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Proposed Rule2023-14044

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

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Published

July 10, 2023

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

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.

Full Text

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[Federal Register Volume 88, Number 130 (Monday, July 10, 2023)]
[Proposed Rules]
[Pages 43654-43817]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-14044]

[[Page 43653]]

Vol. 88

Monday,

No. 130

July 10, 2023

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 409, 410, 414, et al.

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; Proposed Rule

Federal Register / Vol. 88, No. 130 / Monday, July 10, 2023 /
Proposed Rules

[[Page 43654]]

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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.

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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):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-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.
3. 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
<a href="/cdn-cgi/l/email-protection#d69eb9bbb39eb3b7baa2be86b9babfb5af96b5bba5f8bebea5f8b1b9a0">[email&#160;protected]</a>.
For information about the Home Health Quality Reporting Program (HH
QRP), send your inquiry via email to <a href="/cdn-cgi/l/email-protection#bbf3f3eae9ebcacedec8cfd2d4d5c8fbd8d6c895d3d3c895dcd4cd">[email&#160;protected]</a>.
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
<a href="https://innovation.cms.gov/innovation-models/expanded-home-health-value-based-purchasing-model">https://innovation.cms.gov/innovation-models/expanded-home-health-value-based-purchasing-model</a>.
For more information about the hospice informal dispute resolution
and special focus program, send your inquiry to
<a href="/cdn-cgi/l/email-protection#5405071b130b3c3b27243d3731143739277a3c3c277a333b22">[email&#160;protected]</a>.

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: <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>. 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

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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) <a href="https://www.govinfo.gov/link/plaw/116/public/136">https://www.govinfo.gov/link/plaw/116/public/136</a> 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 Sec. 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

[[Page 43656]]

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 Sec. 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 Sec. 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 Sec. 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.

[[Page 43657]]

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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec.
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 Sec. 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 Sec. 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 Sec. 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 Sec. 414.1670 under new subpart Q and use
the same process described in Sec. 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 Sec. 414.1600 to explain the purpose and
definitions found in subpart Q.
We are also proposing to add Sec. 414.1660 to address continuity
of pricing when HCPCS codes for lymphedema compression treatment items
are divided or combined.
We are proposing to add Sec. 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 Sec. 414.402.
We are proposing to revise Sec. 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

[[Page 43658]]

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 Sec. 414.412 to address limiting bids
submitted under the program using the payment established under subpart
Q.
We are proposing to add Sec. 414.1690 indicating that the payment
amounts established under Sec. 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 Sec.
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 Sec. 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 Sec. 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

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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 Sec. 484.225(h) and (i)
in

[[Page 43661]]

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/

[[Page 43662]]

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,\1\ 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''.
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\1\ Report to Congress, Medicare Payment Policy. Home Health
Care Services, Chapter 8. MedPAC. March 2023 <a href="https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf</a>.
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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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[[Page 43665]]

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.\2\ 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.
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\2\ Report to Congress, Medicare Payment Policy. Home Health
Care Services, Chapter 8. MedPAC. March 2023 <a href="https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2023/03/Ch8_Mar23_MedPAC_Report_To_Congress_SEC.pdf</a>
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(c) Clinical Groupings and Comorbidities
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.
[GRAPHIC] [TIFF OMITTED] TP10JY23.011

(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).\3\ 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

[[Page 43667]]

established can be found in the technical report, ``Overview of the
Home Health Groupings Model'' posted on the HHA webpage.\4\ 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.
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\3\ 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.
\4\ <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/HH-PDGM">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/HH-PDGM</a>.
[GRAPHIC] [TIFF OMITTED] TP10JY23.012

(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.\5\ 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.
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\5\ Medicare Benefit Policy Manual, Chapter 7 Home Health
Services, Section 40.2 Skilled Therapy Services <a href="https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c07.pdf">https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c07.pdf</a>.
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[[Page 43668]]

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[GRAPHIC] [TIFF OMITTED] TP10JY23.014

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.

[[Page 43669]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.015

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.

[[Page 43670]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.016

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.

[[Page 43671]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.017

BILLING CODE 4120-01-C
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 \6\ (Sec. 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 Sec. 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.\7\ 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).\8\
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\6\ Intermittent skilled nursing care, physical therapy, speech
language pathology, or a continuing need for occupational therapy.
\7\ 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://<a href="http://doi.org/10.1186/s12889-019-7762-5">doi.org/10.1186/s12889-019-7762-5</a>
\8\ Russell D, Rosati RJ, Peng TR, Barr[oacute]n 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
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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:

[[Page 43672]]

<bullet> 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?
<bullet> 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?
<bullet> 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?
<bullet> 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?
<bullet> 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?
<bullet> 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.
<bullet> 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?
<bullet> 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

[[Page 43673]]

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.

<bullet> Create simulated 60-day episodes from 30-day periods
<bullet> Price out the simulated 60-day episodes and determine
aggregate expenditures
<bullet> Price out only the 30-day periods which were used to create
the simulated 60-day episodes and determine aggregate expenditures
<bullet> Compare aggregate expenditures between the simulated 60-day
episodes and actual 30-day periods
<bullet> 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
<bullet> 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.\9\ Again, this is to ensure a simulated 60-day episode (simulated
from two 30-day periods) does not overlap years.
---------------------------------------------------------------------------

\9\ 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.
---------------------------------------------------------------------------

<bullet> Beneficiaries and all of their claims if they have
overlapping claims from the same provider (as identified by CCN).\10\
---------------------------------------------------------------------------

\10\ 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.
---------------------------------------------------------------------------

<bullet> Beneficiaries and all of their claims if three or more
claims from the same provider are linked to the same occurrence code 50
date.\11\
---------------------------------------------------------------------------

\11\ 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
<bullet> 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.
<bullet> 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.
<bullet> 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) \12\ 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.
---------------------------------------------------------------------------

\12\ <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/CaseMixGrouperSoftware">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/CaseMixGrouperSoftware</a>.
---------------------------------------------------------------------------

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.

[[Page 43674]]

(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.
(c) Calculating Permanent and Temporary Payment Adjustments
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.

[[Page 43675]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.018

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.

[[Page 43676]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.019

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.\13\
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,\14\ 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.
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\13\ <a href="https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/home_health_pps_lds">https://www.cms.gov/research-statistics-data-and-systems/files-for-order/limiteddatasets/home_health_pps_lds</a>.
\14\ <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices</a>.
---------------------------------------------------------------------------

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

[[Page 43677]]

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.
[GRAPHIC] [TIFF OMITTED] TP10JY23.020

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
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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: <a href="https://www.cms.gov/medicare/home-health-pps/home-health-pps-archive">https://www.cms.gov/medicare/home-health-pps/home-health-pps-archive</a>, provides a more detailed explanation as to the
construction of these functional impairment levels using the OASIS
items. We are proposing to use this

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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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(c) CY 2024 Comorbidity Subgroups
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:
<bullet> Low comorbidity adjustment: There is a reported secondary
diagnosis on the home health-specific comorbidity subgroup list that is
associated with higher resource use.
<bullet> 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.
<bullet> 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),
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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 <a href="https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center">https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center</a>.
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 \15\ upon display of
this proposed rule.
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\15\ HHA Center web page: <a href="https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center">https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center</a>.

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BILLING CODE 4120-01-C
Changes to the PDGM case-mix weights are implemented in a budget
neutral manner by multiplying the CY 2024 national standardized 30-day

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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
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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.
(c) Derivation of the Proposed 2021-Based Home Health Market Basket
Major Cost Weights
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

[[Page 43705]]

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.
(c) Transportation
Transportation costs reflect direct patient care costs as well as
transportation costs associated with Capital Expenses, Plant Operations
and Maintenance, and Administrative and General 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.

[[Page 43706]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.045

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.
[GRAPHIC] [TIFF OMITTED] TP10JY23.046

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 <a href="http://www.bea.gov/industry/io_annual.htm">http://www.bea.gov/industry/io_annual.htm</a>. 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.\16\ 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
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\16\ <a href="http://www.bea.gov/papers/pdf/IOmanual_092906.pdf">http://www.bea.gov/papers/pdf/IOmanual_092906.pdf</a>.

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[[Page 43707]]

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 x 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
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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).
BILLING CODE 4120-01-P
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[[Page 43708]]

BILLING CODE 4120-01-C
(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:
<bullet> 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).
<bullet> 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 (<a href="https://www.bls.gov/ppi/">https://www.bls.gov/ppi/</a>).
<bullet> 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 (<a href="https://www.bls.gov/cpi/">https://www.bls.gov/cpi/</a>). 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:
<bullet> 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.)
<bullet> 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.
<bullet> 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.
<bullet> 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 <a href="http://www.bls.gov/oes/current/oes_tec.htm">http://www.bls.gov/oes/current/oes_tec.htm</a>.
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.''
BILLING CODE 4120-01-P

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[[Page 43710]]

[GRAPHIC] [TIFF OMITTED] TP10JY23.049

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.\17\
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\17\ <a href="https://www.bls.gov/soc/2018/soc_2018_whats_new.pdf">https://www.bls.gov/soc/2018/soc_2018_whats_new.pdf</a>.
[GRAPHIC] [TIFF OMITTED] TP10JY23.050

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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[GRAPHIC] [TIFF OMITTED] TP10JY23.051

(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.
[GRAPHIC] [TIFF OMITTED] TP10JY23.052

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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[GRAPHIC] [TIFF OMITTED] TP10JY23.053

(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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[[Page 43714]]

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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.
[GRAPHIC] [TIFF OMITTED] TP10JY23.056

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 <plus-minus>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,

[[Page 43715]]

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 <a href="https://www.bls.gov">https://www.bls.gov</a> for the BLS
historical published TFP data. A complete description of IGI's TFP
projection methodology is available on the CMS website at <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch">https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch</a>. 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.
(c) Proposed CY 2024 Annual Update for HHAs
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 data subsequently become
available (for example, a more recent estimate of the market basket and
productivity adjustment), we would use such data, if appropriate, to
determine the CY 2024 market basket percentage increase and
productivity adjustment in the final rule.
Section 1895(b)(3)(B)(v) of the Act requires that the home health
percentage update be decreased by 2 percentage points for those HHAs
that do not submit quality data as required by the Secretary. For HHAs
that do not submit the required quality data for CY 2024, the proposed
home health payment update percentage is 0.7 percent (2.7 percent minus
2 percentage points).
We invite public comment on our proposals for the CY 2024 home
health market basket percentage increase and productivity adjustment.
(d) Labor-Related Share
Effective for CY 2024, we are proposing to update the labor-related
share to reflect the proposed 2021-based home health market basket
Compensation (Wages and Salaries plus Benefits, which include direct
patient care contract labor costs) cost weight. The current labor-
related share is based on the Compensation cost weight of the 2016-
based home health market basket. Based on the proposed 2021-based home
health market basket, the proposed labor-related share is 74.9 percent
and the proposed non-labor-related share is 25.1 percent. The labor-
related share for the 2016-based home health market basket was 76.1
percent and the non-labor-related share was 23.9 percent. As explained
earlier, the decrease in the compensation cost weight of 1.2 percentage
points is primarily attributable to a lower cost weight of direct
patient care contract labor costs as reported in the Medicare cost
report data. Table B33 details the components of the labor-related
share for the 2016-based and proposed 2021-based home health market
baskets.
[GRAPHIC] [TIFF OMITTED] TP10JY23.057

The revised labor-related share will be implemented in a budget
neutral manner through the use of labor-related share budget neutrality
factor (as described in section II.C.4.f.(2) below) so that the
aggregate payments do not increase or decrease due to changes in the
labor-related share values. We invite public comments on the proposed
labor-related share and the use of a labor-related share budget
neutrality factor.
(e) Proposed CY 2024 Home Health Wage Index
Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the
Secretary to provide appropriate adjustments to the proportion of the
payment amount under the HH PPS that account for area

[[Page 43716]]

wage differences, using adjustment factors that reflect the relative
level of wages and wage-related costs applicable to the furnishing of
home health services. Since the inception of the HH PPS, we have used
inpatient hospital wage data in developing a wage index to be applied
to home health payments. We propose to continue this practice for CY
2024, as it is our belief that, in the absence of home health-specific
wage data that accounts for area differences, using inpatient hospital
wage data is appropriate and reasonable for the HH PPS.
In the CY 2021 HH PPS final rule (85 FR 70298), we finalized our
proposal to adopt the revised OMB delineations with a 5-percent cap on
wage index decreases, where the estimated reduction in a geographic
area's wage index would be capped at 5-percent in CY 2021 only, meaning
no cap would be applied to wage index decreases for the second year (CY
2022). Therefore, we proposed and finalized the use of the FY 2022 pre-
floor, pre-reclassified hospital wage index with no 5-percent cap on
decreases as the CY 2022 wage adjustment to the labor portion of the HH
PPS rates (86 FR 62285). However, as described in the CY 2023 HH PPS
final rule (87 FR 66851 through 66853), for CY 2023 and each subsequent
year, we finalized that the CY HH PPS wage index would include a 5-
percent cap on wage index decreases. Specifically, we finalized for CY
2023 and subsequent years, the application of a permanent 5-percent cap
on any decrease to a geographic area's wage index from its wage index
in the prior year, regardless of the circumstances causing the decline.
That is, we finalized that a geographic area's wage index for CY 2023
would not be less than 95 percent of its final wage index for CY 2022,
regardless of whether the geographic area is part of an updated CBSA,
and that for subsequent years, a geographic area's wage index would not
be less than 95 percent of its wage index calculated in the prior CY.
For CY 2024, we propose to base the HH PPS wage index on the FY 2024
hospital pre-floor, pre-reclassified wage index for hospital cost
reporting periods beginning on or after October 1, 2019 and before
October 1, 2020 (FY 2020 cost report data). The proposed CY 2024 HH PPS
wage index would not take into account any geographic reclassification
of hospitals, including those in accordance with section 1886(d)(8)(B)
or 1886(d)(10) of the Act but would include the 5-percent cap on wage
index decreases. We will apply the appropriate wage index value to the
revised labor portion of the HH PPS rates based on the site of service
for the beneficiary (defined by section 1861(m) of the Act as the
beneficiary's place of residence).
To address those geographic areas in which there are no inpatient
hospitals, and thus, no hospital wage data on which to base the
calculation of the CY 2024 HH PPS wage index, we propose to continue to
use the same methodology discussed in the CY 2007 HH PPS final rule (71
FR 65884) to address those geographic areas in which there are no
inpatient hospitals. For rural areas that do not have inpatient
hospitals, we propose to use the average wage index from all contiguous
Core Based Statistical Areas (CBSAs) as a reasonable proxy. Currently,
the only rural area without a hospital from which hospital wage data
could be derived is Puerto Rico. However, for rural Puerto Rico, we do
not apply this methodology due to the distinct economic circumstances
that exist there (for example, due to the close proximity to one
another of almost all of Puerto Rico's various urban and non-urban
areas, this methodology would produce a wage index for rural Puerto
Rico that is higher than that in half of its urban areas). Instead, we
propose to continue to use the most recent wage index previously
available for that area. The most recent wage index previously
available for rural Puerto Rico is 0.4047, which is what we propose to
use. For urban areas without inpatient hospitals, we use the average
wage index of all urban areas within the State as a reasonable proxy
for the wage index for that CBSA. For CY 2024, the only urban area
without inpatient hospital wage data is Hinesville, GA (CBSA 25980).
Using the average wage index of all urban areas in Georgia as proxy, we
propose the CY 2024 wage index value for Hinesville, GA to be 0.8601.
On February 28, 2013, OMB issued Bulletin No. 13-01, announcing
revisions to the delineations of MSAs, Micropolitan Statistical Areas,
and CBSAs, and guidance on uses of the delineation of these areas. In
the CY 2015 HH PPS final rule (79 FR 66085 through 66087), we adopted
OMB's area delineations using a 1-year transition.
On August 15, 2017, OMB issued Bulletin No. 17-01 in which it
announced that one Micropolitan Statistical Area, Twin Falls, Idaho,
now qualifies as a Metropolitan Statistical Area. The new CBSA (46300)
comprises the principal city of Twin Falls, Idaho in Jerome County,
Idaho and Twin Falls County, Idaho. The CY 2022 HH PPS wage index value
for CBSA 46300, Twin Falls, Idaho, will be 0.8707. Bulletin No. 17-01
is available at <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf</a>.
On April 10, 2018 OMB issued OMB Bulletin No. 18-03, which
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14,
2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10,
2018 OMB Bulletin No. 18-03. These bulletins established revised
delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas. A
copy of OMB Bulletin No. 18-04 may be obtained at: <a href="https://www.bls.gov/bls/omb-bulletin-18-04-revised-delineations-of-metropolitan-statistical-areas.pdf">https://www.bls.gov/bls/omb-bulletin-18-04-revised-delineations-of-metropolitan-statistical-areas.pdf</a>.
On March 6, 2020, OMB issued Bulletin No. 20-01, which provided
updates to and superseded OMB Bulletin No. 18-04 that was issued on
September 14, 2018. The attachments to OMB Bulletin No. 20-01 provided
detailed information on the update to statistical areas since September
14, 2018, and were based on the application of the 2010 Standards for
Delineating Metropolitan and Micropolitan Statistical Areas to Census
Bureau population estimates for July 1, 2017 and July 1, 2018. (For a
copy of this bulletin, we refer readers to <a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>). In OMB Bulletin No. 20-
01, OMB announced one new Micropolitan Statistical Area, one new
component of an existing Combined Statistical Area and changes to New
England City and Town Area (NECTA) delineations. In the CY 2021 HH PPS
final rule (85 FR 70298), we stated that if appropriate, we would
propose any updates from OMB Bulletin No. 20-01 in future rulemaking.
After reviewing OMB Bulletin No. 20-01, we have determined that the
changes in Bulletin 20-01 encompassed delineation changes that would
not affect the Medicare home health wage index for CY 2022.
Specifically, the updates consisted of changes to NECTA delineations
and the re-designation of a single rural county into a newly created
Micropolitan Statistical Area. The Medicare home health wage index does
not utilize NECTA definitions, and, as most recently discussed in the
CY 2021 HH PPS final rule (85 FR 70298) we include hospitals located in
Micropolitan Statistical areas in each State's rural wage index. In
other words, these OMB updates did not affect any geographic areas for
purposes of the HH PPS wage index calculation.

[[Page 43717]]

The proposed CY 2024 wage index is available on the CMS website at:
<a href="https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center">https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center</a>.
(f) Proposed CY 2024 Home Health Payment Update
(1) Background
The HH PPS has been in effect since October 1, 2000. As set forth
in the July 3, 2000 final rule (65 FR 41128), the base unit of payment
under the HH PPS was a national, standardized 60-day episode payment
rate. As finalized in the CY 2019 HH PPS final rule with comment period
(83 FR 56406), and as described in the CY 2020 HH PPS final rule with
comment period (84 FR 60478), the unit of home health payment changed
from a 60-day episode to a 30-day period effective for those 30-day
periods beginning on or after January 1, 2020.
As set forth in Sec. 484.220, we adjust the national, standardized
prospective payment rates by a case-mix relative weight and a wage
index value based on the site of service for the beneficiary. To
provide appropriate adjustments to the proportion of the payment amount
under the HH PPS to account for area wage differences, we apply the
appropriate wage index value to the labor portion of the HH PPS rates.
In the CY 2019 HH PPS final rule with comment period (83 FR 56435), we
finalized rebasing the home health market basket to reflect 2016
Medicare cost report data. We also finalized a revision to the labor-
related share to reflect the 2016-based home health market basket
Compensation (Wages and Salaries plus Benefits) cost weight. We
finalized that for CY 2019 and subsequent years, the labor-related
share would be 76.1 percent and the non-labor related share would be
23.9 percent. As discussed earlier in section II.C.3, for CY 2024 we
are proposing to rebase the home health market basket using 2021
Medicare cost report data. We are also proposing that the labor-related
share based on the proposed 2021-based home health market basket would
be 74.9 percent and the non-labor-related share would be 25.1 percent.
The following are the steps we take to compute the case-mix and wage-
adjusted 30-day period payment amount for CY 2024:
<bullet> Multiply the national, standardized 30-day period rate by
the patient's applicable case-mix weight.
<bullet> Divide the case-mix adjusted amount into a labor (74.9
percent) and a non-labor portion (25.1 percent).
<bullet> Multiply the labor portion by the applicable wage index
based on the site of service of the beneficiary.
<bullet> Add the wage-adjusted portion to the non-labor portion,
yielding the case-mix and wage adjusted 30-day period payment amount,
subject to any additional applicable adjustments.
We provide annual updates of the HH PPS rate in accordance with
section 1895(b)(3)(B) of the Act. Section 484.225 sets forth the
specific annual percentage update methodology. In accordance with
section 1895(b)(3)(B)(v) of the Act and Sec. 484.225(i), for an HHA
that does not submit home health quality data, as specified by the
Secretary, the unadjusted national prospective 30-day period rate is
equal to the rate for the previous calendar year increased by the
applicable home health payment update percentage, minus 2 percentage
points. Any reduction of the percentage change would apply only to the
calendar year involved and would not be considered in computing the
prospective payment amount for a subsequent calendar year.
The final claim that the HHA submits for payment determines the
total payment amount for the period and whether we make an applicable
adjustment to the 30-day case-mix and wage-adjusted payment amount. The
end date of the 30-day period, as reported on the claim, determines
which calendar year rates Medicare will use to pay the claim.
We may adjust a 30-day case-mix and wage-adjusted payment based on
the information submitted on the claim to reflect the following:
<bullet> A LUPA is provided on a per-visit basis as set forth in
Sec. Sec. 484.205(d)(1) and 484.230.
<bullet> A partial payment adjustment as set forth in Sec. Sec.
484.205(d)(2) and 484.235.
<bullet> An outlier payment as set forth in Sec. Sec.
484.205(d)(3) and 484.240.
(2) CY 2024 National, Standardized 30-Day Period Payment Amount
Section 1895(b)(3)(A)(i) of the Act requires that the standard
prospective payment rate and other applicable amounts be standardized
in a manner that eliminates the effects of variations in relative case-
mix and area wage adjustments among different home health agencies in a
budget-neutral manner. To determine the CY 2024 national, standardized
30-day period payment rate, we will continue our practice of using the
most recent, complete utilization data at the time of rulemaking; that
is, we are using CY 2022 claims data for CY 2024 payment rate updates.
We apply a permanent behavioral adjustment factor, a case-mix weights
recalibration budget neutrality factor, a wage index budget neutrality
factor, a labor-related share budget neutrality factor and the home
health payment update percentage to update the CY 2024 payment rate. As
discussed in section II.C.1 of this proposed rule, we are proposing to
implement a permanent behavior adjustment of -5.653 percent to ensure
that payments under the PDGM do not exceed what payments would have
been under the 153-group payment system as required by law. The
proposed permanent behavior adjustment factor is 0.94347. As discussed
previously, to ensure the changes to the PDGM case-mix weights are
implemented in a budget neutral manner, we apply a case-mix weight
budget neutrality factor to the CY 2024 national, standardized 30-day
period payment rate. The proposed case-mix weight budget neutrality
factor for CY 2024 is 1.0121.
Additionally, we apply a wage index budget neutrality factor to
ensure that wage index updates and revisions are implemented in a
budget neutral manner. To calculate the wage index budget neutrality
factor, we first determine the payment rate needed for non-LUPA 30-day
periods using the CY 2024 wage index so those total payments are
equivalent to the total payments for non-LUPA 30-day periods using the
CY 2023 wage index and the CY 2023 national standardized 30-day period
payment rate adjusted by the case-mix weights recalibration neutrality
factor. Then, by dividing the payment rate for non-LUPA 30-day periods
using the CY 2024 wage index with a 5-percent cap on wage index
decreases by the payment rate for non-LUPA 30-day periods using the CY
2023 wage index with a 5-percent cap on wage index decreases, we obtain
a wage index budget neutrality factor of 1.0015. We then apply the wage
index budget neutrality factor of 1.0015 to the 30-day period payment
rate. After we apply the wage index budget neutrality factor, we will
also apply a labor-related share budget neutrality factor so that
aggregate payments do not increase or decrease due to changes in the
labor-related share values. In order to calculate the labor-related
share budget neutrality factor, we simulate total payments using CY
2022 home health utilization claims data with the CY 2024 HH PPS wage
index and the proposed labor-related share (labor-related share of 74.9
percent and non-labor-related share of 25.1 percent) and compare it to
our simulation of total payments using the CY 2024 HH PPS wage index
with the current labor-related share (labor-related share of 76.1
percent and non-labor-related share of 23.9 percent). By dividing the
base payment amount using the proposed labor-related share

[[Page 43718]]

and CY 2024 wage index and payment rate by the base payment amount
using the current labor-related share and CY 2024 wage index and
payment rate, we obtain a labor-related share budget neutrality factor
of 0.9998.
Next, we propose to update the 30-day period payment rate by the
proposed CY 2024 home health payment update percentage of 2.7 percent.
The CY 2024 national, standardized 30-day period payment rate is
calculated in Table B34.
[GRAPHIC] [TIFF OMITTED] TP10JY23.058

The CY 2024 national, standardized 30-day period payment rate for
an HHA that does not submit the required quality data is updated by the
proposed CY 2024 home health payment update percentage of 0.7 percent
(2.7 percent minus 2 percentage points) and is shown in Table B35.
[GRAPHIC] [TIFF OMITTED] TP10JY23.059

(3) CY 2024 National Per-Visit Rates for 30-Day Periods of Care
The national per-visit rates are used to pay LUPAs and are also
used to compute imputed costs in outlier calculations. The per-visit
rates are paid by type of visit or home health discipline. The six home
health disciplines are as follows:
<bullet> Home health aide (HH aide).
<bullet> Medical Social Services (MSS).
<bullet> Occupational therapy (OT).
<bullet> Physical therapy (PT).
<bullet> Skilled nursing (SN).
<bullet> Speech-language pathology (SLP).
To calculate the proposed CY 2024 national per-visit rates, we
started with the CY 2023 national per-visit rates. Then we applied a
wage index budget neutrality factor to ensure budget neutrality for
LUPA per-visit payments. We calculated the wage index budget neutrality
factor by simulating total payments for LUPA 30-day periods of care
using the CY 2024 wage index with a 5-percent cap on wage index
decreases and comparing it to simulated total payments for LUPA 30-day
periods of care using the CY 2023 wage index with 5-percent cap. By
dividing the total payments for LUPA 30-day periods of care using the
CY 2024 wage index by the total payments for LUPA 30-day periods of
care using the CY 2023 wage index, we obtained a wage index budget
neutrality factor of 1.0015. We apply the wage index budget neutrality
factor in order to calculate the CY 2024 national per-visit rates. In
order to calculate the labor-related share budget neutrality factor for
the national per visit amounts, we simulate total payments for LUPA 30-
day periods using CY 2022 home health utilization claims data with the
CY 2024 HH PPS wage index and the proposed labor-related share (labor-
related share of 74.9 percent and non-labor-related share of 25.1
percent) and compare it to our simulation of total payments for LUPA
30-day periods using the CY 2024 HH PPS wage index with the current
labor-related share (labor-related share of 76.1 percent and non-labor-
related share of 23.9 percent). By dividing the payment amounts for
LUPA 30-day periods using the proposed labor-related share and CY 2024
wage index and payment rate by the payment amounts for LUPA 30-day
periods using the current labor-related share and CY 2024 wage index
and payment rate, we obtain a labor-related share budget neutrality
factor of 0.9999.
The LUPA per-visit rates are not calculated using case-mix weights.
Therefore, no case-mix weight budget neutrality factor is needed to
ensure budget neutrality for LUPA payments. Additionally, we are not
applying the

[[Page 43719]]

permanent adjustment to the per visit payment rates but only to the
case-mix adjusted 30-day payment rate. Lastly, the per-visit rates for
each discipline are updated by the proposed CY 2024 home health payment
update percentage of 2.7 percent. The national per-visit rates are
adjusted by the wage index based on the site of service of the
beneficiary. The per-visit payments for LUPAs are separate from the
LUPA add-on payment amount, which is paid for episodes that occur as
the only episode or initial episode in a sequence of adjacent episodes.
The CY 2024 national per-visit rates for HHAs that submit the required
quality data are updated by the proposed CY 2024 home health payment
update percentage of 2.7 percent and are shown in Table B36.
[GRAPHIC] [TIFF OMITTED] TP10JY23.060

The CY 2024 per-visit payment rates for HHAs that do not submit the
required quality data are updated by the proposed CY 2024 home health
payment update percentage of 2.7 percent minus 2 percentage points and
are shown in Table B37.
[GRAPHIC] [TIFF OMITTED] TP10JY23.061

(4) LUPA Add-On Factors
Prior to the implementation of the 30-day unit of payment, LUPA
episodes were eligible for a LUPA add-on payment if the episode of care
was the first or only episode in a sequence of adjacent episodes. As
stated in the CY 2008 HH PPS final rule, the average visit lengths in
these initial LUPAs are 16 to 18 percent higher than the average visit
lengths in initial non-LUPA episodes (72 FR 49848). LUPA episodes that
occur as the only episode or as an initial episode in a sequence of
adjacent episodes are adjusted by applying an additional amount to the
LUPA payment before adjusting for area wage differences. In the CY 2014
HH PPS final rule (78 FR 72305), we changed the methodology for
calculating the LUPA add-on amount by finalizing the use of three LUPA
add-on factors: 1.8451 for SN; 1.6700 for PT; and 1.6266 for SLP. We
multiply the per-visit payment amount for the first SN, PT, or SLP
visit in LUPA episodes that occur as the only episode or an initial
episode in a sequence of adjacent episodes by the appropriate factor to
determine the LUPA add-on payment amount.
In the CY 2019 HH PPS final rule with comment period (83 FR 56440),
in addition to finalizing a 30-day unit of payment, we finalized our
policy of continuing to multiply the per-visit

[[Page 43720]]

payment amount for the first skilled nursing, physical therapy, or
speech-language pathology visit in LUPA periods that occur as the only
period of care or the initial 30-day period of care in a sequence of
adjacent 30-day periods of care by the appropriate add-on factor
(1.8451 for SN, 1.6700 for PT, and 1.6266 for SLP) to determine the
LUPA add-on payment amount for 30-day periods of care under the PDGM.
For example, using the proposed CY 2024 per-visit payment rates for
HHAs that submit the required quality data, for LUPA periods that occur
as the only period or an initial period in a sequence of adjacent
periods, if the first skilled visit is SN, the payment for that visit
would be $309.85 (1.8451 multiplied by $167.93), subject to area wage
adjustment.
(5) Occupational Therapy LUPA Add-On Factor
In order to implement Division CC, section 115, of CAA, 2021, CMS
finalized changes to regulations at Sec. 484.55(a)(2) and (b)(3) that
allowed occupational therapists to conduct initial and comprehensive
assessments for all Medicare beneficiaries under the home health
benefit when the plan of care does not initially include skilled
nursing care, but either PT or SLP (86 FR 62351). This change, led to
us establishing a LUPA add-on factor for calculating the LUPA add-on
payment amount for the first skilled occupational therapy (OT) visit in
LUPA periods that occurs as the only period of care or the initial 30-
day period of care in a sequence of adjacent 30-day periods of care.
As stated in the CY 2022 HH PPS final rule with comment period (86
FR 62289) since there was not sufficient data regarding the average
excess of minutes for the first visit in LUPA periods when the initial
and comprehensive assessments are conducted by occupational therapists
we finalized the use of the PT LUPA add-on factor of 1.6700 as a proxy.
We also stated that we would use the PT LUPA add-on factor as a proxy
until we have CY 2022 data to establish a more accurate OT add-on
factor for the LUPA add-on payment amounts (86 FR 62289). At this time,
we are analyzing the CY 2022 data and will continue to use the PT LUPA
add-on factor for OT LUPAs and plan to propose a LUPA add-on factor
specific to OT in future rulemaking.
(6) Payments for High-Cost Outliers Under the HH PPS
(a) Background
Section 1895(b)(5) of the Act allows for the provision of an
addition or adjustment to the home health payment amount otherwise made
in the case of outliers because of unusual variations in the type or
amount of medically necessary care. Under the HH PPS and the previous
unit of payment (that is, 60-day episodes), outlier payments were made
for 60-day episodes whose estimated costs exceed a threshold amount for
each HHRG. The episode's estimated cost was established as the sum of
the national wage-adjusted per visit payment amounts delivered during
the episode. The outlier threshold for each case-mix group or PEP
adjustment defined as the 60-day episode payment or PEP adjustment for
that group plus a fixed-dollar loss (FDL) amount. For the purposes of
the HH PPS, the FDL amount is calculated by multiplying the home health
FDL ratio by a case's wage-adjusted national, standardized 60-day
episode payment rate, which yields an FDL dollar amount for the case.
The outlier threshold amount is the sum of the wage and case-mix
adjusted PPS episode amount and wage-adjusted FDL amount. The outlier
payment is defined to be a proportion of the wage-adjusted estimated
cost that surpasses the wage-adjusted threshold. The proportion of
additional costs over the outlier threshold amount paid as outlier
payments is referred to as the loss-sharing ratio.
As we noted in the CY 2011 HH PPS final rule (75 FR 70397 through
70399), section 3131(b)(1) of the Affordable Care Act amended section
1895(b)(3)(C) of the Act to require that the Secretary reduce the HH
PPS payment rates such that aggregate HH PPS payments were reduced by 5
percent. In addition, section 3131(b)(2) of the Affordable Care Act
amended section 1895(b)(5) of the Act by redesignating the existing
language as section 1895(b)(5)(A) of the Act and revised the language
to state that the total amount of the additional payments or payment
adjustments for outlier episodes could not exceed 2.5 percent of the
estimated total HH PPS payments for that year. Section 3131(b)(2)(C) of
the Affordable Care Act also added section 1895(b)(5)(B) of the Act,
which capped outlier payments as a percent of total payments for each
HHA for each year at 10 percent.
As such, beginning in CY 2011, we reduced payment rates by 5
percent and targeted up to 2.5 percent of total estimated HH PPS
payments to be paid as outliers. To do so, we first returned the 2.5
percent held for the target CY 2010 outlier pool to the national,
standardized 60-day episode rates, the national per visit rates, the
LUPA add-on payment amount, and the NRS conversion factor for CY 2010.
We then reduced the rates by 5 percent as required by section
1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) of the
Affordable Care Act. For CY 2011 and subsequent calendar years we
targeted up to 2.5 percent of estimated total payments to be paid as
outlier payments, and apply a 10-percent agency-level outlier cap.
In the CY 2017 HH PPS proposed and final rules (81 FR 43737 through
43742 and 81 FR 76702), we described our concerns regarding patterns
observed in home health o

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