual 30-day periods using both the actual and recalculated 30-day base payment rates to ensure that the utilization and distribution of claims are the same. In accordance with section 1895(b)(3)(D)(iii) of the Act, the temporary adjustment is to be applied on a prospective basis and shall apply only with respect to the year for which such temporary increase or decrease is made. Therefore, after we determine the dollar amount to be reconciled in any given year, we calculate a temporary adjustment factor to be applied to the base payment rate for that year. The temporary adjustment factor is based on an estimated number of 30-day periods in the next year using historical data trends, and as applicable, we control for a permanent adjustment factor, case-mix weight recalibration neutrality factor, wage index budget neutrality factor, and the home health payment update. The temporary adjustment factor is applied last.

(d) CY 2020 Results

This section discusses the final results CMS determined from CY 2020 claims data that was previously published in the CY 2023 final rule (87 FR 66804 through 66805). CMS did not do any recalculations for CY 2020 data and this section simply reiterates what was done previously for informative purposes only. Using the methodology described previously, we simulated 60-day episodes using actual CY 2020 30-day periods to determine what the CY 2020 permanent and temporary payment adjustments should be to offset for such increases or decreases in estimated aggregate expenditures. For CY 2020, we began with 8,423,688 30-day periods and dropped 603,157 30-day periods that had a claim occurrence code 50 date after October 31, 2020. We also eliminated 79,328 30-day periods that didn't appear to group with another 30-day period to form a 60-day episode if the 30-day period had a “from date” before January 15, 2020 or a “through date” after November 30, 2020. This was done to ensure a 30-day period would not have been part of a 60-day episode that would have overlapped into CY 2021. Applying the additional exclusions and assumptions as described previously, an additional 14,062 30-day periods were excluded from this analysis. Additionally, we excluded 66,469 simulated 60-day episodes of care where no OASIS information was available in the CCW VRDC or could not be grouped to a HIPPS due to a missing primary diagnosis or other reason. Our simulated 60-day episodes of care produced a distribution of two 30-day periods of care (70.6 percent) and single 30-day periods of care (29.4 percent). This distribution is similar to what we found when we simulated 30-day periods of care for implementation of the PDGM. After all exclusions and assumptions were applied, the final dataset included 7,618,061 actual 30-day periods of care and 4,463,549 simulated 60-day episodes of care for CY 2020.

Using the final dataset for CY 2020 (7,618,061 actual 30-day periods which made up the 4,463,549 simulated 60-day episodes) we determined the estimated aggregate expenditures under the pre-PDGM HH PPS were lower than the actual estimated aggregate expenditures under the PDGM HH PPS. This indicates that aggregate expenditures under the PDGM were higher than if the 153-group payment system was still in place in CY 2020. As described previously in the methodology, we needed to calculate what the actual CY 2020 30-day base payment rate ($1,864.03) should have been to equal the aggregate expenditures that we calculated using the simulated CY 2020 60-day episodes. We determined the CY 2020 30-day base payment rate should have been $1,742.52 based on actual behavior rather than the $1,864.03 based on assumed behaviors. The percent change between the two payment rates (actual and recalculated) would be the permanent adjustment. Next, we calculated the difference in aggregate expenditures for all CY 2020 PDGM 30-day claims using the actual and recalculated payment rates. This difference is the retrospective dollar amount needed to offset payment. Our results are shown in Table B12.

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As shown in Table B12 and in the CY 2023 HH PPS final rule (87 FR 66805), a permanent prospective adjustment of −6.52 percent to the CY 2023 30-day payment rate would be required to offset for such increases in estimated aggregate expenditures in future years. Additionally, we determined that our initial estimate of base payment rates required to achieve budget neutrality resulted in excess expenditures of HHAs of approximately $873 million in CY 2020. This would require a temporary adjustment to offset for such increase in estimated aggregate expenditures for CY 2020.

(e) CY 2021 Results

This section discusses the final results CMS determined from CY 2021 claims data that was previously published in the CY 2023 final rule (87 FR 66805 through 66806). CMS did not do any recalculations for CY 2021 data and this section simply reiterates what was done previously for informative purposes only. Using the methodology described previously, we simulated 60-day episodes using actual CY 2021 30-day periods to determine what the permanent and temporary payment adjustments should be to offset for such increases or decreases in estimated aggregate expenditures as a result of the impact of differences between assumed behavior changes and actual behavior changes. For CY 2021, we began with 9,269,971 30-day periods of care and dropped 570,882 30-day periods of care that had claim occurrence code 50 date after October 31, 2021. We also excluded 968,434 30-day periods of care that had claim occurrence code 50 date before January 1, 2021 to ensure the 30-day period would not be part of a simulated 60-day episode that began in CY 2020. Applying the additional exclusions and assumptions as described previously, an additional 5,868 30-day periods were excluded.

Additionally, we excluded 14,302 simulated 60-day episodes of care where no OASIS information was available in the CCW VRDC or could not be grouped to a HIPPS due to a missing primary diagnosis or other reason. Our simulated 60-day episodes of care produced a distribution of two 30-day periods of care (70.0 percent) and single 30-day periods of care (30.0 percent) that was similar to what we found when we simulated two 30-day periods of care for implementation of the PDGM. After all exclusions and assumptions were applied, the final dataset included 7,703,261 actual 30-day periods of care and 4,529,498 simulated 60-day episodes of care for CY 2021.

Using the final dataset for CY 2021 (7,703,261 actual 30-day periods which made up the 4,529,498 simulated 60-day episodes) we determined the estimated aggregate expenditures under the pre-PDGM HH PPS were lower than the actual estimated aggregate expenditures under the PDGM HH PPS. This indicates that aggregate expenditures under the PDGM were higher than if the 153-group payment system was still in place in CY 2021. As described previously in the methodology, we needed to calculate what the actual CY 2021 30-day base payment rate ($1,901.12) should have been to equal aggregate expenditures that we calculated using the simulated CY 2021 60-day episodes. We determined the CY 2021 30-day base payment rate should have been $1,751.90 based on actual behavior rather than the $1,901.12 based on assumed behaviors. The actual CY 2021 base payment rate of $1,901.12 does not account for any behavior adjustments needed for CY 2020, and therefore to evaluate changes for only CY 2021 we would need to control for the −6.52 percent prospective adjustment that we determined for CY 2020. Therefore, using the recalculated CY 2020 base payment rate of $1,742.52, multiplied by the CY 2021 wage index budget neutrality factor (0.9999) and the CY 2021 home health payment update (1.020), the CY 2021 base payment rate for assumed behaviors would have been $1,777.19. The percent change between the two payment rates would be the annual permanent adjustment for CY 2021 (assuming the −6.52 percent adjustment was already taken). Next, we calculated the difference in aggregate expenditures for all CY 2021 PDGM 30-day claims using the actual ($1,901.12, as this was what CMS actually paid in CY 2021) and recalculated ($1,751.90) payment rates. This difference is the retrospective dollar amount needed to offset payment. Our results are shown in Table B13.

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As shown in Table B13 and in the CY 2023 HH PPS final rule (87 FR 66806), a permanent prospective adjustment of −1.42 percent (assuming the −6.52 percent adjustment was already taken) would be required to offset for such increases in estimated aggregate expenditures in future years. Additionally, we determined that our initial estimate of base payment rates required to achieve budget neutrality resulted in excess expenditures of approximately $1.2 billion in CY 2021. This would require a one-time temporary adjustment factor to offset for such increases in estimated aggregate expenditures for CY 2021.

(f) CY 2022 Preliminary Results

We will continue the practice of using the most recent complete home health claims data at the time of rulemaking. The HH PPS limited data set (LDS) file released with this proposed rule includes two files: the actual CY 2022 30-day periods and the CY 2022 simulated 60-day episodes. We remind readers a data use agreement (DUA) is required to purchase the CY 2024 proposed HH PPS LDS file. Access will be granted for both the 30-day periods and the simulated 60-day episodes under one DUA. Visit the HH PPS LDS web page for more information.

In addition, the proposed CY 2024 Home Health Descriptive Statistics from the LDS Files spreadsheet is available on the Home Health Prospective Payment System Regulations and Notices web page,

does not require a DUA, and is available at no cost to interested parties. The spreadsheet contains information on the number of simulated 60-day episodes and actual 30-day periods in CY 2022 that were used to determine the behavior adjustments. The spreadsheet also provides information such as the number of episodes and periods by case-mix group, case-mix weights, and simulated payments. The CY 2022 analysis presented in this proposed rule is considered preliminary and, as more data become available from the latter half of CY 2022, we will update our results in the final rule. The CY 2024 final rule will utilize the CY 2022 finalized data for determining any behavior adjustment needed to the CY 2024 payment rate. However, while the claims data and the permanent and temporary behavior adjustment results will be considered complete, any adjustments to future payment rates may be subject to additional considerations such as permanent adjustments taken in previous years.

https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/home_health_pps_lds.

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

Using the methodology described previously, we simulated 60-day episodes using actual CY 2022 30-day periods to determine what the permanent and temporary payment adjustments should be to offset for such increases or decreases in estimated aggregate expenditures as a result of the impact of differences between assumed behavior changes and actual behavior changes. For CY 2022, we began with 8,386,706 30-day periods of care and dropped 476,889 30-day periods of care that had claim occurrence code 50 date after October 31, 2022. We also excluded 894,319 30-day periods of care that had claim occurrence code 50 date before January 1, 2022 to ensure the 30-day period would not be part of a simulated 60-day episode that began in CY 2021. Applying the additional exclusions and assumptions as described previously, an additional 5,452 30-day periods were excluded.

Additionally, we excluded 17,054 simulated 60-day episodes of care where no OASIS information was available in the CCW VRDC or could not be grouped to a HIPPS due to a missing primary diagnosis or other reason. Our simulated 60-day episodes of care produced a distribution of two 30-day periods of care (69.1 percent) and single 30-day periods of care (30.9 percent) that was similar to what we found when we simulated two 30-day periods of care for implementation of the PDGM. After all exclusions and assumptions were applied, the final dataset for this proposed rule included 6,982,837 actual 30-day periods of care and 4,127,754 simulated 60-day episodes of care for CY 2022.

Using the final dataset for CY 2022 (6,982,837 actual 30-day periods which made up the 4,127,754 simulated 60-day episodes) we determined the estimated aggregate expenditures under the pre-PDGM HH PPS were lower than the actual estimated aggregate expenditures under the PDGM HH PPS as shown in Table B14. This indicates that aggregate expenditures under the PDGM were higher than if the 153-group payment system was still in place in CY 2022. As described previously in the methodology, we needed to calculate

what the actual CY 2022 30-day base payment rate ($2,031.64) should have been to equal aggregate expenditures that we calculated using the simulated CY 2022 60-day episodes. We determined the CY 2022 30-day base payment rate should have been $1,841.55 based on actual behavior rather than the $2,031.64 based on assumed behaviors. We note, the actual CY 2022 base payment rate of $2,031.64 does not account for any behavior adjustments needed for CYs 2020 and 2021, and therefore to evaluate changes for only CY 2022 we need to account for the −7.85 percent prospective adjustment that we determined for CYs 2020 and 2021. Therefore, using the recalculated CY 2021 base payment rate of $1,751.90 (shown in Table B13), multiplied by the CY 2022 case-mix weights recalibration neutrality factor (1.0396), the CY 2022 wage index budget neutrality factor (1.0019) and the CY 2022 home health payment update (1.026), the CY 2022 base payment rate for assumed behavior would have been $1,872.18. The percent change between the two payment rates would be the additional permanent adjustment (assuming the −7.85 percent adjustment was already taken). Next, we calculated the difference in aggregate expenditures for all CY 2022 PDGM 30-day claims using the actual ($2,031.64) and recalculated ($1,841.55) payment rates. This difference is the retrospective dollar amount needed to offset payment. Our results are shown in Table B14.

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As shown in Table B14, a permanent prospective adjustment of −1.636 percent to the CY 2024 30-day payment rate (assuming the −7.85 percent adjustment was already taken) would be required to offset for such increases in estimated aggregate expenditures in future years. Additionally, we determined that our initial estimate of base payment rates required to achieve budget neutrality resulted in excess expenditures of approximately $1.4 billion in CY 2022. This would require a one-time temporary adjustment factor to offset for such increases in estimated aggregate expenditures for CY 2022.

(g) Proposed CY 2024 Permanent Adjustment and Temporary Adjustment Calculations

To offset the increase in estimated aggregate expenditures for CYs 2020 and 2021 based on the impact of the differences between assumed and actual behavior changes, CMS needed to apply a −7.85 percent permanent adjustment to the CY 2023 base payment rate, as well as implement a temporary adjustment of approximately $2.1 billion to reconcile retrospective overpayments in CYs 2020 and 2021. We recognized that applying the full permanent and temporary adjustment immediately would result in a significant negative adjustment in a single year. However, if the PDGM 30-day base payment rate remains higher than it should be, then there would likely be a compounding effect, potentially creating the need for an even larger reduction to adjust for behavioral changes in future years. Therefore, we proposed to apply only the permanent adjustment to the CY 2023 base payment rate. We believed this could mitigate the need for a larger permanent adjustment and could reduce the amount of any additional temporary adjustments in future years.

We also recognized the potential hardship to some providers of implementing the full −7.85 percent permanent adjustment in a single year. As we have the discretion to implement any adjustment in a time and manner determined appropriate, in accordance with section 1895(b)(3)(D) of the Act, we finalized only a −3.925 percent (half of the −7.85 percent) permanent adjustment for CY 2023. However, we emphasized that the permanent adjustment needed in CY 2023 to account fully for actual behavior changes in CYs 2020 and 2021 was −7.85 percent, and applying a −3.925 percent permanent adjustment to the CY 2023 30-day payment rate would not fully account for differences in behavior changes on estimated aggregate expenditures during those years, as well as CYs 2022 and 2023. We stated we would need to account for that difference in future rulemaking, and any additional adjustments needed to the base payment rate, to account for behavior change based on more recent data analysis.

The percent change between the actual CY 2022 base payment rate of $2,031.64 (based on assumed behaviors) and the CY 2022 recalculated base payment rate of $1,841.55 (based on actual behaviors) (shown in Table B14) is the total (cumulative) permanent adjustment for CY 2022. The summation of the dollar amount for CYs 2020, 2021, and 2022 is the amount that represents the temporary payment adjustment to offset for increased aggregate expenditures in CYs 2020, 2021, and 2022. Our results are shown in Table B15 and B16.

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We remind readers adjustment factors are multiplied in this payment system and therefore individual numbers (that is, percentages) do not sum precisely to the permanent adjustment needed to account for the total permanent adjustment in that year. Additionally, as we stated in the CY 2023 HH PPS final rule (87 FR 66808), applying a −3.925 percent permanent adjustment to the CY 2023 30-day payment rate would not adjust the rate fully to account for differences in behavior changes on estimated aggregate expenditures in CYs 2020 and 2021. Therefore, we cannot determine the CY 2024 proposed permanent adjustment by simply subtracting −3.925 percent from the total permanent adjustment of −9.356 percent.

Instead, we look at the total permanent adjustment needed for the current year of data and account for any prior permanent adjustments through multiplication and division of factors. In other words, we determined the total permanent adjustment based on CY 2022 data (which had no prior adjustments) is −9.356 percent, which is converted to a 0.90644 factor. We recognize that in CY 2023 we implemented a −3.925 percent permanent behavior adjustment, converted to a 0.96075 factor, and we must account for it in the proposed CY 2024 permanent adjustment. Next, we calculated the CY 2024 permanent adjustment factor by solving (1−x) = 0.90644 (9.356 percent) divided by 0.96075 (3.925 percent). The resulting factor (1−x) is 0.94347, which is converted to a 5.653 percent reduction to the CY 2024 national, standardized base payment rate. In other words, 1 minus the factor 0.94347 equals 0.05653 which is equal to 5.653 percent reduction. Therefore, to offset the increase in estimated aggregate expenditures for CY 2022 based on the impact of the differences between assumed and actual behavior changes, and to account for the permanent adjustment of −3.925 percent taken in CY 2023 rulemaking, CMS would need to apply a −5.653 percent permanent adjustment to the CY 2024 base payment rate. We are proposing to apply a −5.653 percent permanent adjustment to the CY 2024 national, standardized 30-day payment rate.

We acknowledge that, as previously discussed, we finalized, in the CY 2023 HH PPS final rule, half of the −7.85 percent permanent adjustment, noting that the full permanent adjustment may be burdensome for some providers. However, we believe applying the full permanent adjustment of −5.635 in CY 2024 would potentially reduce any future permanent adjustments, stem the accrual of the temporary payment adjustment dollar amount, and would help fulfill the statutory requirements at section 1895(b)(3)(D) of the Act to offset any increases or decreases on the impact of differences between assumed behavior and actual behavior changes on estimated aggregate expenditures. We previously explained when reducing the permanent adjustment in CY 2023 that we would need to implement a greater rate reduction in future years, therefore home health agencies have had some time to consider this proposed rate reduction.

In order to calculate the temporary adjustment, we would add the CY 2022 temporary adjustment dollar amount of $1,355,208,655 to the previously finalized CYs 2020 and 2021 dollar amounts for a total of $3,439,284,729. We stated in the CY 2023 HH PPS final rule (87 FR 66804) and in this proposed rule, after we determine the dollar amount to be reconciled we will calculate a temporary adjustment factor to be applied to the base payment rate for that year. That is, the dollar amount will be converted to a factor. However, as we noted in the CY 2023 HH PPS proposed rule (87 FR 37682), we recognize that implementing both the permanent and temporary adjustments may adversely affect HHAs. Given that the magnitude of both the temporary and permanent adjustments for CY 2024 rate setting may result in a significant reduction of the payment rate, we are not proposing to take the temporary adjustment in CY 2024. We will propose a temporary adjustment factor to the

national, standardized base payment rate when we propose this temporary payment adjustment in future rulemaking. As noted previously, we will update these permanent and temporary adjustments in the final rule to reflect more complete claims data for CY 2022. We solicit comments on the proposal to apply a −5.653 percent permanent adjustment to the CY 2024 base payment rate.

2. Proposed CY 2024 PDGM LUPA Thresholds and PDGM Case-Mix Weights

(a) Proposed CY 2024 PDGM LUPA Thresholds

Under the HH PPS, LUPAs are paid when a certain visit threshold for a payment group during a 30-day period of care is not met. In the CY 2019 HH PPS final rule with comment period (83 FR 56492), we finalized that the LUPA thresholds would be set at the 10th percentile of visits or 2 visits, whichever is higher, for each payment group. This means the LUPA threshold for each 30-day period of care varies depending on the PDGM payment group to which it is assigned. If the LUPA threshold for the payment group is met under the PDGM, the 30-day period of care will be paid the full 30-day period case-mix adjusted payment amount (subject to any partial payment adjustment or outlier adjustments). If a 30-day period of care does not meet the PDGM LUPA visit threshold, then payment will be made using the CY 2024 per-visit payment amounts as described in section II.C.4.f.2 of this proposed rule. For example, if the LUPA visit threshold is four, and a 30-day period of care has four or more visits, it is paid the full 30-day period payment amount; if the period of care has three or less visits, payment is made using the per-visit payment amounts.

In the CY 2019 HH PPS final rule with comment period (83 FR 56492), we finalized our policy that the LUPA thresholds for each PDGM payment group would be reevaluated every year based on the most current utilization data available at the time of rulemaking. However, as CY 2020 was the first year of the new case-mix adjustment methodology, we stated in the CY 2021 HH PPS final rule (85 FR 70305, 70306) that we would maintain the LUPA thresholds that were finalized and shown in Table 17 of the CY 2020 HH PPS final rule with comment period (84 FR 60522) for CY 2021 payment purposes. We stated that at that time, we did not have sufficient CY 2020 data to reevaluate the LUPA thresholds for CY 2021.

In the CY 2022 HH PPS final rule with comment period (86 FR 62249), we finalized the proposal to recalibrate the PDGM case-mix weights, functional impairment levels, and comorbidity subgroups while maintaining the LUPA thresholds for CY 2022. We stated that because there are several factors that contribute to how the case-mix weight is set for a particular case-mix group (such as the number of visits, length of visits, types of disciplines providing visits, and non-routine supplies) and the case-mix weight is derived by comparing the average resource use for the case-mix group relative to the average resource use across all groups, we believe the COVID-19 PHE would have impacted utilization within all case-mix groups similarly. Therefore, the impact of any reduction in resource use caused by the PHE on the calculation of the case-mix weight would be minimized since the impact would be accounted for both in the numerator and denominator of the formula used to calculate the case-mix weight. However, in contrast, the LUPA thresholds are based on the number of overall visits in a particular case-mix group (the threshold is the 10th percentile of visits or 2 visits, whichever is greater) instead of a relative value (like what is used to generate the case-mix weight) that would control for the impacts of the COVID-19 PHE. We noted that visit patterns and some of the decrease in overall visits in CY 2020 may not be representative of visit patterns in CY 2022. Therefore, to mitigate any potential future and significant short-term variability in the LUPA thresholds due to the COVID-19 PHE, we finalized the proposal to maintain the LUPA thresholds finalized and displayed in Table 17 in the CY 2020 HH PPS final rule with comment period (84 FR 60522) for CY 2022 payment purposes.

For CY 2023, we proposed to update the LUPA thresholds using CY 2021 Medicare home health claims (as of March 21, 2022) linked to OASIS assessment data. After reviewing the CY 2022 home health claims utilization data we determined that visit patterns have stabilized. Our data analysis indicated that visits in 2022 were similar to visits in 2020. We believed that CY 2021 data will be more indicative of visit patterns in CY 2023 rather than continuing to use the LUPA thresholds derived from the CY 2018 data pre-PDGM. Therefore, we finalized a policy to update the LUPA thresholds for CY 2023 using data from CY 2021.

For CY 2024, we are proposing to update the LUPA thresholds using CY 2022 home health claims utilization data (as of March 17, 2023), in accordance with our policy to annually recalibrate the case-mix weights and update the LUPA thresholds, functional impairment levels and comorbidity subgroups. The proposed LUPA thresholds for the CY 2024 PDGM payment groups with the corresponding Health Insurance Prospective Payment System (HIPPS) codes and the case-mix weights are listed in Table B22 We solicit public comments on the proposed updates to the LUPA thresholds for CY 2024.

(b) CY 2024 Functional Impairment Levels

Under the PDGM, the functional impairment level is determined by responses to certain OASIS items associated with activities of daily living and risk of hospitalization; that is, responses to OASIS items M1800-M1860 and M1033. A home health period of care receives points based on each of the responses associated with these functional OASIS items, which are then converted into a table of points corresponding to increased resource use. The sum of all of these points results in a functional score which is used to group home health periods into a functional level with similar resource use. That is, the higher the points, the higher the response is associated with increased resource use. The sum of all of these points results in a functional impairment score which is used to group home health periods into one of three functional impairment levels with similar resource use. The three functional impairment levels of low, medium, and high were designed so that approximately one-third of home health periods from each of the clinical groups fall within each level. This means home health periods in the low impairment level have responses for the functional OASIS items that are associated with the lowest resource use, on average. Home health periods in the high impairment level have responses for the functional OASIS items that are associated with the highest resource use on average.

For CY 2024, we propose to use CY 2022 claims data to update the functional points and functional impairment levels by clinical group. The CY 2018 HH PPS proposed rule (82 FR 35320) and the technical report from December 2016, posted on the Home Health PPS Archive web page located at:

https://www.cms.gov/medicare/home-health-pps/home-health-pps-archive,

provides a more detailed explanation as to the construction of these functional impairment levels using the OASIS items. We are proposing to use this

same methodology previously finalized to update the functional impairment levels for CY 2024. The updated OASIS functional points table and the table of functional impairment levels by clinical group for CY 2024 are listed in Tables B17 and B18, respectively. We solicit public comments on the updates to functional points and the functional impairment levels by clinical group.

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Thirty-day periods of care receive a comorbidity adjustment category based on the presence of certain secondary diagnoses reported on home health claims. These diagnoses are based on a home-health specific list of clinically and statistically significant secondary diagnosis subgroups with similar resource use, meaning the diagnoses have at least as high as the median resource use and are reported in more than 0.1 percent of 30-day periods of care. Home health 30-day periods of care can receive a comorbidity adjustment under the following circumstances:

•

Low comorbidity adjustment:

There is a reported secondary diagnosis on the home health-specific comorbidity subgroup list that is associated with higher resource use.

•

High comorbidity adjustment:

There are two or more secondary diagnoses on the home health-specific comorbidity subgroup interaction list that are associated with higher resource use when both are reported together compared to when they are reported separately. That is, the two diagnoses may interact with one another, resulting in higher resource use.

•

No comorbidity adjustment:

A 30-day period of care receives no comorbidity adjustment if no secondary diagnoses exist or do not meet the criteria for a low or high comorbidity adjustment.

In the CY 2019 HH PPS final rule with comment period (83 FR 56406), we stated that we would continue to

examine the relationship of reported comorbidities on resource utilization and make the appropriate payment refinements to help ensure that payment is in alignment with the actual costs of providing care. For CY 2024, we propose to use the same methodology used to establish the comorbidity subgroups to update the comorbidity subgroups using CY 2022 home health data.

For CY 2024, we propose to update the comorbidity subgroups to include 21 low comorbidity adjustment subgroups as identified in Table B19 and 101 high comorbidity adjustment interaction subgroups as identified in Table B20. The proposed CY 2024 low comorbidity adjustment subgroups and the high comorbidity adjustment interaction subgroups including those diagnoses within each of these comorbidity adjustments will also be posted on the HHA Center web page at

https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center.

We invite comments on the proposed updates to the low comorbidity adjustment subgroups and the high comorbidity adjustment interactions for CY 2024.

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(d) CY 2024 PDGM Case-Mix Weights

As finalized in the CY 2019 HH PPS final rule with comment period (83 FR 56502), the PDGM places patients into meaningful payment categories based on patient and other characteristics, such as timing, admission source, clinical grouping using the reported principal diagnosis, functional impairment level, and comorbid conditions. The PDGM case-mix methodology results in 432 unique case-mix groups called home health resource groups (HHRGs). We also finalized a policy in the CY 2019 HH PPS final rule with comment period (83 FR 56515) to recalibrate annually the PDGM case-mix weights using a fixed effects model with the most recent and complete utilization data available at the time of annual rulemaking. Annual recalibration of the PDGM 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 recalibrated CY 2024 case-mix weights, we used CY 2022 home health claims data with linked OASIS data (as of March 17, 2023). These data are the most current and complete data available at this time. We believe that recalibrating the case-mix weights using data from CY 2022 would be reflective of PDGM utilization and patient resource use for CY 2024. The proposed recalibrated case-mix weights will be updated based on more complete CY 2022 claims data for the final rule.

The claims data provide visit-level data and data on whether non-routine supplies (NRS) were provided during the period and the total charges of NRS. We determine the case-mix weight for each of the 432 different PDGM payment groups by regressing resource use on a series of indicator variables for each of the categories using a fixed effects model as described in the following steps:

Step 1

: Estimate a regression model to assign a functional impairment level to each 30-day period. The regression model estimates the relationship between a 30-day period's resource use and the functional status and risk of hospitalization items included in the PDGM, which are obtained from certain OASIS items. We refer readers to Table B17 for further information on the OASIS items used for the functional impairment level under the PDGM. We measure resource use with the cost-per-minute + NRS approach that uses information from 2021 home health cost reports. We use 2021 home health cost report data because it is the most complete cost report data available at the time of rulemaking. Other variables in the regression model include the 30-day period's admission source, clinical group, and 30-day period timing. We also include home health agency level fixed effects in the regression model. After estimating the regression model using 30-day periods, we divide the coefficients that correspond to the functional status and risk of hospitalization items by 10 and round to the nearest whole number. Those rounded numbers are used to compute a functional score for each 30-day period by summing together the rounded numbers for the functional status and risk of hospitalization items that are applicable to each 30-day period. Next, each 30-day period is assigned to a functional impairment level (low, medium, or high) depending on the 30-day period's total functional score. Each clinical group has a separate set of functional thresholds used to assign 30-day periods into a low, medium or high functional impairment level. We set those thresholds so that we assign roughly a third of 30-day periods within each clinical group to each functional impairment level (low, medium, or high).

Step 2:

A second regression model estimates the relationship between a 30-day period's resource use and indicator variables for the presence of any of the comorbidities and comorbidity interactions that were originally examined for inclusion in the PDGM. Like the first regression model, this model also includes home health agency level fixed effects and includes control variables for each 30-day period's admission source, clinical group, timing, and functional impairment level. After we estimate the model, we assign comorbidities to the low comorbidity adjustment if any comorbidities have a coefficient that is statistically significant (p-value of 0.05 or less) and which have a coefficient that is larger than the 50th percentile of positive and statistically significant comorbidity coefficients. If two comorbidities in the model and their interaction term have coefficients that sum together to exceed $150 and the interaction term is statistically significant (p-value of 0.05 or less), we assign the two comorbidities together to the high comorbidity adjustment.

Step 3:

After Step 2, each 30-day period is assigned to a clinical group, admission source category, episode timing category, functional impairment level, and comorbidity adjustment category. For each combination of those variables (which represent the 432 different payment groups that comprise the PDGM), we then calculate the 10th percentile of visits across all 30-day periods within a particular payment group. If a 30-day period's number of visits is less than the 10th percentile for their payment group, the 30-day period is classified as a Low Utilization Payment Adjustment (LUPA). If a payment group has a 10th percentile of visits that is less than two, we set the LUPA threshold for that payment group to be equal to two. That means if a 30-day period has one visit, it is classified as a LUPA and if it has two or more visits, it is not classified as a LUPA.

Step 4:

Take all non-LUPA 30-day periods and regress resource use on the 30-day period's clinical group, admission source category, episode timing category, functional impairment level, and comorbidity adjustment category. The regression includes fixed effects at the level of the home health agency. After we estimate the model, the model coefficients are used to predict each 30-day period's resource use. To create the case-mix weight for each 30-day period, the predicted resource use is divided by the overall resource use of the 30-day periods used to estimate the regression.

The case-mix weight is then used to adjust the base payment rate to determine each 30-day period's payment. Table B21 shows the coefficients of the payment regression used to generate the weights, and the coefficients divided by average resource use.

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The case-mix weights proposed for CY 2024 are listed in Table B22 and will also be posted on the HHA Center web page

upon display

of this proposed rule.

HHA Center web page:

https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center

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Changes to the PDGM case-mix weights are implemented in a budget neutral manner by multiplying the CY 2024 national standardized 30-day

period payment rate by a case-mix budget neutrality factor. Typically, the case-mix weight budget neutrality factor is also calculated using the most recent, complete home health claims data available. For CY 2024, we will continue the practice of using the most recent complete home health claims data at the time of rulemaking, which is CY 2022 data. The case-mix budget neutrality factor is calculated as the ratio of 30-day base payment rates such that total payments when the CY 2024 PDGM case-mix weights (developed using CY 2022 home health claims data) are applied to CY 2022 utilization (claims) data are equal to total payments when CY 2023 PDGM case-mix weights (developed using CY 2021 home health claims data) are applied to CY 2022 utilization data. This produces a case-mix budget neutrality factor for CY 2024 of 1.0121.

We invite public comments on the CY 2024 proposed case-mix weights and proposed case-mix weight budget neutrality factor.

3. Proposal To Rebase and Revise the Home Health Market Basket and Revise the Labor-Related Share

(a) Background

Section 1895(b)(3)(B) of the Act requires that the standard prospective payment amounts for CY 2024 be increased by a factor equal to the applicable home health market basket update for those HHAs that submit quality data as required by the Secretary. Effective for cost reporting periods beginning on or after July 1, 1980, we developed and adopted an HHA input price index (that is, the home health “market basket”). Although “market basket” technically describes the mix of goods and services used to produce home health care, this term is also commonly used to denote the input price index derived from that market basket. Accordingly, the term “home health market basket” used in this document refers to the HHA input price index.

The percentage change in the home health market basket reflects the average change in the price of goods and services purchased by HHAs in providing an efficient level of home health care services. We first used the home health market basket to adjust HHA cost limits by an amount that reflected the average increase in the prices of the goods and services used to furnish reasonable cost home health care. This approach linked the increase in the cost limits to the efficient utilization of resources. For a greater discussion on the home health market basket, see the notice with comment period published in the February 15, 1980

Federal Register

(45 FR 10450, 10451), the notice with comment period published in the February 14, 1995

Federal Register

(60 FR 8389, 8392), and the notice with comment period published in the July 1, 1996

Federal Register

(61 FR 34344, 34347). Beginning with the FY 2002 HH PPS payments, we have used the growth in a home health market basket to update payments under the HH PPS.

We have rebased and revised the home health market basket periodically through the years since FY 2002. We rebased the home health market basket effective with the FY 2005 update (69 FR 31251-31255), with the CY 2008 update (72 FR 25435-25442), and with the CY 2013 update (77 FR 67081). We last rebased and revised the home health market basket effective with the CY 2019 update (83 FR 56425 through 56435) reflecting a 2016 base year. Beginning with CY 2024, we are proposing to rebase and revise the home health market basket to reflect a 2021 base year. In the following discussion, we provide an overview of the proposed home health market basket and describe the methodologies used to determine the proposed 2021-based home health market basket.

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 relative to the base period are not measured.

The index itself is constructed in three steps. First, a base period is selected (for the proposed home health market basket, we are proposing to use 2021 as the base period) and total base period costs are estimated for a set of mutually exclusive and exhaustive cost categories. Each category is calculated as a proportion of total costs. These proportions are called cost 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 cost weight for each cost category is multiplied by the level of its respective price proxy. The sum of these products (that is, the cost 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 costs resulting from changes in the mix of goods and services purchased subsequent to the base period are not measured. For example, an HHA hiring more nurses after the base period 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 home health market basket periodically so that the cost weights reflect recent changes in the mix of goods and services that HHAs purchase to furnish inpatient care between base periods.

(b) Proposed Rebasing and Revising of the Home Health Market Basket

We believe that it is technically appropriate 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. For the CY 2024 HH PPS proposed rule, we propose to rebase and revise the home health market basket to reflect a 2021 base year using 2021 Medicare cost report data for Medicare-participating freestanding HHAs, the latest available and most complete data on the actual structure of HHA costs at the time of this rulemaking. In prior rulemaking, commenters have expressed concern that recent cost pressures and the impact of the COVID-19 PHE have impacted input price inflation in providing home health services. We are proposing to use 2021 as the base year because we believe that the Medicare cost reports for this year represent the most recent, complete set of Medicare cost report data available for developing the proposed home health market basket that captures recent cost trends. Given the potential impact of the COVID-19 PHE on the Medicare cost report data, we will continue to monitor these data going forward and any changes to the

home health market basket will be proposed in future rulemaking.

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 2016 to 2021) without making any other major changes to the methodology. The term “revising” means changing data sources, cost categories, and price proxies used in the input price index. For the CY 2024 HH PPS proposed rule, we propose to rebase and revise the home health market basket to reflect a 2021 base year.

The major cost weights for the proposed revised and rebased home health market basket are derived from the Medicare cost reports (CMS Form 1728-20, OMB No. 0938-0022) for freestanding HHAs whose cost reporting period began on or after October 1, 2020 and before October 1, 2021. Of the 2021 Medicare cost reports for freestanding HHAs, approximately 84 percent of the reports had a begin date on January 1, 2021, approximately 5 percent had a begin date on July 1, 2021, and approximately 3 percent had a begin date on October 1, 2020. The remaining 8 percent had a begin date within the specified range. 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 propose to maintain our policy of using data from freestanding HHAs, which account for about 93 percent of HHAs (87 FR 66882), as our analysis has determined that they better reflect HHAs' actual cost structure. Cost data for hospital-based HHAs can be affected by the allocation of overhead costs over the entire institution.

We are proposing to derive seven major cost categories (Wages and Salaries, Benefits, Transportation, Professional Liability Insurance (PLI), Fixed Capital, Movable Capital, and Medical Supplies) from the 2021 HHA Medicare cost reports. The residual cost category, “All Other”, reflects all remaining costs not captured in the seven major cost categories. These costs are based on those cost centers that are reimbursable under the HH PPS, specifically cost centers 16 through 25 (Skilled Nursing Care—RN, Skilled Nursing Care—LPN, Physical Therapy, Physical Therapy Assistant, Occupational Therapy, Certified Occupational Therapy Assistant, Speech-Language Pathology, Medical Social Services, Home Health Aide, and Medical Supplies Charged to Patients). While the cost centers have changed in CMS Form 1728-20, these generally coincide with those cost centers from CMS Form 1728-94 that were used to derive the 2016-based home health market basket (83 FR 56425). The cost centers used from CMS Form 1728-94 were cost centers 6 through 12 (Skilled Nursing Care, Physical Therapy, Occupational Therapy, Speech Pathology, Medical Social Services, Home Health Aide, and Supplies). Total costs for the HH PPS reimbursable services reflect overhead allocation. We note that Medical Supplies was not considered to be a major cost category in the 2016-based home health market basket because it was not derived directly from Medicare cost report data, and was instead derived from the residual “All Other” category using Benchmark Input-Output (I-O) data published by the Bureau of Economic Analysis (BEA). Next, we provide details on the proposed calculations for the total Medicare allowable costs and each of the proposed seven major cost categories derived from the Medicare cost report data. Unless otherwise specified, proposed calculations are consistent with 2016 methodology.

(1) Total Medicare Allowable Costs

We propose that total Medicare allowable costs for HHAs would be equal to the sum of total costs for the Medicare allowable cost centers as reported on Worksheet B, column 10, lines 16 through 25. We propose that these total Medicare allowable costs for the HHA will be the denominator for the cost weight calculations for the Wages and Salaries, Benefits, Transportation, Professional Liability Insurance, Fixed Capital, Movable Capital, and Medical Supplies cost weights. With this work complete, we then set about deriving cost levels for the seven major cost categories.

(2) Costs for the Seven Major Cost Categories Derived From the Medicare Cost Report Data

(a) Wages and Salaries

We propose that wages and salaries costs reflect direct patient care wage and salary costs, overhead wage and salary costs (associated with the following overhead cost centers: Plant Operations and Maintenance, Transportation, Telecommunications Technology, Administrative and General, Nursing Administration, Medical Records, and Other General Service cost centers), and a portion of direct patient care contract labor costs. The estimation of the wage and salary costs is derived using a similar methodology to that which was implemented for the 2016-based home health market basket, with the primary difference being the specific cost report line items now available on the HHA cost report form.

(i) Direct Patient Care

We are proposing to calculate direct patient care wages and salaries by summing costs from Worksheet A, column 1, lines 16 through 25.

(ii) Overhead

We are proposing to calculate overhead wages and salaries by summing costs from Worksheet B, columns 3 through 9, lines 16 through 25 multiplied by the percentage of costs in the overhead cost centers that were reported as salaries. This ratio is calculated as the sum of costs on Worksheet A, column 1, lines 3 through 9, divided by the sum of costs on Worksheet A, columns 1 through 5, lines 3 through 9.

(iii) Wages and Salaries Portion of Direct Patient Care Contract Labor

Contract labor costs allocated to wages and salaries costs reflect a portion of the direct patient care contract labor costs. Specifically, we are proposing to calculate direct patient care contract labor costs by first summing costs from Worksheet A, column 4, lines 16 through 25. These contract labor costs are then multiplied by each provider's ratio of direct patient care wages and salaries costs to total direct patient care wages and salaries and benefits costs. This ratio is calculated as the sum of costs on Worksheet A, column 1, lines 16 through 25, divided by the sum of costs on Worksheet A, columns 1 and 2, lines 16 through 25. Similarly, the 2016 method for deriving the wages and salaries costs multiplied the combined salaries and benefits (both Direct Patient Care (DPC) and non-DPC) and DPC contract labor, by the ratio of combined DPC and non-DPC salaries to total DPC and non-DPC salaries and benefits.

(b) Benefits

Benefits costs reflect direct patient care benefit costs, overhead benefit costs (associated with the following overhead cost centers: Plant Operations and Maintenance, Transportation, Telecommunications Technology, Administrative and General, Nursing Administration, Medical Records, and Other General Service) and a portion of direct patient care contract labor costs. Similarly, the 2016 method for deriving

the benefits costs multiplied the combined salaries and benefits (both DPC and non-DPC) and DPC contract labor, by the ratio of combined DPC and non-DPC benefits to total DPC and non-DPC salaries and benefits.

(i) Direct Patient Care

We are proposing to calculate the cost of the direct patient care benefit costs by summing costs from Worksheet A, column 2, lines 16 through 25.

(ii) Overhead

We are proposing to calculate overhead benefit costs by summing costs from Worksheet B, columns 3 through 9, lines 16 through 25 multiplied by the percentage of costs in the overhead cost centers that were reported as benefits. This percentage is calculated as the sum of costs on Worksheet A, column 2, lines 3 through 9, divided by the sum of costs on Worksheet A, columns 1 through 5, lines 3 through 9.

(iii) Benefits Portion of Direct Patient Care Contract Labor

Contract labor costs allocated to Benefits costs reflect a portion of the direct patient care contract labor costs. Specifically, we are proposing to first calculate direct patient care contract labor costs by summing costs from Worksheet A, column 4, lines 16 through 25. These contract labor costs are then multiplied by each provider's ratio of direct patient care benefits costs to total direct patient care wages and salaries and benefits costs. This ratio is calculated as the sum of costs on Worksheet A, column 2, lines 16 through 25, divided by the sum of costs on Worksheet A, columns 1 and 2, lines 16 through 25.

Transportation costs reflect direct patient care costs as well as transportation costs associated with Capital Expenses, Plant Operations and Maintenance, and Administrative and General cost centers. Specifically, we are proposing to calculate transportation costs by summing costs from Worksheet A, column 3, lines 16 through 25; Worksheet A, column 3, lines 1 through 3; and costs on Worksheet B, column 4, lines 16 through 25 multiplied by a ratio that reflects the non-salary and benefits portion of these costs. Specifically, this ratio was calculated as 1 minus the sum of costs on Worksheet A, columns 1 and 2, line 4, divided by the sum of costs on Worksheet A, columns 1 through 5, line 4.

(d) 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 S-2 Part I, line 14, columns 1 through 3.

(e) 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 are proposing to 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 was calculated as the sum of costs from Worksheet B, column 1, lines 16 through 25 divided by the sum of costs from Worksheet B, column 1, line 1 minus lines 3 through 9. This percentage is then applied to the costs from Worksheet A, column 5, line 1.

(f) Movable Capital

Movable Capital-related costs reflect the portion of Medicare-allowable costs reported in Capital Related Movable Equipment (Worksheet A, column 5, line 2). We are proposing to 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 was calculated as the sum of costs from Worksheet B, column 2, lines 16 through 25 divided by the sum of costs from Worksheet B, column 2, line 2 minus lines 3 through 9. This percentage is then applied to the costs from Worksheet A, column 5, line 2.

(g) Medical Supplies

Medical Supplies costs reflect the cost of supplies furnished to individual patients and for which a separate charge is made, as well as minor medical and surgical supplies not expected to be specifically identified in the plan of treatment or for which a separate charge is not made. Specifically, we propose to calculate Medical Supplies as the sum of Worksheet A, column 5, line 25; and Worksheet B, column 6, line 25 multiplied by a ratio that reflects the non-salary and benefits portion of these costs. Specifically, this ratio was calculated as 1 minus the sum of costs on Worksheet A, columns 1 and 2, line 6, divided by the sum of costs on Worksheet A, columns 1 through 5, line 6. We note that in the 2016-based home health market basket, the Medical Supplies cost weight was derived from the “All Other” residual cost weight.

(3) Derivation of the Major Cost Weights

After we derive costs for each of the seven major cost categories and total Medicare allowable costs for each provider using the Medicare cost report data, we propose to address data outliers using the following steps. First, for each of the seven major cost categories, we divide the costs in that category by total Medicare allowable costs calculated for the provider to obtain cost weights for the universe of HHA providers. We propose to trim the data to remove outliers (a standard statistical process) by: (1) requiring that major costs (such as wages and salaries costs) and total Medicare allowable costs be greater than zero and requiring that category costs are less than the total Medicare allowable costs; and (2) excluding the top and bottom five percent of the major cost weight (for example, wages and salaries costs as a percent of total Medicare allowable costs). We note that missing values are assumed to be zero consistent with the methodology for how missing values were treated in the 2016-based home health market basket. After these outliers have been excluded, we sum the costs for each category across all remaining providers. We then divide this by the sum of total Medicare allowable costs across all remaining providers to obtain a cost weight for the proposed 2021-based home health market basket for the given category.

Finally, we propose to calculate the residual “All Other” cost weight that reflects all remaining costs that are not captured in the other categories listed by subtracting the major cost weight percentages (Wages and Salaries, Benefits, Transportation, Professional Liability Insurance, Fixed Capital, Movable Capital, and Medical Supplies) from 1. We note that non-direct patient care contract labor costs (such as contract labor costs reported in the Administrative and General cost center of the Medicare cost report) are captured in the “All Other” residual cost weight and later disaggregated into more detail as described later in this section.

Table B23 shows the major cost categories and their respective cost weights as derived from the Medicare cost reports for this proposed rule.

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The decrease in the proposed wages and salaries cost weight of 0.9 percentage point and the decrease in the proposed benefits cost weight of 0.2 percentage point is primarily attributable to direct patient care contract labor costs as reported on the Medicare cost report data, as shown in Table B24. Our analysis of the Medicare cost report data shows that a decrease in the compensation cost weight from 2016 to 2021 occurred, in aggregate, among for-profit, nonprofit, and government providers and among providers serving only rural beneficiaries, only urban beneficiaries, or both rural and urban beneficiaries.

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Our analysis of the Medicare cost report data shows that decreased contract labor utilization has occurred over most occupational categories, including higher-paid specialties in particular, and that utilization of direct patient care contract labor has been trending downward since 2010. We also note that over the 2016 to 2021 time period, the average number of full-time equivalents per provider decreased considerably.

(4) Derivation of the Detailed Cost Weights

We propose to divide the “All Other” residual cost weight estimated from the 2021 Medicare cost report data into more detailed cost categories. To divide this cost weight, we are proposing to use the 2012 Benchmark I-O “Use Tables/Before Redefinitions/Purchaser Value” for North American Industrial Classification System (NAICS) 621600, Home Health Agencies, published by the BEA. These data are publicly available at

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

For the 2016-based home health market basket, we used the 2007 Benchmark I-O data, the most recent data available at the time (83 FR 56427).

The BEA Benchmark I-O data are generally scheduled for publication every five years with the most recent data available for 2012. The 2012 Benchmark I-O data are derived from the 2012 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.

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 2012 Benchmark

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

I-O data forward to 2021 by applying the annual price changes from the respective price proxies to the appropriate market basket cost categories that are obtained from the 2012 Benchmark I-O data. We repeated this practice for each year. Then, we calculated the cost shares that each cost category represents of the 2012 I-O data inflated to 2021. These resulting 2021 cost shares were applied to the “All Other” residual cost weight to obtain the detailed cost weights for the proposed 2021-based home health market basket. For example, the cost for Utilities represents 11.0 percent of the sum of the “All Other” 2012 Benchmark I-O HHA costs inflated to 2021. Therefore, the Utilities cost weight represents 11.0 percent of the proposed 2021-based home health market basket's “All Other” cost category (18.6 percent), yielding a Utilities proposed cost weight of 2.0 percent in the proposed 2021-based home health market basket (0.110 × 18.6 percent = 2.0 percent). For the 2016-based home health market basket, we used the same methodology utilizing the 2007 Benchmark I-O data (aged to 2016).

Using this methodology, we propose to derive eight detailed cost categories from the proposed 2021-based home health market basket “All Other” residual cost weight (18.6 percent). These categories are: (1) Utilities; (2) Administrative Support; (3) Financial Services; (4) Rubber and Plastics; (5) Telephone; (6) Professional Fees; (7) Other Products; and (8) Other Services. We note that the proposed Utilities cost category is currently referred to as Operations & Maintenance in the 2016-based home health market basket; however, the methodology and data sources underlying this cost category remain the same.

Table B25 compares the cost categories and weights for the proposed 2021-based home health market basket compared to the 2016-based home health market basket. In cases where a cost category has been recategorized in the proposed 2021-based home health market basket, we have entered “n/a” to maintain correct totals as they appear in the CY 2019 HH PPS final rule with comment period (83 FR 56428).

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(d) Selection of Price Proxies

After developing the cost weights for the proposed 2021-based home health market basket, we select the most appropriate wage and price proxies currently available to represent the rate of price change for each cost 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 employment 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. ECIs are superior to Average Hourly Earnings (AHE) as price proxies for input price indexes because they are not affected by shifts in occupation or industry mix, and because they measure pure price change and are available by both occupational group and by industry. The industry ECIs are based on the NAICS and the occupational ECIs are based on the Standard Occupational Classification System (SOC).

•

Producer Price Indexes.

Producer Price Indexes (PPIs) measure the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services (

https://www.bls.gov/ppi/

•

Consumer Price Indexes.

Consumer Price Indexes (CPIs) measure the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services (

https://www.bls.gov/cpi/

). CPIs are only used when the purchases are similar to those of retail consumers rather than purchases at the producer level, or if no appropriate PPIs are available.

We evaluate the price proxies using the criteria of reliability, timeliness, availability, and relevance:

•

Reliability.

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 a way that can be replicated. Low sampling variability is desirable because it indicates that the sample reflects the typical members of the population. (Sampling variability is variation that occurs by chance because only a sample was surveyed rather than the entire population.)

•

Timeliness.

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 for the underlying price proxies to be up-to-date, reflecting the most recent data available. We believe that using proxies that are published regularly (at least quarterly, whenever possible) helps to 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.

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.

•

Relevance.

Relevance means that the proxy is applicable and representative of the cost category weight to which it is applied. The CPIs, PPIs, and ECIs that we have selected to propose 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.

The following is a detailed explanation of the price proxies we are proposing for each cost category weight.

(e) Proposed 2021-Based Home Health Market Basket Price Proxies

As part of the revising and rebasing of the home health market basket, we are proposing to rebase and revise 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 categories of the proposed 2021-based home health market basket, as we did in the 2016-based home health market basket. The following is a more detailed discussion.

(1) Wages and Salaries

For measuring price growth in the 2021-based home health market basket, we are proposing to apply six price proxies to six occupational subcategories within the Wages and Salaries cost weight, which would reflect the 2021 occupational mix in HHAs. This is a similar approach that was used for the 2016-based market basket. We propose to 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 NAICS 621600, Home Health Care Services, published by the BLS Office of Occupational Employment and Wage Statistics (OEWS) as the data source for the cost shares of the home health blended wage and benefits proxy. We note that in the spring of 2021, the Occupational Employment Statistics (OES) program began using the name Occupational Employment and Wage Statistics (OEWS) to better reflect the range of data available from the program. Data released on or after March 31, 2021 reflect the new program name. This is the same data source that was used for the 2016-based HHA blended wage and benefit proxies; however, we are proposing to use the May 2021 estimates in place of the May 2016 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 six occupational subcategories (Health-Related Professional and Technical, Non-Health-Related Professional and Technical, Management, Administrative, Health and Social Assistance Service, and Other Service Occupations) for the Wages and Salaries cost weight were tabulated from the May 2021 OEWS data for NAICS 621600, Home Health Care Services. Table B26 compares the proposed 2021 occupational assignments to the 2016 occupational assignments of the six CMS designated subcategories. Data that are unavailable in the OEWS occupational classification for 2016 or 2021 are shown in Table B26 as “n/a.”

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Total costs by occupation were calculated by taking the OEWS number of employees multiplied by the OEWS annual average salary for each subcategory, and then calculating the proportion of total wage costs that each subcategory represents of the total industry wage costs. The proportions listed in Table B27 represent the proposed 2021 wages and salaries blend weights, and the proposed ECIs for each occupational category within the Wages and Salaries price proxy blend. We note that the ECIs reflect the 2021 occupational mix of workers. We also note that 2018 updates to the Standard Occupational Classification (SOC) system included a reclassification of Personal Care Aides from SOC code 39-9021 to 31-1122, which is reflected in the updated weights and represents the major reason for the higher weight for health care and social assistance services and lower weight for other service occupations.

https://www.bls.gov/soc/2018/soc_2018_whats_new.pdf.

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A comparison of the yearly changes from CY 2021 to CY 2024 for the 2016-based home health Wages and Salaries proxy blend and the proposed 2021-based home health Wages and Salaries proxy blend is shown in Table B28. The annual increases in the wages and salaries proposed price proxy is 0.3 percentage point lower in 2021 and 2022 relative to the 2016-based price proxy, and 0.1 to 0.2 percentage point higher in 2023 and 2024. These differences are primarily driven by the aforementioned reclassification of Personal Care Aides, which caused a shift in the relative share from the Other Service Occupations to Health and Social Assistance Services as illustrated previously in Table B27.

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(2) Benefits

For measuring Benefits price growth in the proposed 2021-based home health market basket, we are proposing to apply applicable price proxies to the six occupational subcategories that are used for the proposed Wages and Salaries price proxy blend. The proposed six categories in Table B29 are the same as those in the 2016-based home health market basket and include the same occupational mix as listed in Table B27.

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There is no available data source that exists for benefit costs 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 2021 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 the 2021 OEWS wage and salary weights for each of the six occupational subcategories, and normalized. For example, the 2021 ECI data shows a ratio of benefits to wages for the health-related professional & technical category of 1.010. We applied this ratio to the 2021 OEWS weight for wages and salaries for health-related professional & technical (9.7 percent) to get an unnormalized weight of 30.0 (29.7 times 1.010), and then normalized those weights relative to the other five benefit occupational categories to obtain a final benefit weight for health-related professional & technical (30.1 percent).

A comparison of the yearly changes from CY 2021 to CY 2024 for the 2016-based home health Benefits proxy blend and the proposed 2021-based home health Benefits proxy blend is shown in Table B30. With the exception of a 0.2 percentage point difference in 2022, the annual increases in the two price proxies are the same when rounded to one decimal place.

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(3) Medical Supplies

We are proposing to use a 75/25 blend of the PPI Commodity data for Surgical and Medical Instruments (BLS series code #WPU1562) and the PPI Commodity data for Personal Safety Equipment and Clothing (BLS series code #WPU1571), which would replace the current price proxy of the PPI for Medical, Surgical, and Personal Aid Devices (BLS series code #WPU156). The PPI Commodity data for Personal Safety Equipment and Clothing would reflect personal protective equipment (PPE) including but not limited to face shields and protective clothing. The 2012 Benchmark I-O data does not provide specific costs for the two categories we are proposing to blend. In absence of such data, we have based the weights of this blend on the change in the medical supplies weight as reported in the Medicare cost reports in the years prior to and after the COVID-19 PHE. Specifically, analysis of Medicare cost report data found that the average weight for medical supplies for the 2016-2019 period (stable around 1.5 percent) was about 75 percent of the weight observed for the 2020-2021 period (roughly 2.0 percent). Thus, we believe that it was likely that the increase in the cost weight was mainly attributable to costs such as those associated with personal safety equipment and clothing, and are basing the proposed 75/25 blend on that analysis. We believe this change will more closely proxy the rate of change of the underlying costs, including increased utilization of personal protective equipment.

(4) Professional Liability Insurance

We are proposing to use the CMS Physician Professional Liability Insurance price index to measure price growth of this cost category. To generate this index, we collect commercial insurance premiums for a fixed level of coverage while holding non-price factors constant (such as a change in the level of coverage). The same proxy was used for the 2016-based home health market basket.

(5) 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 2016-based home health market basket.

(6) 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 2016-based home health market basket.

(7) 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 2016-based home health market basket.

(8) 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 2016-based home health market basket.

(9) 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 2016-based home health market basket.

(10) 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 2016-based home health market basket.

(11) Utilities

We are proposing to use CPI-U 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 2016-based home health market basket.

(12) 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 2016-based home health market basket.

(13) 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 2016-based home health market basket.

(14) 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 2016-based home health market basket.

(15) 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 2016-based home health market basket.

(f) Summary of Price Proxies of the Proposed 2021-Based Home Health Market Basket

Table B31 shows the price proxies for the proposed 2021-based home health market basket.

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We invite public comment on our proposal to rebase and revise the home health market basket to reflect a 2021 base year.

4. Proposed CY 2024 Home Health Payment Rate Updates

(a) Proposed CY 2024 Home Health Market Basket Percentage Increase

A comparison of the yearly percent changes from CY 2019 to CY 2026 for the 2016-based home health market basket and the proposed 2021-based home health market basket based on IHS Global Inc.'s (IGI's) first quarter 2023 forecast, with historical data through the fourth quarter of 2022, is shown in Table B32. IGI is a nationally recognized economic and financial forecasting firm with which CMS contracts to forecast the components of the market baskets. Based on IGI's first quarter 2023 forecast, the proposed CY 2024 home health market basket percentage increase is 3.0 percent based on the proposed 2021-based home health market basket. We propose that if more recent data subsequently become available (for example, a more recent estimate of the market basket), we would use such data, if appropriate, to determine the market basket percentage increase in the final rule.

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BILLING CODE 4120-01-C

Table B32 shows that the forecasted percentage increase for CY 2024 of the proposed 2021-based home health market basket is 3.0 percent; 0.1 percentage point lower growth as estimated using the 2016-based home health market basket. The average historical estimates of the growth in the proposed 2021-based and 2016-based home health market baskets over CY 2019 through CY 2022 differ by an average of 0.1 percentage point. As discussed previously, this is primarily driven by a reclassification of Personal Care Aides, which caused a shift in the relative weight of the Wages and Salaries and Benefits blended price proxies from Other Service Occupations to Health and Social Assistance Services, which over this period grew relatively slower. Forecasted updates from CY 2023 through CY 2026 are the same on average; however, there is year to year variation of ±0.1 percentage point for any given year.

(b) Proposed CY 2024 Productivity Adjustment

In the CY 2015 HH PPS final rule (79 FR 38384), we finalized our methodology for calculating and applying the multifactor productivity 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 HH PPS 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 (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 BLS publishes the official measures of productivity for the United States economy. We note that previously the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private nonfarm business multifactor productivity. Beginning with the November 18, 2021 release of productivity data, BLS replaced the term “multifactor productivity” with “total factor productivity” (TFP). BLS noted that this is a change in terminology only and will not affect the data or methodology. As a result of the BLS name change, the productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as “private nonfarm business total factor productivity”. We refer readers to

https://www.bls.gov

for the BLS historical published TFP data. A complete description of IGI's TFP projection methodology is available on the CMS website at

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.

Based on IGI's first quarter 2023 forecast, the proposed productivity adjustment (the 10-year moving average of TFP for the period ending December 31, 2024) for CY 2024 is 0.3 percent. We also propose that if more recent data subsequently become available (for example, a more recent estimate of the productivity adjustment), we would use such data, if appropriate, to determine the productivity adjustment in the CY 2024 HH PPS final rule.

In accordance with section 1895(b)(3)(B)(iii) of the Act, we propose to base the CY 2024 market basket percentage increase, which is used to determine the applicable percentage increase for HHA payments, on the most recent estimate of the proposed 2021-based home health market basket percentage increase. Based on IGI's first quarter 2023 forecast with history through the fourth quarter of 2022, the projected increase of the proposed 2021-based home health market basket for CY 2024 is 3.0 percent. We propose to then reduce this percentage increase by the current estimate of the productivity adjustment for CY 2024 of 0.3 percentage point in accordance with section 1895(b)(3)(B)(vi) of the Act. Therefore, the proposed CY 2024 home health payment update percentage is 2.7 percent (3.0 percent market basket percentage increase, reduced by 0.3 percentage point productivity adjustment). Furthermore, we propose that if more recent

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