Hospice Services Under Medicare Program; Intent To Form Negotiated Rulemaking Committee

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Part 418

[BPD-820-N]

RIN 0938-AG93

Hospice Services Under Medicare Program; Intent To Form

Negotiated Rulemaking Committee

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Notice of intent.

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SUMMARY: We are considering establishing a Negotiated Rulemaking

Committee under the Federal Advisory Committee Act (FACA). The

Committee's purpose would be to negotiate the wage index used to adjust

payment rates for hospice services under the Medicare program. The

Committee would consist of representatives of interests that are likely

to be significantly affected by the proposed rule. The Committee would

be assisted by a neutral facilitator.

We request public comment on whether:

We should establish a Federal Advisory Committee;

We have properly identified interests that will be

affected by key issues listed below;

Negotiated rulemaking is appropriate for this issue.

EFFECTIVE DATE: Comments will be considered if we receive them at the

appropriate address, as provided below, no later than 5 p.m. on

November 14, 1994.

ADDRESSES: Mail written comments (1 original and 3 copies) to the

following address: Health Care Financing Administration, Department of

Health and Human Services, Attention: BPD-820-N, P.O. Box 26676,

Baltimore, MD 21207.

If you prefer, you may deliver your written comments (1 original

and 3 copies) to one of the following addresses:

Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,

Washington, DC 20201, or

Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,

MD 21207.

Because of staffing and resource limitations, we cannot accept

comments by facsimile (FAX) transmission. In commenting, please refer

to file code BPD-820-N. Comments received timely will be available for

public inspection as they are received, generally beginning

approximately 3 weeks after publication of a document, in Room 309-G of

the Department's offices at 200 Independence Avenue, SW., Washington,

DC, on Monday through Friday of each week from 8:30 a.m. to 5 p.m.

(phone: (202) 690-7890).

FOR FURTHER INFORMATION CONTACT:

Randal S. Ricktor, (410) 966-5650--For issues related to hospice

payment.

Maryann Troanovitch, (202) 690-7890--For issues related to the

establishment of the committee or administrative matters.

Judith Ballard, (202) 690-7419--Convener.

SUPPLEMENTARY INFORMATION:

I. Negotiated Rulemaking Act

The Negotiated Rulemaking Act (Public Law 101-648, 5 U.S.C. 581-

590) establishes a framework for the conduct of negotiated rulemaking

and encourages agencies to use negotiated rulemaking to enhance the

informal rulemaking process. Under the Act, the head of an agency must

consider whether--

There is a need for a rule;

There are a limited number of identifiable interests that

will be significantly affected by the rule;

There is a reasonable likelihood that a committee can be

convened with a balanced representation of persons who--

(1) can adequately represent the interests identified; and

(2) are willing to negotiate in good faith to reach a consensus on

the proposed rule;

There is a reasonable likelihood that a committee will

reach a consensus on the proposed rule within a fixed period of time;

The negotiated rulemaking procedure will not unreasonably

delay the notice of proposed rulemaking and the issuance of a final

rule;

The agency has adequate resources and is willing to commit

such resources, including technical assistance, to the committee; and

The agency, to the maximum extent possible consistent with

the legal obligations of the agency, will use the consensus of the

committee with respect to the proposed rule as the basis for the rule

proposed by the agency for notice and comment.

Negotiations are conducted by a committee chartered under the

Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). The committee

includes an agency representative and is assisted by a neutral

facilitator. The goal of the Committee is to reach consensus on the

language or issues involved in a rule. If consensus is reached, it is

used as the basis of the agency's proposal. The process does not affect

otherwise applicable procedural requirements of the FACA, the

Administrative Procedure Act and other statutes.

II. Subject and Scope of the Rule

A. Need for the Rule

The Medicare hospice benefit was enacted in the Tax Equity and

Fiscal Responsibility Act of 1982 and implemented effective November 1,

1983. The statutory authority for payment to Medicare hospices is

contained in section 1814(i) of the Social Security Act (the Act).

Final regulations for Medicare hospice care services were published in

the Federal Register on December 16, 1983 (48 FR 56008), effective for

hospice services furnished on or after November 1, 1983, and are

codified at 42 CFR part 418. These regulations provide for payment to

hospices based on one of four prospectively determined rates for each

day in which a qualified Medicare beneficiary is under the care of the

hospice. The four rate categories are routine home care, continuous

home care, inpatient respite care, and general inpatient care. Payment

rates are established for each rate category. Our regulations at 42 CFR

418.306(c) authorize adjustment to the payment rates to reflect local

differences in area wage levels. Since hospice care is labor intensive,

this local adjustment is necessary to permit payment of higher rates in

areas with high wage levels and proportionately lower rates in areas

with wage levels below the national average.

In the preamble to the final rule, we specified that the wage index

used to adjust the hospice payment rates is the wage index published in

the Federal Register on September 1, 1983 (48 FR 39871) for purposes of

determining Medicare inpatient hospital prospective payment rates. This

hospital wage index, which is still in use for hospices, was based on

calendar year 1981 hospital wage and employment data obtained from the

Bureau of Labor Statistics' (BLS) ES 202 Employment, Wages and

Contributions file for hospital workers. In applying the hospital wage

index to the hospice rates, our rules provide for the use of a

``floor'' index value of 0.8 if a particular hospital wage index value

is lower than 0.8. The use of the ``floor'' on the index reflected our

belief that use of an index below 0.8 would unduly jeopardize the

availability of the benefit in rural areas by preventing hospices from

attracting and retaining sufficient skilled staff to provide the

hospice benefit.

While Medicare hospice payment rates have been periodically updated

since the inception of the Medicare hospice program in late 1982, we

have never updated the wage index. Previous attempts to begin to

develop an updated wage index through rulemaking brought to our

attention the divergent views within the hospice industry itself and

between the industry and HCFA on how best to update the index. During

discussions preliminary to developing a new wage index, the industry

voiced concerns over the adverse financial impact of a new wage index

on individual hospices and a possible reduction in overall Medicare

hospice care payments, the effect of overarching Federal budgetary

constraints. The end result is that, in the absence of agreement, we

continue to use a wage index to geographically adjust payment to

Medicare hospices that is over a decade old and clearly obsolete.

We believe it is appropriate and desirable to take prompt steps to

update the hospice wage index. We believe the index must be changed

through the rulemaking process because a specific wage index was named

in the initial Medicare hospice regulations and there will be a

significant impact on hospices when we adopt a new wage index. Any new

index developed through this proposed negotiated rulemaking would be

subject to public notice and comment procedures.

We believe that the hospice wage index is an appropriate subject

for development through the negotiated rulemaking process. With the

assistance of a neutral facilitator, we believe it may be possible to

reach consensus with hospice industry groups and other affected

interests on how best to propose an update of the present outdated

hospice wage index. We also believe a new wage index based on consensus

would be less controversial and easier to administer. We solicit

comment on the appropriateness of this issue for negotiated rulemaking.

B. Subject and Scope of the Rule

The current hospice wage index is based on 1981 BLS data that

contained serious deficiencies. In fact, those deficiencies led us to

construct our own survey-based hospital wage index for use in

geographically adjusting Medicare hospital payments. We have

periodically updated the hospital wage index and the survey database

since that time. The most recent survey is based on hospital wage data

beginning in fiscal year 1991 (that is, cost reporting periods

beginning October 1, 1990 and ending before October 1, 1991). Those

survey data are the basis for the current HCFA Fiscal Year 1995

hospital wage index, which was published in the Federal Register on

September 1, 1994.

We are considering pursuing an update to the Medicare hospice wage

index based on the HCFA hospital wage index. We are considering using

the hospital wage index since hospice-specific data have been

unreliable. We believe the HCFA hospital wage index provides a good

measure of area wage differences, not only for hospitals, but also for

hospices since hospitals and hospices generally compete in the same

labor market. The HCFA hospital wage index and related information data

base are available and we will share that information with negotiation

participants.

While recognizing that it is difficult to predict the end product

of negotiated rulemaking on the hospice wage index, we anticipate that

the scope of the proposed rule resulting from negotiations will include

a specific recommended wage index, adjustments to that index, a

decision on retaining a floor index value, and a possible phase-in

schedule.

C. Issues and Questions To Be Resolved

Hospice wage index rulemaking will address a limited number of

specific issues. Issues that we anticipate are outlined below. We also

invite public comment on other wage index issues not identified.

Since Medicare regulations require only that the hospice rates be

adjusted to reflect local differences in wages, there is a range of

wage index options that could potentially be acceptable. We believe the

well-developed hospital wage data base will enhance meaningful

discussion and resolution of these issues.

1. What Data Should Be Used for a Wage Index for Hospices?

We propose to use hospital data for a hospice wage index since

previous efforts to collect hospice cost data have resulted in

unreliable data. Hospices contend that there are differences in the way

hospices and hospitals operate that are relevant in determining

geographic differences in wages. If hospital data are used, the

negotiations would address whether such differences exist, whether they

are relevant to the wage index, and, if so, whether there should be

adjustments to the hospital data to account for such differences.

We also invite discussion on and encourage participants to share

any alternative data upon which a hospice wage index can be

constructed. The Committee will need to ascertain how those data might

be adaptable and whether they may be appropriate to the hospice

setting.

2. How Would a New Wage Index Be Phased In?

Projections by both HCFA and the industry indicate that most

hospices would have their wage indices lowered if a new wage index were

based on unadjusted current hospital data. These decreases would occur

for any hospices in areas where the current indices are artificially

high due to flaws in the 1981 BLS data or where wages have gone down

relative to other geographic areas. The negotiations would address what

phase-in period, if any, is appropriate (1) to enable these hospices to

plan and implement strategies to reduce costs or obtain other funding;

or (2) to offset decreases in reimbursement due to a lower index by

automatic yearly increases in hospice payment rates provided for by

statute. (These automatic increases are based on the rate of increase

in the hospital market-basket index, but recent legislation reduces the

increase by 2 percent in fiscal year 1994, and by 1.5 percent in 1995

and 1996.) For those hospices whose wage index would be increased, the

negotiations may also address what phase-in period is appropriate. A

related issue to discussions on the phase-in period is what should be

the effective date of any new index.

3. Should the 0.8 Floor Be Retained?

The wage index uses a value of one (1.0) for national average

wages. The current hospice rule provides for the use of a ``floor''

index value of 0.8 if the applicable wage index value for any

particular area is lower than 0.8. The rationale for the ``floor'' was

that hospices needed to attract and retain sufficient skilled staff to

provide the hospice benefit, and use of an index below 0.8 would unduly

jeopardize the availability of the benefit in rural areas. We

anticipate that retaining, replacing, or eliminating this ``floor''

will be a discussion issue. Also, if participants agree to retain a

``floor,'' discussion may arise on the appropriateness and methods of

adjusting the wage index to offset the cost of the ``floor'' wage index

value of 0.8 against wage index values above the ``floor.''

4. How Can Budget Neutrality Be Achieved?

As mentioned above, we are considering pursuing an update to the

Medicare hospice wage index based on the HCFA hospital wage index.

Since the latest HCFA hospital wage index generally results in lower

payments to hospices in the aggregate than the existing hospice wage

index, whether to adjust the new index and addressing its aggregate

budget impact are likely to be a key issue. We anticipate discussion on

the budget impact of the new wage index and on acceptable methodologies

to compute and apply an adjustment factor to the baseline hospital wage

index data, if participants agree that an adjustment factor is

appropriate. We consider it a given parameter of negotiations that any

revised wage index would have to be at least budget neutral; that is,

total aggregate payments for the same services could not be more using

the revised wage index than if such payments were made using the

current index.

5. Should the Wage Index Be Updated More Frequently?

We anticipate discussion addressing future updates to the Medicare

hospice wage index, including which data sources will be used and the

frequency of updates.

D. Issues and Questions Not Open to Negotiation

Two additional issues have been raised which are related to hospice

payments, but which we have determined cannot be resolved as part of

the proposed negotiations because no reliable data exist.

Occupational Mix Issue

The occupational mix issue refers to the argument of some in the

industry that the mix of occupations represented in the hospital wage

data differs from that encountered in the hospice setting, and,

therefore, these critics argue, adjustments to the hospital wage data

may be necessary and appropriate to adapt such data to the hospice

setting. We believe any adjustment to the underlying wage data of

hospital workers to isolate hospice-type services is impractical. We

believe attempts to compare hospital services with hospice services may

be difficult because of differences in the palliative rather than

curative approach to care unique to the hospice setting. Also, Medicare

experience with the collection of practitioner-level hospital wage data

has shown that such data have been highly unreliable. Presently, we do

not possess reliable national practitioner-level hospital wage data. We

are open to the possibility of a separate study of this issue in the

future provided reliable data become available. We plan to provide an

explanation of the occupational mix issue to Committee members when

appropriate to the discussion of other wage index issues. We do not,

however, intend to negotiate an occupational mix adjustment based on

practitioner-level hospital wage data.

Possible Changes to Labor-Related Portion of the Hospice Rates

Final hospice regulations published in 1983 established labor and

non-labor components of the Medicare hospice rates for purposes of

determining what portion of the rates would be subject to adjustment by

the wage index. These labor/non-labor components were established in

1983, using existing Medicare program data. The same ratios reflected

in the original labor/non-labor breakdown have been applied to all

subsequent updates to the hospice rates. We plan to explain the labor/

non-labor breakdown to the Committee. We have determined, however, that

it would be impractical to include in these negotiations a change to

the labor/non-labor proportions of the hospice rates based on hospice-

specific data. Including this issue would require examining the entire

spectrum of hospice costs and divert resources from discussions on the

wage index.

III. Affected Interests and Potential Participants

The Convener has proposed and we agree to accept the following

individuals as negotiation participants. We believe these individuals

represent an appropriate mix of interests and backgrounds:

Donna Bales, Kansas Hospice Association

Janice Casey, Hospice of Stamford, Connecticut

Kate Colburn, Hospice of Des Moines, Iowa

Randall DuFour, Hospice of Louisville, Kentucky

Thomas Hoyer, Bureau of Policy Development, HCFA

Mary Labiak, Hospice of the Florida Suncoast, Florida

John J. Mahoney, National Hospice Organization

Janet Neigh, Hospice Association of America

Mark Sterling, VITAS Healthcare

Claire Tehan, Hospital Home Health and Hospice, Torrance, California

We also propose to include Mary Ellen Bliss, a representative of

the American Association of Retired Persons. We invite public comment

on this list of negotiation participants.

The intent in establishing the negotiating committee is that all

interests are represented, not necessarily all parties. We believe this

proposed list of participants represents all interests associated with

adoption of a new wage index for hospices. The proposed participants

include the two major hospice associations, as well as hospice

organizations representing differences in geographic location (the

major characteristic related to the wage index) and other differences

in the hospice community (such as proprietary versus non-profit). One

participant is with a State association which has been active with

rural hospices and understands their concerns. Consumers and hospice

employees were also identified as being potentially affected by any

change in the wage index. This effect would be relatively minimal,

however, and would vary depending on whether the wage index in any

particular area is increased or decreased. Because of our strong

commitment to obtaining consumer input, we nonetheless are proposing a

consumer representative for the committee. We preliminarily determined

that any employee interest could best be represented by the hospices

themselves, who have an even stronger interest in the wage index, and

by the hospice associations. Both associations have employee members.

IV. Schedule for the Negotiation

We have set a deadline of 6 months beginning with the date of the

first meeting for the Committee to complete work on the proposed rule.

We intend to terminate the activities of the Committee if it does not

appear likely to reach consensus on a schedule that is consistent with

HCFA's rulemaking needs.

If we make a final decision to negotiate, the first meeting is

scheduled for Wednesday, November 30, 1994 through Friday, December 2,

1994 at the Comfort Inn, 6921 Baltimore Annapolis Blvd., Baltimore

Maryland, 21225. The first day's meeting will begin at 10 a.m. The

purpose of this meeting will be to discuss in detail how the

negotiations will proceed and how the Committee will function. Also,

HCFA will present technical information related to the rule. The

Committee will agree to groundrules for Committee operation, will

determine how best to address the principal issues, and, if time

permits, will begin to address those issues.

A second meeting is scheduled for Tuesday, January 17, 1995 through

Wednesday, January 18, 1995. We expect that by this meeting the

Committee can complete action on any procedural matters outstanding

from the organizational meeting and either begin or continue to address

the issues.

Subsequent meetings of the Committee would be held approximately

once a month in the Baltimore, Maryland/Washington, D.C. area.

V. Formation of the Negotiating Committee

A. Procedure for Establishing an Advisory Committee

As a general rule, an agency of the Federal government is required

to comply with the requirements of FACA when it establishes or uses a

group that includes non-federal members as a source of advice. Under

FACA, an advisory committee is established only after both consultation

with the General Services Administration and receipt of a charter. We

have prepared a charter and initiated the requisite consultation

process. Only upon successful completion of this process and the

receipt of the approved charter will we form the Committee and begin

negotiations. Notice of approval of the charter will be published in

the Federal Register.

B. Participants

The number of participants in the group is estimated to be 10 and

should not exceed 25 participants. A number larger than this could make

it difficult to conduct effective negotiations. One purpose of this

notice is to help determine whether the proposed rule would

significantly affect interests not adequately represented by the

proposed participants. We do not believe that each potentially affected

organization or individual must necessarily have its own

representative. However, each interest must be adequately represented.

Moreover, we must be satisfied that the group as a whole reflects a

proper balance and mix of interests.

C. Requests for Representation

If, in response to this notice, an additional individual or

representative of an interest requests membership or representation in

the negotiating group, we, in consultation with the facilitator, will

determine whether that individual or representative should be added to

the group. We will make that decision based on whether the individual

or interest:

Would be significantly affected by the rule; and

Is already adequately represented in the negotiating

group.

D. Establishing the Committee

After reviewing any comments on this Notice and any requests for

representation, we will take the final steps to form the Committee

unless the comments and other relevant considerations convince us that

such action is inappropriate or our charter request is disapproved.

VI. Negotiation Procedures

If a committee is formed, the following procedures and guidelines

will apply, unless they are modified as a result of comments received

on this notice or during the negotiating process.

A. Facilitator

We will use a neutral facilitator. The facilitator will not be

involved with the substantive development or enforcement of the

regulation. The facilitator's role is to:

Chair negotiating sessions;

Help the negotiation process run smoothly; and

Help participants define and reach consensus.

B. Good Faith Negotiations

Participants must be willing to negotiate in good faith and be

authorized to do so. We believe this may best be accomplished by

selection of senior officials as participants. We believe senior

officials are best suited to represent the interests and viewpoint of

their organizations. This applies to HCFA as well, and we are

designating Thomas Hoyer, Director, Office of Coverage and Eligibility

Policy, Bureau of Policy Development, to represent HCFA.

C. Administrative Support

We will supply logistical, administrative and management support.

If it is deemed necessary and appropriate, we will provide technical

support to the Committee in gathering and analyzing additional data or

information.

D. Meetings

Meetings will be held in the Baltimore/Washington area (or in

another location) at the convenience of the Committee. We will announce

Committee meetings and agendas in the Federal Register. Unless

announced otherwise, meetings are open to the public.

E. Committee Procedures

Under the general guidance and direction of the facilitator, and

subject to any applicable legal requirements, the members will

establish the detailed procedures for Committee meetings which they

consider most appropriate.

F. Defining Consensus

The goal of the negotiating process is consensus. Under the

Negotiated Rulemaking Act, consensus generally means that each interest

concurs in the result unless the term is defined otherwise by the

committee. We expect the participants to fashion their working

definition of this term.

G. Failure of Advisory Committee To Reach Consensus

If the Committee is unable to reach consensus, HCFA will proceed to

develop a proposed rule. Parties to the negotiation may withdraw at any

time. If this happens, the remaining Committee members and HCFA will

evaluate whether the Committee should continue.

H. Record of Meetings

In accordance with FACA's requirements, we will keep minutes of all

Committee meetings. The minutes will be placed in the public rulemaking

record.

I. Other Information

In accordance with the provisions of Executive Order 12866 this

notice was reviewed by the Office of Management and Budget.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical

Assistance Program; No. 93.773, Medicare--Hospital Insurance

Program; and No. 93.774, Medicare--Supplementary Medical Insurance

Program)

Dated: October 11, 1994.

Bruce C. Vladeck,

Administrator, Health Care Financing Administration.

Dated: October 12, 1994.

Donna E. Shalala,

Secretary.

[FR Doc. 94-25638 Filed 10-13-94; 8:45 am]

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