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Rule2023-24455

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

November 13, 2023

Effective

January 1, 2024

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This final rule sets 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-- discusses comments received regarding access to home health aide services; implements home health payment-related changes; rebases and revises the home health market basket and revises the labor-related share; codifies statutory requirements for disposable negative pressure wound therapy (dNPWT); and implements the new items and services payment for the home intravenous immune globulin (IVIG) benefit. In addition, it--finalizes changes to the Home Health Quality Reporting Program (HH QRP) requirements and the expanded Home Health Value-Based Purchasing (HHVBP) Model; implements the new Part B benefit for lymphedema compression treatment items, codifies the Medicare definition of brace, and makes other codification changes based on recent legislation; adds an informal dispute resolution (IDR) and special focus program (SFP) for hospice programs; codifies DMEPOS refill policy; and finalizes proposed revisions for Medicare provider and supplier enrollment requirements.

Full Text

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[Federal Register Volume 88, Number 217 (Monday, November 13, 2023)]
[Rules and Regulations]
[Pages 77676-77880]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24455]

[[Page 77675]]

Vol. 88

Monday,

No. 217

November 13, 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; Final Rule

Federal Register / Vol. 88 , No. 217 / Monday, November 13, 2023 /
Rules and Regulations

[[Page 77676]]

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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-F]
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: Final rule.

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SUMMARY: This final rule sets 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--
discusses comments received regarding access to home health aide
services; implements home health payment-related changes; rebases and
revises the home health market basket and revises the labor-related
share; codifies statutory requirements for disposable negative pressure
wound therapy (dNPWT); and implements the new items and services
payment for the home intravenous immune globulin (IVIG) benefit. In
addition, it--finalizes changes to the Home Health Quality Reporting
Program (HH QRP) requirements and the expanded Home Health Value-Based
Purchasing (HHVBP) Model; implements the new Part B benefit for
lymphedema compression treatment items, codifies the Medicare
definition of brace, and makes other codification changes based on
recent legislation; adds an informal dispute resolution (IDR) and
special focus program (SFP) for hospice programs; codifies DMEPOS
refill policy; and finalizes proposed revisions for Medicare provider
and supplier enrollment requirements.

DATES: These regulations are effective on January 1, 2024.

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#652d0a08002d000409110d350a090c061c250608164b0d0d164b020a13">[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#753d3d24272504001006011c1a1b06351618065b1d1d065b121a03">[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#c79694888098afa8b4b7aea4a287a4aab4e9afafb4e9a0a8b1">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary and Issuance of the Proposed Rule
A. Executive Summary
B. Issuance of the Proposed Rule
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. 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. Changes to the Expanded Home Health Value-Based Purchasing
(HHVBP) Model
A. Background
B. Proposed Changes to the Applicable Measure Set
C. Proposed Changes to the Appeals Process
D. Public Reporting Reminder
E. Health Equity Update
V. Medicare Home Intravenous Immune Globulin (IVIG) Items and
Services
A. General Background
B. Proposed Scope of Expanded IVIG Benefit
C. Proposed IVIG Administration Items and Services Payment
D. Proposed Home IVIG Items and Services Payment Rate
E. Billing Procedures for Home IVIG Items and Services
VI. Hospice Informal Dispute Resolution and Special Focus Program
A. Background and Statutory Authority
B. Proposed Regulatory Provisions
VII. Final Changes Regarding Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS)
A. Medicare Durable Medical Equipment, Prosthetics, Orthotics,
and Supplies (DMEPOS) Fee Schedule Adjustments
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. 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
K. Waiver Fiscal Responsibility Act Requirements Regulations
Text

I. Executive Summary and Issuance of the Proposed Rule

A. Executive Summary

1. Purpose and Legal Authority
a. Home Health Prospective Payment System (HH PPS)
As required under section 1895(b) of the Social Security Act (the
Act), this final rule updates the payment rates for home health
agencies (HHAs) for CY 2024. In this final rule we discuss comments
received on our request for information (RFI) related to access to home
health aide services. This rule finalizes a permanent prospective
adjustment to the CY 2024 home health payment rate to account for the
differences between assumed and actual behavior changes on estimated
aggregate expenditures. It also finalizes the proposal to recalibrate
the PDGM case-

[[Page 77677]]

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
that start in CY 2024. This rule finalizes the proposal to rebase and
revise the home health market basket and finalizes the proposal to
revise the labor-related share. Additionally, this rule finalizes the
proposal 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).
b. 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 finalizing the addition of two
quality measures to the HH QRP, the removal of two Outcome and
Assessment Information Set (OASIS)-based data elements the codification
of the previously finalized 90 percent OASIS data completion threshold
policy in the Code of Federal Regulations (CFR) and the public
reporting of four measures. We also note that the proposed rule
included a request for information on future HH QRP measure concepts
and an update on health equity in the HH QRP.
c. Expanded Home Health Value-Based Purchasing (HHVBP) Model
In accordance with the statutory authority at section 1115A of the
Act, we are finalizing proposed 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 with conforming regulation text
changes for the expanded HHVBP Model. We are also including an update
on health equity and a reminder about public reporting.
d. Home Intravenous Immune Globulin (IVIG) Items and Services
As required under Division FF, section 4134 of the Consolidated
Appropriations Act, 2023 (CAA, 2023), this final rule will 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).
e. Hospice Informal Dispute Resolution and Special Focus Program
As required under Division CC, section 407 of the Consolidated
Appropriations Act of 2021 (CAA, 2021), as codified in section 1822(b)
of the Act, this final rule will 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 finalizing our proposed regulatory changes 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.
f. 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 finalizing the
proposed 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 addresses 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 will fall under the new benefit.
This rule also implements section 1834(z) of the Act in
establishing payment amounts for items covered under the new benefit
and frequency limitations for lymphedema compression treatment items.
CMS expects to conduct outreach for individuals with Medicare and issue
provider education regarding this benefit.
The definition of brace in section 1861(s)(9) of the Act provides
coverage under Part B for leg, arm, back, and neck braces. This rule
codifies the existing definition of a brace found in the Medicare
Benefit Policy Manual (CMS Pub. 100-02) and clarifies that this
definition encompasses newer, technology-powered devices.
g. 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. This rule will codify our long-standing refill policy, with
some changes. We proposed to require documentation indicating that the
beneficiary has confirmed their need for the refill within the 30-day
period prior to the end of the current supply. We also proposed 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 sought comments for potential future rulemaking
on ways to balance beneficiary burden with the potential program
integrity risk of not verifying the beneficiary's need for recurring
supplies for certain individuals with permanent conditions and will
consider the commenter submissions.
h. Provider and Supplier Enrollment Requirements
The purpose of our provider enrollment provisions is to strengthen

[[Page 77678]]

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 these objectives will assist in protecting the Trust Funds
and Medicare beneficiaries.
2. Summary of the Provisions of This Final Rule
a. Home Health Prospective Payment System (HH PPS)
In section II.B.2. of this final rule, we discuss comments related
to access to home health aide services. In section II.C.1. of this
rule, we are finalizing a permanent prospective adjustment of -2.890
percent to the CY 2024 home health payment rate.
In section II.C.2. of this rule, we are finalizing the proposal 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 are finalizing the proposals to
rebase and revise the home health market basket to reflect a 2021 base
year and revise the labor-related share.
In section II.C.4. of this rule, we are finalizing our 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 final home
health payment update percentage for CY 2024 is 3.0 percent.
Additionally, this rule finalizes the CY 2024 FDL ratio to ensure that
aggregate outlier payments do not exceed 2.5 percent of the estimated
total aggregate payments, as required by section 1895(b)(5)(A) of the
Act.
In section II.C.5 of this rule, we finalize our proposal to codify
statutory payment changes for negative pressure wound therapy using a
disposable device (dNPWT).
b. Home Health Quality Reporting Program (HH QRP)
In section III. of this final rule, we will finalize 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 finalizes the adoption of
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 are finalizing the removal of the ``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) measure
from the HH QRP beginning with the CY 2025 HH QRP. CMS additionally is
finalizing the removal of two OASIS items no longer necessary for
collection, the M0110--Episode Timing and M2200- Therapy Need items. We
are also finalizing 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 summarize input on
CMS's request for information on future HH QRP measure concepts and CMS
updates on HH QRP health equity initiatives.
c. Expanded Home Health Value Based Purchasing (HHVBP) Model
In section IV. of this final rule, we are finalizing codification
of the HHVBP measure removal factors at Sec. 484.380. We will remove
five and add three quality measures to the applicable measure set.
Along with the proposed revisions to the current measure set, we
proposed 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 finalizing 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 finalizing to
amend the appeals process such that reconsideration decisions may be
reviewed by the Administrator. We are also making conforming regulation
text changes at Sec. 484.375(b)(5). We included 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 are also including a
reminder that we will begin public reporting HHVBP performance data on
or after December 1, 2024.
d. 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 finalizes
proposed 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.
e. Hospice Informal Dispute Resolution and Special Focus Program
In section VI. of this final rule, we are finalizing 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 proposed that the hospice IDR would address
disputes related to condition-level survey findings following a hospice
program's receipt of the official survey statement of deficiencies. The
proposed IDR would 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 proposed 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 finalized SFP. In section VI. of this rule, we
are finalizing our proposal to add the hospice Special Focus Program
(SFP) at Sec. 488.1135. In the final rule, we are finalizing 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 in the CY 2022 HH PPS rule 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 proposed SFP. The finalized
hospice SFP becomes effective beginning the effective date of this
final rule with implementation during CY 2024. We will periodically
review the effectiveness of the finalized methodology and algorithm.

[[Page 77679]]

f. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies
Products and CAA 2023 Related Changes
In section VII.A.3. of this rule, we are finalizing without
modification the 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 finalizing revisions under 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 finalizing revisions to 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 finalizing our proposal 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 finalizing our proposal 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 finalizing the proposal 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 the amendment of 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 will
include accessories such as zippers, liners, and padding or fillers
that are necessary for the effective use of a gradient compression
garment or wrap with adjustable straps.
We are finalizing our proposal to modify and add to the existing
HCPCS Level II codes for lymphedema compression treatment items.
We are finalizing our proposal 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 finalizing our proposal 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 to establish payment amounts for lymphedema
compression treatment items.
We are finalizing our proposal to add Sec. 414.1600 to explain the
purpose and definitions found in subpart Q.
We are finalizing our proposal to add Sec. 414.1660 to address
continuity of pricing when HCPCS codes for lymphedema compression
treatment items are divided or combined.
We are finalizing our proposal to add Sec. 414.1680 with details
regarding frequency limitations for lymphedema compression treatment
items. Medicare will cover and pay for three daytime garments or wraps
every six months and two nighttime garments or wraps every 2 years.
We are finalizing our proposal 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 are adding
lymphedema compression treatment items to the definition of item at
Sec. 414.402. We are revising Sec. 414.408 to indicate that payment
for these items will be calculated on a lump sum purchase basis and
payment under the program will be made in accordance with any frequency
limitations established under subpart Q in accordance with section
1834(z)(2) of the Act. We are also adding 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 finalizing our proposal 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 are finalizing 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.
g. Documentation Requirements for Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies Products Supplied as Refills to
the Original Order
We are finalizing our proposed refill documentation requirements.
We will be updating the refill documentation requirements such that a
beneficiary affirmation will need to be documented by the supplier. We
will 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 will 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

[[Page 77680]]

the Office of Management and Budget under OMB control number 0938-0969
(CMS-10417).
h. Provider and Supplier Enrollment Requirements
We proposed several changes to our Medicare provider and supplier
enrollment requirements. These included but were not limited to: (1)
provisions related to hospice enrollment and ownership; and (2)
deactivation of providers and suppliers.
3. Summary of Costs, Transfers, and Benefits
BILLING CODE 4120-01-P
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B. Issuance of the Proposed Rule

The proposed rule titled ``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'' appeared in the Federal Register on July, 10,
2023 (88 FR 43654) hereinafter referred to as the CY 2024 HH PPS
proposed rule or July 2023 proposed rule).
The proposed rule set forth proposed payment and policy changes to
the Medicare Home Health prospective payment system for CY 2024,
proposed changes regarding other programs and policies, as well as
solicited comments.
In the sections of the rule that follow, we will present the
proposed policies

[[Page 77682]]

and summarize and respond to the public comments received.

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 issued a
final rule which appeared 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. We issued a final rule which appeared in the
November 9, 2006 Federal Register (71 FR 65935), to implement the pay-
for-reporting requirement of the DRA, which was codified at Sec.
484.225(h) and (i) in accordance with the statute. The pay-for-
reporting requirement was implemented on January 1, 2007.
Section 51001(a)(1)(B) of the Bipartisan Budget Act of 2018 (BBA of
2018) (Pub. L. 115-123) amended section 1895(b) of the Act to require a
change to the home health unit of payment to 30-day periods beginning
January 1, 2020. Section 51001(a)(2)(A) of the BBA of 2018 added a new
subclause (iv) under section 1895(b)(3)(A) of the Act, requiring the
Secretary to calculate a standard prospective payment amount (or
amounts) for 30-day units of service furnished that end during the 12-
month period beginning January 1, 2020, in a budget neutral manner,
such that estimated aggregate expenditures under the HH PPS during CY
2020 are equal to the estimated aggregate expenditures that otherwise
would have been made under the HH PPS during CY 2020 in the absence of
the change to a 30-day unit of service. Section 1895(b)(3)(A)(iv) of
the Act requires that the calculation of the standard prospective
payment amount (or amounts) for CY 2020 be made before the application
of the annual update to the standard prospective payment amount as
required by section 1895(b)(3)(B) of the Act.
Additionally, section 1895(b)(3)(A)(iv) of the Act requires that in
calculating the standard prospective payment amount (or amounts), the
Secretary must make assumptions about behavior changes that could occur
as a result of the implementation of the 30-day unit of service under
section 1895(b)(2)(B) of the Act and case-mix adjustment factors
established under section 1895(b)(4)(B) of the Act. Section
1895(b)(3)(A)(iv) of the Act further requires the Secretary to provide
a description of the behavior assumptions made in notice and comment
rulemaking. CMS finalized these behavior assumptions in the CY 2019 HH
PPS final rule with comment period (83 FR 56461).
Section 51001(a)(2)(B) of the BBA of 2018 also added a new
subparagraph (D) to section 1895(b)(3) of the Act. Section
1895(b)(3)(D)(i) of the Act requires the Secretary annually to
determine the impact of differences between assumed behavior changes,
as described in section 1895(b)(3)(A)(iv) of the Act, and actual
behavior changes on estimated aggregate expenditures under the HH PPS
with respect to years beginning with 2020 and ending with 2026. Section
1895(b)(3)(D)(ii) of the Act requires the Secretary, at a time and in a
manner determined appropriate, through notice and comment rulemaking,
to provide for one or more permanent increases or decreases to the
standard prospective payment amount (or amounts) for applicable years,
on a prospective basis, to offset for such increases or decreases in
estimated aggregate expenditures, as determined under section
1895(b)(3)(D)(i) of the Act. Additionally, section 1895(b)(3)(D)(iii)
of the Act requires the Secretary, at a time and in a manner determined
appropriate, through notice and comment rulemaking, to provide for one
or more temporary increases or decreases to the payment amount for a
unit of home health services for applicable years, on a prospective
basis, to offset for such increases or decreases in estimated aggregate
expenditures, as determined under section 1895(b)(3)(D)(i) of the Act.
Such a temporary increase or decrease shall apply only with respect to
the year for which such temporary increase or decrease is made, and the
Secretary shall not take into account such a temporary increase or
decrease in computing the payment amount for a unit of home health
services for a subsequent year. Finally, section 51001(a)(3) of the BBA
of 2018 amends section 1895(b)(4)(B) of the Act by adding a new clause
(ii) to require the Secretary to eliminate the use of therapy
thresholds in the case-mix system for CY 2020 and subsequent years.
Division FF, section 4136 of the Consolidated Appropriations Act,
2023 (CAA, 2023) amended section 1834(s)(3)(A) of the Act to require
that, beginning with 2024, the separate payment for furnishing negative
pressure wound therapy (NPWT) using a disposable device 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 (PFS) (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-

[[Page 77683]]

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 NPWT using a disposable device
(though this rule is finalizing 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 <a href="https://www.cms.gov/regulations-and-guidanceguidancetransmittals2020-transmittals/se20005">https://www.cms.gov/regulations-and-guidanceguidancetransmittals2020-transmittals/se20005</a>. 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
In the CY 2024 HH PPS proposed rule (88 FR 43663), CMS provided
data analysis on 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. We received one comment on the analysis presented in the
proposed rule.
Comment: The commenter stated that while the utilization patterns
before and after PDGM implementation show a continuous downward trend,
there is lack of data analysis and explanation by CMS indicating
whether the appropriate level of home health care is being provided to
beneficiaries. They also suggested that CMS should expand the data
collected to include geographic, racial, ethnic, socioeconomic, sexual
orientation and gender identifiers which could highlight whether
disparities in home health usage vary in diverse populations.
Response: We thank the commenter for their feedback on the home
health utilization data presented in the CY 2024 HH PPS proposed rule.
The intent of the monitoring section is to show the trends in the data
presented. We discuss our analysis of these data in the discussion of
our RFI related to home health aides and in the discussion of the PDGM
behavioral assumption adjustments. We will continue to monitor and
analyze home health trends and vulnerabilities within the home health
payment system and will consider the additional monitoring suggested by
the commenter for future rulemaking.

[[Page 77685]]

2. Request for Information (RFI) for Access to Home Health Aide
Services
As we continue to focus on promoting access and value within the
home health benefit, in the CY 2024 HH PPS proposed rule (88 FR 43654),
we solicited comments from the public, including home health providers
as well as patients and advocates, regarding certain trends in the data
that coincide with home health coverage misinformation obtained
anecdotally from beneficiaries; that is, information related to the
provision of home health aide services as needed when a patient is
under the home health benefit. We queried interested parties on the
potential basis for continued decline in utilization of home health
aide services despite persistent need, particularly among higher acuity
beneficiaries. Also, in an effort to better understand the decline in
utilization and improve the provision of the home health aide services
under the home health benefit, we solicited comments specifically on
how home health agencies' recruitment and retention challenges, wage
disparities, aide care impact and wage alignment, Medicare-Medicaid
coordination, physician plans of care, and expected beneficiary
outcomes might be interconnected.
In response to our request for information on access to home health
aide services, we received a total of 85 comments, where commenters
highlighted a multitude of challenges and offered several
recommendations to improve the provision of home health aide services
under Medicare. These comments and our responses are summarized in this
section of the rule.
Comment: Commenters broadly stated that the decline in the
utilization of home health aide services is not indicative of a reduced
need for such services. Commenters also stated that despite Medicare
laws allowing for substantial home health aide hours, the actual
provision is dwindling, especially affecting those with chronic or
long-term conditions, who often require a combination of skilled and
aide services for optimal health and safety at home. A commenter
further stated that both CMS' and home health agencies' policies and
practices have resulted in barriers that devalue and disincentivize the
provision of these essential services. Specifically, the commenter
stated that Medicare's current payment model, PDGM, discourages HHAs
from employing aides and providing necessary aide services. The
commenter stated that this is especially true for patients with high
functional impairments and multiple comorbidities. The commenter stated
``the PDGM base calculation amount favors post-institutional care and
the initial 30 days of services through higher case-mix adjustment for
admission source and timing and there is a low percentage of additional
reimbursement for beneficiaries with high functional impairments and
multiple comorbidities, relative to beneficiaries with low functional
impairments and no co-morbidities.'' The commenter stated that because
these are ostensibly the beneficiaries that would need the most aide
services (and HHAs have surmised that the more aide visits they provide
the lower their overall reimbursement will potentially be in the
future), this has led HHAs tell patients that ``Medicare does not pay
for aides.''
In addition to comments stating that the PDGM discourages the
provision of aide services, commenters also stated that HHAs' engage in
selective practices and strategic preference for serving lower acuity
patients to maximize profits, which they assert has a
disproportionately negative effect on higher acuity patients (that is,
those with multiple comorbidities or high functional impairment) and
often leaves them underserved or completely neglected. Commenters
suggested that CMS has not fulfilled its oversight of HHAs conducting
such discriminatory practices and has failed to enforce the
nondiscrimination conditions of participation for Medicare-certified
HHAs. They stated that CMS should investigate the practices of HHAs
that tend to exclude or underserve beneficiaries with chronic,
disabling conditions and take enforcement action to ensure that
patients with long-term disabilities do not face discrimination in the
provision of aide services.
Commenters identified multiple barriers that they stated affected
HHAs in recruiting and retaining home health aides, including low
compensation, competition for labor in different job markets,
inadequate/limited training opportunities, and demanding work
conditions. Commenters' suggestions to overcome these barriers included
improved compensation, including aide services more directly in care
plans, providing advanced training, and establishing centralized
systems for employee development.
Commenters stated that they had noticed wage disparities between
home health aides and similar positions in other care settings, such as
inpatient hospitals and nursing homes, attributing the disparities to
various factors like the nature of work, working conditions, and level
of institutional support available. They stated that reevaluating
compensation structures is necessary for parity. A commenter stated
that CMS's episodic reimbursement for home health does not support
robust staffing, particularly in rural areas. Commenters stated this
creates a situation where HHAs cannot justify separate visits by a home
health aide when nurses or occupational therapists can perform these
functions within their scope of practice during a skilled or therapy
visit.
Commenters urged both HHAs and CMS to overhaul the current
reimbursement compensation to better incentivize fulfillment of home
health aide services in order to ensure aides receive fair wages
commensurate with the critical nature of their role and their impact on
patient care. A commenter suggested the need for CMS to establish new
payment mechanisms specifically designed to ensure HHAs are compensated
fairly for delivering all necessary services, specifically home health
aide services.
Commenters stated that the effectiveness of coordination between
Medicare and Medicaid varies by state and is generally limited
(especially for dually eligible beneficiaries) and that gaps in
coordination are a systemic issue arising from differences in
eligibility, coverage, and administrative factors. Commenters also
stated that although dually eligible beneficiaries might receive
somewhat better access to aide services through Medicaid, better care
coordination is vital for boosting utilization rates and addressing
disparities in access to services.
Further, commenters stated that they believed a dual issue affected
physicians' care plans for home health aide services. They stated there
is limited availability of aides to provide the aide services included
on care plans due to difficulties in finding qualified staff and
inadequate reimbursements from CMS, as well as the fact that physicians
themselves are increasingly less likely to include home health aide
services in care plans. Commenters stated that this physician hesitance
is fueled by HHAs reporting that aide services are either very limited
or not available at all. Commenters stated that, as a result,
practitioners have substantially reduced or altogether eliminated
requests for aide services. Additionally, commenters stated that HHAs
often refuse to initiate aide services unless family/caregivers commit
to learning how to perform the aide functions themselves (even if those
caregivers are not willing and/or able to continue the care and even if
the patient objects to having a family member

[[Page 77686]]

provide aide care). A few commenters stated that HHAs also have a
practice of either refusing to staff aides adequately or understaffing
them deliberately.
Commenters also stated that there were consequences to
beneficiaries' lack of adequate access to home health aide services,
including outcomes such as unnecessary hospitalizations, nursing
facility admissions, potentiated health complications, family/caregiver
burnout, and even forced institutionalizations that lead to a
significant loss of independence and quality of life.
Response: CMS appreciates the comments and suggestions received
regarding home health aide service utilization (especially among higher
acuity Medicare beneficiaries), the status of Medicare and Medicaid
home health aide coordination, physician care plans, HHA recruitment
and retention challenges, as well as wage disparities in other care
settings, in influencing both the availability and quality of home
health aide services for Medicare beneficiaries. We thank commenters
for their feedback suggesting various changes for the equitable and
adequate provision of home health aide services, as well as for payment
reform, recruitment, and retention strategies, improved inter-program
coordination between Medicare and Medicaid, and an overall shift in how
the value of home health aide services is recognized, how home health
aides are compensated, and how home health aide services are
effectively integrated into plans of care. We do note that the current
HH PPS, which generally bundles payment for all goods and services
furnished in a 30-day period, including home health aide services, is
set forth by statute. As such, suggestions related to the payment
structure of the HH PPS, including regarding how aides are paid, are
more appropriately addressed to Congress for consideration.
We would like to thank commenters for their responses regarding
payment rates for home health aide services. In response to the
comments detailing concern that HHAs may be influencing practitioners
to curtail or omit aide services, or are refusing to initiate such
services as ordered, we would like to direct readers' attention to the
home health Conditions of Participation (CoPs) at 42 CFR 484.60. As a
reminder, per the regulations, each patient is required to receive home
health services as delineated in an individualized plan of care. Such
plan of care must specify the care and services necessary to meet the
patient-specific needs as identified in the comprehensive assessment,
including identification of the responsible discipline(s), and the
measurable outcomes that the HHA anticipates will occur as a result of
implementing and coordinating the plan of care. It is improper for an
HHA to unduly influence a practitioner based on the HHA's own service
constraints.
Overall, the feedback provided by respondents will help guide our
policy formulation processes. One of CMS' objectives is to continually
enhance home health policies to optimize both access and quality of
care for Medicare beneficiaries. Likewise, in keeping with the
President's Executive Order (E.O.) on Increasing Access to High-Quality
Care and Supporting Caregivers,\1\ we find the comments and suggestions
received relevant to identifying ``gaps in knowledge about the home-
and community-based workforce serving people with disabilities and
older adults.'' As such, all comments and suggestions will be
considered alongside the goals of this E.O., including identifying
opportunities to expand analyses, supplementing data, or launching new
efforts to provide important data on the home- and community-based
workforce, such as home health aides, as appropriate. This information
may assist in policy development, addressing barriers, and fostering
coordination under the home health benefit for future regulatory
updates.
---------------------------------------------------------------------------

\1\ Exec. Order No. 14,095, 3 CFR 24669-24676. (April 18, 2023).
---------------------------------------------------------------------------

C. Provisions for CY 2024 Payment Under the HH PPS

1. CY 2024 Final 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 as to documentation,
coding, and the LUPA thresholds, 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 the effects of 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 in CYs 2021 and 2022 relating to the behavior assumptions that
were finalized in the CY 2019 HH PPS final rule with comment period, or
to the negative 4.36 percent behavior change assumption adjustment,
that was finalized in the CY 2020 HH PPS final rule with comment
period.
In the CY 2023 HH PPS final rule (87 FR 66796), we concluded that
the three assumed behavior changes had in fact occurred. Additionally,
this monitoring showed that other behavioral changes, such as changes
in the provision of therapy and functional impairment levels, also
resulted from implementing the PDGM. We also restated, as we originally
noted in the CY 2020 HH PPS final rule with comment period (84 FR
60513), that we interpret actual behavior changes to encompass both
behavior changes that were previously outlined and assumed by CMS, as
well as other behavior changes that were 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 other behavior changes occurred, including that 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 the CY 2024 HH PPS
proposed rule (88 FR 43663 through 43671), we stated that our analysis
continues to show that the actual 30-day periods are similar to the
simulated 30-day periods, overall. The number of therapy visits (total
and average) continue to decline, indicating that HHAs changed their
behavior to reduce therapy visits. The analysis continues to support
the presence of the original three assumed behavior changes (for
example, in the volume of visits for LUPAs), as well as other
individual behavior changes (for example, therapy visits). To capture
all such behavior changes, we use the entirety of all behaviors to
calculate estimated aggregate expenditures. The law instructs CMS 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, as required by section 1895(b)(3)(A)(iv)

[[Page 77687]]

and 1895(b)(3)(D) of the Act. We accordingly use the aggregate data.
Section 4142(a) of the CAA, 2023, requires 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 <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>. In the CY 2024 HH PPS
proposed rule, we continued to describe actual behavior changes (88 FR
43663 through 43672) identified through our analysis of CYs 2020-2022
claims data. We posted a descriptive statistics file with the release
of the CY 2024 HH PPS proposed rule. Additionally, the LDS file
available for purchase contained the simulated 60-day episodes and
actual 30-day periods. Furthermore, to promote data transparency, we
will continue to describe the behavior changes analyzed through CY 2026
claims and we will continue to post the descriptive statistics file and
the LDS file with the simulated 60-day episodes and actual 30-day
periods in annual rulemaking.
(b) Method To Annually Determine the Impact of Differences Between
Assumed Behavior Changes and Actual Behavior Changes on Estimated
Aggregate Expenditures
In the CY 2022 HH PPS proposed rule (86 FR 35889 through 35892) we
solicited comments on our methodology to annually determine the impact
of differences between assumed and actual behavior changes on estimated
aggregate expenditures. We received feedback from this comment
solicitation, as well as commenter's feedback when this methodology was
proposed in the CY 2023 HH PPS proposed rule. We finalized this
methodology in the CY 2023 HH PPS final rule (87 FR 66804) stating that
this methodology aligns with the statutory requirements as required by
1895(b)(3)(D) of the Act. Under that methodology, for CYs 2020 through
2026, we will evaluate whether the 30-day budget neutral payment rate
and resulting aggregate expenditures are equal under the PDGM to what
they would have been under the 153-group case-mix system and 60-day
unit of payment. An overview of the methodology is listed in this
section, followed by detailed instructions on each step.
<bullet> Create simulated 60-day episodes from actual 30-day
periods.
<bullet> Price out the simulated 60-day episodes and determine
aggregate expenditures.
<bullet> Price out only the actual 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 the simulated 60-day episodes aggregate expenditures using the
153-group case-mix system and 60-day unit of payment.
(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.\2\ Again, this is to ensure a simulated 60-day episode (simulated
from two 30-day periods) does not overlap years.
---------------------------------------------------------------------------

\2\ 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).\3\
---------------------------------------------------------------------------

\3\ 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 than 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.\4\
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\4\ 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

[[Page 77688]]

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) \5\ 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.
---------------------------------------------------------------------------

\5\ <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 the
specific year (for example, CY 2020) using those specific 30-day
periods that were used to create the simulated 60-day episodes.
Therefore, both the actual PDGM expenditures and the simulated pre-PDGM
aggregate expenditures are based on the exact same claims for the
permanent adjustment calculation.
(4) Compare Aggregate Expenditures Between the Simulated 60-Day
Episodes and Actual 30-Day Periods
We determine if the total aggregate expenditures under the PDGM
were higher or lower than under the 153-case mix group system in each
year beginning with CY 2020 through CY 2026. If expenditures were
higher under the PDGM (that is, we paid more than we would have if the
153-group payment system was in place), then the actual base payment
rate we implemented was too high. If the expenditures were lower under
the PDGM (that is, we paid less than we would have if the 153-group
payment system was in place), then the actual base payment rate we
implemented was too low.
(5) Determine What the 30-Day Payment Rate Should Have Been
Using an iterative process, we determine what the 30-day base
payment rate should have been, in order to achieve the same estimated
aggregate expenditures as obtained from the simulated 60-day episodes.
This is our recalculated (``repriced'') base payment rate.
(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. While we did not propose any changes to the
methodology finalized in the CY 2023 HH PPS final rule (87 FR 66804),
we did receive comments on the CY 2024 HH PPS proposed rule which are
summarized in this section.
Comment: Many commenters opposed the behavioral adjustment
methodology finalized in the CY 2023 HH PPS final rule based on legal
and technical concerns that mostly repeated objections raised in the
last rulemaking cycle. The legal arguments mostly restated we are
violating the Medicare statute. These commenters repeated technical
concerns including the use of therapy visits, accepted diagnosis codes,
timing assignment, and missing OASIS items. Commenters stated ``home
health agencies have predictably provided fewer therapy sessions,'' and
the methodology's reliance on this change in therapy utilization is not
appropriate to use in determining behavior changes since the law
required the elimination of the therapy thresholds. Commenters again
stated the methodology is unreasonable because ``claims billed under
one case-mix system, with different incentives, coding and billing
rules, and unit of payment'' cannot be compared. They requested that
CMS reverse the permanent payment adjustment taken in CY 2023, withdraw
the proposal of a permanent payment

[[Page 77689]]

adjustment for CY 2024, and develop and propose a new methodology after
input from a technical expert panel. Similarly, a few commenters stated
again that the methodology performs an unauthorized rebasing of the 30-
day payment rate. Lastly, several commenters stated beneficiaries using
home health are becoming more complex and have higher acuity needs, for
which reimbursement does not match. We received a new comment on the
methodology requesting CMS to consider how to further integrate the
acuity of patients into the behavioral assumption methodology and how
to better account for acuity overall in the PDGM.
Response: We appreciate the comments and recommendations we
received regarding the behavior adjustment methodology. We did not
propose any changes to the behavior adjustment methodology in this
year's proposed rule and will not be finalizing any changes. As noted,
most of these comments were similar to comments we received on the CY
2023 HH PPS proposed rule, so we refer readers to our responses to
these concerns in the CY 2023 HH PPS final rule (87 FR 66797 through
66804). In that rule, for example, we responded to commenters'
assertions that we violated the Medicare statute, as well as
commenters' disagreement with technical concerns, including the
inclusion of therapy provision, with our methodology.
One such argument to which we responded in the CY 2023 HH PPS final
rule (87 FR 66802) was a theory that we implemented an unauthorized
rebasing of the payment rates. The law requires us to determine the
difference between assumed versus actual behaviors on estimated
aggregate expenditures. Therefore, we continue to believe that the best
reading of the law requires us to retrospectively determine if the 30-
day payment amount in CYs 2020 through 2022 resulted in the same
estimated aggregate expenditures if the 60-day unit of payment and the
PDGM case-mix adjustment had not been implemented. As stated
previously, the finalized methodology compares the payment rate and
aggregate expenditures based on assumed behaviors to what the payment
rate and estimated aggregate expenditures would have been using actual
behaviors, which we believe is what the law requires.
We thank the commenters for their suggestion that they should be
paid more because patient acuity has increased. We finalized a policy
in the CY 2019 HH PPS final rule with comment period (83 FR 56515) to
annually recalibrate 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. It also allows us to be as accurate and up to date as
possible when measuring relationships between resource use and
functional points, functional threshold levels, comorbidities, LUPA
thresholds, and case-mix weights. These aspects of the PDGM capture
patient acuity. Further, because our finalized methodology utilizes the
most recent claims data (which includes case-mix), patient acuity is
reflected in the data.
(d) CY 2020 Results
This section discusses the final results that CMS determined from
CY 2020 claims data that was previously published in the CY 2023 HH PPS
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 did not 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 B1.

[[Page 77690]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.003

As shown in Table B1 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 HH PPS
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 B2.

[[Page 77691]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.004

As shown in Table B2 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 Final Results
We will continue the practice of using the most recent complete
home health claims data at the time of rulemaking. The CY 2022 analysis
presented in the CY 2024 HH PPS proposed rule was considered
``preliminary'' and as more data became available from the latter half
of CY 2022, we updated our results. As we did with the CY 2024 HH PPS
proposed rule, the HH PPS limited data set (LDS) file released with
this final 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 final 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.\6\ In addition, the final 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,\7\ 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 2024
final rule utilizes the CY 2022 finalized data for determining the
behavior adjustment needed to calculate 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.
---------------------------------------------------------------------------

\6\ <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>.
\7\ <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>.
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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 8,593,266 30-
day periods of care and dropped 539,048 30-day periods of care that had
claim occurrence code 50 date after October 31, 2022. We also excluded
894,333 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 6,105 30-day periods were excluded.
Additionally, we excluded 18,296 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 (69.6 percent) and single 30-day periods
of care (30.4 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 7,124,359 actual 30-day periods of care and 4,199,746
simulated 60-day episodes of care for CY 2022.
Using the final dataset for CY 2022 (7,124,359 actual 30-day
periods which made up the 4,199,746 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 B3. This indicates that aggregate
expenditures under the PDGM were higher than if the 153-group payment
system was still in place in CY 2022. As described previously in the
methodology, we needed to calculate what the actual CY 2022 30-day base
payment rate should have been to equal aggregate expenditures that we
calculated using the simulated CY 2022 60-day episodes. We determined
the CY

[[Page 77692]]

2022 30-day base payment rate should have been $1,839.10 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 B2), 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 ($1,839.10)
payment rates. This difference is the retrospective dollar amount
needed to offset payment. Our results are shown in Table B3.
[GRAPHIC] [TIFF OMITTED] TR13NO23.005

As shown in Table B3, a permanent prospective adjustment of -1.767
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) CY 2024 Final Permanent Adjustment and Temporary Adjustment
Calculations
As discussed in the CY 2023 HH PPS final rule (87 FR 66808), to
offset fully the increase in estimated aggregate expenditures for CYs
2020 and 2021 based on the impact of the differences between assumed
and actual behavior changes, in CY 2023, CMS would have 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 have resulted in a significant negative adjustment in
a single year. However, as we noted at the time, and as still is
applicable, if the PDGM 30-day base payment rate remained higher than
it should be, there will be a compounding effect, potentially creating
the need for an even larger reduction to adjust for behavioral changes
in future years. After considering all options, CMS proposed and
finalized the application of only a permanent adjustment to the CY 2023
base payment rate. We believed, and continue to believe, this mitigates
the need for a larger permanent adjustment and reduces 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. We exercised our discretion to implement adjustments in a time
and manner determined appropriate, under section 1895(b)(3)(D) of the
Act, to finalize a -3.925 percent (half of the -7.85 \8\ percent)
permanent adjustment to the CY 2023 30-day payment rate. 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 (that is, the remaining half not applied to the CY
2023 payment rate) in future rulemaking, and any additional adjustments
(for example, CY 2022) needed to the base payment rate, to account for
behavior change based on more recent data analysis. We note that the
total permanent adjustment based on CY 2022 data did not have any
previous behavior adjustments applied.

[[Page 77693]]

However, as described later in this section, we recognize for CY 2024
we must account for adjustments made in CY 2023.
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\8\ We initially proposed a -7.69 percent permanent adjustment
in the CY 2023 HH PPS proposed rule (87 FR 37620). As more data
became available from the latter half of CY 2021, we updated our
results.
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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 $1,839.10 (based on actual behaviors) (shown in
Table B3) 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 B4 and B5.
[GRAPHIC] [TIFF OMITTED] TR13NO23.006

[GRAPHIC] [TIFF OMITTED] TR13NO23.007

We remind readers when we update the national, standardized 30-day
period payment amount (section II.C.4.2) that 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 final
permanent adjustment by simply subtracting -3.925 percent from the
total permanent adjustment of -9.477 percent (updated from -9.356
percent in the proposed rule as more data became available), as
described further below.
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 -9.477 percent, which is converted to a
0.90523 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) = 0.90523 (9.477 percent) divided by 0.96075 (3.925
percent). The resulting factor (1-x) is 0.94221, which is converted to
a 5.779 percent (updated from 5.653 percent in the CY 2024 HH PPS
proposed rule (88 FR 43678) as more data became available) reduction to
the CY 2024 national, standardized base payment rate. In other words, 1
minus the factor 0.94221 equals 0.05779 which is equal to a 5.779
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 -5.779 percent permanent
adjustment to the CY 2024 base payment rate.
To calculate the temporary adjustment, we would add the CY 2022
temporary adjustment dollar amount of $1,405,447,290 to the previously
finalized CYs 2020 and 2021 dollar amounts for a total of
$3,489,523,364. We stated in the CY 2023 HH PPS final rule (87 FR
66804) and the CY 2024 HH PPS proposed rule (88 FR 43678), 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, in the CY 2023 HH PPS proposed rule (87 FR 37682), we opted to
implement only the permanent adjustment and solicit

[[Page 77694]]

comments on the implementation of a temporary adjustment, as we
believed for that year applying both would result in too significant of
a reduction in the payment rate in one year. Given that the magnitude
of implementing both the temporary and permanent adjustments for CY
2024 rate setting may also result in a significant reduction of the
payment rate, we similarly did not propose to take the temporary
adjustment in CY 2024. As we are required by Section 1895(b)(3)(D)(iii)
of the Act, we will propose a temporary adjustment factor to the
national, standardized 30-day base payment rate when we propose this
temporary payment adjustment in future rulemaking.
We received 343 comments on the permanent prospective behavior
change adjustment on the CY 2024 home health payment rate which are
summarized in this section. Similar to comments received on the CY 2023
permanent adjustment, the majority of commenters disagreed with the
proposed permanent adjustment to the CY 2024 payment rate.
Comment: Overall, commenters raised concerns that the proposed rate
cut would be a threat to home health access. Further, industry
advocates submitted data from hospitals and health systems to support
their assertion that HHA referrals for Medicare beneficiaries are
increasingly being rejected, and the number of patients referred to
home health and subsequently admitted is dropping.
These commenters interpret these trends to be indicative of
declining access to home health services and state that CMS's
implementation of the PDGM and behavior adjustment resulting in rate
cuts are major contributors. Commenters stated that a rate cut will
affect beneficiary access by forcing HHAs to close, sell, reduce
service areas, reduce admissions, and struggle to retain staff, while
many others are operating with, or will operate with, negative margins
if the CY 2024 permanent rate adjustment is finalized. These commenters
contend that CMS does not have an accurate financial picture of
industry stability, as we do not account for overall margins (for
example, Medicare Advantage), rather just Medicare Fee-For-Service
(FFS) margins when considering margin analyses. A commenter stated that
``the economic model of HHAs necessitates a view consistent with the
HHAs' evaluation of its overall financial condition,'' suggesting that
it is common for Medicare's FFS payment to subsidize shortfalls from
other payers.
Response: We appreciate industry advocates' dedication to ensuring
continued access to home health services. We recognize there is always
a level of concern that accompanies a payment rate decrease and we
remind readers that, by law, as described in section 1895(b)(3)(D) of
the Act, we are required to ensure that estimated aggregate
expenditures under the HH PPS are equal to our determination of
estimated aggregate expenditures that otherwise would have been made
under the HH PPS in the absence of the change to a 30-day unit of
payment and changes in case-mix adjustment factors. We appreciate
providers', beneficiaries', and other stakeholders' commitment to the
sustainability of the home health benefit.
As we noted above, we reprice the base payment rate based on actual
behavior changes by HHAs, not on how the behavior changes impact HHA
margins. In any event, CMS looked closely at our data to ensure the
payment rate adequately covers the costs reported by HHAs, without
creating unnecessary hardship to providers and maintaining access to
quality services for all beneficiaries. Maintaining access is one of
CMS's priorities when making policy decisions. We do not intend to
obstruct the provision of home health services to any beneficiary who
qualifies for this benefit.
Overall, CMS's data on the cost of providing care (as reported by
HHAs on the Home Health Medicare Cost Reports (CMS Form 1728-20, OMB
No. 0938-0022)) and the margin analysis, along with data reported by
MedPAC in their annual Medicare payment policy reports to the Congress,
indicate that the cost of providing home health care remains, on
average, below the base payment rate and that HHAs in general continue
to experience high profit margins. CMS's analysis, shown in Table B4 of
the CY 2024 HH PPS proposed rule, indicates that the CY 2022 national,
standardized 30-day period payment rate was approximately 45 percent
more than the CY 2022 estimated 30-day period cost (88 FR 43665).
MedPAC's 2023 March Report to the Congress \9\ found that in 2021, home
health agencies' average cost per 30-day period decreased by 2.9
percent and that Medicare's payment per in-person visit increased by
17.7 percent. Medicare margins for freestanding agencies averaged 24.9
percent in 2021, up from 20.2 percent in 2020 and 15.4 percent in 2019.
These high margins indicate that the increase in payments in 2021 far
exceeded the increase in costs, which undermines commenters' assertion
that CMS's modest (by comparison) cuts to the base rate in 2023 would
exacerbate any problems with access to care. Further, MedPAC's
projected Medicare margin for HHAs for 2023 is 17.0 percent, which
includes the statutory adjustment to the base payment rate in
accordance with the statutory requirement to determine the impact of
differences between assumed behavior changes and actual behavior
changes on estimated aggregate expenditures in response to the change
in case-mix adjustment and the 30-day period payment.
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\9\ 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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Some commenters pointed to the number of HHAs with negative
margins. Using Medicare cost reports with a year end of December 31,
2022, approximately 21 percent of HHAs have margins below zero percent.
We are aware that some HHAs face financial difficulties, but the
behavior adjustment is an aggregate adjustment that impacts the base
payment rates of all HHAs equally. Our analysis, shown in Table B6,
indicates that even prior to the PDGM, approximately 20 to 23 percent
of freestanding HHAs had margins below zero percent, indicating that
this phenomenon pre-dated the PDGM, and are not the result of the rate
adjustments related to the initial behavior assumptions applied in CY
2020.

[[Page 77695]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.008

With respect to the comment that CMS must look at the HHAs' overall
financial condition (that is, overall margins), we have never endorsed
the view that Medicare funds should be used to subsidize reimbursement
rates from other payers--a policy that would be inconsistent with our
obligation to be responsible stewards of the Medicare Trust Funds and
would ultimately increase costs to Medicare beneficiaries, taxpayers,
or both. As we noted in the CY 2023 HH PPS final rule we responded to
this assertion stating: ``Medicare has never set payments to cross-
subsidize other payers. Section 1861(v)(1)(A) of the Act states that
under the methods of determining costs, the necessary costs of
efficiently delivering covered services to individuals covered by the
insurance programs established by this title will not be borne by
individuals not so covered, and the costs with respect to individuals
not so covered will not be borne by such insurance programs'' (87 FR
66807).
While CMS monitors the payment rate to ensure it is adequate for
providing care, MedPAC further assesses access to care by reviewing
several indicators to determine the level at which payments will be
adequate to cover the costs of providing care of a provider in any
given year. Specifically, they examine the supply of home health
providers, annual changes in the volume of services, quality of care,
and access to capital, in addition to the relationship between
Medicare's payments and providers' costs. Their annual reports indicate
that prior to and following the implementation of the PDGM, the payment
adequacy indicators for home health care have been positive.
Finally, we observed many methodological weaknesses in the analyses
submitted by commenters. It is unclear whether the proprietary data on
which commenters base their analyses includes referrals from only
Medicare FFS beneficiaries or also includes referrals from patients
covered by other payers, which means the entire analysis may be inapt
for Medicare FFS policy. In addition, the proportion of hospital
referrals rejected by HHAs does not equate to the proportion of
qualifying beneficiaries who are denied care. The data fails to capture
why the beneficiary was rejected--for example, because the analysis
focuses on numbers of referrals denied rather than numbers of
beneficiaries denied care, the rejection referral proportion could be
inflated by a small number of beneficiaries rejected from multiple
HHAs, or by beneficiaries rejected from one HHA but who ultimately
received care from another HHA. It also fails to indicate that the HHA
did in fact reject the referral and why it was rejected (for example,
payment or staff related), or whether there was another reason the
patient did not receive home health services, such as patient refusal
or readmission to an inpatient facility.
Further, the data submitted by the commenters is deficient in
analyzing the characteristics of the beneficiaries who are receiving
home health services versus those that do not. The usefulness of such
analysis would be to potentially show whether HHAs are strategic in
accepting certain types of patients over others. In response to a
similar home health rate decrease (CY 2011 HH PPS final rule), in which
CMS finalized a 3.79 percent rate reduction, a commenter stated that
``HHAs may become more selective in their acceptance of medically
difficult patients who are likely to utilize more services'' (75 FR
70375). Additionally, in the CY 2023 HH PPS final rule we quoted an
article published in February 2020, in which the National Association
for Home Care and Hospice (NAHC) stated ``categorically, across the
board, we're going to reduce our therapy services'' because of the PDGM
(87 FR 66798). A comment letter received by NAHC on the CY 2023
proposed rule also attempted to outline, how historically, rate cuts to
Medicare home health services alter how HHAs provide care.
Compellingly, we also received a significant number of comments in
response to the CY 2024 HH PPS proposed rule supporting this concept.
These comments are discussed below.
Comment: Commenters indicated that HHAs may also choose which
patients to accept on service to maximize payment. For example, a
patient advocate group noted that ``HHAs self-select the Medicare
patients they will serve (or not serve), and then HHAs determine the
services they provide, based on their hiring choices and OASIS
assessments.'' This commenter stated that home health care has become
``big business,'' and stated that ``HHAs focus

[[Page 77696]]

more on profits for shareholders and less on critically needed services
for patients.'' Another commenter stated, ``the venture capital backed
agencies are using data-mining solutions to ensure a profit is made.
This includes everything from the heavily scrutinized referral
acceptance procedure to ensure `profitable' patients are chosen over
`non-profitable' patients and the rationing of care based on what the
data shows to create profit from decreasing direct care costs.''
Response: Our previous response related to margins suggests that,
as some commenters have claimed, HHAs may be strategically admitting or
denying beneficiaries based to maximize their margins. We are concerned
by suggestions that the ``referral rejections'' and perceived access to
care issue that industry advocates have cited to us are in fact being
caused by strategic behavior. We would be interested to receive data
and analysis comparing beneficiaries who are receiving home health
services versus those who are not, which could help inform future
policy proposals. The data we received does not address that issue, and
CMS's review of utilization software websites designed to guide HHAs to
the most profitable referrals and to identify ways to decrease costs
supports these commenters assertions. For these reasons, we cannot
credit home health agencies' conclusion that either behavioral
adjustments or the PDGM are the root cause of the access issues
reported by beneficiaries.
We will continue to monitor home health utilization, claims data,
and home health cost reports to identify trends that may indicate
vulnerabilities and deficiencies in the home health prospective payment
system and potentially affect access to care. Given this monitoring and
analyses showing that the home health payment exceeds the cost of
providing care, we would expect that providers would not have to reject
referrals because of inadequate payment. In fact, due to the newly
implemented case-mix system designed to encourage a varied distribution
of services, we would not only expect that agencies would not have to
reject referrals but be well-positioned to accept a wide range of
referrals regardless of the services needed.
We are aware of the changes in the home health industry, including
buyouts and increased interest of private equity groups. These shifts
will undoubtedly change the landscape of home health; however, we
remind stakeholders that Medicare FFS sets rates to cover costs that
align with Medicare's principles of reasonable cost determination as
set out at 42 CFR 413.9, not to ensure high profit margins. The home
health benefit uses a prospective payment system that is inclusive of
all care required in a 30-day period of care. This method of payment is
made based on a predetermined, base payment amount. The home health
case-mix system, the PDGM, was created to align the payment system more
closely with patient characteristics and ensure that payment accurately
meets the resource needs of various types of patients. This helps HHAs
to be paid appropriately for a wide range of patients with varying care
needs and improves the likelihood that clinically complex and ill
beneficiaries and patients coming from the hospital will have adequate
access to home health care. In the CY 2019 HH PPS final rule with
comment period (83 FR 56448), where we finalized the implementation of
the PDGM, there was some commenter concern that the PDGM may introduce
``inappropriate practice patterns,'' suggesting again that HHAs may
change how they operate in accordance with payment. However, our
objective then, as well as now, remains to pay for the care provided as
required by the statute. As evidenced by the behavior changes described
in the CY 2023 HH PPS final rule, we understand that providers do
continue to adjust practice patterns in response to payment and case-
mix changes. We also understand that venture capital and private equity
groups are buying HHAs. This, however, does not mean that overall
access to the benefit has been compromised and the analyses presented
by commenters fails to show evidence that this is the case. Further,
were the data to show definitively that overall access has been
affected, there remains no direct link to inadequate payment. It is
also important to note that while the commenters' data purports to show
an increase in ``referral rejections'' beginning with the
implementation of the PDGM and through the beginning of CY 2023, in CY
2020 (beginning of PDGM) and each subsequent year through CY 2023, CMS
has instituted a positive rate update for HHAs. It is unclear why HHAs
would reject referrals when payment rates have increased each year
since the implementation of the PDGM, and as established earlier, have
continually exceeded the cost of providing care. Additionally, CMS is
statutorily required, under Section 1895(b)(3)(D)(i), 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, by accounting for the impact of the differences
between assumed behavior changes and actual behavior changes on
estimated aggregate expenditures. This requirement under section
1895(b)(3)(D)(i) resulted in the proposed -5.653 percent adjustment for
CY 2024.
We do not believe that the percentage of ``referral rejections''
attributable to staffing issues requires a different policy. Commenters
did not submit any evidence that staffing shortages are due to changes
in the payment rate or case-mix adjustment rather than the widespread
staffing shortages that exist across the spectrum of healthcare, and in
the general labor market. While we recognize the staffing challenges
faced by HHAs and other healthcare providers, we are accounting for
those staffing challenges in other ways, such as the market basket
increase (which includes labor costs), as explained in section II.C.3
of this final rule.
In conclusion, we appreciate the concerns that a rate decrease may
affect access to home health services; however, CMS's analysis of HHA
cost reports and margin analysis, as well as MedPAC's analysis of
profit margins, the supply of home health providers, annual changes in
the volume of services, quality of care, and access to capital shows
that access should remain adequate. Our discussion above indicates that
any effect on access would not be a result of CMS paying more
accurately for the care provided. In addition, the law requires us to
evaluate the difference between assumed and actual behavior changes on
estimated aggregate expenditures independently for CYs 2020 through
2026. The payment adjustment does not include extenuating factors such
as margins. Further, while the analyses submitted by the commenters
allegedly show that access to home health services has been
compromised, CMS does not have access to the proprietary data used to
create the analysis to confirm the validity of the results.
Final Decision: We continue to adhere to the methodology finalized
in the CY 2023 HH PPS final rule (87 FR 66804). However, as in previous
years, we acknowledge that taking a large permanent adjustment in a
single year, to comply with the statutory requirement that CMS ensure
the estimated aggregate expenditures under the PDGM are equal to the
estimated aggregate expenditures that would have been made under the
prior system, may be burdensome for some providers. As we have the
discretion to implement any behavior adjustment in a time and manner
determined appropriate, we are

[[Page 77697]]

finalizing only a -2.890 percent (half of the -5.779 \10\ percent)
permanent adjustment for CY 2024. This approach of applying half of the
permanent adjustment is aligned with the approach finalized in the CY
2023 HH PPS final rule (87 FR 66808) where CMS finalized half of the
permanent adjustment to the CY 2023 30-day payment rate.
---------------------------------------------------------------------------

\10\ We initially proposed a -5.653 percent permanent adjustment
in the CY 2024 HH PPS proposed rule (88 FR 43679). As more data
became available from the latter half of CY 2022, we updated our
results.
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However, we note the permanent adjustment to account for actual
behavior changes in CYs 2020, 2021, and 2022, should be -5.779 percent,
which includes the remaining ``half'' from the CY 2023 HH PPS final
rule and the additional adjustment based on CY 2022 data. Therefore,
applying a -2.890 percent permanent adjustment to the CY 2024 30-day
payment rate would not adjust the rate fully to account for differences
in behavior changes on estimated aggregate expenditures during those
years. We will have to account for that difference, and any other
potential adjustments needed to the base payment rate, to account for
behavior change based on data analysis in future rulemaking.
CMS did not propose to adjust the CY 2024 base payment rate using
our temporary adjustment authority, as section 1895(b)(3)(D)(iii)
allows any adjustment to be made in a time and manner deemed
appropriate by the Secretary. However, we remind readers that without
the full permanent adjustment (-5.779 percent) in effect, the total
temporary dollar amount will likely continue to increase until the
permanent adjustment is fully implemented.
2. CY 2024 PDGM LUPA Thresholds and PDGM Case-Mix Weights
(a) 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
a policy to set the LUPA thresholds 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 may vary 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.e.3. of this final 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 a policy to reevaluate the LUPA thresholds for each PDGM
payment group 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 (86 FR 62249), we discussed the
influence of the COVID-19 PHE on home health utilization and finalized
a 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 believed 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 COVID-19 PHE on the
calculation of the case-mix weight would be minimal 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 would be more indicative of visit
patterns in CY 2023 rather than continuing to use the LUPA thresholds
derived from the CY 2018 pre-PDGM data. Therefore, in the CY 2023 HH
PPS final rule we finalized a policy to update the LUPA thresholds for
CY 2023 using data from CY 2021.
In accordance with our policy, for CY 2024, in the CY 2024 HH PPS
proposed rule, we proposed to update the LUPA thresholds using CY 2022
home health claims utilization data (as of March 17, 2023). We
solicited public comments on the proposed updates to the LUPA
thresholds for CY 2024. These comments and our responses are summarized
in this section of the rule.
Comment: A few commenters expressed support for the proposed LUPA
thresholds.
Response: We thank the commenters for their support.
Comment: Some commenters continued to disagree with the policy to
reevaluate and update the LUPA thresholds annually. A commenter
recommended that CMS reduce the LUPA threshold for all case-mix groups
to two visits. Another commenter recommended CMS not update the LUPA
thresholds for CY 2024 and reassess the impact of using CY 2023 data
before making any adjustments. This commenter stated that the change in
LUPA visit thresholds from two and three visits to the current four and
five visit thresholds narrows the gap between the LUPA visit threshold
and the average visits per home health period, and that as the gap
narrows, LUPA payments will no longer represent outliers. Lastly, a
commenter questioned the methodology used to calculate the LUPA
thresholds.

[[Page 77698]]

Response: We thank the commenters for their recommendations;
however, in the CY 2019 HH PPS final rule with comment period (83 FR
56492), we finalized the policies to set LUPA thresholds at the 10th
percentile of visits or 2 visits, whichever is higher, for each payment
group, and reevaluate the LUPA thresholds for each PDGM payment group
every year based on the most current utilization data available at the
time of rulemaking. We did not propose any changes to our finalized
LUPA threshold policy in the CY 2024 HH PPS proposed rule. Further, our
policy to reevaluate the LUPA thresholds ensures that they reflect, as
accurately as possible, current home health resource use and changes in
utilization patterns. As such, we believe that we should update the
LUPA thresholds using CY 2022 home health claims utilization data (as
of July 15, 2023), to ensure they are representative of the most recent
visit patterns.
Final Decision: We are finalizing the proposal to update the LUPA
thresholds for CY 2024, using CY 2022 claims data (as of July 15,
2023). The final 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 B12 and is
also available on the HHA Center web page.\11\
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\11\ <a href="https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center">https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center</a>.
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(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 (ADLs) 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 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 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 proposed 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 proposed to use the same methodology previously finalized to
update the functional impairment levels for CY 2024.
We solicited public comments on the updates to functional points
and the functional impairment levels by clinical group. A summary of
these comments and our responses are as follows:
Comment: Several commenters opposed the proposed, updated CY 2024
functional impairment points and levels. A commenter recommended
delaying this update until the effect of the CY 2023 functional
impairment levels has been assessed. This commenter also suggested that
if future updates are warranted that it should occur in CY 2025 using
post pandemic CY 2023 claims data.
Response: We thank the commenters for their recommendations;
however, performing a yearly recalibration allows us to be as accurate
and up to date as possible when measuring the relationship between
resource use and functional points, functional threshold levels,
comorbidities, LUPA thresholds and case-mix weights. Therefore, we do
not believe it would be appropriate to delay updates to the functional
impairment points and levels for CY 2024. We continue to believe that
updating the functional impairment levels using current data ensures
that all variables used as part of the overall case-mix adjustment
appropriately align home health payment with the actual cost of
providing home health care services.
Comment: A commenter disagreed with the method used for assigning
the functional impairment levels, stating that the update in point
values appears to be more aimed at achieving an arbitrarily set target
of one-third in each level rather than a true categorization of the
patients' clinical presentation.
Response: We remind commenters that the functional levels are set
so that roughly a third of periods within each clinical group are
assigned to low, medium, and high to ensure that the case-mix system
pays appropriately for differences in functional impairment level. The
structure of categorizing functional impairment into low, medium, and
high levels has been part of the home health payment structure since
the implementation of the HH PPS. The previous HH PPS grouped home
health episodes using functional scores based on functional OASIS items
with similar average resource use within the same functional level,
with approximately a third of episodes classified as low functional
score, a third of episodes classified as medium functional score, and a
third of episodes classified as high functional score. Likewise, the
PDGM groups home health periods of care using functional impairment
scores based on functional OASIS items with similar resource use and
has three levels of functional impairment severity: low, medium, and
high. However, the PDGM differs from the previous HH PPS functional
variable, in that the three functional impairment level thresholds in
the PDGM vary between the clinical groups. The PDGM functional
impairment level structure accounts for the patient characteristics
within that clinical group associated with increased resource costs
affected by functional impairment. This is to further ensure that
payment is more accurately aligned with actual patient characteristics
and resource needs.
Comment: Some commenters were concerned that the proposed
functional impairment levels do not accurately reflect the actual
functional impairment levels of home health patients or the cost to
provide care for higher acuity patients, specifically those in the
musculoskeletal rehabilitation, neuro rehabilitation, surgical
aftercare, and wounds groups, as these individuals often have intense
needs for assistance with daily living. A few commenters questioned why
it appears there would be a reduction in reimbursement for the highest
acuity patients and suggested that this will limit an agency's ability
to care for these types of patients. Some commenters indicated that
they would see fewer patients with high functional impairment, as
several groups changed from high functional impairment to medium
functional impairment, while others stated this change will

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incentivize for-profit agencies to hand-pick patients based on their
predicted case mix grouping. A commenter suggested that the shift of
patients from high functional impairment to medium functional
impairment indicates by CMS through the HIPPS code that these patients
are not as clinically complex and therefore would not require as many
resources.
Response: We have noted in past rules that we use the functional
impairment level case-mix adjustment, developed as part of the PDGM
case-mix, to provide the necessary payment adjustments to ensure that
functional care needs are met based on actual patient characteristics.
As in any case-mix system, there will be certain case-mix groups where
a patient's costs exceed the average as well as where their costs are
below the average. However, we do not believe that a patient assignment
to a HIPPS category should dictate what care the patient needs. We
expect the provision of services to be made to best meet the patient's
care needs and in accordance with the home health CoPs at Sec. 484.60
which sets forth the requirements for the content of the individualized
home health plan of care which includes the types of services,
supplies, and equipment required; the frequency and duration of visits
to be made; as well as patient and caregiver education and training to
facilitate timely discharge. Therefore, we do not expect HHAs to under-
supply care or services; reduce the number of visits in response to
payment; or inappropriately discharge a patient receiving Medicare home
health services as these would be violations of the CoPs and could also
subject HHAs to program integrity measures.
Final Decision: We are finalizing the functional points and
functional impairment levels updates for CY 2024 as proposed, using CY
2022 claims data (as of July 15, 2023). The updated OASIS functional
points table and the table of functional impairment levels by clinical
group for CY 2024 are listed in Tables B7 and B8, respectively.
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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.

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<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),
we stated that we would continue to examine the relationship of
reported comorbidities on resource utilization and make the appropriate
payment refinements to help ensure that payment is in alignment with
the actual costs of providing care. For CY 2024, we proposed 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 proposed to update the comorbidity subgroups to
include 22 low comorbidity adjustment subgroups as identified in Table
B19 and 101 high comorbidity adjustment interaction subgroups as
identified in Table B20 in the CY 2024 HH PPS proposed rule.
We invited comments on the proposed updates to the low comorbidity
adjustment subgroups and the high comorbidity adjustment interactions
for CY 2024. These comments and our responses are summarized as
follows.
Comment: A commenter supported the proposed low comorbidity
subgroups and the high comorbidity interactions. This commenter stated
that the proposed low comorbidity subgroups achieve the goal of
ensuring that payment is in alignment with the actual costs of
providing care and the high comorbidity adjustment interaction
subgroups acknowledge the impact of multiple diagnoses on care delivery
complexity and cost.
Response: We thank the commenter for their support.
Comment: A commenter requested clarification on the number of
proposed low comorbidity subgroups for CY 2024. This commenter noted
that Table B19 included 22 subgroups, but the preamble language listed
the number of subgroups as 21.
Response: We thank the commenter for bringing this to our
attention. The preamble language inadvertently stated that there were
21 low comorbidity subgroups; however, the 22 subgroups listed in Table
B19 are accurate. Furthermore, the number of low comorbidity subgroups
remains 22 for this final rule.
Comment: A commenter requested that CMS reassign diseases and
disorders, as well as specific ICD-10 CM diagnosis codes, to different
comorbidity subgroups and create new high comorbidity interactions. The
commenter requested the following reassignments:
<bullet> Include the Diabetes with mononeuropathy, E.41 codes in
the Neurological 10 grouping.
<bullet> Include rheumatic mitral valve diseases I05. codes and
aortic rheumatic valve diseases I06 codes in the Heart 9 grouping.
<bullet> Add a high comorbidity interaction for Circulatory 1 and
Skin 4.
<bullet> Add a high comorbidity interaction between Neurological 11
and Skin 4.
<bullet> Add a high comorbidity interaction between Skin 1, abscess
and Skin 4.
Response: We appreciate the commenter's review of these codes and
suggested reassignments and may consider these changes in future
rulemaking. As we stated in the CY 2020 final rule with comment period
(84 FR 60510), and as described in the technical report ``Overview of
the Home Health Groupings Model,'' the home health-specific comorbidity
list is based on the principles of patient assessment by body systems
and their associated diseases, conditions, and injuries. We used this
process to develop categories of conditions that identify clinically
relevant relationships associated with increased resource use. We
understand the magnitude of clinical conditions and comorbidities, and
the interactions that exist between them, in the Medicare home health
population; however, we remind commenters that only those subgroups of
diagnoses that represent more than 0.1 percent of periods of care and
that have at least as high as the median resource use will receive a
low comorbidity adjustment. We describe this method for determining
statistical significance in the CY 2020 final rule with comment period
(84 FR 60510). This is based on the knowledge that the average number
of comorbidities in the aggregate becomes the standard within that
population for the purpose of payment. However, because we still expect
HHAs to report all secondary diagnoses that affect care planning, there
will be comorbidity subgroups included in the home health-specific list
that do not meet the criteria to receive an adjustment.
Final Decision: We are finalizing the proposal to update the
comorbidity adjustment subgroups and the high comorbidity adjustment
interactions using CY 2022 home health data. For CY 2024, the final
update to the comorbidity adjustment subgroups includes 22 low
comorbidity adjustment subgroups as identified in Table B9 and 102 high
comorbidity adjustment interaction subgroups as identified in Table
B10. The final 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>.
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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 for the CY 2024 HH PPS proposed rule, we used CY 2022 home
health claims data with linked OASIS data (as of March 17, 2023). These
data were the most current and complete data available at the time of
rulemaking. We stated that 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 and indicated that the proposed
recalibrated case-mix weights would 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 B7 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 B11 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 final case-mix weights for CY 2024 are listed in Table B12 and
will also be posted on the HHA Center web page \12\ upon display of
this final rule.
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\12\ 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
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

[[Page 77726]]

data at the time of rulemaking, which is CY 2022 data (as of July 15,
2023). 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 1.0124.
We invited comments on the proposed CY 2024 case-mix weights, case-
mix weight budget neutrality factor and these are summarized as
follows.
Comment: A commenter expressed support for the annual recalibration
of the case-mix weights using CY 2022 utilization data.
Response: We thank the commenter for their support.
Comment: Several commenters opposed recalibrating the PDGM case-mix
weights for CY 2024. Some commenters expressed concern with the
frequency of recalibration stating that annual updates create
instability for home health agencies. Other commenters stated that CMS
should delay recalibrating the case-mix weights until the impact of
previous recalibrations on access and care has been reviewed. A
commenter suggested that an independent analysis should be conducted to
verify the reliability of the regression model used to set case-mix
weights during a period of budget neutrality measurement. Lastly, a
commenter requested transparency as to why and how CMS makes changes to
the PDGM case-mix weights.
Response: We recognize that commenters have had concerns regarding
annual recalibration since we finalized this policy previously;
however, we continue to believe that annual recalibration of the PDGM
case-mix weights ensures that the case-mix weights reflect, as
accurately as possible, current home health resource use, changes in
utilization patterns, and reflects the types of patients currently
receiving home health services. We believe that prolonging
recalibration, rather than recalibrating annually, could lead to more
significant variation in the case-mix weights than what is observed
using the most recent utilization data. Therefore, we believe that
utilizing CY 2022 data to recalibrate the CY 2024 case-mix weights is
appropriate and do not agree that an independent analysis is necessary.
Regarding the comment requesting transparency, we direct commenters to
review the CY 2019 HH PPS final rule with comment period (83 FR 56502)
for the finalized case-mix adjustment methodology, as well as the
previously discussed steps we take to determine the case-mix weight for
each of the 432 different PDGM payment groups which are outlined in
this final rule.
Comment: A few commenters requested that CMS analyze the cumulative
impact of the proposed recalibration of the PDGM case-mix weights, as
well as the updates to the wage index prior to finalizing any changes.
Response: It is important to note that both the recalibration of
the PDGM case-mix weights and updates to the HH PPS are implemented in
a budget neutral manner so that changes to the case-mix weights,
functional impairment levels, comorbidity adjustments, as well as
updated wage data do not impact payments in the aggregate.
Comment: A commenter had general concerns regarding the diagnosis
codes included in the clinical grouping case-mix variable. This
commenter stated that there continues to be no assignment of many
diagnoses that drive home health need, citing non-specific diagnosis
codes such as debility and weakness. The commenter stated that while
there may be no specific medical diagnoses causing these conditions,
the patient would still greatly benefit from home health care. The
commenter recommended that CMS allow codes such as R29.6 Repeated
falls, R54 Age related physical debility, R26.89 Abnormalities of gait,
M62.81 Muscle weakness, and generalized R41.82 Altered Mental Status
for home health services.
Response: As we stated in the CY 2019 HH PPS final rule with
comment period (83 FR 56473), we believe that the majority of the R-
codes (codes that describe signs and symptoms, as opposed to diagnoses)
are not appropriate as principal diagnosis codes for grouping home
health periods into clinical groups. We believe that the use of
symptoms, signs, and abnormal clinical and laboratory findings would
make it difficult to meet the requirements of an individualized plan of
care as required at 42 CFR 484.60. Likewise, we believe that clinically
it is important for home health providers to have a clear understanding
of the patients' diagnoses in order to safely and effectively furnish
home health services. Interventions and treatment aimed at mitigating
signs and symptoms of a condition may vary depending on the cause.
Anecdotally, we have heard that a home health referral may be
nonspecific or that a physician or allowed practitioner may be in the
process of determining a more definitive diagnosis. However, with
respect to patient safety and quality of care, we believe it is
important for a clinician to investigate the cause of the signs and/or
symptoms for which the referral was made. This may involve calling the
referring physician or allowed practitioner to gather more information.
We note that HHAs are required under the home health CoPs at Sec.
484.60 to participate in care coordination to assure the identification
of patient needs and factors that could affect patient safety and
treatment efficacy. ICD-10-CM coding guidelines are clear that R-codes
are to be used when no more specific diagnosis can be made even after
all the facts bearing on the case have been investigated. Therefore,
while these codes should not be used as a principal diagnosis for the
provision of home health services, they can be reported as secondary
diagnoses to provide a more complete clinical picture of the patient.
By the time the patient is referred to home health and meets the
qualifications of eligibility, we would expect that a more definitive
code would substantiate the need for services.
Final Decision: We are finalizing the proposal to recalibrate the
HH PPS case-mix weights for CY 2024. The proposed recalibrated case-mix
weights were updated based on more complete CY 2022 claims data (as of
July 15, 2023) for this final rule. We did not receive any comments on
the proposed case-mix weight budget neutrality factor. Therefore, we
are finalizing the proposal to implement the changes to the PDGM case-
mix weights in a budget neutral manner by applying a case-mix budget
neutrality factor to the CY 2024 national, standardized 30-day period
payment rate. As stated previously, the final case-mix budget
neutrality factor for CY 2024 will be 1.0124.
3. 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
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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 proposed
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 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
proposed 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) 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
proposed 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 proposed 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 home health
market basket that captures recent cost trends. Given the potential
impact of the COVID-19 PHE on the Medicare cost report data, we will
continue to monitor these data going forward and any changes to the
home health market basket will be proposed in future rulemaking.
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, denote different activities. The term ``rebasing''
means moving the base year for the structure of costs of an input price
index (that is, in this exercise, we proposed 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 proposed to rebase and
revise the home health market basket to reflect a 2021 base year.
(c) Derivation of the 2021-Based Home Health Market Basket Major Cost
Weights
We proposed to derive the major cost weights for the revised and
rebased home health market basket 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 proposed to maintain our policy of using data from freestanding
HHAs,

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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 proposed 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. Each of the major cost categories and the residual 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 seven major cost categories derived
from the Medicare cost report data. Unless otherwise specified,
calculations are consistent with 2016 methodology.
(1) Total Medicare Allowable Costs
We proposed 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 proposed
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 proposed 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 proposed to calculate direct patient care wages and salaries by
summing costs from Worksheet A, column 1, lines 16 through 25.
(ii) Overhead
We proposed 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 proposed to calculate direct patient care contract
labor costs by first summing costs from Worksheet A, column 4, lines 16
through 25. These contract labor costs are then multiplied by each
provider's ratio of direct patient care wages and salaries costs to
total direct patient care wages and salaries and benefits costs. This
ratio is calculated as the sum of costs on Worksheet A, column 1, lines
16 through 25, divided by the sum of costs on Worksheet A, columns 1
and 2, lines 16 through 25. Similarly, the 2016 method for deriving the
wages and salaries costs multiplied the combined salaries and benefits
(both Direct Patient Care (DPC) and non-DPC) and DPC contract labor, by
the ratio of combined DPC and non-DPC salaries to total DPC and non-DPC
salaries and benefits.
(b) Benefits
Benefits costs reflect direct patient care benefit costs, overhead
benefit costs (associated with the following overhead cost centers:
Plant Operations and Maintenance, Transportation, Telecommunications
Technology, Administrative and General, Nursing Administration, Medical
Records, and Other General Service) and a portion of direct patient
care contract labor costs. Similarly, the 2016 method for deriving the
benefits costs multiplied the combined salaries and benefits (both DPC
and non-DPC) and DPC contract labor, by the ratio of combined DPC and
non-DPC benefits to total DPC and non-DPC salaries and benefits.
(i) Direct Patient Care
We proposed 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 proposed 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
proposed 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.

[[Page 77729]]

(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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 2021-based home health market
basket for the given category.
Finally, we proposed 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 B13 shows the major cost categories and their respective cost
weights as derived from the Medicare cost reports.

[[Page 77730]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.033

The decrease in the wages and salaries cost weight of 0.9
percentage point and the decrease in the 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 B14. 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] TR13NO23.034

Additionally, the Medicare cost report data shows that decreased
contract labor utilization has occurred over most occupational
categories, including higher-paid specialties, 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 proposed 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 proposed 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.\13\ 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 proposed to
inflate the detailed 2012 Benchmark I-O data forward to 2021 by
applying the annual price changes for each year from the respective
price proxies to the appropriate market basket cost categories that are
obtained from the 2012 Benchmark I-O data. 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 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 2021-based home health market
basket's ``All Other'' cost category (18.6 percent), yielding a
Utilities cost weight

[[Page 77731]]

of 2.0 percent in the 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 while basing it on the 2007
Benchmark I-O data (aged to 2016).
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\13\ <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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Using this methodology, we proposed to derive eight detailed cost
categories from the 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 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 B15 compares the cost categories and weights for the 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 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).
[GRAPHIC] [TIFF OMITTED] TR13NO23.035

(d) Selection of Price Proxies
After developing the cost weights for the 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

[[Page 77732]]

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 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
proposed for each cost category weight.
(e) 2021-Based Home Health Market Basket Price Proxies
As part of the revising and rebasing of the home health market
basket, we proposed to rebase and revise the home health blended Wages
and Salaries index and the home health blended Benefits index. We
proposed to use these blended indexes as price proxies for the Wages
and Salaries and the Benefits categories of the 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 proposed 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 proposed to use a
blended wage proxy because there is not a published wage proxy specific
to the home health industry.
We proposed 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 proposed 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 B16 compares the 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 B16 as ``n/a.''

[[Page 77733]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.036

We proposed to calculate total costs by occupation 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 B17 represent the wages and
salaries blend weights for 2021, and the ECIs for each occupational
category within the Wages and Salaries price proxy blend, as well as
the 2016 weights. We note that the current ECI series also 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

[[Page 77734]]

social assistance services and lower weight for other service
occupations.\14\
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\14\ <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] TR13NO23.037

[GRAPHIC] [TIFF OMITTED] TR13NO23.038

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 2021-
based home health Wages and Salaries proxy blend is shown in Table B18.
The annual increases in the wages and salaries price proxy is 0.3
percentage point lower in 2021 and 2022 relative to the 2016-based
price proxy, and the increases are equal in 2023 and 2024. The
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 B17.

[[Page 77735]]

[GRAPHIC] [TIFF OMITTED] TR13NO23.039

(2) Benefits
For measuring Benefits price growth in the 2021-based home health
market basket, we proposed to apply applicable price proxies to the six
occupational subcategories that are used for the Wages and Salaries
price proxy blend. The six categories in Table B19 are the same as
those in the 2016-based home health market basket and include the same
occupational mix as listed in Table B17.
[GRAPHIC] [TIFF OMITTED] TR13NO23.040

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 proposed 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 (29.7 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 2021-based home
health Benefits proxy blend is shown in Table B20. 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.
[GRAPHIC] [TIFF OMITTED] TR13NO23.041

[[Page 77736]]

(3) Medical Supplies
We proposed 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 proposed 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 we based the 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 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

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