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Rule2024-25441

Medicare Program; Calendar Year (CY) 2025 Home Health Prospective Payment System (HH PPS) Rate Update; HH Quality Reporting Program Requirements; HH Value-Based Purchasing Expanded Model Requirements; Home Intravenous Immune Globulin (IVIG) Items and Services Rate Update; and Other Medicare Policies

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Published

November 7, 2024

Effective

January 1, 2025

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This final rule will set forth routine updates to the Medicare home health payment rates; the payment rate for the disposable negative pressure wound therapy (dNPWT) devices; and the intravenous immune globulin (IVIG) items and services payment rate for CY 2025 in accordance with existing statutory and regulatory requirements. In addition, it finalizes changes to the Home Health Quality Reporting Program (HH QRP) requirements and provides an update on potential approaches for integrating health equity in the Expanded Health Value Based Purchasing (HHVBP) Model. It also finalizes a new standard for an acceptance-to-service policy in the HH conditions of participation (CoPs). Lastly, it updates provider and supplier enrollment requirements and changes to the long-term care reporting requirements for acute respiratory illnesses.

Full Text

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[Federal Register Volume 89, Number 216 (Thursday, November 7, 2024)]
[Rules and Regulations]
[Pages 88354-88485]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25441]

[[Page 88353]]

Vol. 89

Thursday,

No. 216

November 7, 2024

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 424, 483, and 484

Medicare Program; Calendar Year (CY) 2025 Home Health Prospective
Payment System (HH PPS) Rate Update; HH Quality Reporting Program
Requirements; HH Value-Based Purchasing Expanded Model Requirements;
Home Intravenous Immune Globulin (IVIG) Items and Services Rate Update;
and Other Medicare Policies; Final Rule

Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 /
Rules and Regulations

[[Page 88354]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 424, 483, and 484

[CMS-1803-F]
RIN 0938-AV28

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 will set forth routine updates to the Medicare
home health payment rates; the payment rate for the disposable negative
pressure wound therapy (dNPWT) devices; and the intravenous immune
globulin (IVIG) items and services payment rate for CY 2025 in
accordance with existing statutory and regulatory requirements. In
addition, it finalizes changes to the Home Health Quality Reporting
Program (HH QRP) requirements and provides an update on potential
approaches for integrating health equity in the Expanded Health Value
Based Purchasing (HHVBP) Model. It also finalizes a new standard for an
acceptance-to-service policy in the HH conditions of participation
(CoPs). Lastly, it updates provider and supplier enrollment
requirements and changes to the long-term care reporting requirements
for acute respiratory illnesses.

DATES: These regulations are effective on January 1, 2025.

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#a6eec9cbc3eec3c7cad2cef6c9cacfc5dfe6c5cbd588ceced588c1c9d0">[email&#160;protected]</a>.
For general information about the IVIG Items and Services Payment,
send your inquiry via email to <a href="/cdn-cgi/l/email-protection#82cacbd6ddcbd4cbc5f2edeeebe1fbc2e1eff1aceaeaf1ace5edf4">[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#1058584142406165756364797f7e6350737d633e7878633e777f66">[email&#160;protected]</a>.
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>.
Frank Whelan, (410) 786-1302, for Medicare provider and supplier
enrollment inquiries.
Mary Rossi-Coajou at <a href="/cdn-cgi/l/email-protection#d3beb2a1aafda1bca0a0bafeb0bcb2b9bca693b0bea0fdbbbba0fdb4bca5">[email&#160;protected]</a> or Molly
Anderson at <a href="/cdn-cgi/l/email-protection#8de0e2e1e1f4a3ece3e9e8fffee2e3cdeee0fea3e5e5fea3eae2fb">[email&#160;protected]</a>, for more information about the
home health conditions of participation (HH CoPs).
Kim Roche at <a href="/cdn-cgi/l/email-protection#3a51535714485559525f0b7a59574914525249145d554c">[email&#160;protected]</a> or Diane Corning at
<a href="/cdn-cgi/l/email-protection#4d29242c2328632e223f2324232a0d2e203e6325253e632a223b">[email&#160;protected]</a> for information about long term care facility
acute respiratory illness reporting.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary and Issuance of the Final 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. CY 2025 Final Rule Payment Adjustments Under the HH PPS
D. CY 2025 Home Health Low Utilization Payment Adjustment (LUPA)
Thresholds, Functional Impairment Levels, Comorbidity Sub-Groups,
Case-Mix Weights, and Reassignment of Specific ICD-10-CM Codes Under
the PDGM
III. Home Health Quality Reporting Program (HH QRP)
A. Background and Statutory Authority
B. Summary of the Provision of This Final Rule
C. Quality Measures Currently Adopted for the CY 2024 HH QRP
D. Proposal To Collect Four New Items as Standardized Patient
Assessment Data Elements and Modify One Item Collected as a
Standardized Patient Assessment Data Element Beginning With the CY
2027 HH QRP
E. Proposal To Update OASIS All-Payer Data Collection
F. Form, Manner, and Timing of Data Submission Under the HH QRP
G. HH QRP Quality Measure Concepts Under Consideration for
Future Years--Request for Information (RFI)
IV. The Expanded Home Health Value-Based Purchasing (HHVBP) Model
A. Background
B. Request for Information on Future Performance Measure
Concepts for the Expanded HHVBP Model
C. Future Approaches to Health Equity in the Expanded HHVBP
Model
D. Social Risk Factors
E. Approaches to a Potential Health Equity Adjustment for the
Expanded HHVBP Model
F. Other Health Equity Measures
V. Medicare Home Intravenous Immune Globulin (IVIG) Items and
Services
A. General Background
B. Scope of Expanded IVIG Benefit
C. Home IVIG Administration Items and Services Payment
D. Home IVIG Items and Services Payment Rate
VI. Home Health Agency Condition of Participation (CoP) Changes and
Long Term Care (LTC) Facility Requirements for Acute Respiratory
Illness Reporting
A. Home Health Agency CoP Changes
B. Long-Term Care (LTC) Requirements for Acute Respiratory
Illness Reporting
VII. Provider Enrollment--Provisional Period of Enhanced Oversight
A. Background
B. Provisional Period of Enhanced Oversight (PPEO)
VIII. Collection of Information Requirements
A. Statutory Requirement for the Solicitation of Comments
B. Information Collection Requirements (ICRs)
IX. 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

I. Executive Summary and Issuance of the Final 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 CY 2025 payment rates for home health
agencies (HHAs) and the CY 2025 payment rate for disposable negative
pressure wound therapy (dNPWT) devices. This rule finalizes a crosswalk
for mapping the Outcome and Assessment Information Set-D (OASIS-D) data
elements to the equivalent OASIS-E data elements for use in the
methodology to analyze the difference between assumed versus actual
behavior change on estimated aggregate expenditures and finalizes a
permanent adjustment to the CY 2025 home health base payment rate. In
addition, this rule finalizes the recalibrated PDGM case-mix weights
and updates the low-utilization payment adjustment (LUPA) thresholds,
functional impairment levels, and

[[Page 88355]]

comorbidity adjustment subgroups under section 1895(b)(4)(A)(i) and
(b)(4)(B) of the Act for 30-day periods of care in CY 2025; finalizes
the proposal to adopt the most recent Office of Management and Budget
(OMB) Core-Based Statistical Area (CBSA) delineations for the home
health wage index; and finalizes an occupational therapy (OT) LUPA add-
on factor and updates the physical therapy (PT), speech-language
pathology (SLP), and skilled nursing (SN) LUPA add-on factors.
Additionally, this rule updates the CY 2025 fixed-dollar loss ratio
(FDL) for outlier payments (so that outlier payments as a percentage of
estimated total payments are projected 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 updated policies. We are
finalizing a proposal to add four new assessment items and modify one
assessment item on the OASIS, update the removal of the suspension of
OASIS all payer data collection and summarize public feedback on future
HH QRP quality measure (QM) concepts.
c. Expanded Home Health Value-Based Purchasing (HHVBP) Model
In accordance with the statutory authority at section 1115A of the
Act, we are doing the following for the expanded HHVBP Model: (1)
providing an update on potential approaches for integrating health
equity that are being considered; and (2) summarizing comments we
received on a request for information (RFI) related to potential future
performance measure concepts.
d. Home Intravenous Immune Globulin (IVIG) Items and Services
In section V.D.1. of this rule, we finalize the rate for the CY
2025 IVIG items and services payment under the home intravenous immune
globulin (IVIG) benefit.
e. Home Health CoP Changes
In section VI.A. of this final rule, we are finalizing a new
standard at Sec. 484.105(i) that will require HHAs to develop,
implement, and maintain an acceptance-to-service policy that is applied
consistently to each prospective patient referred for home health care.
As finalized, the policy must address, at minimum, the following
criteria related to the HHA's capacity to provide patient care: the
anticipated needs of the referred prospective patient, the HHA's case
load and case mix, the HHA's staffing levels, and the skills and
competencies of the HHA staff. We also finalized a policy that HHAs
will be required to make specified information available to the public
that is reviewed whenever services are changed, and no less often than
annually.
f. Provider and Supplier Enrollment Requirements
Section 1866(j)(3)(A) of the Act states that the Secretary shall
establish procedures to provide for a provisional period of between 30
days and 1 year during which new providers and suppliers--as the
Secretary determines appropriate, including categories of providers or
suppliers--will be subject to enhanced oversight. We are finalizing our
proposal to expand the definition of ``new provider or supplier'' in
Sec. 424.527(a) (solely for purposes of applying a provisional period
of enhanced oversight) to include providers and suppliers that are
reactivating their Medicare enrollment and billing privileges.
g. Long-Term Care (LTC) Facility Requirements for Acute Respiratory
Illness Reporting
The current LTC requirements for reporting COVID-19 related data
expire on December 31, 2024, except for reporting COVID-19 resident and
staff vaccination status. Given the utility of LTC facility data, we
finalized a requirement to replace these requirements with streamlined
continued data reporting requirements for certain respiratory
illnesses. We are also finalizing a requirement that LTC facilities
submit additional, related data elements that could be activated in the
event of a future acute respiratory illness public health emergency
(PHE). We are not finalizing our proposal to increase data reporting if
a significant threat for a PHE for an acute infectious illness exists.
2. Summary of the Provisions of This Final Rule
a. Home Health Prospective Payment System (HH PPS)
In section II.B.1. of this final rule, we discuss comments related
to the monitoring and data analysis on PDGM utilization.
In section II.C.1 of this final rule, we finalize a permanent
adjustment to the base payment rate under the HH PPS. Additionally, we
finalize a crosswalk for mapping the OASIS-D data elements to the
equivalent OASIS-E data elements for use in the methodology to analyze
the difference between assumed versus actual behavior change on
estimated aggregate expenditures.
In section II.D. of this final rule, we recalibrate the CY 2025
home health LUPA thresholds, case-mix weights, and co-morbidity
subgroups. Additionally, we discuss providers' suggestions regarding
the reassignment of specific ICD-10-CM diagnosis codes under the PDGM.
In section II.E. of this final rule, we finalize a policy updating
the home health wage index using the new labor market delineations from
the July 21, 2023, OMB Bulletin No. 23-01 based on data collected from
the 2020 Decennial Census. This section also includes the CY 2025
national, standardized 30-day period final payment rate, the final CY
2025 national per-visit payment amounts updated by the home health
payment update percentage, and the final OT, PT, SLP, and SN LUPA add-
on factors. The final home health payment update percentage for CY 2025
is 2.7 percent. Additionally, this rule finalizes the CY 2025 FDL ratio
to ensure that aggregate outlier payments do not exceed 2.5 percent of
the total aggregate payments, as required by section 1895(b)(5)(A) of
the Act.
In section II.F.4. of this final rule, we finalize the CY 2025
payment rate for dNPWT devices.
b. Home Health Quality Reporting Program (HH QRP)
In section III. of this final rule, we finalize the collection of
four new items as standardized patient assessment data elements in the
social determinants of health (SDOH) category and modify one item
collected as a standardized patient assessment data element in the SDOH
category beginning with the CY 2027 HH QRP. The four assessment items
finalized for collection are: one Living Situation item, two Food
items, and one Utilities item. We also finalize a policy to modify the
current Transportation item beginning with the CY 2027 HH QRP. We are
also proposed an update to the removal of the suspension of OASIS all-
payer data collection to change all-payer data collection to begin with
the start of care OASIS data collection timepoint instead of discharge
timepoint. Lastly, we seek input on future HH QRP measure concepts.
c. Expanded Home Health Value Based Purchasing (HHVBP) Model
In section IV. of this final rule, we summarize comments received
on an RFI related to future measure concepts for the expanded HHVBP
Model. We are also including an update to the RFI, ``Future Approaches
to Health Equity in the Expanded HHVBP Model,'' that was

[[Page 88356]]

published in the CY 2023 HH PPS final rule (87 FR 66874, November 4,
2022) and subsequently updated in the CY 2024 HH PPS final rule (88 FR
77687, November 13, 2023).
d. Home Intravenous Immune Globulin (IVIG) Items and Services
In section V.D.1. of this final rule, we finalize the CY 2025 IVIG
items and services payment rate under the home intravenous immune
globulin (IVIG) benefit.
e. Home Health CoP Changes
In section VI.A. of this final rule, we finalized a new standard at
Sec. 484.105(d) that will require HHAs to develop, implement, and
maintain an acceptance-to-service policy that is applied consistently
to each prospective patient referred for home health care. We have also
finalized a requirement that the policy must address, at minimum, the
following criteria related to the HHA's capacity to provide patient
care: the anticipated needs of the referred prospective patient, the
HHA's case load and case mix, the HHA's staffing levels, and the skills
and competencies of the HHA staff. We also finalized a requirement that
HHAs make specified information available to the public that is
reviewed at least annually. In the proposed rule, we sought public
comments on other factors that influence the patient referral and
intake processes. In this final rule, we summarize comments received.
f. Provider and Supplier Enrollment Requirements
Section 1866(j)(3)(A) of the Act states that the Secretary may
establish procedures to provide for a provisional period of between 30
days and 1 year during which new providers and suppliers--as the
Secretary determines appropriate, including categories of providers or
suppliers--will be subject to enhanced oversight. We are finalizing our
proposal to expand the definition of ``new provider or supplier''
(solely for purposes of applying a PPEO) to include providers and
suppliers that are reactivating their Medicare enrollment and billing
privileges.
g. Long-Term Care (LTC) Requirements for Acute Respiratory Illness
Reporting
The current LTC requirements for reporting COVID-19 related data
expire on December 31, 2024, except for reporting COVID-19 resident and
staff vaccination status. Given the utility of LTC facility data, we
finalized to replace these requirements with streamlined continued data
reporting requirements for certain respiratory illnesses. We are also
finalizing additional, related data elements that could be activated in
the event of a future acute respiratory illness PHE. We are not
finalizing our proposal to increase data reporting if a significant
threat for a PHE for an acute infectious illness exists.
3. Summary of Costs, Transfers, and Benefits
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[GRAPHIC] [TIFF OMITTED] TR07NO24.001

B. Issuance of the Proposed Rule

The proposed rule, titled ``Medicare Program; Calendar Year (CY)
2025 Home Health Prospective Payment System (HH PPS) Rate Update; HH
Quality Reporting Program Requirements; HH Value-Based Purchasing
Expanded Model Requirements; Home Intravenous Immune Globulin (IVIG)
Items and Services Rate Update; and Other Medicare Policies,'' appeared
in the Federal Register on July 3, 2024 (89 FR 55312) (hereinafter
referred to as the CY 2025 HH PPS proposed rule or July 2024 proposed
rule).
The proposed rule set forth proposed payment and policy changes to
the Medicare Home Health prospective payment system for CY 2025,
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 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), 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. In the November 9, 2006, Federal Register (71 FR
65935), we issued a final rule 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

[[Page 88358]]

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 will 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) (Pub. L. 117-328) amended section 1834(s)(3)(A) of the
Act to require that, beginning with 2024, the separate payment for
furnishing negative pressure wound therapy (NPWT) be for just the
device and not for nursing and therapy services. Payment for nursing
and therapy services are to be included as part of payments under the
HH PPS. The separate payment for 2024 was required to be equal to the
supply price used to determine the relative value for the service under
the Medicare Physician Fee Schedule (as of January 1, 2022) for the
applicable disposable device updated by the percentage increase in the
Consumer Price Index for All Urban Consumers (CPI-U). The separate
payment for 2025 and each subsequent year is to be the payment amount
for the previous year updated by the percentage increase in the CPI-U
(United States city average) for the 12-month period ending in June of
the previous year reduced by the productivity adjustment as described
in section 1886(b)(3)(B)(xi)(II) of the Act for such year. The CAA,
2023 also added section 1834(s)(4) of the Act to require that beginning
with 2024, as part of submitting claims for the separate payment, the
Secretary shall accept, and process claims submitted using the type of
bill that is most commonly used by home health agencies to bill
services under a home health plan of care.
2. Current System for Payment of Home Health Services
For home health periods of care beginning on or after January 1,
2020, Medicare makes payment under the HH PPS on the basis of a
national, standardized 30-day period payment rate that is adjusted for
case-mix and area wage differences in accordance with section
51001(a)(1)(B) of the BBA of 2018. The national, standardized 30-day
period payment rate includes payment for the six home health
disciplines (skilled nursing, home health aide, physical therapy,
speech-language pathology, occupational therapy, and medical social
services). Payment for non-routine supplies (NRS) is also part of the
national, standardized 30-day period rate. Durable medical equipment
(DME) provided as a home health service, as defined in section 1861(m)
of the Act, is paid the fee schedule amount or is paid through the
competitive bidding program and such payment is not included in the
national, standardized 30-day period payment amount. Additionally, the
30-day period payment rate does not include payment for certain
injectable osteoporosis drugs and disposable negative pressure wound
therapy (dNPWT) devices, but such drugs and devices 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 dNPWT devices.
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

[[Page 88359]]

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 1. 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).
[GRAPHIC] [TIFF OMITTED] TR07NO24.002

B. Monitoring the Effects of the Implementation of PDGM

1. Routine PDGM Monitoring
The CY 2025 HH PPS proposed rule included analysis of Medicare home
health benefit utilization, including 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

[[Page 88360]]

any therapy visits, nursing visits, and/or aide/social worker visits.
We also included monitoring of home health visits using
telecommunications technology and remote patient monitoring, which we
began collecting on claims submitted voluntarily beginning January 1,
2023, and which was required beginning July 1, 2023.
Comment: Overall, commenters discussed the home health utilization
trends presented in the monitoring concurrently with comments regarding
access to the benefit and generally stated that they believe a decline
in utilization is not related to a reduced need for home health
services. These commenters encouraged CMS to develop policies that
ensure that the PDGM does not continue to affect access to care as
indicated by these declining utilization trends. A commenter also
suggested CMS expand data collection to include geographic, racial,
ethnic, socio-economic, sexual orientation, and gender identity to
highlight disparities in home health care services.
Response: We will continue to monitor and analyze home health
trends and vulnerabilities within the home health payment system and
appreciate the commenter's suggestion for additional monitoring. We
respond to comments discussing declining trends in utilization as they
relate to access to care in our discussion in section B.1.f. of this
final rule, and refer readers to that discussion.

C. CY 2025 Final Rule Payment Adjustments Under the HH PPS

1. Finalized Behavior Assumption Adjustments Under the HH PPS
a. Background
As discussed in section II.A.1. of this final rule, starting in CY
2020, the Secretary was required by section 1895(b)(2)(B) of the Act to
change the unit of payment under the HH PPS from a 60-day episode of
care to a 30-day period of care. CMS was also required to make
assumptions about behavior changes that could occur as a result of the
implementation of the 30-day unit of payment and the case-mix
adjustment factors that eliminated the use of therapy thresholds. In
the CY 2019 HH PPS final rule with comment period (83 FR 56455), we
finalized three behavior change assumptions which were also described
in the CY 2022 and 2023 HH PPS rules (86 FR 35890, 87 FR 37614, and 87
FR 66795 through 66796). In the CY 2020 HH PPS final rule with comment
period (84 FR 60519), we included these behavioral change assumptions
in the calculation of the 30-day budget neutral payment amount for CY
2020, finalizing a negative 4.36 percent behavior change assumption
adjustment (``assumed behaviors''). We did not propose any changes for
CYs 2021 and 2022 relating to the behavior assumptions finalized in the
CY 2019 HH PPS final rule with comment period, or to the negative 4.36
percent behavior change assumption adjustment, finalized in the CY 2020
HH PPS final rule with comment period.
In the CY 2023 HH PPS final rule (87 FR 66796), we stated, based on
our annual monitoring at that time, the three assumed behavior changes
did occur as a result of the implementation of the PDGM and that other
behaviors, such as changes in the provision of therapy and changes in
functional impairment levels also occurred. We also reminded readers
that in the CY 2020 HH PPS final rule with comment period (84 FR
60513), we stated we interpret actual behavior changes to encompass
both behavior changes that were previously outlined as assumed by CMS,
and other behavior changes not identified at the time the budget-
neutral 30-day payment rate for CY 2020 was established. In the CY 2023
HH PPS final rule (87 FR 66796), we provided supporting evidence that
indicated the number of therapy visits declined in CYs 2020 and 2021,
as well as a slight decline in therapy visits beginning in CY 2019
after the finalization of the removal of therapy thresholds, but prior
to implementation of the PDGM. In section II.B.1. of the CY 2025 HH PPS
proposed rule (89 FR 55318), our analysis continued to show overall the
actual 30-day periods are similar to the simulated 30-day periods and
there continues to be a decline in therapy visits, indicating that HHAs
changed their behavior to reduce therapy visits. Although the analysis
demonstrates evidence of individual behavior changes (for example, in
the volume of visits for LUPAs, therapy sessions, etc.), we use the
entirety of the behaviors in order to calculate estimated aggregate
expenditures. The law instructs us to ensure that estimated aggregate
expenditures under the PDGM are equal to the estimated aggregate
expenditures that otherwise will have been made under the prior system.
Section 4142(a) of the CAA, 2023 required CMS to present, to the
extent practicable, a description of the actual behavior changes
occurring under the HH PPS from CYs 2020-2026. This subsection of the
CAA, 2023 also required CMS to provide datasets underlying the
simulated 60-day episodes and discuss and provide time for stakeholders
to provide input and ask questions on the payment rate development for
CY 2023. CMS complied with these requirements by posting online both
the supplemental limited data set (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>.
b. Method To Annually Determine the Impact of Differences Between
Assumed Behavior Changes and Actual Behavior Changes on Estimated
Aggregate Expenditures
In the CY 2023 HH PPS final rule (87 FR 66804), we finalized the
methodology to evaluate the impact of the differences between assumed
and actual behavior changes on estimated aggregate expenditures. In the
CY 2024 HH PPS final rule (88 FR 77687 through 77688), we provided an
overview of the methodology with detailed instructions for each step.
The overall methodology as finalized remains the same for evaluating
the impact of behavior changes as required by law; however, due to an
update of the Outcome and Assessment Information Set (OASIS)
instrument, we need to update two minor technical parts and in the CY
2025 proposed rule, proposed to add new assumptions in the first step
(creating simulated 60-day episodes from 30-day periods). These new

[[Page 88361]]

assumptions are described in this section.
Section 1895(b)(3)(B)(v) of the Act requires HHAs to report certain
quality data. As described in regulation at 42 CFR 484.250(a), this
data is required to be reported using the OASIS instrument. Under the
prior 153-group system (and the first three years for assessments
associated with the PDGM completed prior to CY 2023), HHAs submitted
the OASIS-D version. However, OMB approved an updated version of the
OASIS instrument, OASIS-E, on November 30, 2022, effective January 1,
2023. Thus, OASIS-E is the current version of the OASIS instrument used
in the PDGM. The valid OMB control number for this information
collection is 0938-1279.
There are 13 items from the OASIS-D used in the 153-group system
that are included in the OASIS-E; however, the responses for these
items are now only recorded at the start of care (SOC) or resumption of
care (ROC) assessments in the OASIS-E and not at all for OASIS-E
follow-up assessments as shown in the following figure 2.
[GRAPHIC] [TIFF OMITTED] TR07NO24.003

Three items in the OASIS-E differ slightly from the OASIS-D by
incorporating more specific questions and responses than in the OASIS-
D. These three items, as shown in figure 3, ask about therapies
(M1030), vision (M1200), and the frequency of pain interfering with
activity (M1242). Additionally, these items are only asked at SOC/ROC
and not at follow-up in the OASIS-E.

[[Page 88362]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.004

To continue with our finalized methodology and create simulated 60-
day episodes under the 153-group case mix system from 30-day periods
under the PDGM, we need to impute the OASIS-D responses when we only
have an OASIS-E available. For each of the three items, we considered
the clinical relationship between the responses in the OASIS-E items
that differ from the OASIS-D items. CMS also considered the response
distribution between the OASIS-D and OASIS-E items when creating the
mapping of the responses.
CMS proposed the following two assumptions to address the changes
from the OASIS-D to the OASIS-E to continue to create simulated 60-day
episodes from 30-day periods.
<bullet> If the simulated 60-day episode matches to a SOC or ROC
assessment then we proposed to not impute the 13 items. If the
simulated 60-day episode matches to a follow-up assessment, then we
proposed to look back for the most recent 30-day period that is linked
to a SOC or ROC assessment and impute the 13 responses for follow-up
using the responses at the most recent SOC or ROC assessment. We
proposed that we would limit the look-back period to the beginning of
the calendar year that precedes the calendar year for the claim. For
example, for a simulated 60-day episode with a follow-up assessment on
June 1, 2023, we would look back for a 30-day period linked to a SOC or
ROC assessment that began on or after January 1, 2022. If we cannot
find a SOC or ROC assessment in that time period, we proposed to
exclude the claim from analysis because we would not have sufficient
timely data to impute responses.
<bullet> If the simulated 60-day episode matches to an OASIS-D
assessment, then we proposed to use the OASIS-D for responses. If the
simulated 60-day episode matches to an OASIS-E assessment, we proposed
applying the following mapping for the therapies, vision, and pain
items to impute responses as these responses are required for accurate
payment calculation under the prior 153-group system. We also proposed
applying the look-back period (that is, beginning of the calendar year
that precedes the calendar year for the claim) as described in the
assumption above, when necessary, when mapping claims.

[[Page 88363]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.005

Note, if an OASIS-E assessment has a response of ``no'' to all
three items (O0110H--IV medication, K0520--Parenteral/IV feeding, and
K0520--Feeding Tube), as shown in figure 5, then the mapping for M1030
would be a response of ``none of the above''.
[GRAPHIC] [TIFF OMITTED] TR07NO24.006

[[Page 88364]]

There was one pain item on the OASIS-D (M1242--Frequency of Pain
Interfering with patient's activity or movement) used for calculating
payments. There are three pain related items on the OASIS-E (J0510--
pain effect on sleep, J0520--pain interference with therapy activities,
and J0530--pain interference with day-to-day activities) that
correspond to the one OASIS-D pain item used for calculating payments.
Therefore, we stated that we believed using the response from J0510,
J0520, or J0530 that reflects the maximum severity would be the most
appropriate for mapping back to the OASIS-D. For example, if J0510
(pain effect on sleep) has a response of ``rarely'', J0520 (pain
interference with therapy activities) has a response of ``frequently'',
and J0530 (pain interference with day-to-day activities) has a response
of ``occasionally'', then we would use the response from J0520
(``frequently'') for mapping as this is the most severe response.
Figure 6 shows the proposed mapping based on the maximum severity
response for each of the three pain items.
[GRAPHIC] [TIFF OMITTED] TR07NO24.007

As the overall methodology was finalized in the CY 2023 HH PPS
final rule (87 FR 66804), the two proposed assumptions described
previously are simply technical updates based on the updated OASIS
instrument 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 for assessing behavior
changes as required by law. We refer readers to the CY 2024 HH PPS
final rule (88 FR 77687 through 77688) for an overview of the overall
methodology with detailed instructions for each step. We received a few
comments on the proposed assumptions related to mapping of the OASIS-E
items.
Comment: A commenter supported the proposed assumptions. Another
commenter expressed concerns related to the difference in the versions
of questions used for mapping and a potential two-year lookback period.
While the commenter did not present an alternative for mapping the
three items missing from OASIS-E, the commenter did recommend a
narrower lookback period of no more than three months.
Response: We appreciate the commenter's thoughtful review and
recommendations. We carefully reevaluated the crosswalk and found a
three-month lookback period could significantly decrease the number of
claims available for analysis, as well as skew the data to potentially
more clinically severe patients, for example, this would generally
limit the data to those patients who are discharged after an inpatient
admission directly to home health care. A significant decrease in the
total number of claims or in a particular type of claim (for example,
community late) may not fully represent the population of home health
patients. However, using an almost two-year look-back period for an
assessment may not provide the most updated functional status of a
beneficiary for the claim being analyzed, as a patient's functional
impairment status may have changed (increased or decreased) in a longer
look-back period. Balancing the need for adequate and unbiased data
with the need for up-to-date data, we evaluated using a 12-month look-
back period and found this timeframe provided the most complete and
accurate data possible. It provides a sufficient number of claims while
also allowing for the use of more updated assessment data than would
have been used in a 24-month look-back period.
Final Decision: After consideration of the public comments and
reevaluation of the proposed timeframe, we are finalizing the following
assumptions for the OASIS-D to OASIS-E crosswalk:
<bullet> If the simulated 60-day episode matches to a SOC or ROC
assessment then we will not impute the 13 items. If the simulated 60-
day episode matches to an OASIS-E follow-up assessment, then we will
look back for the most recent 30-day period that is linked to a SOC or
ROC assessment and impute the 13 responses for follow-up using the
responses at the most recent SOC or ROC assessment. We will limit the
look-back period to 12-months. For example, a simulated 60-day episode
that began on June 1, 2023, and linked to a follow-up assessment will
be limited to a 30-day period that ended on or after June 1, 2022, and
linked to a SOC or ROC assessment. If we cannot find a SOC or ROC
assessment in that time period, we will exclude the claim from
analysis.
<bullet> If the simulated 60-day episode matches to an OASIS-D
assessment, then we will use the OASIS-D for the three items (therapies
(M1030), vision (M1200), and the frequency of pain interfering with
activity (M1242)) responses. If the simulated 60-day episode matches to
an OASIS-E

[[Page 88365]]

assessment, we will apply the mapping for the therapies, vision, and
pain items as shown in figures 4-6 to impute responses as these
responses are required for accurate payment calculation under the prior
153-group system. When necessary, we will also apply the same 12-month
look-back period as described in the previous assumption.
c. Calculating Permanent and Temporary Payment Adjustments
To offset prospectively for such increases or decreases in
estimated aggregate expenditures resulting from 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 an 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 calculated 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 used 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. We refer readers to the CY 2024 HH PPS final
rule (88 FR 77689 through 77694) for analysis for CYs 2020 through 2022
claims. Additionally, at the end of this section we provide a summary
table for the permanent adjustment and temporary dollar amounts
calculated for each year.
Comment: Several commenters continue to oppose the behavior
adjustment methodology finalized in the CY 2023 HH PPS final rule and
repeated objections discussed in the CY 2023 HH PPS final rule and CY
2024 HH PPS final rule, stating that they believe the methodology
violates the Social Security Act and performs an unauthorized rebasing
of the 30-day payment rate. Commenters again requested that CMS develop
and propose a new methodology.
Response: The comments received on the methodology for the proposed
rule are similar to those received during CY 2023 and CY 2024
rulemaking. We refer readers to our responses to those comments in the
CY 2023 HH PPS final rule (87 FR 66797 through 66804) and CY 2024 final
rule (88 FR 77689). In those rules, we responded to commenters'
statements that they believe our final methodology was a violation of
the Social Security Act, as well as commenters' technical concerns,
such as the inclusion of therapy visits as part of our methodology. In
this year's proposed rule, we did not propose any changes to the
behavior adjustment methodology, as we finalized this methodology to
evaluate the impact of the differences of assumed versus actual
behavior changes on estimated aggregate expenditures, which is an
ongoing evaluation for all the years in which a payment adjustment is
appropriate.
d. CY 2023 Final Claims Results
We will continue the practice of using the most recent complete
home health claims data available at the time of rulemaking. The CY
2023 analysis presented in the CY 2025 HH PPS proposed rule was
considered preliminary and as additional data became available from the
latter half of CY 2023, we updated our results in this final rule.
While the claims data and the permanent and temporary adjustment
results in this final rule will be considered complete, any adjustments
to future payment rates may be subject to additional considerations
such as permanent adjustments taken in previous years.
The claims data used in rulemaking is released twice each year in
the HH PPS Limited Data Set (LDS) file, one for the proposed and one
for the final. Accordingly, the HH PPS LDS file released with this
final rule includes two files: the actual CY 2023 30-day periods and
the CY 2023 simulated 60-day episodes.
We remind readers a data use agreement (DUA) is required to
purchase the CY 2025 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.\1\ In
addition, the final CY 2025 Home Health Descriptive Statistics from the
LDS Files spreadsheet is available on the HH PPS Regulations and
Notices web page,\2\ 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
2023 that were used to determine the adjustments. The spreadsheet also
provides information such as the number of episodes and periods by
case-mix group, case-mix weights, and simulated payments.
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\1\ <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>.
\2\ <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>.
---------------------------------------------------------------------------

e. Applying the Methodology to CY 2023 Data To Determine the CY 2025
Permanent and Temporary Adjustments
Using the methodology finalized in the CY 2023 HH PPS final rule to
apply for all the years in which an adjustment is appropriate, and
described most recently in the CY 2024 HH PPS final rule (88 FR 77687
through 77688), as well as the two new assumptions related to the
OASIS-E mapping, we simulated 60-day episodes using actual CY 2023 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.
Using the final CY 2023 dataset, we began with 8,319,064 30-day
periods of care and dropped 513,580 30-day periods of care that had a
claim occurrence code 50 date after October 31, 2023. We also excluded
866,308 30-day periods of care that had a claim occurrence code 50 date
before January 1, 2023, to ensure the 30-day period will not be part of
a simulated 60-day episode that began in CY 2022. Applying the
additional exclusions and assumptions as described in the finalized
methodology (87 FR 66804), an

[[Page 88366]]

additional 13,508 30-day periods were excluded.
Additionally, we excluded 204,597 simulated 60-day episodes of care
where no OASIS information was available in the Chronic Conditions Data
Warehouse (CCW) Virtual Research Data Center (VRDC), a recent SOC/ROC
OASIS was not available, a wage index was not available, or the episode
could not be grouped to a Health Insurance Prospective Payment System
(HIPPS) code 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 (69.0 percent) and single 30-day periods of care (31.0
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 for this final rule
included 6,541,678 actual 30-day periods of care and 3,870,602
simulated 60-day episodes of care for CY 2023.
Using the final dataset for CY 2023 (6,541,678 actual 30-day
periods which made up the 3,870,602 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 2023 and therefore, we determined the CY 2023 30-day base
payment rate should have been $1,875.46 based on actual behavior, as
shown in table 2. As stated in the CY 2024 final rule (88 FR 77693) we
determined for CYs 2020 through CY 2022 a total of -5.779 percent
permanent adjustment was needed (after accounting for the -3.925
percent applied to the CY 2023 payment rate). In order to determine
behavior changes for only CY 2023, we simulated what the CY 2023 base
payment rate would have been if the -5.779 percent adjustment that we
determined using CY 2022 claims data had been implemented.
Using the recalculated CY 2022 base payment rate of $1,839.10 (88
FR 77693), multiplied by the CY 2023 case-mix weight recalibration
neutrality factor (0.9904), the CY 2023 wage index budget neutrality
factor (1.0001) and the CY 2023 home health payment update factor
(1.040), the CY 2023 base payment rate for assumed behavior would have
been $1,894.49. For the CY 2023 annual permanent adjustment, we
calculated the percent change between the two payment rates for only CY
2023 (assuming the -5.779 percent adjustment was already taken). For
the temporary adjustment we calculated the difference in aggregate
expenditures in dollars for all CY 2023 PDGM 30-day claims using the
actual payment rate ($2,010.69) and recalculated payment ($1,875.46).
This difference is shown as the retrospective dollar amount needed to
offset payment in a future year. Our results for the CY 2023 annual
(single year) permanent and temporary adjustment calculations using CY
2023 final claims data are shown in table 2.
[GRAPHIC] [TIFF OMITTED] TR07NO24.008

As shown in table 2, a permanent prospective adjustment of -1.004
percent to the CY 2025 30-day payment rate (assuming the-5.779 percent
adjustment was already taken) for CY 2023 would be required to offset
for such increases in estimated aggregate expenditures in future years.
We remind readers, the permanent prospective adjustment of -1.004
percent is for illustrative purposes only and the annual (single year)
permanent adjustment cannot be added to previous annual adjustments. To
illustrate the annual calculation for CY 2023 claims only:
[GRAPHIC] [TIFF OMITTED] TR07NO24.010

Section 1895(b)(3)(D) of the Act requires us to annually analyze
data from CY 2020 through CY 2026 and offset any increases or decreases
in estimated aggregate expenditures at a time and manner determined
appropriate. We now have four years of claims data (CYs 2020-2023)
under the PDGM, with one of these years including a partial permanent
adjustment. Later we provide an illustration of the annual (single
year)

[[Page 88367]]

permanent adjustments calculated on the discrete year of claims. We
remind readers these annual adjustments cannot be added or multiplied
together to determine the total permanent adjustment needed for CY 2025
because each individual year requires an assumption that all prior
adjustments were taken. We provided an illustrative equation in the CY
2025 HH PPS proposed rule (89 FR 55335) using the annual adjustment. We
remind readers that equation may result in slightly different results
due to the underlying assumptions each year and rounding.
[GRAPHIC] [TIFF OMITTED] TR07NO24.009

Additionally, we determined that our initial estimate of the base
payment rate ($2,010.69) resulted in excess expenditures of
approximately $971 million in CY 2023. This will require a temporary
adjustment, where the dollar amount ($971 million) will be converted to
a factor when implemented, to offset for such increases in estimated
aggregate expenditures for CY 2023.
f. CY 2025 Final Permanent Adjustment and Temporary Adjustment
Calculations
In the preceding section we describe how we annually analyzed CY
2023 final claims data to determine the effects of actual behavior
change on estimated aggregate expenditures. Again, that analysis
included simulations that assumed that the -5.779 percent payment
adjustment was already taken. We note that CMS implemented a payment
adjustment of-2.890 percent for CY 2024, rather than the -5.779 percent
we calculated (88 FR 77697), so the calculations set forth later in
this section reflect the remaining adjustments that are still needed.
Therefore, the calculation in this section includes any of the
remaining adjustments not applied in previous years (that is, CYs 2020
to 2022 claims data), as well as the adjustment needed to account for
CY 2023 claims. In calculating the full permanent adjustment needed to
the CY 2025 30-day payment rate, we compare estimated aggregate
expenditures under the PDGM and the prior system. Unlike the annual
adjustments described in table 3, we do not assume the full adjustment
from prior years had been taken.
As discussed in section II.C.1.d. of this final rule, using the
final dataset for CY 2023 (6,541,678 actual 30-day periods which made
up the 3,870,602 simulated 60-day episodes) we determined the CY 2023
30-day base payment rate should have been $1,875.46 based on actual
behavior, rather than the actual CY 2023 30-day base payment rate
($2,010.69) based on assumed behaviors. The percent change, as shown in
table 4, between the actual CY 2023 base payment rate of $2,010.69
(based on assumed behaviors and included a -3.925 percent adjustment
applied to the CY 2023 payment rate) and the CY 2023 recalculated base
payment rate of $1,875.46 (based on actual behaviors) is the total
permanent adjustment need for CYs 2020 through 2023 claims.
[GRAPHIC] [TIFF OMITTED] TR07NO24.012

As shown in table 4, a permanent prospective adjustment of -6.726
percent to the CY 2025 30-day payment rate for CYs 2020 through 2023
will be required to offset for such increases in estimated aggregate
expenditures in future years. To illustrate this calculation:
[GRAPHIC] [TIFF OMITTED] TR07NO24.011

[[Page 88368]]

As we stated in the CY 2024 HH PPS final rule (88 FR 77697),
applying a -2.890 percent permanent adjustment to the CY 2024 30-day
payment rate will not adjust the rate fully to account for differences
in behavior changes on estimated aggregate expenditures in CYs 2020,
2021, and 2022. Using CY 2023 claims data, as shown in table 5, a
permanent prospective adjustment of -6.726 percent to the CY 2025 30-
day payment rate will be required to offset for such increases in
estimated aggregate expenditures for CYs 2020 through 2023. We remind
readers adjustment factors are multiplied in this payment system and
therefore, individual numbers (that is, percentages) cannot be added or
subtracted together to determine the final adjustment. Therefore, we
cannot determine the CY 2025 proposed permanent adjustment, which will
include estimated aggregate expenditures in CY 2023, by simply
subtracting the -2.890 percent applied in CY 2024 from the total
permanent adjustment of -6.726 percent.
Instead, we account for the permanent adjustment applied in CY 2024
of -2.890 percent when we calculate the CY 2025 permanent adjustment by
solving the following equation (1-0.0289) x (1-x) = (1-0.06726). To
illustrate this calculation we used the following approach.
[GRAPHIC] [TIFF OMITTED] TR07NO24.014

In table 5 we provide the base payment rate for assumed behaviors
(what CMS actually paid), the recalculated base payment rate for actual
behaviors (what CMS should have paid), the total permanent adjustments
calculated from the base payment rates (accounts for any adjustments
taken prior), and the permanent adjustment applied.
[GRAPHIC] [TIFF OMITTED] TR07NO24.013

In the CY 2025 HH PPS proposed rule (89 FR 55337), we proposed to
apply the full permanent adjustment we (then) calculated of -4.067
percent, noting that we would update this percentage using more
complete claims data in the final rule, to satisfy the statutory
requirements at section 1895(b)(3)(D) of the Act to offset any
increases or decreases on the impact of differences between assumed
behavior and actual behavior changes on estimated aggregate
expenditures, reduce the need for any future large permanent
adjustments, and help slow the accrual of the temporary payment
adjustment amount. Using more complete claims data, and as calculated
previously, the permanent adjustment to the CY 2025 30-day payment rate
would be a reduction of 3.95 percent.
We remind readers that while we have not yet proposed a methodology
on how CMS will apply the temporary adjustment on a prospective basis
to the base payment rate, we finalized the methodology for determining
the temporary adjustment dollar amount in the CY 2023 HH PPS final rule
(87 FR 66804). We stated in the CY 2023 HH PPS final rule (87 FR
66804), the CY 2024 HH PPS proposed rule (88 FR 43674) and in the CY
2025 HH PPS proposed rule (89 FR 55337), that after we determine the
total dollar amount to be reconciled, we will calculate a temporary
adjustment factor to be applied to the base payment rate for the year
in which it is implemented. In other words, the total dollar amount for
the temporary adjustment will not change as data analysis in the final
rules

[[Page 88369]]

are considered complete. In table 6, we provide the temporary
adjustment dollar amount for each year and the overall total.
[GRAPHIC] [TIFF OMITTED] TR07NO24.015

We did not propose to take the temporary adjustment in CY 2025. In
future rulemaking, we will propose the temporary adjustment dollar
amount to be converted to a factor to be applied to the national,
standardized base payment rate in a time and manner determined
appropriate.
Comment: Commenters stated that they believe CMS has not provided
data, or that they believe the data presented is inaccurate to
demonstrate behavior changes, and therefore, they believe any payment
adjustment is not supported.
Response: We disagree that we have not provided commenters with the
data on which we relied, or that we relied on inaccurate data. We
provided our extensive data in the CY 2022 HH PPS proposed rule (86 FR
35880 through 35889), the CY 2023 HH PPS proposed rule (87 FR 37605
through 37614), the CY 2024 HH PPS proposed rule (88 FR 43663 through
43671), and the CY 2025 HH PPS proposed rule (89 FR 55318 through
55327). 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 the materials from the webinar, including the
presentation and the data files were published on the CMS website.\3\
As stated previously, CMS also provides twice a year (that is, proposed
and final rules) the HH PPS LDS file and the Home Health Descriptive
Statistics from the LDS Files. Therefore, CMS has provided this data
numerous times through rulemaking and made all data files used in
assessing behavior changes and rate setting available for interested
parties.
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\3\ 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>.
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Comment: The majority of commenters opposed the proposed permanent
adjustment to the CY 2025 home health rate and requested CMS postpone
its application in order to preserve access to home health services and
the scope of care available. Commenters stated that they believe CMS
dismissed data analysis presented from interested parties showing an
increase in referral rejections, which commenters purport is caused by
the permanent rate adjustment. These commenters stated that this ``on-
going pattern of loss of access to care'' is directly related to
implementation of the PDGM and payment adjustments related to the
behavior adjustment analysis and that CMS has an obligation to answer
the questions posed through these analyses. The most common themes
commenters presented as support for their concern that another
permanent adjustment in CY 2025 is exacerbating an unstable home health
benefit are negative margins, increasing costs, labor shortages, and
increasing referral rejections by HHAs.
Response: We diligently review all comments and analysis from
interested parties submitted through public comment on proposed rules.
Our review of data and comments provided by interested parties, as well
as our own internal data and analysis, helps the agency implement
appropriate payment policies. This thorough process helps guide agency
decision making, as we have discretion to implement regulations and
payment adjustments in a time and manner deemed appropriate. Throughout
the policy-making process, we monitor the effects the PDGM and Medicare
home health payment rates have on access to care, including the number
of beneficiaries accessing the benefit as well as the number of
providers furnishing services. We carefully analyze our own data
extracted through the CCW VRDC, claims review, and examination of cost
reports. CMS also monitors the effects of the PDGM on the quality of
care provided by HHAs through the home health quality reporting program
(HH QRP),\4\ and we refer readers to section III of this rule for
further information about the HH QRP. To the extent commenters suggest

[[Page 88370]]

access to care concerns mean we should not make any behavioral
adjustments, such concerns cannot override our statutory obligations.
As for the suggestion that access to care issues justify delaying
implementation of the permanent behavioral adjustments, our analysis
has not identified sufficient evidence that delaying the implementation
of the permanent adjustment will have a significant effect on access to
care or the issues commenters describe as destabilizing the home health
benefit. Below, we respond to these concerns and discuss potential
influencing factors that may affect the home health industry beyond the
permanent behavioral adjustments.
---------------------------------------------------------------------------

\4\ <a href="https://www.cms.gov/medicare/quality/home-health">https://www.cms.gov/medicare/quality/home-health</a>.
---------------------------------------------------------------------------

We understand that commenters are concerned that the PDGM might
have narrowed the gap between the margins providers receive treating
patients enrolled in Medicare-FFS and the margins providers receive
from patients with other health coverage. However, as we stated in the
CY 2023 HH PPS final rule (87 FR 66807) and the CY 2024 HH PPS final
rule (88 FR 77695), Medicare does not set payments to cross-subsidize
other payers, as we are mindful of our obligation to be responsible
stewards of the Medicare Trust Funds. Many commenters stated outright
that Medicare should consider all-payor margins when evaluating the
accuracy of the Medicare home health payment rate. While CMS analyzes
Medicare margins as a financial gauge overall to the soundness of the
home health industry, we again note that 42 CFR 413.5 states that
``costs attributable to other patients of the institution are not to be
borne by the program''--``the program'' being Medicare. In other words,
when setting payment rates, CMS is not required to consider any
shortfalls or deficits created by the payment rates of insurance
programs covering other patients.
Our analysis of cost reports submitted by HHAs shows that Medicare
payment rates exceed costs of care by 32 percent (89 FR 55321).
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 presented in the CY 2024 HH PPS
final rule (88 FR 77695), along with data reported by MedPAC, an
independent congressional agency,\5\ 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 Medicare
margins. We also note that we reviewed an annual outlook survey \6\ of
152 home health market participants (72 percent of which were
executives, see page 4) published by Homecare Homebase (HCHB), an
electronic health records service provider to home health agencies that
report their software serves ``all ten of the top ten largest home
health agencies.'' \7\ Approximately 85 percent of survey participants
reported they expect their organization's overall revenue to stay the
same (20 percent) or increase (65 percent) in 2024 compared to 2023
(pg. 7). We understand this survey is only a sample and may not
represent every HHA; however, it is important to recognize that many
home health executives report an overall positive market outlook
despite the permanent adjustment to the home health payment rate
implemented in CY 2023.
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\5\ <a href="https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_MedPAC_Report_To_Congress_SEC-2.pdf">https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_MedPAC_Report_To_Congress_SEC-2.pdf</a>.
\6\ <a href="https://hchb.com/resources/white-papers/survey-2024-hhcn-outlook-survey-and-report/">https://hchb.com/resources/white-papers/survey-2024-hhcn-outlook-survey-and-report/</a>.
\7\ <a href="https://hchb.com/faqs/">https://hchb.com/faqs/</a>.
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We acknowledge commenters' concerns regarding staff shortages.
Similar to what we stated in the CY 2024 HH PPS final rule (88 FR
77696), we recognize there are widespread staffing shortages across the
spectrum in healthcare as well as the general labor market. But the
statute limits behavioral adjustments to those attributable to the
implementation of the PDGM, and commenters do not cite evidence
suggesting staffing shortages are attributable to those changes. We
primarily account for those challenges in other ways, such as the
market basket as explained in section II.C of this final rule. As we
stated above and previously, delaying the permanent adjustment now will
only lead to larger permanent adjustments in the future, and any
temporary savings by HHAs will be offset by larger future temporary
adjustments.
We also considered the referral analysis industry advocates again
submitted using their proprietary data. While we welcome analysis
conducted by industry advocates and incorporate insights from the
industry's experience and data as appropriate, for reasons including
those explained in the CY 2024 HH PPS final rule (88 FR 77695), we must
use Medicare FFS data to set Medicare FFS policy. We appreciate that
the industry advocates addressed some of the concerns with their data
that we raised last year. However, they did not address whether their
proprietary data contains information from other payors, such as
Medicare Advantage (MA) plans.
It is important to note that neither our nor the industry's
analysis of referral rejections studied causation. In other words, an
increase of non-acceptance to home health does not necessarily indicate
that delaying the payment adjustment would increase referral
acceptance. The industry appears to assume that the main reason an HHA
would reject a referral is because the HHA cannot afford to provide the
services for the referred patient based on the Medicare home health
payment rate. As noted above, CMS's analysis of home health costs
suggests the payment rate is adequate to provide services to
beneficiaries, and any number of reasons exist that could result in a
patient not receiving home health services. For instance, not every
patient is found to be eligible for home health upon initial assessment
and some patients decline home health despite being referred.
Additionally, HHAs decide which services they can provide (in addition
to skilled nursing) and may not be appropriately staffed to provide the
services in the patient's plan of care. For example, a patient may need
skilled nursing, physical therapy, and occupational therapy, but the
referred HHA is not appropriately staffed with (or contracted with) an
occupational therapist. Therefore, even large increases in referral
rejections would not necessarily justify delaying the permanent
adjustment or substantiate concerns that HHAs cannot afford to accept
patients based on the national-standardized payment rates.
Nevertheless, based on the industry's suggestion that their data
suggests that there has been an increase in referral rejections since
we implemented the PDGM, we conducted our own referral analysis using
Medicare FFS data, and our findings, as shown in figure 7, differ from
the industry's. We acknowledge that there will always be a certain
percentage of referral rejections, for example, patient refusal or
ineligibility, and our analysis indicates that the rejection rate has
been relatively stable with less than a five percent change from CY
2020 to 2023.
In conducting our referral analysis, we first determined
``referrals'' by identifying FFS acute inpatient, inpatient
rehabilitation facility (IRF), skilled nursing facility (SNF), and
outpatient claims that had a discharge status code indicating home
health. While a beneficiary may be counted more than once (for example,
multiple inpatient admissions in a year), each claim with a discharge
to home health is considered its own referral. Figure 7 illustrates the
percentages of claims

[[Page 88371]]

with a discharge status code indicating home health services.
[GRAPHIC] [TIFF OMITTED] TR07NO24.016

We found from 2018 to 2023 referrals to home health services from
acute inpatient claims remained stable, increased for IRF claims,
decreased for SNF claims, and increased for outpatient claims.
Next, utilizing the same time period (CYs 2018-2023), we excluded
any home health claims where the beneficiary did not have an acute
inpatient, IRF, SNF, or outpatient claim preceding the home health
claim. We specifically looked at acute inpatient, IRF, SNF or
outpatient claims because this is the clearest way to determine that
the beneficiary was referred to home health based on the discharge
status codes. We then analyzed the number of days between the acute
inpatient, IRF, SNF, and outpatient claim (with a discharge status code
to home health) through date and the home health claim from date. Per
42 CFR 484.55(a)(1) the initial assessment visit must be held within 48
hours of referral, or within 48 hours of the patient's return home, or
on the physician or allowed practitioner-ordered start of care date.
Therefore, we limited our analysis to a home health claim start date
within seven days of the non-home health claim through date. For
example, an acute inpatient claim has a through-date of January 31st,
and the same beneficiary has a home health claim start date on or
before February 7th. Figure 8 illustrates the percentage of acute
inpatient, IRF, SNF, and outpatient claims that had a discharge status
code to home health and the beneficiary having a home health claim
within seven days of discharge from an acute inpatient, IRF, SNF, or
outpatient setting.

[[Page 88372]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.017

Our analysis shows on average, beneficiaries with acute inpatient,
IRF, SNF, and outpatient claims had a home health claim within seven
days of discharge: 79 percent, 86 percent, 75 percent, and 71 percent,
respectively from 2018 to 2023. Overall, we found, on average, 80
percent of referrals from acute inpatient, IRF, and SNF claims have a
home health claim within seven days of discharge, while outpatient had
71 percent of referrals on average. In our analysis we found an average
of 80 percent, 79 percent, and 75 percent acceptance of referrals for
2018 (pre-PDGM), 2020 (PDGM), and 2023 (PDGM) respectively for Medicare
FFS beneficiaries.
Our analysis shows that there is a 4.2 percent reduction in the
referral acceptance rate between 2020 and 2023 which is less than half
the approximate 10 percent reduction in the referral acceptance rate
the industry found in that same time. We note that we do not expect
that all referrals to home health would result in acceptance of those
referrals. As mentioned previously, there are several reasons for non-
acceptance of a referrals, including patient ineligibility for home
health services. The purpose of the referral analysis shown in this
final rule is to compare the Medicare FFS referral rejection rate to
the industry's analysis of the referral rejection rate using their
proprietary data. The industry reported an approximate 77 percent, 75
percent, and 65 percent acceptance of referrals for 2018 (pre-PDGM),
2020 (PDGM), and 2023 (PDGM) respectively for their study population.
One reason for the different results could be the different population
the industry studied. As described in the CY 2025 HH PPS proposed rule
(89 FR 55319) there was a total of about 17.1 million unique FFS
beneficiaries from 2018 to 2023.\8\ Commenters stated that their
referral analysis was ``based on 25.7 million patients who entered
Homecare Homebase from 2018 through the present.'' It is unclear why
the Homecare Homebase data included an additional 8.6 million patients.
One possibility is that that Homecare Homebase's database included
patients who were not enrolled in Medicare FFS or used other payors. As
explained above, we set Medicare FFS policy based on how it affects
Medicare FFS beneficiaries--not how it affects other payors' enrollees.
---------------------------------------------------------------------------

\8\ Some beneficiaries may be counted across years, and
therefore the total may overestimate the total number of
beneficiaries between 2018 and 2023.
---------------------------------------------------------------------------

Comment: Commenters also highlighted a decrease in the number of
HHAs since the implementation of the PDGM and this decrease may be
contributing to the lack of access to care and increased referral
rejections.
Response: In the CY 2024 HH PPS final rule (88 FR 77696) we stated
awareness of changes in the home health industry. We acknowledged that
the home health landscape is changing as HHAs continue to be
consolidated and bought by private equity firms and the increase of
for-profit agencies. For example, in our data we identified a total of
8,674 HHAs that had ownership status available, and 82 percent are for-
profit; 15 percent are non-profit, and 3 percent government owned. In
their 2024 report, MedPAC describes a continuous decline in the number
of HHAs since 2013, while the supply of agencies remained relatively
stable after the implementation of PDGM in 2020.\9\ MedPAC also notes
that relative to the FFS Medicare population alone, the supply of
agencies increased (to 2.3 HHAs per 10,000 FFS beneficiaries) because
the 2022 decline in FFS Medicare beneficiaries was greater than the
decline in the number of agencies. Further, our own analysis shows that

[[Page 88373]]

there is only a 1.7 percent decline in the number of HHAs with at least
one claim in 2019 to the number of HHAs with at least one claim in
2023, and the vast majority of Medicare beneficiaries live in counties
with a few HHAs with positive margins. While the distribution of HHAs
have changed, there is no evidence to support that this is solely
attributable to adjustments to the home health payment rates and,
again, note that the change in ownership practices could be
contributing to the slight decline in the number of HHAs.
---------------------------------------------------------------------------

\9\ Medicare Payment Advisory Commission, Report to the
Congress: Medicare Payment Policy, Washington, D.C. (March 2024)--
<a href="https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch7_MedPAC_Report_To_Congress_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2024/03/Mar24_Ch7_MedPAC_Report_To_Congress_SEC.pdf</a>.
---------------------------------------------------------------------------

Comment: We have continued to receive concerns from commenters
regarding ``inappropriate practice patterns,'' suggesting again that
HHAs may change how they operate in accordance with payment. In
response to the CY 2025 HH PPS proposed rule, CMS received many letters
from therapists and other home health care practitioners detailing
administrative mandates from HHAs limiting how many visits a patient
may receive. Further, many of these commenters stated that it was not
their salary that would cause them to leave the home health
environment, but the strict direction detailing the limits of their
practice in order to generate profit for the agency.
Response: These comments mirror comments we responded to in last
year's HH PPS final rule discussing the potential for the functional
impairment levels to create an incentive for HHAs to hand-pick patients
based on their predicted case mix grouping. We again emphasize that the
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 influence a practitioner on what should be included in the plan
of care based on the HHA's own financial constraints and staffing
abilities. As stated in the CY 2024 HH PPS final rule (88 FR 77699), we
expect the provision of services be made to best meet the patient's
care needs and in accordance with the home health CoPs at Sec. 484.60,
and that it is not proper for HHAs to under-supply care or services or
reduce the number of visits in response to payment, as this would be a
violation of the CoPs.
A commenter summed up many of these comments by stating that ``rate
cuts lead to care cuts.'' We acknowledge commenters' concerns that they
believe HHAs are dictating practice patterns in response to the
implementation of the PDGM. However, Medicare sets payment rates in
accordance with statutory requirements, and not HHA's business
practices. Moreover, access to care is impacted by many factors. This
may include factors as varied as labor conditions, patient mix,
industry margins, and competitive pressures. Congress changed the home
health prospective payment system in the BBA of 2018 and instructed CMS
to further adjust payment rates to account for differences between the
behavior changes we predicted in the CY 2019 rule and the actual
behavior changes we have observed since the implementation of the PDGM
in CY 2020. We are implementing these payment adjustments in a time and
manner appropriate in accordance with the law, while mindful of
possible disruptions this implementation may cause to the services to
which beneficiaries are entitled. Our analysis continues to suggest
that the permanent adjustment we are finalizing here to the CY 2025
base payment rate should not materially affect access to the Medicare
home health benefit.
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 are committed to remaining responsive to commenter concern
regarding on-going permanent rate adjustments. We acknowledge that
while we must 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, we have the discretion to implement any adjustment in a
time and manner determined appropriate. Therefore, in response to
commenter concerns, we are finalizing a -1.975 percent (half of the
proposed -3.95 percent) permanent adjustment for CY 2025. This approach
of applying half of the amount proposed for the permanent adjustment is
aligned with the approach finalized in the CY 2023 HH PPS final rule
(87 FR 66808) and the CY 2024 HH PPS final rule (88 FR 77697) where CMS
finalized half of the remaining permanent adjustment, as indicated by
the most recently available claims data. However, again, we note the
permanent adjustment to account for actual behavior changes in CYs 2020
through 2023, should be -3.95 percent, which includes the remaining
``half'' from the CY 2024 HH PPS final rule, and the additional
adjustment based on CY 2023 data. Therefore, applying a -1.975 percent
permanent adjustment to the CY 2025 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
2025 base payment rate using our temporary adjustment authority, as
section 1895(b)(3)(D)(iii) of the Act 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 (-3.95
percent) in effect, the total temporary dollar amount will continue to
increase until the full permanent adjustment is implemented.

D. CY 2025 Home Health Low Utilization Payment Adjustment (LUPA)
Thresholds, Functional Impairment Levels, Comorbidity Sub-Groups, Case-
Mix Weights, and Reassignment of Specific ICD-10-CM Codes Under the
PDGM

1. CY 2025 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 setting the LUPA thresholds at the 10th percentile of visits
or two visits, whichever is higher, for each payment group. This means
the LUPA threshold for each 30-day period of care varies depending on
the PDGM payment group to which it is assigned. If the LUPA threshold
for the payment group is met under the PDGM, the 30-day period of care
will be paid the full 30-day period case-mix adjusted payment amount
(subject to any partial payment adjustment or outlier adjustments). If
a 30-day period of care does not meet the PDGM LUPA visit threshold,
then payment will be made using the per-visit payment amounts as
described in section II.E.4.c. 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 fewer visits, payment is made using the
per-visit payment amounts.
In the CY 2019 HH PPS final rule with comment period (83 FR 56492),
we finalized our policy that the LUPA thresholds for each PDGM payment
group will be reevaluated every year based on the most current
utilization

[[Page 88374]]

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 will maintain
the LUPA thresholds that were finalized and shown in table 17 of the CY
2020 HH PPS final rule with comment period (84 FR 60522) for CY 2021
payment purposes. We stated that at that time, we did not have
sufficient CY 2020 data to reevaluate the LUPA thresholds for CY 2021.
In the CY 2022 HH PPS final rule with comment period (86 FR 62249),
we finalized the proposal to recalibrate the PDGM case-mix weights,
functional impairment levels, and comorbidity subgroups while
maintaining the LUPA thresholds for CY 2022. We stated that because
there are several factors that contribute to how the case-mix weight is
set for a particular case-mix group (such as the number of visits,
length of visits, types of disciplines providing visits, and non-
routine supplies) and the case-mix weight is derived by comparing the
average resource use for the case-mix group relative to the average
resource use across all groups, we believe the COVID-19 PHE will have
impacted utilization within all case-mix groups similarly. Therefore,
the impact of any reduction in resource use caused by the PHE on the
calculation of the case-mix weight will be minimized since the impact
will 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 will 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 2024, we proposed to update the LUPA thresholds using CY
2022 Medicare home health claims (as of March 17, 2023) linked to OASIS
assessment data. We believed that CY 2022 data will be more indicative
of visit patterns in CY 2024 rather than continuing to use the LUPA
thresholds derived from the CY 2018 data pre-PDGM. Therefore, we
finalized a policy to update the LUPA thresholds for CY 2024 using data
from CY 2022.
For CY 2025, we proposed to update the LUPA thresholds using CY
2023 home health claims utilization data (using more complete CY 2023
claims data as of July 11, 2024), in accordance with our policy to
annually recalibrate the case-mix weights and update the LUPA
thresholds, functional impairment levels and comorbidity subgroups.
After reviewing the CY 2023 home health claims utilization data, we
determined that LUPA visit patterns in 2023 were similar to visits in
2021 and a total of eight case-mix groups have a decline in their LUPA
threshold of a single visit. The proposed LUPA thresholds for the CY
2025 PDGM payment groups with the corresponding Health Insurance
Prospective Payment System (HIPPS) codes and the case-mix weights can
be found in the CY 2025 HH PPS proposed rule (89 FR 55349). We
solicited public comment on the proposed updates to the LUPA thresholds
for CY 2025.
Comment: All commenters expressed support for the updated LUPA
thresholds and recognized that this adjustment helps align payments
more closely with evolving care delivery and improves payment accuracy.
Response: We thank the commenters for their support.
Final Decision: We are finalizing the proposal to update the LUPA
thresholds for CY 2025 using CY 2023 claims data (as of July 11, 2024).
The final LUPA thresholds for the CY 2025 PDGM payment groups with the
corresponding Health Insurance Prospective Payment System (HIPPS) codes
and the case-mix weights are listed in table 7 and is also available on
the HHA Center web page, located at <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>.
2. CY 2025 Functional Impairment Levels
Under the PDGM, the functional impairment level is determined by
responses to certain OASIS items associated with activities of daily
living and risk of hospitalization; that is, responses to OASIS items
M1800-M1860 and M1033. A home health period of care receives points
based on each of the responses associated with these functional OASIS
items, which are then converted into a table of points corresponding to
increased resource use. The sum of all these points results in a
functional impairment score which is used to group home health periods
into a functional level with similar resource use. That is, the higher
the points, the more the response is associated with increased resource
use, or increased impairment. The three functional impairment levels of
low, medium, and high were designed so that approximately one-third of
home health periods from each clinical group falls 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 2025, we proposed to use CY 2023 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 the functional impairment levels using the OASIS items.
We proposed to use the same methodology previously finalized to update
the functional impairment levels for CY 2025. The final updated OASIS
functional points table and the table of functional impairment levels
by clinical group for CY 2025 are listed in tables 7 and 8,
respectively.
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We solicited public comment on the updates to functional points and
the functional impairment levels by clinical group.
Comment: Several commenters opposed the proposed updates to the CY
2025 functional impairment points and levels. These commenters contend
that the assignment of functional impairment levels appears arbitrary
and requested that CMS refrain from making additional changes to the
functional scoring system that would affect level assignments until the
impact of CY 2024 updates is fully understood. Several commenters
expressed concerns that the proposed functional impairment levels may
not accurately reflect the actual functional status of home health
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complex or higher-acuity conditions. Specifically, they stated that
patients with significant needs for assistance with activities of daily
living may not be adequately represented within the proposed levels,
potentially leading to a misalignment between the resources required to
provide care and the associated payment structure. Additionally,
commenters noted that the agency's proposed recalibration for CY 2025
does not sufficiently account for what the commenters say is a fact
that patients entering home health care post-COVID-19 pandemic are, on
average, more impaired than they were prior to the pandemic. Commenters
stated that they believe this marks the fourth consecutive year in
which changes to functional item scoring have been finalized without
fully considering the impacts of the changes implemented in the
previous year (that is, CY 2024 changes for CY 2025 rulemaking).
Commenters requested that CMS delay finalizing any updates to the
functional domain methodology until CY 2026, when post-pandemic data
from 2024 can be fully analyzed to assess the appropriateness of
further modifications.
Response: We appreciate the commenters' recommendations. However,
we maintain that annual recalibration is essential to ensure the most
accurate and current assessment of the relationship between resource
use and functional points, functional threshold levels, comorbidities,
utilization thresholds, and case-mix weights. As such, we do not agree
with delaying updates to the functional impairment points and levels
for CY 2025. We continue to believe that using the most up-to-date data
to revise functional impairment levels is critical to ensuring that all
variables used in the case-mix adjustment process align with the actual
costs of delivering home health services. We would also like to remind
commenters that the functional impairment levels are structured so that
approximately one-third of periods within each clinical group are
assigned to low, medium, and high categories, ensuring that the case-
mix system appropriately reflects differences in functional impairment.
This classification of functional impairment into low, medium, and high
levels has been a fundamental component of the HH PPS since its
implementation. 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. As such, the PDGM functional impairment structure
accounts for patient characteristics within each clinical group that
are associated with increased resource use due to functional
impairment. This ensures that payment is more accurately aligned with
patient characteristics, including beneficiaries who have greater need
with activities of daily living (ADLs) and who are more functionally
impaired. Regardless of whether patients entering home health are more
impaired due to the post-COVID environment or any other influence, the
functional levels capture the relationship between functional status as
indicated on the OASIS with resource use captured on claims. As such,
updating the functional levels would specifically capture any increase
in functional impairment and any increase in resource use associated
with ADLs.
Final Decision: We are finalizing the functional points and
functional impairment level updates for CY 2025 as proposed, using
updated CY 2023 claims data (as of July 11, 2024).
3. CY 2025 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> 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> Low comorbidity adjustment: There is a reported secondary
diagnosis on the home health-specific comorbidity subgroup list that is
associated with higher resource use.
<bullet> 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 will 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 2025, we proposed to use the same
methodology used to establish the comorbidity subgroups to update the
comorbidity subgroups using CY 2023 home health data with linked OASIS
data.
For CY 2025, we proposed to update the comorbidity subgroups to
include 22 low comorbidity adjustment subgroups and 97 high comorbidity
adjustment interaction subgroups. The proposed CY 2025 low comorbidity
adjustment subgroups and the high comorbidity adjustment interaction
subgroups including those diagnoses within each of these comorbidity
adjustments was included in the CY 2025 HH PPS proposed rule (89 FR
55340).
We invited comments on the proposed updates to the low comorbidity
adjustment subgroups and the high comorbidity adjustment interactions
for CY 2025.
Using more updated claims data, for CY 2025 there are 22 low
comorbidity subgroups, and 94 high comorbidity subgroups as shown in
tables 9 and 10.
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Comment: Several commenters expressed support for the proposed low
and high comorbidity adjustments, particularly those pertaining to low
comorbidity adjustments for diagnoses such as diabetes and endocrine
disorders. Commenters stated these adjustments will result in more
accurate payment, reflecting the resources required to effectively
manage patients with these conditions. Additionally, commenters
indicated that the proposed changes to the comorbidity subgroups align
with the stated objective of ensuring that payments more accurately
reflect the actual costs of providing care.
Response: We thank commenters for their support.
Comment: A commenter expressed concern that the COVID-19 diagnosis
was excluded from the comorbidity grouping list, despite its continued
impact on elderly and high-risk patients. Another commenter also
pointed out that Circulatory 1 (nutritional anemias) are grouped with
Skin 3 (non-pressure ulcers), but not with Skin 4 (pressure ulcers).
Furthermore, Circulatory 2 (hemolytic, aplastic, and other anemias) are
no longer grouped with either Skin 3 or Skin 4. Commenters raised
concerns as to why certain anemias are recognized as having an impact
on some ulcer types but not others. They also stated that the same
principle should apply to Circulatory 1 and Circulatory 2, as anemias
included in Circulatory 2 are likely to result in greater
complications, such as compromised strength and skin integrity, than
those in Circulatory 1.
Response: We appreciate commenters' thorough review of these
groupings. As outlined in the CY 2020 final rule with comment period
(84 FR 60510) and further detailed in the technical report ``Overview
of the Home Health Groupings Model'', the Home Health Specific
Comorbidity List stems from the principles of patient assessment by
providers, as well as the evaluation of body systems and their
associated diseases, conditions, and injuries. This framework was used
to develop condition categories that identify clinically relevant
relationships tied to increased resource use.
We acknowledge the complexity and breadth of clinical conditions,
comorbidities, and their interactions within the Medicare home health
population. However, we remind commenters that only subgroups of
diagnoses representing more than 0.1% of periods of care, and
demonstrating at least the median resource use, qualify for a low
comorbidity adjustment. For example, in reference to the commenter's
concern regarding the grouping of Circulatory 1 (nutritional anemias)
with Skin 3 (non-pressure ulcers), and the exclusion of Circulatory 2
(hemolytic, aplastic, and other anemias) from both Skin 3 and Skin 4
groupings, these categorizations are driven by data reflecting resource
utilization patterns. If the anemias in Circulatory 2 do not
demonstrate the requisite median resource use in relation to specific
ulcer types, such as Skin 4 (pressure ulcers), they would not qualify
for inclusion in the comorbidity list. This explains why certain
anemias appear in the comorbidity list for one ulcer category but not
for another despite clinical similarities or the potential for greater
clinical complications like compromised strength and skin integrity.
This methodology for determining statistical significance was detailed
in the CY 2020 final rule with comment period (84 FR 60510). It is
based on the understanding that the aggregate number of comorbidities
within the population forms the standard for payment purposes. While we
expect HHAs to report all secondary diagnoses that impact care
planning, nevertheless it is important to note that certain comorbidity
subgroups included in the Home Health Specific List may not meet the
criteria for a payment adjustment.
Final Decision: We are finalizing the updated comorbidity
adjustment subgroups and the high comorbidity adjustment interactions
using CY 2023 home health data. For CY 2025, the final updated
comorbidity adjustment subgroups include 22 low comorbidity adjustment
subgroups as identified in table 9 and 94 high comorbidity adjustment
interaction subgroups as identified in table 10. The final CY 2025 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>.
4. CY 2025 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 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.
To generate the proposed recalibrated CY 2025 case-mix weights, we used
CY 2023 home health claims data with linked OASIS data (as of March 19,
2024). We included the proposed case-mix weights in table 25 of the
proposed rule (89 FR 55351). In this final rule, we updated these case-
mix weights with claims data as of July 11, 2024, as shown in table 11.
These data are the most current and complete data available at the time
of rulemaking.
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 25 of the proposed rule 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 2022 home health cost reports. We use 2022 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
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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 11 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 updated case-mix weights for CY 2025 are listed in table
12 and will also be posted on the HHA Center web page \10\ upon display
of this final rule.
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\10\ 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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Changes to the PDGM case-mix weights are implemented in a budget
neutral manner by multiplying the CY 2025 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
2025, we will continue the practice of using the most recent complete
home health claims data at the time of rulemaking, which is CY 2023
data. The case-mix budget neutrality factor is calculated as the ratio
of 30-day base payment rates such that total payments when the CY 2025
PDGM case-mix weights (developed using CY 2023 home health claims data)
are applied to CY 2023 utilization (claims) data are equal to total
payments when CY 2024 PDGM case-mix weights (developed using CY 2022
home health claims data) are applied to CY 2023 utilization data. This
produces a case-mix budget neutrality factor for CY 2025 of 1.0039.
We invited public comments on the CY 2025 proposed case-mix weights
and proposed case-mix weight budget neutrality factor.
Comment: Several commenters expressed support for the updated case-
mix weights using the most current data available for recalibration.
Response: We thank the commenters for their support.
Comment: A few commenters stated that any recalibration should not
be budget neutral. They stated this stance is based on several factors,
including the increasing acuity of patients, rising operational
expenses, growing demand for home health services, and the ongoing
labor shortage. Commenters stated that these factors warrant
consideration in ensuring adequate payment to align with the current
healthcare environment. Specifically, a commenter disagreed with the
downgrading of points for toilet transfers and ambulation. While the
commenter acknowledged that budget neutrality drives the reallocation
of points when others are increased, they expressed concern that
reducing points for ambulation may place less emphasis on this critical
task, potentially leading to higher fall rates and, consequently,
increased hospitalizations. The commenter also noted that while bathing
points were significantly increased, which they stated was beneficial,
the commenter stated the increase should not be as substantial,
especially given the larger reduction in points for toilet transfers
and ambulation. Additionally, some commenters expressed concern that
the proposed changes to the case-mix weights contribute to substantial
year-to-year payment variances, which may have a significant financial
impact on many providers as case-mix weights are driven lower. These
commenters noted that this variability in payment could create
financial challenges for providers, particularly those already dealing
with increasing costs and labor shortages.
Response: While we recognize that commenters have consistently
raised concerns regarding the annual recalibration of case mix weights
since the policy's initial finalization, we continue to believe that
annual recalibration of PDGM case mix weights is essential. This
approach promotes accurate weighting of the case mix weights to reflect
current home health resource utilization, changes in utilization
patterns, and the characteristics of patients currently receiving home
health services. Prolonging recalibration beyond an annual schedule
could result in greater variation in case mix weights, compared to
recalibrating using the most recent utilization data. Therefore, we
believe that utilizing calendar year 2023 data to recalibrate the
calendar year 2025 case-mix weights is appropriate. We direct
commenters to review the calendar year 2019 HH PPS final rule with
comment (83 FR 56502) for the finalized case-mix adjustment
methodology, as well as the detailed steps taken to determine the case-
mix weight for each of the 432 different PDGM payment groups, which are
outlined in this final rule. Furthermore, 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 as statutorily
required in section 1895(b)(3)(A)(i) of the Act, ensuring that changes
to case-mix weights, functional impairment levels, comorbidity
adjustments, and updated wage data do not impact overall payments in
the aggregate.
We appreciate the commenters' recognition of our efforts to
recalibrate case-mix weights using the most current data available.
Regarding concerns about the downgrading of points for toilet transfers
and ambulation, we recognize the importance of accurately reflecting
the resource needs associated with these tasks. However, the
reallocation of points is driven by the need to maintain budget
neutrality, and any adjustments are made based on current utilization
data and resource allocation. While a few commenters expressed support
for the idea of non-budget neutral recalibration, it is important to
note that, as statutorily required by section 1895(b)(3)(A)(i) of the
Act, any adjustments to case-mix weights must be made in a budget
neutral manner to ensure that the aggregate level of payments resulting
from changes in case-mix weights remains consistent.
We also acknowledge the concern that case-mix weight changes may
lead to year-to-year payment variances and potential financial
challenges for providers. The intent of recalibration is to align
payments with actual resource use while maintaining overall budget
neutrality. As always, we will continue to evaluate the impact of these
adjustments and consider the evolving needs of the home health
population.
Final Decision: We are finalizing the recalibrated case-mix weights
for CY 2025, updated with claims data as of July 11, 2024. 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 2025 national,
standardized 30-day period payment rate. As stated previously, the
final case-mix budget neutrality factor for CY 2025 will be 1.0039.
5. Reassignment of Specific ICD-10-CM Codes Under the PDGM
a. Background
The 2009 final rule ``HIPAA Administrative Simplification:
Modifications to Medical Data Code Set Standards To Adopt ICD-10-CM and
ICD-10-PCS'' (74 FR 3328, January 16, 2009), set October 1, 2013, as
the compliance date for all covered entities under the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) to use the
International Classification of Diseases, 10th Revision, Clinical
Modification (ICD-10-CM) and the International Classification of
Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) medical
data code sets. The ICD-10-CM diagnosis codes are granular and specific
and provide HHAs a better opportunity to report codes that best reflect
the patient's conditions that support the need for home health
services. However, as stated in the CY 2019 HH PPS final rule with
comment period (83 FR 56473), because the ICD-10-CM is comprehensive,
it also contains many codes that may not support the need for home
health services. For example, diagnosis codes that indicate death as
the outcome are Medicare covered codes but are not relevant to home
health. In addition, diagnosis and procedure coding guidelines may
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sequence of ICD-10-CM coding conventions. For example, the underlying
condition must be listed first (for example, Parkinson's disease must
be listed prior to Dementia if both codes were listed on a claim).
Therefore, not all the ICD-10-CM diagnosis codes are appropriate as
principal diagnosis codes for grouping home health periods into
clinical groups or to be placed into a comorbidity subgroup when listed
as a secondary diagnosis. As such, each ICD-10-CM diagnosis code is
assigned, including those diagnosis codes designated as ``not
assigned'' (NA), to a clinical group and comorbidity subgroup within
the HH PPS grouper software (HHGS). We reminded readers the ICD-10-CM
diagnosis code list is updated each fiscal year with an effective date
of October 1st and therefore, the HH PPS is generally subject to a
minimum of two HHGS releases, one in October and one in January of each
year, to ensure that claims are submitted with the most current code
set available. Likewise, there may be new ICD-10-CM diagnosis codes
created (for example, codes for emergency use) or a new or revised edit
in the Medicare Code Editor (MCE) so an update to the HHGS may occur on
the first of each quarter (January, April, July, October). We encourage
readers to check the HHGS routinely at these times, as we do not
anticipate posting changes to the home health web page.
b. Methodology for ICD-10-CM Diagnosis Code Assignments
Although it is not our intent to review all ICD-10-CM diagnosis
codes each year, we recognize that occasionally some ICD-10-CM
diagnosis codes may require changes to their assigned clinical group
and/or comorbidity subgroup. For example, there may be an update to the
MCE unacceptable principal diagnosis list, or we receive public
comments from interested parties requesting specific changes. Any
addition or removal of a specific diagnosis code to the ICD-10-CM code
set (for example, three new diagnosis codes, Z28.310, Z28.311 and
Z28.39, for reporting COVID-19 vaccination status were effective April
1, 2022) or minor tweaks to a descriptor of an existing ICD-10-CM
diagnosis code generally could be implemented as appropriate and may
not be discussed in rulemaking.
We rely on the expert opinion of our clinical reviewers (for
example, nurse consultants and medical officers) and current ICD-10-CM
coding guidelines to determine if the ICD-10-CM diagnosis codes under
review for reassignment are significantly similar or different to the
existing clinical group and/or comorbidity subgroup assignment. As we
stated in the CY 2018 HH PPS proposed rule (82 FR 35313), the intent of
the clinical groups is to reflect the reported principal diagnosis,
clinical relevance, and coding guidelines and conventions. Therefore,
for the purposes of assignment of ICD-10-CM diagnosis codes into the
PDGM clinical groups we will not conduct additional statistical
analysis as such decisions are clinically based and the clinical groups
are part of the overall case-mix weights.
As we noted in the CY 2019 HH PPS final rule with comment period
(83 FR 56486), the home health-specific comorbidity list is based on
the principles of patient assessment by body systems and their
associated diseases, conditions, and injuries to develop larger
categories of conditions that identified clinically relevant
relationships associated with increased 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. If
specific ICD-10-CM diagnosis codes are to be reassigned to a different
comorbidity subgroup (including NA), we will first evaluate the
clinical characteristics (as discussed previously for clinical groups)
and if the ICD-10-CM diagnosis code does not meet the clinical
criteria, then no reassignment will occur. However, if an ICD-10-CM
diagnosis code does meet the clinical criteria for a comorbidity
subgroup reassignment, then we will evaluate the resource consumption
associated with the ICD-10-CM diagnosis codes, the current assigned
comorbidity subgroup, and the proposed (reassigned) comorbidity
subgroup. This analysis is to ensure that any reassignment of an ICD-
10-CM diagnosis code (if reported as secondary) in any given year will
not significantly alter the overall resource use of a specific
comorbidity subgroup. For resource consumption, we use non-LUPA 30-day
periods to evaluate the total number of 30-day periods for the
comorbidity subgroup(s) and the ICD-10-CM diagnosis code, the average
number of visits per 30-day periods for the comorbidity subgroup(s) and
the ICD-10-CM diagnosis code, and the average resource use for the
comorbidity subgroup(s) and the ICD-10-CM diagnosis code. The average
resource use measures the costs associated with visits performed during
a home health period and was previously described in the CY 2019 HH PPS
final rule with comment period (83 FR 56450).
c. Request for ICD-10-CM Diagnosis Code Reassignments to a PDGM
Clinical Group or Comorbidity Subgroup--Renal 3 Comorbidity Subgroup
We received questions from interested parties regarding the ICD-10-
CM diagnosis codes N30.00- (acute cystitis) and the ICD-10-CM diagnosis
code N39.0 (urinary tract infection, site not specified). Specifically,
CMS received a request to reassign N30.00 to the same clinical and
comorbidity group as N39.0. The ICD-10-CM diagnosis codes N30.00-
(acute cystitis) are currently assigned to clinical group J (MMTA--
Gastrointestinal tract and Genitourinary system) when listed as a
primary diagnosis and not assigned to a comorbidity subgroup when
listed as a secondary diagnosis. The ICD-10-CM diagnosis code N39.0
(urinary tract infection, site not specified) is currently assigned to
clinical group J (MMTA--Gastrointestinal tract and Genitourinary
system) when listed as a primary diagnosis and assigned to the renal 3
comorbidity subgroup when listed as a secondary diagnosis.
We reviewed the ICD-10-CM diagnosis codes related to cystitis
(N30.-) and determined all 14 of the codes are not assigned to a
comorbidity subgroup when listed as a secondary diagnosis. Our clinical
reviewers advised that cystitis, including N30.00- (acute cystitis), is
to report inflammation of the urinary bladder; whereas N39.0 (urinary
tract infection, site not specified) is to report the presence of the
infectious microorganisms in the urinary tract system. In addition, we
evaluated resource consumption related to the comorbidity subgroup
renal 3, as well as diagnosis codes N30.00- (acute cystitis) and N39.0
(urinary tract infection, site not specified) and found that acute
cystitis on average has a lower resource use than urinary tract
infection (UTI). As described earlier, based on clinical review and
resources use analysis, the ICD-10-CM diagnosis codes N30.00- (acute
cystitis) are currently assigned to the most appropriate comorbidity
group, not assigned. Therefore, we did not propose a reassignment of
N30.00- (acute cystitis) at this time.
Comment: We received a comment requesting we reassign N30.00-
(acute cystitis) to receive the same clinical grouping and comorbidity
subgroup as an unspecified UTI. Another commenter stated they believe
diagnoses were missing from comorbidity groups, such as sepsis that was
not grouped with UTI. Other commenters requested rheumatic mitral value
diseases I05.- and aortic rheumatic valve diseases I06.- should be
assigned to the comorbidity subgroup

[[Page 88404]]

Heart 9 and that F01., Vascular dementia, be reassigned to the
behavioral health clinical group.
Response: We appreciate the commenters diligent review of the ICD-
10-CM diagnosis codes and their assigned clinical and comorbidity
group. We remind readers that not all diagnosis codes are assigned a
clinical group and/or a comorbidity group under the HH PPS payment
policy. As we did not propose any reassignments at this time, these
comments are considered out of scope for this rule. Additionally, to
evaluate clinically and, when needed, statistically, a request for a
diagnosis code's clinical group or comorbidity subgroup reassignment,
we require the current assignment of the diagnosis code(s), the
requested reassignment, and any supporting evidence for the
reassignment (for example, similar clinical management and services).
As we stated in the CY 2023 HH PPS final rule (87 FR 66808) if an ICD-
10-CM diagnosis code is to be reassigned from one clinical group and/or
a comorbidity subgroup to another clinical/comorbidity group, either
through a request from the public or internal analysis, as the change
may affect payment, it is necessary to propose these changes through
notice and comment rulemaking. Lastly, while we attempt to evaluate
requests in the order in which they are received, the length of time
needed to sufficiently evaluate a request varies. For future requests
for ICD-10 code reassignments, readers can send their request(s) to the
Home Health Policy mailbox: <a href="/cdn-cgi/l/email-protection#d199bebcb499b4b0bda5b981bebdb8b2a891b2bca2ffb9b9a2ffb6bea7">[email&#160;protected]</a>.

E. CY 2025 Home Health Payment Rate Updates

1. Final CY 2025 Home Health Market Basket Update for HHAs
Section 1895(b)(3)(B) of the Act requires that the standard
prospective payment amounts for home health 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. In the CY 2024
HH PPS final rule (88 FR 77726), we finalized a rebasing of the home
health market basket to reflect 2021 cost report data. We also
finalized a policy for CY 2024 and subsequent years that the labor-
related share will be 74.9 percent, and the non-labor-related share
will be 25.1 percent. A detailed description of how we rebased the home
health market basket and labor-related share is available in the CY
2024 HH PPS final rule (88 FR 77726 through 77742).
In the CY 2015 HH PPS final rule (79 FR 38384), we finalized our
methodology for calculating and applying the multifactor productivity
adjustment. As we explained in that rule, section 1895(b)(3)(B)(vi) of
the Act, requires that, in CY 2015 (and in subsequent calendar years,
except CY 2018 (under section 411(c) of the Medicare Access and CHIP
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted April 16,
2015)), the market basket percentage under the HH PPS as described in
section 1895(b)(3)(B) of the Act be annually adjusted by changes in
economy-wide productivity. Section 1886(b)(3)(B)(xi)(II) of the Act
defines the productivity adjustment to be equal to the 10-year moving
average of change in annual economy-wide private nonfarm business
multifactor productivity (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, calendar year, cost
reporting period, or other annual period). The Bureau of Labor
Statistics (BLS) publishes the official measures of productivity for
the United States economy. We note that previously the productivity
measure referenced in section 1886(b)(3)(B)(xi)(II) of the Act was
published by BLS as private nonfarm business multifactor productivity.
Beginning with the November 18, 2021, release of productivity data, BLS
replaced the term ``multifactor productivity'' with ``total factor
productivity'' (TFP). BLS noted that this is a change in terminology
only and will not affect the data or methodology. As a result of the
BLS name change, the productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as ``private
nonfarm business total factor productivity''. We refer readers to
<a href="https://www.bls.gov">https://www.bls.gov</a> for the BLS historical published TFP data. A
complete description of IHS Global Inc.'s (IGI) TFP projection
methodology is available on the CMS website at <a href="https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information">https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information</a>.
The proposed home health update percentage for CY 2025 was based on
the estimated home health market basket percentage increase, specified
at section 1895(b)(3)(B)(iii) of the Act, of 3.0 percent (based on IHS
Global Inc.'s first quarter 2024 forecast with historical data through
fourth quarter 2023). The estimated CY 2025 home health market basket
percentage increase of 3.0 percent was then reduced by a productivity
adjustment, in accordance with section 1895(b)(3)(B)(vi) of the Act.
Based on IGI's first quarter 2024 forecast, the proposed productivity
adjustment was estimated to be 0.5 percentage point for CY 2025.
Therefore, the proposed productivity-adjusted CY 2025 home health
market basket update was 2.5 percent (3.0 percent market basket
percentage increase, reduced by a 0.5 percentage point productivity
adjustment). Furthermore, we proposed that if more recent data
subsequently became available (for example, a more recent estimate of
the market basket and/or productivity adjustment), we would use such
data, if appropriate, to determine the CY 2025 market basket percentage
increase and productivity adjustment in the final rule.
For this final rule, based on updated data from IGI's third quarter
2024 forecast with historical data through the second quarter of 2024,
the 2021-based home health market basket percentage increase for CY
2025 is 3.2 percent reduced by a 0.5 percentage point productivity
adjustment which results in a final CY 2025 update percentage of 2.7
percent.
Section 1895(b)(3)(B)(v) of the Act requires that the home health
percentage update be decreased by 2 percentage points for those HHAs
that do not submit quality data as required by the Secretary. For HHAs
that do not submit the required quality data for CY 2025, the proposed
home health payment update percentage was 0.5 percent (2.5 percent
minus 2 percentage points). For this final rule, for HHAs that do not
submit the required data for CY 2025, the final home health payment
update percentage is 0.7 percent (2.7 percent minus 2 percentage
points).
We invited public comment on our proposals for the CY 2025 home
health market basket percentage increase and productivity adjustment.
Comment: A few commenters stated that they appreciate the market
basket update and that they support the methodology resulting in a
proposed positive payment update of 2.5 percent.
Response: We thank the commenters for their support.
Comment: Some commenters asserted that the proposed update is not
enough to account for the increase in costs that home health agencies
have faced. Commenters stated that home health agencies continue to
face stubborn and rising inflation which they state affects the costs
of medical supplies, medications, materials, utilities, transportation,
as well increases in labor costs. They note that retention and
recruitment of staff remains a priority,

[[Page 88405]]

but there have been challenges due to personnel shortages and the need
to compete with other health care sectors, which continues to apply
upward pressure to the cost of labor. Specifically, a commenter stated
that their labor costs have increased nearly 12 percent between 2021
and 2024, and that they are projecting significant future cost
increases to recruit and retain the workforce necessary to meet rapidly
increasing demand.
A commenter suggested CMS examine trends relative to IHS Global
Inc.'s forecasts to determine whether more recently available data than
used for the final CY 2025 rule would result in a higher market basket
update and determine whether additional updates could be made during
the course of CY 2025 to provide additional support to home health and
other providers.
Some commenters stated that since 2021, they believe IGI's
forecasted growth for the home health market basket has shown a
consistent trend of under-forecasting actual market basket growth. They
stated they were cognizant of the fact that forecasts will always be
imperfect, but the commenters claimed that in the past, they have been
more balanced. However, with what they state are four straight years of
under-forecasts, the commenters were concerned that there is a more
systemic issue with IGI's forecasting. They stated that missed
forecasts have a significant and permanent impact on providers. The
commenters claimed that this has resulted in ongoing and permanent
underpayments to HHAs that is totaling approximately $700 million
annually.
The commenters stated that in addition to inaccurate forecasts, the
underlying market basket itself may have shortcomings that fail to
properly capture growth. They noted that there has been a very large
growth in providers' costs in the last several years, and that it is
confounding how providers with labor-intensive services could have a
change in the actual market basket growth that is 4 percentage points
below general inflation as measured by the CPI-U. Commenters urged CMS
to re-examine the market basket and forecast methodology, and a
commenter urged CMS to provide greater transparency regarding the
forecast methodology so that it might benefit from stakeholder input.
Response: We appreciate the commenters' concerns. We are required
to update HH PPS payments by the market basket update adjusted for
productivity, as directed by section 1895(b)(3)(B) of the Act.
Specifically, section 1895(b)(3)(B)(iii) of the Act states that the
increase factor shall be based on an appropriate percentage increase in
a market basket of goods and services included in home health services
in the same manner as the market basket percentage increase under
section 1886(b)(3)(B)(iii) of the Act is determined and applied to the
mix of goods and services comprising inpatient hospital services for
the fiscal year or year. There is not currently a mechanism in place to
allow for additional updates during the course of CY 2025, as was
suggested by the commenter, beyond the percentage increase described
here.
The home health market basket is a fixed-weight, Laspeyres-type
index that measures price changes over time and would not reflect
increases in costs associated with changes in the volume or intensity
of input goods and services. As such, the home health market basket
update would reflect the prospective price pressures described by the
commenters (such as wage growth or higher energy prices) but would
inherently not reflect other factors that might increase the level of
costs, such as the quantity of labor used. We note that cost changes
(that is, the product of price and quantities) would only be reflected
when the base year weights are updated to a more recent time period.
We would also highlight that the market basket percentage increase
is a forecast of the price pressures that HHAs are expected to face in
2025. IHS Global Inc. (an Affiliate of S&P Global Inc.) is a nationally
recognized economic and financial forecasting firm (a participant in
the Blue Chip Economic Indicators[supreg]) with which CMS contracts to
forecast the components of the market baskets. While this most recent
period has been marked by a consistent under forecasting of the market
basket forecast, over longer periods the forecasts have generally
averaged close to the historical measures. We note that when developing
its forecasts of employment cost indices, IHS Global Inc. considers
overall labor market conditions (including a rise in contract labor
employment due to tight labor market conditions) as well as trends in
contract labor wages, which both have an impact on wage pressures for
workers employed directly by the HHA. CMS will continue to monitor the
methods associated with the market basket forecasts to ensure there are
not underlying systematic issues in the forecasting approach.
While we did not propose to rebase or revise the home health market
basket in the CY 2025 HH PPS proposed rule, we note that we finalized
the 2021-based home health market basket in the CY 2024 HH PPS final
rule (88 FR 77726). At the time of the CY 2024 rulemaking cycle, the
2021 Medicare cost report data was the most comprehensive data source
available. While we typically rebase in regular intervals (roughly
every four years), we monitor the Medicare cost report data to assess
whether rebasing on a more frequent schedule is technically
appropriate, and we will continue to do so in the future. In addition,
we welcome any suggestions for technical improvements to the home
health market basket and note that any changes would be proposed and
established through notice and comment rulemaking.
At the time of the CY 2025 HH PPS proposed rule, based on the IHS
Global Inc. first quarter 2024 forecast with historical data through
the fourth quarter of 2023, the 2021-based home health market basket
update was forecasted to be 3.0 percent for CY 2025, reflecting
forecasted compensation price growth of 3.4 percent. This reflects an
expectation that the growth in compensation costs will ease relative to
the 2021-2023 period but remain elevated relative to historical
compensation growth rates (which averaged 2.1 percent in the 10-year
period from 2011 through 2020). We appreciate the commenter's concern
regarding inflationary pressure and the request to use more recent data
to determine the CY 2025 home health market basket update. In the CY
2025 HH PPS proposed rule, we proposed that if more recent data became
available, we would use such data, if appropriate, to derive the final
CY 2025 home health market basket update for the final rule. For this
final rule, we now have an updated forecast of the price proxies
underlying the market basket that incorporates more recent historical
data and reflects a revised outlook regarding the U.S. economy and
expected price inflation for CY 2025. Based on IHS Global Inc.'s third
quarter 2024 forecast with historical data through the second quarter
of 2024, we are projecting a CY 2025 home health market basket update
of 3.2 percent (reflecting forecasted compensation price growth of 3.5
percent) and a productivity adjustment of 0.5 percentage point.
Therefore, for CY 2025 a final productivity-adjusted home health market
basket update of 2.7 percent (3.2 percent reduced by 0.5 percentage
point) will be applicable, compared to the 2.5 percent productivity-
adjusted home health market basket update that was proposed.

[[Page 88406]]

Comment: Several commenters stated that CMS should recognize the
financial impact of its forecasting error with respect to the annual
Market Basket Index updates from 2021 and 2022 and exercise its
authority to implement a one-time adjustment of 5.2 percent to account
for the forecasting error. A few commenters suggested alternative
forecast error adjustments ranging from approximately 4.4 to 5.7
percent to account for under forecasts in the period from 2021 through
2023.
Response: The home health market basket updates are set
prospectively, which means that the update relies on a mix of both
historical data for part of the period for which the update is
calculated and forecasted data for the remainder. For instance, the CY
2025 market basket update in this final rule reflects historical data
through the second quarter of CY 2024 and forecasted data from the
third quarter of CY 2024 through the fourth quarter of CY 2025. There
is currently no mechanism to adjust for market basket forecast error in
the home health payment update. A forecast error for a market basket
update is equal to the actual market basket percentage increase for a
given year less the forecasted market basket percentage increase. Due
to the uncertainty regarding future price trends, forecast errors can
be both positive and negative, as has occurred since the implementation
of the HH PPS.
Over most of this history the forecast errors were smaller in
magnitude, with the largest error prior to 2021 being an over forecast
of 1.2 percentage points in 2009. More recently the home health market
basket has been under forecast, as noted by the commenters, with larger
errors occurring for 2021 through 2023. The cumulative forecast error
since HH PPS inception (fiscal year 2002 to CY 2023, excluding CY 2018
and CY 2020 when the market basket update was statutorily mandated) is
-0.7 percent. The recent forecast errors were largely a function of
uncertainty in the overall economy and the health sector specifically
due to the nature of the public health emergency and the unforeseen
rapidly accelerating inflationary environment.
For this final rule, we have incorporated more recent historical
data and forecasts to capture the price and wage pressures facing HHAs
and believe it is the best available projection of inflation to
determine the applicable percentage increase for the HHA payments in CY
2025.
Comment: A commenter stated they are disappointed that CMS has not
taken increased workforce safety costs into consideration. They
indicated that workforce safety is an area of growing concern for the
home health industry at large and it will take significant investments
in training, security and equipment to keep home health clinicians safe
while working in the home and community. The commenter stated that
there is currently no area to report many of these unique environmental
and safety costs on the Medicare cost report. The commenter stated that
they believe that CMS needs to work with the home health industry to
ensure that workplace safety costs and other unique expenditures
related to home health are considered when determining the home health
payment rate update.
Response: We recognize the importance of ensuring workforce safety.
CMS reminds commenters that these costs may be recorded under the Plant
Operation & Maintenance cost center, which includes costs associated
with ``protecting employees, visitors, and HHA property.''
As detailed in the CY 2024 HH PPS final rule (88 FR 77728), costs
recorded in the overhead cost centers are used to derive the major cost
weights, and thus any significant changes in the volume or intensity of
investment since the base year (currently 2021) would be a factor in
the cost weights when the home health market basket is next rebased.
Final Decision: After consideration of public comments, we are
finalizing the home health payment update percentage for CY 2025 based
on the most recent forecast of the home health market basket percentage
increase and productivity adjustment at the time of rulemaking. Based
on IHS Global Inc.'s third quarter 2024 forecast with historical data
through the second quarter of 2024, we are projecting a CY 2025 home
health market basket update of 3.2 percent and a productivity
adjustment of 0.5 percentage point. Therefore, we are finalizing for CY
2025 a final productivity-adjusted home health market basket update of
2.7 percent (3.2 percent reduced by 0.5 percentage point).
2. Adoption of the CBSA Delineations for the HH PPS Wage Index
In general, OMB issues major revisions to statistical areas every
10 years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses.
On February 28, 2013, OMB issued Bulletin No. 13-01, announcing
revisions to the delineations of MSAs, Micropolitan Statistical Areas,
and CBSAs, and guidance on uses of the delineation of these areas. In
the CY 2015 HH PPS final rule (79 FR 66085 through 66087), we adopted
OMB's area delineations using a 1-year transition.
On August 15, 2017, OMB issued Bulletin No. 17-01 in which it
announced that one Micropolitan Statistical Area, Twin Falls, Idaho,
now qualifies as a Metropolitan Statistical Area. The new CBSA (46300)
comprises the principal city of Twin Falls, Idaho in Jerome County,
Idaho and Twin Falls County, Idaho. The CY 2025 HH PPS wage index value
for CBSA 46300, Twin Falls, Idaho, will be 0.8519. Bulletin No. 17-01
is available at <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/bulletins/2017/b-17-01.pdf</a>.
On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which
superseded the August 15, 2017, OMB Bulletin No. 17-01. On September
14, 2018, OMB issued OMB Bulletin No. 18-04 which superseded the April
10, 2018, OMB Bulletin No. 18-03. These bulletins established revised
delineations for Metropolitan Statistical Areas, Micropolitan
Statistical Areas, and Combined Statistical Areas, and provided
guidance on the use of the delineations of these statistical areas. A
copy of OMB Bulletin No. 18-04 may be obtained at <a href="https://www.bls.gov/bls/omb-bulletin-18-04-revised-delineations-of-metropolitan-statistical-areas.pdf">https://www.bls.gov/bls/omb-bulletin-18-04-revised-delineations-of-metropolitan-statistical-areas.pdf</a>.
On March 6, 2020, OMB issued Bulletin No. 20-01, which provided
updates to and superseded OMB Bulletin No. 18-04 that was issued on
September 14, 2018. The attachments to OMB Bulletin No. 20-01 provided
detailed information on the update to statistical areas since September
14, 2018, and were based on the application of the 2010 Standards for
Delineating Metropolitan and Micropolitan Statistical Areas to Census
Bureau population estimates for July 1, 2017, and July 1, 2018. (For a
copy of this bulletin, we refer readers to <a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>.) In OMB Bulletin No. 20-
01, OMB announced one new Micropolitan Statistical Area, one new
component of an existing Combined Statistical Area and changes to New
England City and Town Area (NECTA) delineations. In the CY 2021 HH PPS
final rule (85 FR 70298), we stated that if appropriate, we will
propose any updates from OMB Bulletin No. 20-01 in future rulemaking.
After reviewing OMB Bulletin No. 20-01, we determined that the changes
in Bulletin 20-01 encompassed delineation changes that

[[Page 88407]]

did not affect the Medicare home health wage index for CY 2022.
Specifically, the updates consisted of changes to NECTA delineations
and the re-designation of a single rural county into a newly created
Micropolitan Statistical Area. The Medicare home health wage index does
not utilize NECTA definitions, and, as most recently discussed in the
CY 2021 HH PPS final rule (85 FR 70298) we include hospitals located in
Micropolitan Statistical areas in each State's rural wage index. In
other words, these OMB updates did not affect any geographic areas for
purposes of the HH PPS wage index calculation.
In the CY 2021 HH PPS final rule (85 FR 70298), we finalized our
proposal to adopt the revised OMB delineations with a 5-percent cap on
wage index decreases in CY 2021. In the CY 2023 HH PPS final rule (87
FR 66851 through 66853), we finalized a policy that the CY HH PPS wage
index will include a permanent 5-percent cap on wage index decreases
for CY 2023 and each subsequent year. Specifically, we finalized for CY
2023 and subsequent years, the application of a permanent 5-percent cap
on any decrease to a geographic area's wage index from its wage index
in the prior year, regardless of the circumstances causing the decline.
That is, we finalized a policy requiring that a geographic area's wage
index for CY 2023 will not be less than 95 percent of its final wage
index for CY 2022, regardless of whether the geographic area is part of
an updated CBSA, and that for subsequent years, a geographic area's
wage index will not be less than 95 percent of its wage index
calculated in the prior CY. Previously this methodology was applied to
all the counties that make up a CBSA or statewide rural area. However,
as discussed in section II.E.2. of this final rule, because we proposed
to adopt the revised OMB delineations, we also proposed that this
methodology would also be applied to individual counties.
On July 21, 2023, OMB issued Bulletin No. 23-01, which updates and
supersedes OMB Bulletin No. 20-01, issued on March 6, 2020. OMB
Bulletin No. 23-01 establishes revised delineations for the MSAs,
Micropolitan Statistical Areas, Combined Statistical Areas, and
Metropolitan Divisions, collectively referred to as Core Based
Statistical Areas (CBSAs). According to OMB, the delineations reflect
the 2020 Standards for Delineating Core Based Statistical Areas (CBSAs)
(the ``2020 Standards''), which appeared in the Federal Register (86 FR
37770 through 37778) on July 16, 2021, and application of those
standards to Census Bureau population and journey-to-work data (for
example, 2020 Decennial Census, American Community Survey, and Census
Population Estimates Program data). A copy of OMB Bulletin No. 23-01 is
available online at <a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>. The July 21, 2023, OMB Bulletin No. 23-01
contains a number of significant changes. For example, there are new
CBSAs, urban counties that have become rural, rural counties that have
become urban, and existing CBSAs that have been split apart. We believe
it is important for the HH PPS wage index to use the latest OMB
delineations available in order to maintain a more accurate and up-to-
date payment system that reflects the reality of population shifts and
labor market conditions. We further believe that using the most current
OMB delineations will increase the integrity of the HH PPS wage index
by creating a more accurate representation of geographic variation in
wage levels. We proposed to implement the new OMB delineations as
described in the July 21, 2023, OMB Bulletin No. 23-01 for the HH PPS
wage index effective beginning in CY 2025. The proposal was also
consistent with the proposals to adopt the revised OMB delineations in
the IPPS and other post-acute care payment systems.
a. Micropolitan Statistical Areas
As discussed in the CY 2006 HH PPS proposed rule (70 FR 40788) and
final rule (70 FR 68132), CMS considered how to use the Micropolitan
statistical area definitions in the calculation of the wage index. At
the time, OMB defined a ``Micropolitan Statistical Area'' as a CBSA
associated with at least one urban cluster that has a population of at
least 10,000, but less than 50,000 (75 FR 37252). We referred to these
as Micropolitan Areas. After extensive impact analysis, consistent with
the treatment of these areas under the IPPS as discussed in the fiscal
year (FY) 2005 IPPS final rule (69 FR 49029 through 49032), we
determined the best course of action will be to treat Micropolitan
Areas as ``rural'' and include them in the calculation of each state's
home health rural wage index (see 70 FR 40788 and 70 FR 68132). Thus,
the HH PPS statewide rural wage index is determined using IPPS hospital
data from hospitals located in non-Metropolitan Statistical Areas
(MSAs). In the CY 2021 HH PPS final rule (85 FR 70298), we finalized a
policy to continue to treat Micropolitan Areas as ``rural'' and to
include Micropolitan Areas in the calculation of each state's rural
wage index.
The OMB ``2020 Standards'' continue to define a ``Micropolitan
Statistical Area'' as a CBSA with at least one urban area that has a
population of at least 10,000, but less than 50,000. The Micropolitan
Statistical Area comprises the central county or counties containing
the core, plus adjacent outlying counties having a high degree of
social and economic integration with the central county, or counties as
measured through commuting (86 FR 37778). Overall, there are the same
number of Micropolitan Areas (542) under the new OMB delineations based
on the 2020 Census as there were using the 2010 Census. We note,
however, that a number of urban counties have switched status and have
joined or become Micropolitan Areas, and some counties that once were
part of a Micropolitan Area, and thus were treated as rural, have
become urban based on the 2020 Decennial Census data. In the CY 2025 HH
PPS proposed rule, we stated that we believe that the best course of
action would be to continue our established policy and include
Micropolitan Areas in each state's rural wage index as these areas
continue to be defined as having relatively small urban cores
(populations of 10,000 to 49,999) (89 FR 55364). Therefore, in
conjunction with our proposal to implement the new OMB labor market
delineations beginning in CY 2025, and consistent with the treatment of
Micropolitan Areas under the IPPS, we also proposed to continue to
treat Micropolitan Areas as ``rural'' and to include Micropolitan Areas
in the calculation of each state's rural wage index.
Final Decision: We did not receive any comments on our proposal to
continue to treat Micropolitan Areas as rural and to include those
areas in the calculation of each State's rural wage index. We are
finalizing this policy as proposed.
b. Change to County-Equivalents in the State of Connecticut
In a June 6, 2022, Federal Register notice (87 FR 34235 through
34240), the Census Bureau announced that it was implementing the State
of Connecticut's request to replace the eight counties in the State
with nine new ``Planning Regions.'' Planning regions are included in
OMB Bulletin No. 23-01 and now serve as county-equivalents within the
CBSA system. We evaluated the change and proposed to adopt the planning
regions as county equivalents for wage index purposes. We believe it is
necessary to adopt this migration from counties to planning region
county-equivalents in order to maintain

[[Page 88408]]

consistency with our established policy of adopting the most recent OMB
updates. We provided the crosswalk in table 26 of the proposed rule (89
FR 55364) for counties located in Connecticut with the current and
proposed Federal Information Processing Series (FIPS) county and
county-equivalent codes and CBSA assignments.
[GRAPHIC] [TIFF OMITTED] TR07NO24.041

Final Decision: We did not receive any comments on our proposal to
adopt the Connecticut planning regions as county equivalents for wage
index purposes. We are finalizing this policy as proposed. The
crosswalk in table 13 includes counties located in Connecticut with the
current and final FIPS county and county-equivalent codes and CBSA/
transition code assignments.
c. Urban Counties That Will Become Rural
In the CY 2025 HH PPS proposed rule, we inadvertently omitted
Windham County, CT from the list of counties that would become rural
under the revised OMB statistical area delineations (based upon OMB
Bulletin No. 23-01). For this final rule, Windham County has been
included. Therefore, there are a total of 54 counties (and county
equivalents) that are currently considered urban that will be
considered rural beginning in CY 2025. Table 14 lists the 54 counties
that will become rural if we finalize our proposal to implement the
revised OMB delineations.

[[Page 88409]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.042

We invited public comment on our proposal to redesignate the urban
counties in table 14 as rural based on the revised OMB delineations
from OMB Bulletin No. 23-01.

[[Page 88410]]

Comment: Several commenters expressed concern with the proposal to
redesignate urban counties as rural based on the revised delineations
from OMB Bulletin No. 23-01. A few commenters stated that changes to
the wage index that would move some agencies from an urban designation
to a rural one would further reduce agency reimbursement at a time when
rural agencies are facing increased challenges recruiting and retaining
employees. Another commenter stated that utilizing the revised OMB data
for the CBSAs results in even more disparity between urban and rural
agencies than there was under the prior delineations. This commenter
stated that the one-year wage index cap of 5 percent is insufficient to
mitigate rate decreases and that many newly classified rural agencies
will be severely impacted.
Response: We appreciate the concerns raised by the commenters.
However, we continue to believe it is important for the HH PPS wage
index to use the latest OMB delineations available in order to maintain
a more accurate and up-to-date payment system that reflects the reality
of population shifts and labor market conditions. We note that unlike
other payment systems, the appropriate home health wage index value is
applied to the labor portion of the HH PPS rates based on the site of
service for the beneficiary (defined by section 1861(m) of the Act) and
not the agency's location. While some urban counties are becoming rural
based on the revised delineations, HHAs are able to serve beneficiaries
in more than one county including counties that remain designated as
urban. Furthermore, as discussed later in this final rule, we believe
that applying the permanent 5-percent cap policy at the county level
would mitigate potential negative impacts experienced by HHAs who
provide services in counties that have been redesignated as rural. We
proposed to apply the permanent 5-percent cap at the county level so
that counties that move from a CBSA or statewide rural area with a
higher wage index value into a new CBSA or rural area with a lower wage
index value will have a CY 2025 wage index that is not less than 95
percent of the county's CY 2024 wage index value under the old
delineation, despite moving into a new delineation with a lower wage
index. We also proposed that the 5-percent cap would continue to be
applied in these counties until a county's current calendar year wage
index under the revised delineations is not less than 95 percent of the
wage index from the previous calendar year. Therefore, we believe the
5-percent cap applied at the county level is sufficient to mitigate any
negative impacts of adopting the revised delineations.
Final Decision: After consideration of public comments, we are
finalizing the proposal to redesignate the 54 urban counties listed in
table 14 as rural for purposes of the HH PPS wage index beginning in CY
2025.
d. Rural Counties That Will Become Urban
Under the revised OMB statistical area delineations (based upon OMB
Bulletin No. 23-01), a total of 54 counties (and county equivalents)
that are currently located in rural areas will be considered located in
urban areas under the revised OMB delineations beginning in CY 2025.
Table 15 lists the 54 counties that will be urban if we finalize our
proposal to implement the revised OMB delineations.

[[Page 88411]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.043

Final Decision: We did not receive public comments on our proposal
to redesignate the 54 rural counties listed in table 15 as urban based
on the revised OMB delineations from OMB Bulletin No. 23-01. Therefore,
we are finalizing the policy as proposed.
e. Urban Counties That Will Move to a Different Urban CBSA Under the
Revised OMB Delineations
In addition to some rural counties becoming urban and some urban
counties becoming rural, several urban counties will shift from one
urban CBSA to a new or existing urban CBSA under our proposal to adopt
the revised OMB delineations. In other cases, applying the new OMB
delineations will involve a change only in CBSA name or number, while
the CBSA will continue to encompass the same constituent counties. For
example, CBSA 35154 (New Brunswick-Lakewood, NJ) will experience both a
change to its number and its name and become CBSA 29484

[[Page 88412]]

(Lakewood-New Brunswick, NJ), while all three of its constituent
counties will remain the same. In other cases, only the name of the
CBSA will be modified. Table 16 lists CBSAs that will change in name
and/or CBSA number only, but the constituent counties will not change
(except in instances where an urban county became rural or a rural
county became urban, as discussed in the previous section).
BILLING CODE 4120-01-P

[[Page 88413]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.044

In some cases, all urban counties from a CY 2024 CBSA will be moved
and subsumed by another CBSA in CY 2025. Table 17 lists the CBSAs that,
under our proposal to adopt the revised OMB

[[Page 88414]]

statistical area delineations, will be subsumed by another CBSA.
[GRAPHIC] [TIFF OMITTED] TR07NO24.045

In other cases, if we adopt the new OMB delineations, some counties
will shift between existing and new CBSAs, changing the constituent
makeup of the CBSAs. In another type of change, some CBSAs have
counties that will split off to become part of, or to form entirely new
labor market areas. For example, the District of Columbia, DC, Charles
County, MD and Prince Georges County, MD will move from CBSA 47894
(Washington-Arlington-Alexandria, DC-VA-MD-WV) into CBSA 47764
(Washington, DC-Md). Calvert County, MD will move from CBSA 47894
(Washington-Arlington-Alexandria, DC-VA-MD-WV) into CBSA 30500
(Lexington Park, MD). The remaining counties that currently make up
47894 (Washington-Arlington-Alexandria, DC-VA-MD-WV) will move into
CBSA 11694 (Arlington-Alexandria-Reston, VA-WV). Finally, in some
cases, a CBSA will lose counties to another existing CBSA if we adopt
the new OMB delineations. For example, Grainger County, TN will move
from CBSA 34100 (Morristown, TN) into CBSA 28940 (Knoxville, TN). Table
18 lists the 73 urban counties that will move from one urban CBSA to a
new or modified urban CBSA if we adopt the revised OMB delineations.

[[Page 88415]]

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[[Page 88416]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.047

BILLING CODE 4120-01-C

[[Page 88417]]

A summary of the general comments on our proposals to adopt the
revised delineations from OMB Bulletin No. 23-01 appears below:
Comment: Some commenters, including MedPAC, were generally
supportive of the proposals to adopt the revised delineations from OMB
Bulletin No. 23-01. A commenter expressed support for the proposal to
adopt the new OMB delineations as described in OMB Bulletin 23-01 for
the HH PPS wage index effective beginning in CY 2025. This commenter
agreed that using the most current OMB delineations would increase the
integrity of the HH PPS wage index by creating a more accurate
representation of geographic variations in wage levels. Another
commenter stated that until a new home health wage index can be
implemented, the commenter supports CMS' proposal to continue using
OMB's most recent statistical area delineations for the hospital wage
index.
Response: We thank the commenters for their support.
Comment: A commenter opposed what they describe as the automatic
adoption of the revised OMB delineations. This commenter stated that
adopting the new delineations by default is in opposition to both OMB
guidance and the Metropolitan Areas Protection and Standardization Act
of 2021 (MAPs Act). This commenter stated that CMS has not provided any
rationale or explanation for why relying on the updated CBSAs is
appropriate and that rather than simply adopting the OMB CBSAs by
default, CMS must make a fact-specific determination of those CBSAs'
suitability for Medicare payment purposes, including whether it would
be appropriate to use additional data to modify OMB's delineation to
ensure that such changes are appropriate for purposes of defining
regional labor markets for home health workers.
Response: We acknowledge the commenter's concerns about adopting
CBSA changes. We do not agree with the commenter's assertion that this
is ``by default'' or that CMS has not provided rationale for the
proposed adoption of the revised CBSA delineations for CY 2025. The
MAPS Act specifically states that ``this act limits the automatic
application of, and directs the Office of Management and Budget (OMB)
to provide information about, changes to the standards for designating
a core-based statistical area (CBSA) . . .'' We believe our proposed
rule meets the requirements of the MAPS Act, because we have not
automatically applied the revised CBSAs outlined in OMB Bulletin 23-01.
Rather, through notice and comment rulemaking, we proposed the adoption
of the revised CBSA delineations. Further, we stated our rationale for
adopting the revised CBSA delineations, in that we believe it is
important for the HH PPS to use, as soon as is reasonably possible, the
latest available labor market area delineations to maintain a more
accurate and up-to date payment system that reflects the reality of
population shifts and labor market conditions. We also stated that we
believe that using the most current delineations would increase the
integrity of the HH PPS wage index system by creating a more accurate
representation of geographic variations in wage levels. With respect to
the suggestion that CMS consider whether it would be appropriate to use
additional data to ensure that such changes are appropriate for
purposes of defining regional labor markets for home health workers, we
do not believe use of such additional analysis is necessary. Using the
latest available labor market area delineations based on the latest
available CBSA delineations established by OMB inherently reflects
current population and labor market conditions and as such, results in
a more accurate payment system.
Comment: A few commenters expressed concern with specific
redesignations in their areas. A commenter stated that the proposed
adoption of the latest OMB delineations for the home health wage index
will significantly impact several Florida regions and that high-cost
areas such as Miami-Fort Lauderdale-West Palm Beach, Tampa-St.
Petersburg-Clearwater, and Orlando-Kissimmee-Sanford are likely to
experience notable reductions in their wage index values. This
commenter recommended that CMS reconsider the proposed adoption of the
new delineations by accounting for the distinctive economic and
demographic factors influencing high-cost regions in Florida.
Several commenters opposed the delineation change for rural Puerto
Rico where there is now a hospital in rural Puerto Rico from which
hospital wage data can be derived. These commenters stated the payment
calculations to providers will ultimately be reduced by 20.64 percent
when using a wage index of 0.2520 vs 0.4047. The commenters stated that
providers are unable to operate at a 20 percent reduction, particularly
in the face of increasing costs and expressed concern that this
reduction will lead to adverse impacts for beneficiaries as the labor
market further shrinks and healthcare workers exit the Puerto Rico
market for other areas or industries.
A commenter opposed the impact of the adoption of the revised
delineations in Nassau, Suffolk, and Westchester Counties in New York
state. This commenter requested CMS consider the impact of the wage
index changes on Core-Based Statistical Areas (CBSAs) with increasing
labor costs and the impact of these reductions on hospice, home health,
and other home-and community-based providers in relation to
institutional care providers
Another commenter expressed concern about the impact of county
reclassifications on home health agencies serving Dukes and Nantucket
Counties in Massachusetts. The commenter stated that as a result of the
reclassification of Franklin County, the wage index for Dukes and
Nantucket counties has dropped by 10 percent in the last 2 years and
would drop an additional 10 percent over the next 2 years and that
Medicare beneficiaries on those island communities are already
experiencing limited access to home health services. The commenter
stated that the proposed 5 percent cut will exacerbate that access
problem and recommended CMS reverse the proposed 5 percent cut to the
wage index for Dukes and Nantucket Counties to preserve access to home
health services in those counties.
Response: We appreciate the concerns expressed by commenters
regarding specific impacts of implementing the revised designations.
While we understand these concerns, we believe that implementing the
revised OMB delineations will create more accurate representations of
labor market areas nationally and result in home health wage index
values being more representative of the actual costs of labor in a
given area. Although these comments only addressed the negative impact
on certain areas, it is important to note that there are many
geographic locations and home health providers that will experience
positive impacts upon implementation of the revised CBSA designations.
We acknowledge there are areas that will experience a decrease in their
wage index but believe that the permanent 5-percent cap policy provides
an adequate safeguard against any significant payment reductions in CY
2025 while improving the accuracy of the payment adjustment for
differences in area wage levels. Therefore, we believe that it is
appropriate to implement the new OMB delineations without further
delay.
Final Decision: We are finalizing our proposals to adopt the
revised OMB

[[Page 88418]]

delineations from OMB Bulletin No. 23-01.
f. Transition Period
In the past we have provided for transition periods when adopting
changes that have significant payment implications, particularly large
negative impacts, in order to mitigate the potential impacts of
proposed home health policies. For example, we have proposed and
finalized budget-neutral transition policies to help mitigate negative
impacts on HHAs following the adoption of the new CBSA delineations
based on the 2010 Decennial Census data in the CY 2015 HH PPS final
rule (79 FR 66032). Specifically, we implemented a 1-year 50/50 blended
wage to the new OMB delineations. We applied a blended wage index for 1
year (CY 2015) for all geographic areas that will consist of a 50/50
blend of the wage index values using OMB's old area delineations and
the wage index values using OMB's new area delineations. That is, for
each county, a blended wage index was calculated equal to 50 percent of
the CY 2015 wage index using the old labor market area delineation and
50 percent of the CY 2015 wage index using the new labor market area
delineation, which resulted in an average of the two values.
Additionally, in the CY 2021 HH PPS final rule (85 FR 70312), we
proposed and finalized a transition policy to apply a 5-percent cap on
any decrease in a geographic area's wage index value from the wage
index value from the prior CY. This transition allowed the effects of
our adoption of the revised CBSA delineations from OMB Bulletin 18-04
to be phased in over 2 years, where the estimated reduction in a
geographic area's wage index was capped at five percent in CY 2021
(that is, no cap was applied to the reduction in the wage index for the
second year (CY 2022)). We explained that we believed a 5-percent cap
on the overall decrease in a geographic area's wage index value will be
appropriate for CY 2021, as it provided predictability in payment
levels from CY 2020 to CY 2021 and additional transparency because it
was administratively simpler than our prior one-year 50/50 blended wage
index approach.
In the CY 2023 HH PPS final rule (87 FR 66851 through 66853), we
adopted a permanent 5-percent cap on wage index decreases beginning in
CY 2023 and each subsequent year. The policy applies a permanent 5-
percent cap on any decrease to a geographic area's wage index from its
wage index in the prior year, regardless of the circumstances causing
the decline, so that a geographic area's wage index will not be less
than 95 percent of its wage index calculated in the prior CY.
In the CY 2025 HH PPS proposed rule, we stated that the permanent
5-percent cap on wage index decreases would be sufficient to mitigate
any potential negative impact caused by adopting the revised OMB
delineations and that no further transition is necessary. Previously,
the 5-percent cap had been applied at the CBSA or statewide rural area
level, meaning that all the counties that make up the CBSA or rural
area received the 5-percent cap. However, for CY 2025, to mitigate any
potential negative impact caused by the adoption of the revised
delineations, we proposed that in addition to the 5-percent cap being
calculated for an entire CBSA or statewide rural, the cap would also be
calculated at the county level, so that individual counties moving to a
new delineation will not experience more than a five percent decrease
in wage index from the previous calendar year. Specifically, we
proposed for CY 2025, that the 5-percent cap will also be applied to
counties that would move from a CBSA or statewide rural area with a
higher wage index value into a new CBSA or rural area with a lower wage
index value, so that the county's CY 2025 wage index would not be less
than 95 percent of the county's CY 2024 wage index value under the old
delineation despite moving into a new delineation with a lower wage
index.
Due to the way that we proposed to calculate the 5-percent cap for
counties that experience an OMB designation change, some CBSAs and
statewide rural areas could have more than one wage index value because
of the potential for their constituent counties to have different wage
index values after the redesignation. Specifically, some counties that
change OMB designations will have a wage index value that is different
than the wage index value assigned to the other constituent counties
that make up the CBSA or statewide rural area that they are moving into
because of the application of the 5-percent cap. However, for home
health claims processing, each CBSA or statewide rural area can have
only one wage index value assigned to that CBSA or statewide rural
area.
Therefore, HHAs that serve beneficiaries in a county that will
receive the cap will need to use a number other than the CBSA or
statewide rural area number to identify the county's appropriate wage
index value on home health claims in CY 2025. We proposed that
beginning in CY 2025, counties that have a different wage index value
than the CBSA or rural area into which they are designated after the
application of the 5-percent cap will use a wage index transition code.
These special codes are five digits in length and begin with ``50'' and
the remaining digits are unique for that code. We are using ``Xs'' to
show how the transition codes could be labeled. The 50XXX \11\ wage
index transition codes will be used only in specific counties; counties
located in CBSAs and rural areas that do not correspond to a different
transition wage index value will still use the CBSA number. For
example, FIPS county 13171 Lamar County, GA is currently part of CBSA
12060 Atlanta-Sandy Springs-Alpharetta. However, for CY 2025 we
proposed that Lamar County will be redesignated into the Rural Georgia
Code 99911. Because the wage index value of rural Georgia is more than
a 5-percent decrease from the wage index value that Lamar County
previously received under CBSA 12060, the CY 2025 wage index for Lamar
County will be capped at 95 percent of the CY 2024 wage index value for
CBSA 12060. Additionally, because rural Georgia can only have one wage
index value assigned to code 99911, in order for Lamar County to
receive the capped wage index for CY 2025, a transition code will be
used on a home health claim instead of rural Georgia code 99911.
---------------------------------------------------------------------------

\11\ The remaining 3 characters of the code to be determined if
finalized.
---------------------------------------------------------------------------

We also proposed that the 5-percent cap would apply to a county
that corresponds to a different wage index value than the wage index
value in the CBSA or rural area in which they are designated due to a
delineation change until the county's new wage index is more than 95
percent of the wage index from the previous calendar year. Therefore,
in order to capture the correct wage index value, an HHA will continue
to use the assigned 50XXX transition code for the county until the
county's wage index value calculated for that calendar year using the
new OMB delineations is not less than 95 percent of the county's capped
wage index from the previous calendar year. Thus, in the example
mentioned earlier, claims for Lamar County will use the assigned
transition code until the wage index in its revised designation of
Rural Georgia is equal to or more than 95 percent of its wage index
value from the previous calendar year.
The final counties that will require a transition code and the
corresponding 50XXX codes are shown in table 19 and will also be shown
in the CY 2025 HH

[[Page 88419]]

PPS wage index file. Table 19 includes a list of counties that have
changed designation and must use a transition code beginning in CY
2025. This list is comprised of counties that are redesignated into a
new CBSA or rural area and will receive the 5-percent cap on wage index
decreases. These counties must use a transition code because the wage
index for that county is higher than all other constituent counties
that make up the CBSA or rural area (like the earlier example for Lamar
County, GA). Additionally, the list also includes counties that move
into a new CBSA or rural area and have a different wage index value
because the constituent counties that make up the CBSA or rural receive
the 5-percent cap for CY 2025 while the county that moves into the CBSA
or rural area does not. For example, rural area 99922 rural
Massachusetts is comprised of FIPS code 25007 Dukes County, FIPS code
25019 Nantucket County and the redesignated FIPS code 25011 Franklin
County. Dukes County and Nantucket County were part of rural area 99922
Massachusetts for CY 2024 and will receive the 5-percent cap because
the CY 2025 wage index for rural area 99922 is more than a 5-percent
decrease from the CY 2024 wage index for rural area 99922. However,
Franklin County was included in CBSA 44140 Springfield, MA, in FY 2024
and the uncapped CY 2025 wage index for rural area 99922 is higher than
the CY 2024 wage index for CBSA 44140. In this example, Franklin
County, MA, would receive the uncapped wage index for rural Area 99922
while Dukes and Nantucket counties receive the 5-percent capped wage
index. Therefore, HHAs that serve beneficiaries in Franklin County, MA,
must use the transition code 50012 on home health claims instead of
rural area 99922 Rural Massachusetts.
BILLING CODE 4120-01-P

[[Page 88420]]

[GRAPHIC] [TIFF OMITTED] TR07NO24.048

BILLING CODE 4120-01-C

[[Page 88421]]

The following is a summary of the comments on the proposal to use
the permanent 5-percent cap applied at the county level as a
transition.
Comment: A few commenters were supportive of the use of the
permanent 5-percent cap to mitigate any adverse effects of adopting the
revised OMB delineations. MedPAC stated that the Commission supports
having a policy to cap and phase in the wage index reductions that a
provider can experience in a given year. Another commenter thanked CMS
for implementing the 5-percent cap on wage index decreases as a policy
to combat ongoing wage index inequities.
Response: We appreciate the commenters support.
Comment: A few commenters recommended other changes to the
finalized 5-percent cap policy. MedPAC recommended that the cap should
be applied to both increases and decreases in a given year. Several
commenters recommended that the cap be lowered to two percent, while a
commenter suggested the cap should be no more than three percent. A
commenter requested that CMS institute a one-time zero wage index
adjustment in all CBSAs where there is a negative adjustment, while
another commenter recommended that the 5-percent cap should be
implemented in a non-budget neutral manner.
A commenter stated that the 5-percent cap is helpful as a general
measure to stabilize wage index values from year to year, but that does
not negate the need to implement a transition period specific to wage
index changes resulting from revised CBSA delineations. This commenter
recommended a three-year transition period to allow for a wage index
transition consistent with prior updates to the CBSA categorization due
to OMB updates.
Response: We appreciate commenters recommendations for changes to
the finalized cap policy. However, in the CY 2025 HH PPS proposed rule,
we did not propose to make changes to the finalized 5-percent cap
policy outside of the proposal to apply the 5-percent cap at the county
level. Therefore, these comments are outside the scope of the proposed
rule. Any changes to the finalized cap policy beyond the proposal to
apply the cap at the county level would need to go through notice and
comment rulemaking. We continue to believe that a 5-percent cap would
most effectively mitigate any significant decreases in a geographic
area's wage index for a calendar year, while still balancing the
importance of ensuring that area wage index values accurately reflect
relative differences in area wage levels. Furthermore, we believe that
the 5-percent cap on wage index decreases provides a degree of
predictability in payment changes for providers and allows providers
time to adjust to any significant decreases they may face year to year.
Therefore, we do not believe that any transition is appropriate at this
time.
Comment: A commenter expressed support for the proposal to apply
the 5-percent cap at the county level. This commenter stated that they
strongly believe that the wage index for any county or service area
should not decrease by more than five percent in any given year and
expressed support for the proposal that each Transitional CBSA, in
which the included county(s) would have any reduction to their wage
index limited to five percent from the previous year, should remain
active until such time that the county(s) included would be able to be
included in their new CBSA/Service Area when the reduction to their
Wage Index would be five percent or less.
This commenter also recommended that CMS provide a crosswalk in CSV
or Excel format of any/all changes any year in which there are changes
such as these, stating that the crosswalk should include the Social
Security Administration (SSA) Code, FIPS Code, CBSA Code (and
transition code where applicable), and the Wage Index (and transition
wage index where applicable) for every unique County or Service Area
covered under the Medicare program. Another commenter requested that
CMS carefully plan communication to impacted facilities so that they
are clear regarding what number to use on home health claims.
Response: We thank the commenters for their support. We acknowledge
the importance of providing an accurate crosswalk for the CY 2025 wage
index that highlights the changes due to the revised OMB delineations,
specifically in counties that will require a transition code.
Therefore, we are listing the counties that will require a transition
code in CY 2025 in table 19 and we are also including this table in the
CY 2025 wage index file. The CY 2025 wage index file provides a
crosswalk between the current OMB delineations and the final revised
OMB delineations that will be in effect in CY 2025. This file shows
each state and county and its corresponding final wage index along with
the previous CBSA number, the final CBSA number or alternate
identification number, and the final CBSA name. The list of counties
that will require a transition code beginning in CY 2025 will also be
included in the CY 2025 Home Health Rate Update Change Request that can
be located at <a href="https://www.cms.gov/medicare/regulations-guidance/transmittals">https://www.cms.gov/medicare/regulations-guidance/transmittals</a>.
Final Decision: We are finalizing our proposal to adopt the revised
OMB delineations from OMB Bulletin 23-01, and will also apply the
permanent 5-percent cap on wage index decreases at the county level
with the use of a transition code, so that counties impacted by the
revised designations will receive a 5-percent cap on any decrease in a
geographic area's wage index value from the wage index value from the
prior calendar year for CY 2025. We are also finalizing our proposal
that, beginning in CY 2025, counties that have a different wage index
value than the CBSA or rural area into which they are designated due to
the application of the 5-percent cap (including redesignated counties
that will receive the 5-percent cap and redesignated counties that move
into a CBSA or rural area where all other constituent counties receive
the 5-percent cap) will use a wage index transition code. These special
codes are five digits in length and begin with ``50.'' The 50XXX wage
index transition codes will be used only in specific counties; counties
located in CBSAs and rural areas that do not correspond to a different
transition wage index value will still use the CBSA number. Finally, we
are finalizing the policy that the 5-percent cap will apply to a county
that corresponds to a different wage index value than the wage index
value in the CBSA or rural area in which they are designated due to a
delineation change until the county's new wage index is more than 95
percent of the wage index from the previous calendar year. In order to
capture the correct wage index value, the county will continue to use
the assigned 50XXX transition code until the county's wage index value
calculated for that fiscal year using the new OMB delineations is not
less than 95 percent of the county's capped wage index from the
previous calendar year.
The final wage index file applicable to CY 2025 provides a
crosswalk between the CY 2025 wage index using the current OMB
delineations and the CY 2025 wage index using the revised OMB
delineations that will be in effect in CY 2025. This file shows each
state and county and its corresponding final wage index along with the
previous CBSA number, the final CBSA number or transition code, and the
finalized CBSA name. The final HH PPS wage index file applicable for CY
2025 (January 1, 2025, through December 31, 2025) is available on the
CMS website at https://www.cms.gov/medicare/enrollment-

[[Page 88422]]

renewal/providers-suppliers/home-health-agency-center.
3. Final CY 2025 Home Health Wage Index
Sections 1895(b)(4)(A)(ii) and (b)(4)(C) of the Act require the
Secretary to provide appropriate adjustments to the proportion of the
payment amount under the HH PPS that account for area wage differences,
using adjustment factors that reflect the relative level of wages and
wage-related costs applicable to the furnishing of home health
services. Since the inception of the HH PPS, we have used inpatient
hospital wage data in developing a wage index to be applied to home
health

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