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Proposed Rule2025-12347

Medicare and Medicaid Programs; Calendar Year 2026 Home Health Prospective Payment System (HH PPS) Rate Update; Requirements for the HH Quality Reporting Program and the HH Value-Based Purchasing Expanded Model; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program Updates; DMEPOS Accreditation Requirements; Provider Enrollment; and Other Medicare and Medicaid Policies

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Published

July 2, 2025

Issuing agencies

Health and Human Services DepartmentCenters for Medicare & Medicaid Services

Abstract

This proposed rule would set forth routine updates to the Medicare home health payment rates in accordance with existing statutory and regulatory requirements. In addition, this proposed rule proposes permanent and temporary behavior adjustments and proposes to recalibrate the case-mix weights and update the functional impairment levels; comorbidity subgroups; and low-utilization payment adjustment (LUPA) thresholds for CY 2026. Lastly, this proposed rule proposes policy changes to the face-to-face encounter policy. It also proposes changes to the Home Health Quality Reporting Program (HH QRP) and the expanded Health Value-Based Purchasing (HHVBP) Model requirements. In addition, it would update the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP). Lastly it proposes: a technical change to the HH conditions of participation; updates to DMEPOS supplier conditions of payment; updates to provider and supplier enrollment requirements; and changes to DMEPOS accreditation requirements.

Full Text

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[Federal Register Volume 90, Number 125 (Wednesday, July 2, 2025)]
[Proposed Rules]
[Pages 29108-29339]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-12347]

[[Page 29107]]

Vol. 90

Wednesday,

No. 125

July 2, 2025

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 414, et al.

Medicare and Medicaid Programs; Calendar Year 2026 Home Health
Prospective Payment System (HH PPS) Rate Update; Requirements for the
HH Quality Reporting Program and the HH Value-Based Purchasing Expanded
Model; Durable Medical Equipment, Prosthetics, Orthotics, and Supplies
(DMEPOS) Competitive Bidding Program Updates; DMEPOS Accreditation
Requirements; Provider Enrollment; and Other Medicare and Medicaid
Policies; Proposed Rule

Federal Register / Vol. 90 , No. 125 / Wednesday, July 2, 2025 /
Proposed Rules

[[Page 29108]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 414, 424, 455, 484, and 498

[CMS-1828-P]
RIN 0938-AV53

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would set forth routine updates to the
Medicare home health payment rates in accordance with existing
statutory and regulatory requirements. In addition, this proposed rule
proposes permanent and temporary behavior adjustments and proposes to
recalibrate the case-mix weights and update the functional impairment
levels; comorbidity subgroups; and low-utilization payment adjustment
(LUPA) thresholds for CY 2026. Lastly, this proposed rule proposes
policy changes to the face-to-face encounter policy. It also proposes
changes to the Home Health Quality Reporting Program (HH QRP) and the
expanded Health Value-Based Purchasing (HHVBP) Model requirements. In
addition, it would update the Durable Medical Equipment, Prosthetics,
Orthotics, and Supplies (DMEPOS) Competitive Bidding Program (CBP).
Lastly it proposes: a technical change to the HH conditions of
participation; updates to DMEPOS supplier conditions of payment;
updates to provider and supplier enrollment requirements; and changes
to DMEPOS accreditation requirements.

DATES: To be assured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
EDT on September 2, 2025.

ADDRESSES: In commenting, please refer to file code CMS-1828-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1828-P, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1828-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
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#a3ebcccec6ebc6c2cfd7cbf3cccfcac0dae3c0ced08dcbcbd08dc4ccd5">[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#357d7d64676544405046415c5a5b46755658461b5d5d461b525a43">[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://www.cms.gov/priorities/innovation/innovation-models/expanded-home-health-value-based-purchasing-model">https://www.cms.gov/priorities/innovation/innovation-models/expanded-home-health-value-based-purchasing-model</a> or send your inquiry via email
to <a href="/cdn-cgi/l/email-protection#1850504e5a48696d7d6b6c7177766b587b756b3670706b367f776e">[email&#160;protected]</a>.
Frank Whelan (410) 786-1302, for Medicare provider and supplier
enrollment and DMEPOS accreditation inquiries.
Katie Parker (410) 786-0537, Emily Calvert (410) 786-4277, or
Jessica Martindale (410) 786-1558 for DMEPOS Prior Authorization
inquiries.
Alexander Ullman at (410) 786-9671 or <a href="/cdn-cgi/l/email-protection#296d646c79667a694a445a0741415a074e465f">[email&#160;protected]</a>, for
DMEPOS Competitive Bidding Program inquiries.
For information about the Home Health Conditions of Participation,
send your inquiry via email to <a href="/cdn-cgi/l/email-protection#deb6bbbfb2aab6bfb0baadbfb8bbaaa7b7b0afabb7acb7bbad9ebdb3adf0b6b6adf0b9b1a8">[email&#160;protected]</a>.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>. Follow the search instructions on that website to
view public comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
plain language summary of this rule may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Deregulation Request for Information (RFI): On January 31, 2025,
President Trump issued Executive Order (E.O.) 14192 ``Unleashing
Prosperity Through Deregulation,'' which states the Administration
policy to significantly reduce the private expenditures required to
comply with Federal regulations to secure America's economic prosperity
and national security and the highest possible quality of life for each
citizen. We would like public input on approaches and opportunities to
streamline regulations and reduce administrative burdens on providers,
suppliers, beneficiaries, and other stakeholders participating in the
Medicare program. CMS has made available a Request for Information
(RFI) at: (<a href="https://www.cms.gov/medicare-regulatory-relief-rfi">https://www.cms.gov/medicare-regulatory-relief-rfi</a>). Please
submit all comments in response to this request for information through
the provided weblink.

Table of Contents

I. Executive Summary
A. Purpose and Legal Authority
B. Summary of the Provisions of This Proposed Rule
C. Summary of the Regulatory Impact Analysis
II. Home Health Prospective Payment System
A. Overview of the Home Health Prospective Payment System
B. Monitoring the Effects of the Implementation of the PDGM
C. Proposed CY 2026 Payment Adjustments Under the HH PPS
D. Proposed CY 2026 Home Health Low Utilization Payment
Adjustment (LUPA) Thresholds, Functional Impairment Levels,
Comorbidity Sub-Groups, and Case-Mix Weights
E. Proposed CY 2026 Home Health Payment Rate Updates
F. Proposed Regulation Change to Face-to-Face Encounter

[[Page 29109]]

III. Home Health Quality Reporting Program (HH QRP)
A. Background and Statutory Authority
B. Summary of the Provisions of This Proposed Rule
C. Quality Measures Currently Adopted for the CY 2026 HH QRP
D. Proposed Removal of the COVID-19 Vaccine: Percent of
Patients/Residents Who Are Up to Date (Patient/Resident COVID-19
Vaccine) Measure Beginning With the CY 2026 HH QRP
E. Proposed Removal of Four Standardized Patient Assessment Data
Elements Beginning With the CY 2027 HH QRP
F. Amending the Data Non-Compliance Reconsideration Request
Policy and Process Beginning With the FY 2027 HH QRP
G. Updates to Requirements for OASIS All-Payer Data Submission
H. Proposed HHCAHPS Survey Updates
I. HH QRP Quality Measure Concepts Under Consideration for
Future Years--Request for Information
J. Potential Revision of the Final Data Submission Deadline
Period From 4.5 Months to 45 Days--Request for Information (RFI)
K. Advancing Digital Quality Measurement in the HH QRP--Request
for Information
L. Form, Manner, and Timing of Data Submission Under the HH QRP
M. Policies Regarding Public Display of Measure Data for the HH
QRP
IV. The Expanded Home Health Value-Based Purchasing (HHVBP) Model
A. Background
B. Proposed Changes to HHVBP Measure Removal Factors
C. Proposed Changes to the Expanded HHVBP Model's Applicable
Measure Set
D. HHVBP Quality Measure Concepts Under Consideration for Future
Years--Request for Information
V. Updates to the Home Health Agency CoPs To Align With the OASIS
All-Payer Submission Requirements
A. Statutory Authority and Background
B. Updates to the Home Health Agency CoPs To Align With the
OASIS All-Payer Submission Requirements (Sec. Sec. 484.45(a) and
484.55(d)(1)(i))
VI. Provider Enrollment, Certain Durable Medical Equipment,
Prosthetics, Orthotics, and Supplies (DMEPOS) Accreditation
Policies, and DMEPOS Prior Authorization
A. Provider Enrollment
B. DMEPOS Supplier Accreditation Process
C. Proposed Exemption Process for Prior Authorization of Certain
DMEPOS Items (Sec. 414.234(c)(1) and (c)(1)(ii))
VII. DMEPOS Competitive Bidding Program
A. Background
B. Determining Payment Amounts and the Number of Contracts
Awarded for the DMEPOS CBP
C. Adjustments to SPAs
D. Bid Limits and Conditions for Awarding Contracts if Savings
Are Not Expected
E. Revising the Definition of Item Related to Medical Supplies
F. Remote Item Delivery (RID) CBP
G. Payment for Continuous Glucose Monitors and Insulin Infusion
Pumps
H. Revising the Submission of Financial Document Requirements
for the DMEPOS CBP
I. Revising the CDRD Evaluation and Notification Process for the
DMEPOS CBP
J. Bid Surety Bond Review Process
K. Tribal Exemption From Participating in the DMEPOS CBP
L. Addition of a Termination Clause for the Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive
Bidding Program (CBP) Supplier Contracts
M. Technical Change to Sec. 414.408(h)(8)
N. Definitions of Competition and Adjusted and Unadjusted Fee
Schedule Amounts Under Sec. 414.402
VIII. Collection of Information Requirements
A. Statutory Requirement for 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. Unleashing Prosperity Through Deregulation
K. Conclusion
X. Response to Comments

I. Executive Summary

A. Purpose and Legal Authority

1. Home Health Prospective Payment System (HH PPS)
As required under section 1895(b) of the Social Security Act (the
Act), this proposed rule would update the CY 2026 Medicare payment
rates for home health agencies (HHAs). In this proposed rule, we
include an analysis of home health utilization, as well as analysis of
the difference between assumed versus actual behavior change on
estimated aggregate expenditures for home health payments as a result
of the change in the unit of payment to 30 days and the implementation
of the Patient Driven Groupings Model (PDGM) case-mix adjustment
methodology. This rule analyzes the difference between assumed versus
actual behavior change on estimated aggregate expenditures and proposes
permanent and temporary adjustments to the CY 2026 home health base
payment rate. In addition, this rule proposes to recalibrate the PDGM
case-mix weights and to update the low-utilization payment adjustment
(LUPA) thresholds, functional impairment levels, and comorbidity
adjustment subgroups under sections 1895(b)(4)(A)(i) and (b)(4)(B) of
the Act for 30-day periods of care in CY 2026. This proposed rule
proposes to update the CY 2026 fixed-dollar loss (FDL) ratio 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). Additionally, this rule proposes
changes to the face-to-face encounter policy at 42 CFR 424.22(a)(1)(v)
to align with section 3708 of the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act).
2. Home Health (HH) Quality Reporting Program (QRP)
In accordance with the statutory authority at section
1895(b)(3)(B)(v) of the Act, we are proposing updated quality reporting
policies. We are proposing to remove the COVID-19 Vaccine: Percent of
Patients Who Are Up to Date measure and the item related to the measure
and corresponding data element. CMS is proposing the removal of four
assessment items: one Living Situation item, two Food items, and one
Utilities item. We are also proposing to revise the policy to allow for
providers to submit a request for reconsideration of an initial
determination of noncompliance if they can demonstrate full compliance.
In very limited circumstances, HHAs can request an extension to file a
reconsideration request if the HHA was affected by an extraordinary
circumstance beyond the control of the HHA (that is, a natural or man-
made disaster such as a cyber-attack, hurricane, tornado, or
earthquake) during the 30-day reconsideration period. CMS is also
proposing to implement a revised Home Health Consumer Assessment of
Healthcare Providers and Systems (HHCAHPS) Survey beginning with the
April 2026 sample month. This rule would also update regulatory text to
account for all-payer data submission of OASIS data. We are seeking
information on a change to the final data submission deadline period
from 4.5 months to 45 days. We are also seeking feedback on the digital
quality measurement (dQM) transition for HHAs. We aim to solicit
feedback from the public on the current adoption of health information
technology (IT) and standards including Fast Healthcare
Interoperability Resources (FHIR), including related challenges or
barriers HHAs are facing. Finally, we are seeking input on future HH
QRP quality measure (QM) concepts of interoperability, cognitive
function, nutrition, and patient well-being.

[[Page 29110]]

3. 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)
proposing a new measure removal factor for the expanded HHVBP Model
applicable measure set; (2) proposing changes to the expanded HHVBP
Model applicable measure set; and (3) including a request for
information (RFI) related to potential future performance measure
concepts.
We propose to add a new measure removal factor for the expanded
HHVBP Model applicable measure set for measures that are not feasible
to implement. We propose to remove three HHCAHPS Survey-based measures,
to align with proposed changes to the HHCAHPS survey. We also propose
the addition of four new measures. These additions include the claims-
based Medicare Spending Per Beneficiary Post-Acute Care (MSPB-PAC)
measure, and three OASIS-based function measures: Improvement in
Bathing, Improvement in Upper Body Dressing, and Improvement in Lower
Body Dressing. Due to these proposed changes to the applicable measure
set, we also propose to revise the weights of the individual HHVBP
measures as well as the measure categories. We also include an RFI
related to potential future measure concepts for the expanded HHVBP
Model.
4. Updates to the Home Health Agency CoPs To Align With the OASIS All-
Payer Submission Requirements
We propose technical regulation text changes to the Home Health
Conditions of Participation (CoP). These technical changes update
terminology in the Home Health CoPs to further clarify that the
requirement for reporting OASIS information applies to all HHA patients
receiving skilled services.
5. Medicare and Medicaid Provider Enrollment
Consistent with section 1866(j) of the Act, we are proposing
several Medicare provider enrollment provisions to strengthen and
clarify certain aspects of the provider enrollment process. These
include but are not limited to: (1) modifying grounds for denying,
revoking, or deactivating a provider's or supplier's Medicare
enrollment; and (2) expanding the reasons for which CMS can apply a
retroactive effective date for provider and supplier revocations. These
changes are necessary to help ensure that payments are made only to
qualified providers and suppliers, which we believe would assist in
protecting the Trust Funds and Medicare beneficiaries.
We are also proposing a technical correction to one of our Medicaid
provider enrollment provisions in 42 CFR 455.416 to further clarify the
scope of Sec. 455.416(c).
6. DMEPOS Supplier Accreditation Organizations
Consistent with provisions in section 1834(a)(20) of the Act, we
are proposing to revise and supplement a number of our regulations
regarding DMEPOS supplier accreditation and, in particular,
requirements that an organization must meet to become and remain a CMS-
approved DMEPOS accrediting organization (AO). Our proposed revisions
include but are not limited to: (1) requiring DMEPOS suppliers to be
surveyed and reaccredited every year (as opposed to the current 3-year
cycle); (2) eliminating inconsistencies among AOs in how they oversee
DMEPOS suppliers; and (3) strengthening our ability to take action
against poorly performing DMEPOS AOs. We believe these changes would
help better ensure that DMEPOS AOs closely oversee DMEPOS suppliers for
compliance with the DMEPOS quality standards.
7. DMEPOS Prior Authorization
Consistent with provisions in section 1834(a)(15) of the Act and
final rule provisions published in the November 8, 2019 Federal
Register titled ``Medicare Program; End-Stage Renal Disease Prospective
Payment System, Payment for Renal Dialysis Services Furnished to
Individuals with Acute Kidney Injury, End-Stage Renal Disease Quality
Incentive Program, Durable Medical Equipment, Prosthetics, Orthotics
and Supplies (DMEPOS) Fee Schedule Amounts, DMEPOS Competitive Bidding
Program (CBP) Proposed Amendments, Standard Elements for a DMEPOS
Order, and Master List of DMEPOS Items Potentially Subject to a Face-
to-Face Encounter and Written Order Prior to Delivery and/or Prior
Authorization Requirements'' (84 FR 60648), hereinafter referred to as
the ``2019 ESRD PPS & DMEPOS final rule,'' we propose to clarify
authority at Sec. 414.234(c)(1)(ii) to exempt compliant suppliers,
while also establishing notice guidelines for establishing an exemption
and withdrawal of an exemption. The 2019 ERSD PPS & DMEPOS final rule
created the authority at Sec. 414.234(c)(1)(ii) to exempt suppliers
from required prior authorization of DMEPOS items upon compliance with
Medicare coverage, coding, and payment requirements. However, to
clarify this process for exemption from prior authorization
requirements, CMS is proposing to establish guidelines for granting and
withdrawing exemptions. Furthermore, we are proposing to establish
notification requirements to put suppliers on notice that the exemption
has either been granted or withdrawn.
8. DMEPOS Competitive Bidding Program
We are proposing changes to regulations at subpart C of 42 CFR 414
we believe are necessary for the effective implementation of the DMEPOS
Competitive Bidding Program (CBP) mandated by section 1847(a) of the
Act.
a. Determining Payment Amounts and the Number of Contracts Awarded for
the DMEPOS CBP
The purpose of this proposal is to revise both how single payment
amounts (SPAs) are calculated and how CMS determines the number of
contracts to award in each ``competition,'' which is a term that we use
under the DMEPOS CBP to refer to a competitive bidding area (CBA) and
product category combination.
b. Adjustments to SPAs
The purpose of this proposal is to acknowledge the challenge and
uncertainty a bidder may face when factoring inflation into its bid. We
believe that adding an annual increase to the SPAs to account for
inflation would be consistent with Medicare making annual covered item
updates for other DMEPOS items and services. This would account for
inflation in the cost of doing business for suppliers submitting bids
for furnishing items under a multiyear contract.
c. Bid Limits and Conditions for Awarding Contracts if Savings Are Not
Expected
The purpose of this proposal is to revise the methodology used to
establish bid limits and establish the conditions for determining when
contracts cannot be awarded in accordance with section
1847(b)(2)(A)(iii) of the Act because the total amounts to be paid to
contract suppliers in a CBA are expected to be less than the total
amounts that would otherwise be paid. We believe these proposed changes
would better ensure the DMEPOS CBP is responsive to rising costs over
time while still ensuring alignment with the statutory requirement for
achieving savings.

[[Page 29111]]

d. Revising the Definition of ``Item'' Related to Medical Supplies
The purpose of this proposal is to specify that ostomy,
tracheostomy, and urological supplies are medical equipment items
mandated for inclusion under the DMEPOS CBP by section 1847(a)(2)(A) of
the Act.
e. Remote Item Delivery (RID) CBP
The purpose of this proposal is to create two new definitions under
Sec. 414.402 for ``Remote item delivery CBP'' and ``Remote item
delivery item'' for the purpose of establishing one or more RID CBPs
wherein contract suppliers would be responsible for furnishing the
items and services under the product category primarily on a mail order
basis to all Medicare beneficiaries regardless of where they live in
the CBA, but could also furnish the items on a non-mail order basis.
Any competitively bid item furnished on a non-mail order basis would
also need to be furnished by a contract supplier. We are proposing that
for a given product category, we could implement one nationwide RID CBP
that would include all areas (all States, territories, and the District
of Columbia) or we could implement multiple RID CBPs covering different
regions of the country. Items included in a nationwide or regional RID
CBP would be those that are typically furnished to beneficiaries from
remote supplier locations that are hundreds of miles on average from
the beneficiary residence where the items are delivered.
f. Payment for Continuous Glucose Monitors and Insulin Infusion Pumps
The purpose of this proposal is to make payment under the DMEPOS
CBP for certain continuous glucose monitors and insulin infusion pumps
and all necessary supplies and accessories on a bundled monthly rental
basis. The technology of products used by beneficiaries to help manage
diabetes continues to change rapidly, and without frequent and
substantial servicing to ensure that the devices continue to function
correctly, the beneficiary might not receive information they need to
make correct diabetes treatment decisions or the dosage of insulin
administered by the insulin pump could be incorrect, putting the
beneficiary in imminent danger. This proposal would eliminate the need
to wait 5 years to replace equipment, allowing beneficiaries to use the
latest technologically updated items. Payment for continuous glucose
monitors and insulin infusion pumps and all necessary supplies and
accessories that are not furnished under the DMEPOS CBP would also be
made on a bundled monthly rental basis in the same amounts established
for continuous glucose monitors and insulin infusion pumps under the
DMEPOS CBP.
g. Revising the Submission of Financial Documents for the DMEPOS CBP
The purpose of this proposal is to streamline the requirements and
evaluation of the DMEPOS CBP financial standards, while still ensuring
that suppliers that are offered contracts are financially stable enough
to participate in the Medicare DMEPOS CBP for the duration of the
contract performance period.
h. Revising the Covered Document Review Date Evaluation and
Notification Process for the DMEPOS CBP
The purpose of this proposal is to streamline the process for
evaluating and notifying a bidder who submitted a covered document by
the covered document review date if a covered document(s) is missing.
i. Bid Surety Bond Review Process
The purpose of this proposal is to codify the bid surety bond rider
process that occurred during the DMEPOS CBP round in 2021 and to
correct a regulatory citation error from previous rulemaking.
j. Tribal Exemption From Participating in the DMEPOS CBP
The purpose of this proposal is to add a Tribal exception to the
DMEPOS CBP regulations.
k. Addition of a Termination Clause for the DMEPOS CBP Supplier
Contracts
The purpose of this proposal is to add a termination clause to the
DMEPOS CBP contracts that could be utilized during a public health
emergency (PHE), when CMS determines that credible evidence exists of
an access problem for beneficiaries, and when CMS believes the
termination of an entire DMEPOS CBP contract, the termination of a
competition on a DMEPOS CBP contract, or the termination of a defined
area(s) within a CBA could improve the situation for the applicable
competition(s) or defined areas (for example, ZIP codes) within a CBA.
l. Technical Change to Sec. 414.408(h)(8)
The purpose of this proposal is to make a technical change to Sec.
414.408(h)(8) so that it correctly refers to paragraph (h)(8)(ii)
instead of paragraph (h)(7)(ii).
m. Adding Definitions of Adjusted Fee Schedule, Amount Competition, and
Unadjusted Fee Schedule Amount to Sec. 414.402
The purpose of this proposal is to add definitions of ``Adjusted
fee schedule amount,'' ``Competition,'' and ``Unadjusted fee schedule
amount'' to Sec. 414.402 for the purpose of simplifying the regulation
text for subpart F.

B. Summary of the Provisions of This Proposed Rule

1. Home Health Prospective Payment System (HH PPS)
In section II.B.1. of this proposed rule, we provide monitoring and
data analysis on the PDGM utilization.
In section II.C.1. of this proposed rule, we propose a permanent
adjustment and a temporary adjustment to the base payment rate under
the HH PPS.
In section II.D. of this proposed rule, we propose to recalibrate
the CY 2026 PDGM case-mix weights and to update the low-utilization
payment adjustment (LUPA) thresholds, functional impairment levels, and
comorbidity adjustment subgroups.
In section II.E. of this proposed rule, we propose to update the
home health wage index. We also propose to update the CY 2026 national,
standardized 30-day period payment rates and the CY 2026 national per-
visit payment amounts by the home health payment update percentage. The
proposed home health payment update percentage for CY 2026 is 2.4
percent. Additionally, this rule proposes the CY 2026 fixed dollar loss
(FDL) ratio to ensure that aggregate outlier payments are projected not
to exceed 2.5 percent of the total aggregate payments, as required by
section 1895(b)(5)(A) of the Act.
In section II.F. of this proposed rule, we propose changes to the
face-to-face encounter policy at 42 CFR 424.22(a)(1)(v).
2. Home Health Quality Reporting Program (HH QRP)
In section III. of this proposed rule, we are proposing to remove
the COVID-19 Vaccine: Percent of Patients Who Are Up to Date measure
and the item related to the measure. CMS is proposing the removal of
four assessment items: one Living Situation item, two Food items, and
one Utilities item. CMS is also proposing to implement a revised
HHCAHPS Survey beginning with the April 2026 sample month. We are also
proposing to revise the policy to allow for providers to submit a
request for reconsideration of an initial determination of non-
compliance with the HH QRP data submission

[[Page 29112]]

requirements. They can request this if they believe that they can
demonstrate full compliance. We are also proposing that, in very
limited circumstances, the HHA could request an extension to file a
reconsideration request if the HHA was affected by an extraordinary
circumstance beyond the control of the HHA, (that is, a natural
disaster or man-made disaster such as a cyber-attack, hurricane,
tornado, or earthquake) during the 30-day period for requesting
reconsideration of the initial determination. We are also seeking
information on a change to the final data submission deadline period
from 4.5 months to 45 days. We are also seeking feedback on the digital
quality measurement (dQM) transition for HHAs. We aim to solicit
feedback from the public on current adoption of health information
technology (IT) and standards, including Fast Healthcare
Interoperability Resources (FHIR), and what related challenges or
barriers HHAs are facing. Finally, we are seeking input on future HH
QRP quality measure (QM) concepts of interoperability, cognitive
function, nutrition, and patient well-being.
3. Expanded Home Health Value Based Purchasing (HHVBP) Model
In section IV. of this proposed rule, we propose to add a new
measure removal factor for the expanded HHVBP Model applicable measure
set. This ninth measure removal factor would allow CMS to propose
removal of a measure when it is no longer feasible to implement the
measure specifications. We also propose changes to the expanded HHVBP
Model applicable measure set and changes to measure weights. We propose
to remove three HHCAHPS Survey-based measures, to align with proposed
changes to the HHCAHPS survey. We also propose the addition of four new
measures. These additions include the claims-based Medicare Spending
Per Beneficiary Post-Acute Care (MSPB-PAC) measure, and three OASIS-
based function measures: Improvement in Bathing, Improvement in Upper
Body Dressing, and Improvement in Lower Body Dressing. Due to these
proposed changes to the applicable measure set, we also propose to
revise the weights of the individual HHVBP measures and the measure
categories.
We also include an RFI related to potential future measure concepts
for the expanded HHVBP Model.
4. Updates to the Home Health Agency CoPs To Align With the OASIS All-
Payer Submission Requirements
In section V. of this proposed rule, we propose technical
regulation text changes to the Home Health Conditions of Participation
(CoP) to align with the OASIS all-payer submission requirements. These
technical changes update terminology in the Home Health CoPs to further
clarify that the requirement for reporting OASIS information applies to
all HHA patients receiving skilled services.
5. Medicare and Medicaid Provider Enrollment
We are proposing several Medicare provider enrollment provisions to
strengthen and clarify certain aspects of the provider enrollment
process. These include, but are not limited to, the following:
<bullet> Modifying grounds for denying, revoking, or deactivating a
provider's or supplier's Medicare enrollment.
<bullet> Expanding the reasons for which CMS can apply a
retroactive effective date for provider and supplier revocations.
<bullet> Expanding the reasons for which CMS can apply a stay of
enrollment.
<bullet> Requiring providers and suppliers to report any adverse
legal actions imposed against them, their owners, their managers, etc.
within 30 days instead of the current 90 days.
We believe these revisions would help keep unqualified providers
and suppliers out of the Medicare program, which, in turn would prevent
improper Medicare payments to such parties.
6. DMEPOS Supplier Accreditation Organizations
DMEPOS suppliers are required to be accredited by a CMS-approved
accrediting organization to enroll in and bill Medicare. The purpose of
accreditation is to confirm, typically through an on-site survey of the
supplier, that the supplier meets the DMEPOS quality standards.
Regulations promulgating our accreditation requirements were enacted in
2006 but have not been updated since then. We are concerned there may
be instances where: (1) AOs are accrediting DMEPOS suppliers that do
not meet the quality standards; and (2) DMEPOS suppliers are falling
out of compliance with the quality standards (sometimes for extended
periods) after becoming accredited. To enhance our ability to ensure
that AOs are performing DMEPOS accreditation functions effectively and
thoroughly, including verifying suppliers' compliance with the quality
standards, we are proposing to add a number of provisions to our DMEPOS
accreditation regulations. Among our proposed provisions are:
<bullet> Requiring DMEPOS suppliers to be surveyed and reaccredited
every year (as opposed to the current 3-year cycle).
<bullet> Reducing inconsistencies among AOs in how they oversee
DMEPOS suppliers.
<bullet> Requiring AOs to furnish more detailed information to CMS
when applying or reapplying for approval to become or remain a DMEPOS
AO.
<bullet> Facilitating greater CMS oversight of the DMEPOS AOs.
We believe these and other changes to the DMEPOS accreditation
process would help ensure that unqualified DMEPOS suppliers are not
accredited and do not, in turn, receive Medicare payments.
7. DMEPOS Prior Authorization
In section V.C. of this proposed rule, we propose to establish
guidelines for granting and withdrawing exemptions from mandatory prior
authorization requirements for certain DMEPOS suppliers.
8. DMEPOS Competitive Bidding
a. Determining Payment Amounts and the Number of Contracts Awarded for
the DMEPOS CBP
Currently SPAs for the lead item (defined under Sec. 414.402 as
the item in the product category with the highest total allowed charges
nationwide) are calculated using the maximum winning bid submitted by
bidders whose composite bids for the product category that includes the
lead item are equal to or below the pivotal bid for that product
category. We are proposing to revise this calculation to use the 75th
percentile of winning bids for the lead item by bidders whose composite
bids for the product category that includes the lead item are equal to
or below the pivotal bid for that product category. We are also
proposing to change the way the SPAs are calculated for the non-lead
items in a product category in certain CBAs. Currently, the ratio
multiplied by the SPA for the lead item to calculate the SPA for the
non-lead item is based on the average of the 2015 fee schedule amounts
for all areas (that is, all states, the District of Columbia, Puerto
Rico, and the United States Virgin Islands) for the non-lead item
divided by the average of the 2015 fee schedule amounts for all areas
for the lead item. This formula uses average fee schedule amounts
rather than fee schedule amounts for specific areas, which results in
cases where the SPA for a

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non-lead item can be higher than the fee schedule amount that would
otherwise be paid. To address this situation in CBAs other than remote
item delivery CBAs, we are proposing to calculate the ratio based on
the 2015 fee schedule amounts for each specific area rather than the
average of the 2015 fee schedule amounts for all areas. Additionally,
the proposed rule would revise how CMS determines the number of DMEPOS
CBP contracts to award to DMEPOS suppliers by using contract supplier
utilization information from previous rounds of the DMEPOS CBP for
product categories previously included under the CBP as well as
information on current supplier utilization for new product categories.
b. Adjustments to SPAs
We are proposing to apply an annual update factor to SPAs, starting
with year two of the DMEPOS CBP contracts.
c. Bid Limits and Conditions for Awarding Contracts if Savings Are Not
Expected
We are proposing to amend 42 CFR 414.414(f) so contracts could be
awarded in a CBA if the amounts to be paid are no greater than 110
percent of the amounts that would otherwise be paid for the items. This
rule clarifies that the amounts that would otherwise be paid include
payment amounts adjusted in accordance with Sec. 414.210(g). This rule
also proposes to modify 42 CFR 414.412(b) to establish bid limits both
for items included in the CBP for the first time and for items that
have previously been included in the CBP. For items included in the CBP
for the first time, the bid limits would be the amounts otherwise paid
for the items. For items that have previously been included in the CBP,
the bid limits would be the most recent SPA for the items plus 10
percent, or if it has been more than a year since the SPA was last in
effect, the inflation-adjusted SPA plus 10 percent. However, we are
proposing that in no event would the bid limit be allowed to exceed the
unadjusted fee schedule amount. In addition, this rule proposes a
technical correction to add reference to subpart Q (``Payment for
Lymphedema Compression Treatment Items'') to 42 CFR 414.414(f).
d. Payment for Continuous Glucose Monitors and Insulin Infusion Pumps
We are proposing to make payment under the DMEPOS CBP for certain
continuous glucose monitors and insulin infusion pumps and all
necessary supplies and accessories on a bundled monthly rental basis.
We are proposing that payment for continuous glucose monitors and
insulin infusion pumps and all necessary supplies and accessories that
are not furnished under the DMEPOS CBP would also be made on a bundled
monthly rental basis with payments limited to the amounts established
for continuous glucose monitors and insulin infusion pumps under the
DMEPOS CBP.
e. Revising the Definition of ``Item'' as Related to Medical Supplies
We are proposing to revise the definition of ``item'' at Sec.
414.402 to clarify that section 1847(a)(2) of the Act includes ostomy,
tracheostomy, and urological supplies as ``items'' subject to the
DMEPOS CBP. We are proposing that ``medical supplies'' under this
section is a category of items separate from durable medical equipment
that includes ostomy, tracheostomy, and urological supplies.
f. Remote Item Delivery (RID) CBP
We are proposing to create two new definitions under Sec. 414.402
for the purpose of establishing a RID CBP(s) wherein contract suppliers
would be required to furnish the items primarily on a mail order basis
under the product category to all Medicare beneficiaries regardless of
where they live in the CBA. While we expect that the majority of items
would be furnished on a mail order basis, a RID competition would not
exclude items in the product category that are furnished on a non-mail
order basis. Items included in a RID CBP would be those that are
typically furnished to beneficiaries from remote supplier locations
that are hundreds of miles on average from the beneficiary residence
where the items are delivered.
g. Revising the Submission of Financial Document Requirements for the
DMEPOS CBP
We are proposing to no longer require the submission of a tax
return extract, income statement, balance sheet, or statement of cash
flows for the purpose of implementing the financial standards mandated
by section 1847(b)(2)(A)(ii) of the Act. This proposal would reduce
burden for suppliers submitting bids under the DMEPOS CBP. However, we
are proposing to continue requiring suppliers to submit a credit report
with a numerical credit score and/or rating from one of the four
approved credit reporting agencies during the bid window, and by the
CDRD if the supplier wants to be eligible for the process for reviewing
covered documents. Additionally, we are proposing to continue using a
five-tier scoring system in the evaluation of the credit report with a
numerical credit score and/or rating, which will be utilized to
establish a financial score that will indicate if a supplier is
financially stable enough to participate in the Medicare DMEPOS CBP for
the duration of the contract performance period. We are also proposing
to no longer use a supplier's financial score to assist in determining
the capacity to assign to each supplier to meet projected beneficiary
demand. Furthermore, we are proposing to have suppliers attest to the
fact that they meet the small supplier threshold in the DMEPOS Bidding
System (DBidS), or any successor system, if applicable.
h. Revising the CDRD Evaluation and Notification Process for the DMEPOS
CBP
Since the inception of the DMEPOS CBP, when a bidder has submitted
at least one covered document by the CDRD, CMS has notified the bidder
within 90 days after the CDRD if they were missing a covered document
by the close of the bid window or if a covered document was missing by
the CDRD. We are proposing that when a bidder has submitted at least
one covered document by the CDRD, CMS will notify the bidder within 90
days after the CDRD if they have any missing covered document(s) by the
close of the bid window. The supplier would have 10 days after such
notification to provide the missing covered document(s).
i. Bid Surety Bond Review Process
CMS applied a bid surety bond rider process during bid evaluation
for the DMEPOS CBP round in 2021, and we are now proposing to codify
this process in regulation for all future rounds. Additionally, we are
proposing to correct a technical error in 42 CFR 414.412(g) that
happened as a result of a paragraph redesignation in 83 FR 57072.
j. Tribal Exemption From Participating in the DMEPOS CBP
We are proposing to add an exception to the DMEPOS CBP that would
allow Medicare payment to Indian Health Service (IHS) and tribally
operated facilities and suppliers as noncontract suppliers to furnish
competitively bid items and services to American Indian/Alaska Native
(AI/AN) Medicare beneficiaries who reside in a CBA during a round of
the DMEPOS CBP.

[[Page 29114]]

k. Addition of a Termination Clause for the DMEPOS CBP Supplier
Contracts
We are proposing in Sec. 414.422 to have the option to
unilaterally terminate or modify each applicable DMEPOS CBP supplier
contract to allow any Medicare enrolled DMEPOS supplier to furnish the
applicable items and services to Medicare beneficiaries if CMS
determines that due to a PHE, contract suppliers are unable to furnish
certain items and services to beneficiaries in certain areas impacted
by a PHE (PHE-impacted area) as required under their respective DMEPOS
CBP supplier contracts.
CMS is proposing in Sec. 414.422 to have the option to remove
items and services furnished in a PHE-impacted areas from the DMEPOS
CBP when all of the following qualifying criteria are met: (1) he
Secretary declares a PHE; (2) CMS determines that verifiable evidence
exists of a DMEPOS access problem for beneficiaries for a certain
competition or defined area(s) within the competition's CBA; (3) CMS
determines that awarding additional DMEPOS CBP supplier contracts, per
Sec. 414.414(i), would not address the access concerns; and (4) CMS
determines terminating or modifying each impacted DMEPOS CBP supplier
contract to exclude certain competition(s) or defined area(s) within
the competition's CBA from the DMEPOS CBP would alleviate access
concerns.
After termination and/or modification of all applicable DMEPOS CBP
supplier contracts, CMS is proposing in Sec. 414.422 to revert back to
the general fee-for-service program requirements set forth in 42 CFR
part 414 Subpart D for the applicable competition(s) or defined area(s)
within a CBA.
l. Technical Change to Sec. 414.408(h)(8)
We are proposing to make a technical change to Sec. 414.408(h)(8)
so that it correctly refers to paragraph (h)(8)(ii) instead of
paragraph (h)(7)(ii).
m. Adding Definitions of Adjusted Fee Schedule Amount, Competition, and
Unadjusted Fee Schedule Amount to Sec. 414.402
The purpose of this proposal is to add definitions of ``Adjusted
fee schedule amount,'' ``Competition,'' and ``Unadjusted fee schedule
amount'' to Sec. 414.402 for the purpose of simplifying the regulation
text for subpart F.

C. Summary of the Regulatory Impact Analysis

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II. Home Health Prospective Payment System

A. Overview of the Home Health Prospective Payment System

1. Statutory Background
Section 1895(b)(1) of the Act requires the Secretary to establish a
Home Health Prospective Payment System (HH PPS) for all costs of home
health services paid under Medicare. Section 1895(b)(2)(A) of the Act
requires that, in defining a prospective payment amount, the Secretary
shall 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. Pursuant to section
1895(b)(3)(B)(v)(I) of the Act, 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 section 1895(b) of the Act to require a
change to the home health unit of payment to 30-day periods beginning
January 1, 2020. Section 51001(a)(2)(A) of the BBA of 2018 added a new
subclause (iv) under section 1895(b)(3)(A) of the Act, requiring the
Secretary to calculate a standard prospective payment amount (or
amounts) for 30-day units of service furnished that end during the 12-
month period beginning January 1, 2020, in a budget neutral manner,
such that estimated aggregate expenditures under the HH PPS during CY
2020 are equal to the estimated aggregate expenditures that otherwise
would have been made under the HH PPS during CY 2020 in the absence of
the change to a 30-day unit of service. Section 1895(b)(3)(A)(iv) of
the Act requires that the calculation of the standard prospective
payment amount (or amounts) for CY 2020 be made before the application
of the annual update to the standard prospective payment amount as
required by section 1895(b)(3)(B) of the Act.
Additionally, section 1895(b)(3)(A)(iv) of the Act requires that in
calculating the standard prospective payment amount (or amounts), the
Secretary must make assumptions about behavior changes that could occur
as a result of the implementation of the 30-day unit of service under
section 1895(b)(2)(B) of the Act and case-mix adjustment factors
established under section 1895(b)(4)(B) of the Act. Section
1895(b)(3)(A)(iv) of the Act further requires the Secretary to provide
a description of the behavior assumptions made in notice and comment
rulemaking. CMS finalized these behavior assumptions in the CY 2019 HH
PPS final rule with comment period (83 FR 56461).
Section 51001(a)(2)(B) of the BBA of 2018 also added a new
subparagraph (D) to section 1895(b)(3) of the Act. Section
1895(b)(3)(D)(i) of the Act requires the Secretary annually to
determine the impact of differences between assumed behavior changes,
as described in section 1895(b)(3)(A)(iv) of the Act, and actual
behavior changes on estimated aggregate expenditures under the HH PPS
with respect to years beginning with 2020 and ending with 2026. Section
1895(b)(3)(D)(ii) of the Act requires the Secretary, at a time and in a
manner determined appropriate, through notice and comment rulemaking,
to provide for one or more permanent increases or decreases to the
standard prospective payment amount (or amounts) for applicable years,
on a prospective basis, to offset for such increases or decreases in
estimated aggregate expenditures, as determined under section
1895(b)(3)(D)(i) of the Act. Additionally, section 1895(b)(3)(D)(iii)
of the Act requires the Secretary, at a time and in a manner determined
appropriate, through notice and comment rulemaking, to provide for one
or more temporary increases or decreases to the payment amount for a
unit of home health services for applicable years, on a prospective
basis, to offset for such increases or decreases in estimated aggregate
expenditures, as determined under section 1895(b)(3)(D)(i) of the Act.
Such a temporary increase or decrease shall apply only with respect to
the year for which such temporary increase or decrease is made, and the
Secretary shall not take into account such a temporary increase or
decrease in computing the payment amount for a unit of home health
services for a subsequent year. Finally, section 51001(a)(3) of the BBA
of 2018 amends section 1895(b)(4)(B) of the Act by adding a new clause
(ii) to require the Secretary to eliminate the use of therapy
thresholds in the case-mix system for CY 2020 and subsequent years.
Division FF, section 4136 of the Consolidated Appropriations Act,
2023 (CAA, 2023) (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

[[Page 29118]]

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)(5) 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 separate consolidated
billing of certain 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, including the removal of therapy thresholds, through the
Patient-Driven Groupings Model (PDGM) for home health periods of care
beginning on or after January 1, 2020. The PDGM did not change
eligibility or coverage criteria for Medicare home health services, and
as long as the individual meets the criteria for home health services
as described at 42 CFR 409.42, the individual can receive Medicare home
health services, including therapy services. For more information about
the role of therapy services under the PDGM, we refer readers to the
Medicare Learning Network (MLN) Matters article SE20005 available at
<a href="https://www.cms.gov/regulations-and-guidanceguidancetransmittals2020-transmittals/se20005">https://www.cms.gov/regulations-and-guidanceguidancetransmittals2020-transmittals/se20005</a>. To adjust for case-mix for 30-day periods of care
beginning on and after January 1, 2020, the HH PPS uses a 432-category
case-mix classification system to assign patients to a home health
resource group (HHRG) using patient characteristics and other clinical
information from Medicare claims and the Outcome and Assessment
Information Set (OASIS) 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) for further information.
BILLING CODE 4120-01-P

Figure 1: Case-Mix Variables in the PDGM

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BILLING CODE 4120-01-C

B. Monitoring the Effects of the Implementation of the PDGM

1. Routine PDGM Monitoring
CMS routinely analyzes Medicare home health benefit utilization,
including but not limited to, overall total 30-day periods of care and
average periods of care per HHA user; distribution of the type of
visits in a 30-day period of care; the percentage of periods that
receive the LUPA; estimated costs; the percentage of 30-day periods of
care by clinical group, comorbidity adjustment, admission source,
timing, and functional impairment level; the proportion of 30-day
periods of care with and without any therapy visits, nursing visits,
and/or aide/social worker visits, and monitoring of home health visits
using telecommunications technology and remote patient monitoring. For
the monitoring included in this rule, we examine simulated data for CYs
2018 and 2019 and actual data for CYs 2020, 2021, 2022, 2023, and 2024
for 30-day periods of care. We refer readers to the CY 2022 HH PPS
final rule (86 FR 35881) for discussion about simulated data for CYs
2018 and 2019.
(a) Utilization
Table 2 shows the overall utilization of home health services. This
data indicates the average number of 30-day periods of care per unique
HHA beneficiary is higher in CY 2024 compared to CYs 2021, 2022, and
2023. The data also indicates that the number of 30-day periods of care
decreased between CY 2018 and CY 2024. Table 3 shows the average
utilization of visits per 30-day period of care by home health
discipline. Table 4 shows the proportion of 30-day periods of care that
are LUPAs and the average number of visits per discipline of those LUPA
30-day periods of care over time. The data show a decreasing trend in
the average number of visits per 30-day period and average number of
visits per discipline for LUPA 30-day periods of care between CY 2018
and CY 2024.

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(b) Analysis of 2023 Cost Report Data for 30-Day Periods of Care
In the CY 2025 HH PPS proposed rule (89 FR 55320), we provided a
summary of analysis on FY 2022 HHA cost report data, as this was the
most recent and complete cost report data at the time of rulemaking,
and CY 2023 claims to estimate 30-day period of care costs. Our
analysis showed that the CY 2023 national, standardized 30-day period
payment rate of $2,010.69 was approximately 32 percent more than the
estimated CY 2023 estimated 30-day period cost of $1,527.23.
Using this same process in this proposed rule to compare home
health payment to costs, we examined 2023 HHA Medicare cost reports
(CMS Form 1728-20, OMB No. 0938-0222), as this is the most recent and
complete cost report data at the time of rulemaking. We also examined
CY 2024 home health claims to estimate 30-day period of care costs. We
excluded LUPAs and partial payment adjustments when calculating the
average number of visits. The 2023 average NRS costs per visit is
$4.58. To update the estimated 30-day period of care costs, we begin
with the 2023 average costs per visit with NRS for each discipline and
multiply that amount by the CY 2024 home health payment update
percentage of 3.0 percent (or a home health payment update factor of
1.03). That amount for

[[Page 29121]]

each discipline is then multiplied by the 2024 average number of visits
by discipline to determine the 2024 estimated 30-day period costs.
Table 5 shows the estimated average costs for 30-day periods of care by
discipline with NRS and the total 30-day period of care costs with NRS
for CY 2024.
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The CY 2024 national standardized 30-day period payment rate was
$2,057.35, which is approximately 33 percent more than the CY 2024
estimated 30-day period cost of $1,548.39. Moreover, as shown in table3
in this proposed rule, HHAs have reduced visits under PDGM in CY 2024.
(c) Clinical Groupings and Comorbidities
Each 30-day period of care is grouped into one of 12 clinical
groups, which describes the primary reason for which a patient is
receiving home health services under the Medicare home health benefit.
The clinical grouping is based on the principal diagnosis reported on
the home health claim. Table 6 shows the distribution of the 12
clinical groups over time.
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Thirty-day periods of care receive a comorbidity adjustment
category based on certain secondary diagnoses reported on home health
claims. These diagnoses are based on a home health specific list of
clinically and statistically significant secondary diagnosis subgroups
with similar resource use. We refer readers to section II.D. of this
proposed rule and the CY 2020 HH PPS final rule with comment period (84
FR 60493) for further information on the comorbidity adjustment
categories. Home health 30-day periods of care can receive a low or a
high comorbidity adjustment, or no comorbidity adjustment. Table 7
shows the distribution of 30-day periods of

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care by comorbidity adjustment category for all 30-day periods.
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(d) Admission Source and Timing
Each 30-day period of care is classified into one of two admission
source categories--community or institutional, depending on what
healthcare setting was utilized in the 14 days prior to receiving home
health care. Thirty-day periods of care for beneficiaries with any
inpatient acute care hospitalizations, inpatient psychiatric facility
(IPF) stays, skilled nursing facility (SNF) stays, inpatient
rehabilitation facility (IRF) stays, or long-term care hospital (LTCH)
stays within 14-days prior to a home health admission are designated as
institutional admissions. The institutional admission source category
also includes patients that had an acute care hospital stay during a
previous 30-day period of care and within 14 days prior to the
subsequent, contiguous 30-day period of care and for which the patient
was not discharged from home health and readmitted. All other 30-day
periods of care would be designated as community admissions.
Thirty-day periods of care are classified as ``early'' or ``late''
depending on when they occur within a sequence of 30-day periods of
care. The first 30-day period of care is classified as early and all
subsequent 30-day periods of care in the sequence (second or later) are
classified as late. A subsequent 30-day period of care would not be
considered early unless there is a gap of more than 60 days between the
end of one previous period of care and the start of another.
Information regarding the timing of a 30-day period of care comes from
Medicare home health claims data and not the OASIS assessment to
determine if a 30-day period of care is ``early'' or ``late''. Table8
shows the distribution of 30-day periods of care by admission source
and period timing.
[GRAPHIC] [TIFF OMITTED] TP02JY25.015

(e) Functional Impairment Level
Each 30-day period of care is placed into one of three functional
impairment levels (low, medium, or high) based on responses to certain
OASIS functional items associated with grooming, bathing, dressing,
ambulating, transferring, and risk for hospitalization. The specific
OASIS items that are used for the functional impairment level are found
in table 7 in the CY 2020 HH PPS final rule with comment period (84 FR
60490). Responses to these OASIS items are grouped together into
response categories with similar resource use and each response
category has associated points. A more detailed description as to how
these response categories were established can be found in the
technical report, ``Overview of the Home Health Groupings Model''
posted on the HHA web page.\1\ The sum of these points results in a
functional impairment score used to group 30-day periods of care into a
functional impairment level with similar resource use. The scores
associated with the functional impairment levels vary by clinical group
to account for differences in resource utilization. A patient's
functional impairment level remains the same for the first and second
30-day periods of care unless there is a significant change in
condition that warrants an ``other follow-up'' assessment prior to the
second 30-day

[[Page 29123]]

period of care. For each 30-day period of care, the Medicare claims
processing system looks for occurrence code 50 on the claim to
correspond to the M0090 date of the applicable assessment. Table 9
shows the distribution of 30-day periods by functional impairment
level.
---------------------------------------------------------------------------

\1\ <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model">https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model</a>.
[GRAPHIC] [TIFF OMITTED] TP02JY25.016

(f) Therapy and Non-Therapy Visits
Beginning in CY 2020, section 1895(b)(4)(B)(ii) of the Act
eliminated the use of therapy thresholds in calculating payments for CY
2020 and subsequent years. Prior to implementation of the PDGM, HHAs
could receive an adjustment to payment based on the number of therapy
visits provided during a 60-day episode of care. We examined the
proportion of actual 30-day periods of care with and without therapy
visits. To be covered as skilled therapy, the services must require the
skills of a qualified therapist (that is, PT, OT, or SLP) or qualified
therapist assistant and must be reasonable and necessary for the
treatment of the patient's illness or injury. As shown in table 3, we
monitor the number of visits per 30-day period of care by each home
health discipline. Any 30-day period of care can include both therapy
and non-therapy visits. If any 30-day period of care consisted of only
visits for PT, OT, or SLP, then this 30-day period of care is
considered ``therapy only''. If any 30-day period of care consisted of
only visits for skilled nursing, home health aide, or social worker,
then this 30-day period of care is considered ``no therapy''. If any
30-day period of care consisted of at least one therapy visit and one
non-therapy, then this 30-day period of care is considered ``therapy +
non-therapy''. Table 10 shows the proportion of 30-day periods of care
with only therapy visits, at least one therapy visit and one non-
therapy visit, and no therapy visits. Figure 2 shows the proportion of
30-day periods of care by the number of therapy visits (excluding zero)
provided during 30-day periods of care.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP02JY25.017

[[Page 29124]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.028

Figures 2 and 3 indicate there have been changes in the
distribution of both therapy and non-therapy visits in CY 2024 compared
to CY 2023. For example, the proportion of 30-day periods with one
through five therapy visits during a 30-day period increased in CY 2024
compared to prior years. Comparing therapy utilization from before the
PDGM (CYs 2018 and 2019) to after the implementation of the PDGM (CYs
2020-2024), we also see an overall decline in therapy visits across all
clinical groups, as shown in Figure 3.

[[Page 29125]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.018

BILLING CODE 4120-01-C
We also examined the proportion of 30-day periods of care with and
without skilled nursing, social work, or home health aide visits. Table
11 shows the number of 30-day periods of care with only skilled nursing
visits, at least one skilled nursing visit and one other visit type
(therapy or non-therapy), and no skilled nursing visits. Table 12 shows
the number of 30-day periods of care with and without home health aide
or social worker visits.
[GRAPHIC] [TIFF OMITTED] TP02JY25.019

[[Page 29126]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.020

(g) Home Health Services Using Telecommunications Technology
As discussed in the CY 2023 final rule (87 FR 66858), we began
collecting data on the use of telecommunications technology used during
a home health period using three G-codes reported on home health
claims. Collecting data on services furnished via telecommunications
technology on claims allows CMS to analyze the characteristics of
patients using services provided remotely. The monitoring discussion
illustrates which services are most frequently furnished via
telecommunication technology and generally how long remote patient
monitoring is utilized.
We began collecting this information from HHAs on a voluntary basis
on January 1, 2023, and have required this information to be reported
on claims starting on July 1, 2023 (87 FR 66858). The three G-codes
help identify when home health services are furnished using synchronous
telemedicine rendered via a real-time two-way audio and video
telecommunications system (G0320); synchronous telemedicine rendered
via telephone or other real-time interactive audio-only
telecommunications systems (G0321); and the collection of physiologic
data digitally stored and/or transmitted by the patient to the home
health agency, that is, remote patient monitoring (G0322). We capture
the usage and length of remote patient monitoring using the start date
of the remote patient monitoring and the number of days of monitoring
indicated on the claim. We also looked at the disciplines most often
providing remote patient monitoring. We examined the utilization of
telecommunications technology devices during a home health period and
remote patient monitoring by looking at home health claims that
included the three G-codes. Tables 13 and 14 shows that the use of
telecommunications services reported on CY 2024 home health claims are
low (roughly 2 percent of all CY 2024 claims) and are mainly associated
with skilled nursing.
[GRAPHIC] [TIFF OMITTED] TP02JY25.021

[[Page 29127]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.022

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

C. Proposed CY 2026 Payment Adjustments Under the HH PPS

1. Proposed Behavior Adjustments Under the HH PPS
a. Background
As discussed in section II.A.1. of this proposed 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 behavior change assumptions in
the calculation of the 30-day budget neutral payment amount for CY
2020, finalizing a negative 4.36 percent behavior change assumption
adjustment (``assumed behaviors''). We did not propose any changes for
CYs 2021 and 2022 related to the behavior change 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 that we
had concluded, based on our annual monitoring at that time, that the
three expected behavior changes did in fact 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,
had 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 behavior changes that were
previously outlined as assumed by CMS, and other behavior changes not
identified at the time we established the budget-neutral 30-day payment
rate for CY 2020. 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 the actual 30-day periods are similar
overall to the simulated 30-day periods as well as a continued decline
in therapy visits, indicating that HHAs changed their behavior to
reduce therapy visits. Although the analysis demonstrates evidence of
individual behavior changes (for example, in the volume of visits for
LUPAs, therapy sessions, etc.), we use the entirety of the behaviors in
order to calculate estimated aggregate expenditures. The law instructs
us to ensure that estimated aggregate expenditures under the PDGM are
equal to the estimated aggregate expenditures that otherwise would have
been made under the prior system.
Section 4142(a) of the CAA, 2023 required CMS to present, to the
extent practicable, a description of the actual behavior changes
occurring under the HH PPS from CYs 2020 through 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 on and ask questions about 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

[[Page 29128]]

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/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model">https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health/home-health-patient-driven-groupings-model</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.
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 Outcome and Assessment Information Set (OASIS) instrument
version D. However, OMB approved an updated version of the OASIS
instrument, OASIS-E under OMB control number 0938-1279,\2\ on November
30, 2022, effective January 1, 2023. Therefore, in the CY 2025 HH PPS
final rule (89 FR 88364), we finalized two additional methodological
assumptions related to mapping and imputation of OASIS-D responses from
OASIS-E. We refer readers to the CY 2024 and CY 2025 HH PPS final rules
for further information about the methodology.
---------------------------------------------------------------------------

\2\ The current expiration date for this information collection
request is December 31, 2027.
---------------------------------------------------------------------------

c. Calculating Permanent and Temporary Payment Adjustments
To adjust the base payment rate based on increases or decreases in
estimated aggregate expenditures that result from differences between
assumed behavior changes and actual behavior changes for 2020 through
2026, we calculate one or more permanent prospective adjustments 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 account for increases or decreases in estimated aggregate
expenditures that result from differences between assumed behavior
changes and actual behavior changes from 2020 through 2026, we
calculate one or more temporary prospective adjustments 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 each of those years once
data is available (87 FR 66804). In other words, when determining the
dollar amount of aggregate expenditures in prior years that we must
offset in future years, we use the full dataset of actual 30-day
periods using both the actual and recalculated 30-day base payment
rates to ensure that the utilization and distribution of claims are the
same. In accordance with section 1895(b)(3)(D)(iii) of the Act, each
temporary adjustment applies prospectively but, as its name suggests,
only with respect to the year for which such temporary increase or
decrease is made. Therefore, after we determine the dollar amount we
plan to reconcile in a 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, controls for any 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 since the adjustment applies only to the
respective year. That is, the temporary adjustment is not permanently
fixed into future base payment rates. We refer readers to the CY 2024
HH PPS final rule (88 FR 77689 through 77694) for analysis of CYs 2020
through 2022 claims and the CY 2025 HH PPS final rule (89 FR 88366
through 88369) for analysis of CY 2023 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.
d. CY 2024 Preliminary Claims Results
We will continue the practice of using the most recent complete
home health claims data available at the time of rulemaking. While the
CY 2024 analysis presented in this proposed rule uses the most complete
data available at the time, it is considered preliminary and, as more
data become available from the latter half of CY 2024, we would update
our analysis in the final rule. The CY 2026 final rule would use the
complete CY 2024 data for determining any permanent and temporary
adjustments needed to the CY 2026 payment rate. However, while the
claims data and the permanent and temporary adjustments results would
be considered complete for CY 2026, 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 LDS file, one for the proposed and one for the final.
Accordingly, the HH PPS LDS file released with this proposed rule
includes two files: the actual CY 2024 30-day periods and the CY 2024
simulated 60-day episodes.
We remind readers a data use agreement (DUA) is required to
purchase the CY 2026 proposed HH PPS LDS file using the CMS-R-0235A
form under OMB control number 0938-0734. Access would 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.\3\ In
addition, the proposed CY 2026 Home Health Descriptive Statistics from
the LDS Files spreadsheet is available on the HH PPS Regulations and
Notices web page,\4\ 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
2024 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.
---------------------------------------------------------------------------

\3\ <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>.
\4\ <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HomeHealthPPS/Home-Health-Prospective-Payment-System-Regulations-and-Notices</a>.
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e. Applying the Methodology to CY 2024 Data To Determine the CY 2026
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 in the CY 2025 HH PPS final rule (89 FR 88360 through
88365), we simulated 60-day episodes using actual CY 2024 30-day
periods to

[[Page 29129]]

determine what the proposed 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 preliminary CY 2024 dataset, we began with 8,118,120 30-
day periods of care and dropped 446,458 30-day periods of care that had
a claim occurrence code 50 date after October 31, 2024. We also
excluded 842,735 30-day periods of care that had a claim occurrence
code 50 date before January 1, 2025, to ensure the 30-day period will
not be part of a simulated 60-day episode that began in CY 2024.
Applying the additional exclusions and assumptions as described in the
finalized methodology (87 FR 66804), an additional 4,017 30-day periods
were excluded.
Additionally, we excluded 211,772 simulated 60-day episodes, which
consist of 391,799 30-day periods of care where no OASIS information
was available in the Chronic Conditions Warehouse (CCW) Virtual
Research Data Center (VRDC), a recent start of care/resumption of care
(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 (69.5 percent) and single 30-day periods
of care (30.5 percent) that was similar to what we found when we
simulated two 30-day periods of care for implementation of the PDGM.
After all exclusions and assumptions were applied, the final dataset
for this proposed rule included 6,433,111 actual 30-day periods of care
and 3,794,744 simulated 60-day episodes of care for CY 2024.
Using the preliminary dataset for CY 2024 (6,433,111 actual 30-day
periods which made up the 3,794,744 simulated 60-day episodes) we
determined the estimated aggregate expenditures under the pre-PDGM HH
PPS were lower than the actual estimated aggregate expenditures under
the PDGM HH PPS. As shown in table 15, aggregate expenditures under the
PDGM were higher than if the 153-group payment system were still in
place in CY 2024 and therefore, we determined the CY 2024 30-day base
payment rate should have been $1,916.77 based on actual behavior
changes.
As stated in the CY 2025 HH PPS final rule (89 FR 88367) we
determined for CYs 2020 through CY 2023 a total of -3.95 percent
permanent adjustment was needed (after accounting for the -3.925
percent applied to the CY 2023 payment rate and the -2.890 applied to
the CY 2024 payment rate). In order to determine behavior changes only
to CY 2024, we simulated what the CY 2024 base payment rate would have
been if the -3.95 percent adjustment that we determined using CY 2023
claims data had been implemented.
To do so, we started with the recalculated CY 2023 base payment of
$1,875.46 (as published in the CY 2025 HH PPS final rule (89 FR 88366))
and applied the CY 2024 case-mix weights recalibration neutrality
factor (1.0124), the CY 2024 wage index budget neutrality factor
(1.0012), the CY 2024 labor-related share budget neutrality factor
(0.9998), and the CY 2024 home health payment update factor (1.030). We
determined the CY 2024 base payment rate for assumed behavior would
have been $1,957.63.
For the CY 2024 annual permanent adjustment, we calculated the
percent change between the two payment rates for only CY 2024. For the
CY 2024 annual temporary adjustment we calculated the difference in
aggregate expenditures in dollars for all CY 2024 PDGM 30-day claims
using the two payment rates. This difference is shown as the
retrospective dollar amount we will need to offset payment using one or
more temporary adjustments in future years. Our results for the CY 2024
annual (single year) permanent and temporary adjustment calculations
using CY 2024 preliminary claims data is shown in table 15.
[GRAPHIC] [TIFF OMITTED] TP02JY25.023

As shown in table 15, a permanent prospective adjustment of -2.087
percent to the CY 2026 30-day payment rate (assuming all adjustments
from prior years were applied) for CY 2024 would be required to offset
for such increases in estimated aggregate expenditures in future years.
We remind readers, the permanent prospective adjustment of -2.087
percent is for illustrative purposes only and the annual (single year)
permanent adjustment cannot be added to previous annual adjustments.
As shown in table 15, we determined that our initial estimate of
the CY 2024 base payment rate ($2,038.13) resulted in excess
expenditures of approximately $840 million in CY 2024.
Section 1895(b)(3)(D)(ii) of the Act requires us to annually
analyze data from CY 2020 through CY 2026. We now have five years of
claims data (CYs 2020 through 2024) under the PDGM,

[[Page 29130]]

and we have applied three partial permanent adjustments to the 30-day
payment rate (CYs 2023 through 2025), which we summarize in table 16.
We remind readers these annual adjustments cannot be added or
multiplied together to determine the total permanent adjustment needed
for CY 2026 because each individual year requires an assumption that
all prior adjustments were taken. We remind readers that equation may
result in slightly different results due to the underlying assumptions
(for example, all prior year adjustments were taken) each year and
rounding.
[GRAPHIC] [TIFF OMITTED] TP02JY25.024

f. CY 2026 Proposed Permanent Adjustment and Temporary Adjustment
Calculations
In the preceding section we describe how we annually analyzed CY
2024 preliminary claims data to determine the effects of actual
behavior change on estimated aggregate expenditures. Again, that
analysis included simulations that assumed the full -3.95 percent
payment adjustment was already taken. We note that CMS implemented a
payment adjustment of -1.975 percent for CY 2024, rather than the -3.95
percent we calculated (89 FR 88373), 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
through 2023 claims data), as well as the adjustment needed to account
for CY 2024 claims. In calculating the full permanent adjustment needed
to the CY 2026 30-day payment rate, we compare estimated aggregate
expenditures under the PDGM and the prior system. Unlike the annual
adjustments described in table 16, we do not assume the full adjustment
from prior years had been taken.
As discussed in section II.C.1.d. of this proposed rule, using the
preliminary dataset for CY 2024 (6,433,111 actual 30-day periods which
made up the 3,794,744 simulated 60-day episodes) we determined the CY
2024 30-day base payment rate should have been $1,916.77 based on
actual behavior. We then compared the $1,916.77 CY 30-day base payment
rate based on actual behavior to the CY 2024 30-day base payment rate
of $2,038.13 we paid based on assumed behaviors. The percent change, as
summarized in table 17, between the actual CY 2024 base payment rate of
$2,038.13 (based on assumed behaviors) and the CY 2024 recalculated
base payment rate of $1,916.77 (based on actual behaviors) is the total
permanent adjustment reflecting CYs 2020 through 2024 claims.
[GRAPHIC] [TIFF OMITTED] TP02JY25.025

As shown in table 17 a permanent prospective adjustment of -5.954
percent to the CY 2026 30-day payment rate would be required to offset
for such increases in estimated aggregate expenditures in future years.
To illustrate this calculation:
[GRAPHIC] [TIFF OMITTED] TP02JY25.026

[[Page 29131]]

As we stated in the CY 2025 HH PPS final rule (89 FR 88373),
applying a -1.975 percent (half of the proposed -3.95 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 in CYs 2020, 2021, 2022, and 2023.
Using CY 2024 claims data, as shown in table 17, a permanent
prospective adjustment of -5.954 percent to the CY 2026 30-day payment
rate would be required to offset for such increases in estimated
aggregate expenditures for CYs 2020 through 2024. We remind readers
adjustment factors are multiplied in this payment system and,
individual numbers (that is, percentages) cannot be added or subtracted
together to determine the final adjustment. Therefore, we cannot
determine the CY 2026 proposed permanent adjustment, which would
include estimated aggregate expenditures in CY 2024, by simply
subtracting the -1.975 percent applied in CY 2025 from the total
permanent adjustment of -5.954 percent as shown in table 17.
Instead, we account for the permanent adjustment applied in CY 2025
of -1.975 percent when we calculate the CY 2026 permanent adjustment by
solving the following equation (1-0.01975) x (1 x -) = (1-0.05954). To
illustrate this calculation we used the following approach.
[GRAPHIC] [TIFF OMITTED] TP02JY25.027

x = 1-0.95941
x = 0.04059 (that is, 4.059 percent)

Accounting for the previous permanent adjustments applied to the
30-day payment rate in CYs 2023, 2024, and 2025, we can simulate the
permanent adjustment calculation with the simulated annual permanent
adjustment percentage shown previously for CY 2026:

Annual Permanent Adjustments Calculated: 5
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\5\ The annual permanent adjustments are for illustrative
purposes only and the annual (single year) permanent adjustments
cannot be combined to calculate the total permanent adjustment
proposed and finalized in rulemaking.
---------------------------------------------------------------------------

CY 2020 Claims = -6.52% (87 FR 66805)
CY 2021 Claims = -1.42% (87 FR 66806)
CY 2022 Claims = -1.767% (88 FR 77692)
CY 2023 Claims = -1.004% (89 FR 88366)
CY 2024 Claims = -2.087% (Table 16)
Permanent Adjustments Applied:
CY 2023 Rate = -3.925% (88 FR 66808)
CY 2024 Rate = -2.890% (88 FR 77697)
CY 2025 Rate = -1.975% (89 FR 88373)
Illustrative equation.
(1-0.0652)(1-0.0142)(1-0.01767)(1-0.01004)(1-0.02087) = (1-0.03925)(1-
0.0289)(1-0.01975)(1-x)
Solving, x = 4.059%.

In table 18, 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] TP02JY25.056

In the CY 2023, 2024, and 2025 HH PPS final rules (87 FR 66790, 88
FR 77696, 89 FR 88373), we acknowledged that the full permanent
adjustment in a single year may be burdensome for some providers. As
shown in table 18, we finalized only half of the permanent adjustment
percentages in CYs 2023 through 2025 final rules. However, we explained
in the CY 2023, 2024, and 2025 HH PPS final rules (87 FR 66808, 88 FR
77697, 89 FR 88373) that when we apply a reduced permanent adjustment,
we may need to continue to implement a reduction in future years to
satisfy the statutory requirements. However, we recognize that only
applying half of the calculated permanent adjustments in previous years
has contributed to the significant growth of the temporary adjustment.
Therefore, we believe it to be appropriate to propose the full
permanent adjustment to help mitigate

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this continued accrual of the temporary adjustment. Therefore, we are
proposing to apply the full permanent adjustment of -4.059 percent to
the CY 2026 home health base payment rate, noting that we expect to
make minor adjustments to this percentage in the final rule using more
complete claims data. Proposing the full permanent adjustment would
satisfy the statutory requirements at section 1895(b)(3)(D)(ii) 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.
As described previously in this proposed rule, to account 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 from 2020 to 2026, we
calculate one or more temporary prospective adjustments 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 that 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. We refer readers
to the CY 2024 HH PPS final rule (88 FR 77689 through 77694) for
analysis of CYs 2020 through 2022 claims, the CY 2025 HH PPS final rule
(89 FR 88366 through 88369) for analysis of CY 2023 claims, and section
II.C.1.d. of this proposed rule for the analysis of CY 2024 claims.
Table 19 provides a summary of the temporary adjustment dollar amount
for CYs 2020 through 2026.
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Our analysis continues to show estimated aggregate expenditures are
higher under the PDGM than if those same claims were paid under the
prior 153-group system, though the data also show that the behavioral
adjustment we implemented in CY 2023 and CY 2024 successfully brought
estimated aggregate expenditures closer to the statutorily required
budget neutrality. In the CY 2022 HH PPS proposed rule (86 FR 65884),
the CY 2023 HH PPS proposed rule (87 FR 37608), the CY 2024 HH PPS
proposed rule (88 FR 43664), the CY 2025 HH PPS proposed rule (89 FR
55320), and as shown in section II.B.1.b. of this proposed rule, our
analysis has shown that the annual national standardized 30-day period
payment rate has exceeded the average estimated 30-day period cost. In
addition, MedPAC has continued to find that FFS Medicare's payments for
home health care are substantially in excess of costs.\6\
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\6\ <a href="https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch7_MedPAC_Report_To_Congress_SEC.pdf">https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_Ch7_MedPAC_Report_To_Congress_SEC.pdf</a>.
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Given these facts, we believe that it is an appropriate time to
begin recoupment of the temporary dollar amounts. Even though we have
not yet calculated the temporary dollar amounts for CYs 2025 through
2026, we have done so for CYs 2020 through 2024, and the amounts are
substantial. Beginning to adjust the base payment rate now to account
for the calculated temporary dollar amount to date may help reduce the
need for a larger reduction in future years. We estimate that
collecting the full temporary dollar amount of $5,301,103,945 in a
single year (as shown in table 19) would require an approximate 34
percent reduction to the CY 2026 base payment rate. And we anticipate
that we would need to make additional adjustments for CYs 2025 and
2026, once data for those years are available.
We have stated in past rules that implementing both the permanent
and temporary adjustments in the same year may be burdensome to HHAs;
however, we propose only to implement a small temporary adjustment
(rather than the estimated 34 percent) along with the permanent
adjustment, which should lessen any hardship to HHAs, as well as reduce
larger temporary adjustments in future years. Beginning to apply a

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temporary adjustment in CY 2026 balances the underlying statutory goal
of budget neutrality against any hardship to HHAs.
Therefore, we exercise our authority under section
1895(b)(3)(D)(iii) of the Act to apply ``one or more'' temporary
adjustments to begin recoupment of the retrospective overpayments for
CYs 2020 through 2024. Specifically, we propose to implement a 5.0
percent reduction in CY 2026, that is equivalent to a 0.9500 temporary
adjustment factor, to the CY 2026 national, standardized payment rate.
Using historical trends, we estimated 7,723,632 number of 30-day
periods would occur in CY 2026. Using this estimated utilization, a 5.0
percent reduction to the CY 2026 30-day payment rate would begin to
collect approximately $786 million of the total temporary adjustment
dollar amount, equating to about 14.8 percent of the total $5.3 billion
shown in table 19. In doing so, however, we would need to account for
the remaining temporary adjustment dollar amount for CYs 2020 through
2024, plus any possible adjustments for CY 2025 and 2026, in future
years. It is important to note that the estimated $786 million dollar
amount anticipated to be collected by the implementation of the
temporary adjustment factor is based on an estimate of the number of
30-day periods that would occur in CY 2026. It may not reflect the
actual dollar amount to be collected if the actual number of 30-day
periods and other utilization trends in CY 2026 differ from what was
estimated. In other words, CMS will calculate the actual amount
collected from the temporary adjustment in CY 2026 and credit it to the
overall cumulative temporary dollar amount.
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. We interpret this to mean we would not include the
-5.0 percent temporary adjustment applied for CY 2026 when calculating
the CY 2027 base payment rates. However, to continue recoupment of the
retrospective overpayments we may propose additional temporary
adjustments in future rulemaking and are not proposing that the -5.0
percent temporary adjustment would be applied each year after CY 2026.
Rather, we will continue to analyze the data each year through CY 2026
claims as required by law, and in a time and manner deemed appropriate
we will propose one or more temporary adjustments to account for
retrospective overpayments. We refer readers to section II.E.3.b. for
the CY 2026 base payment rates with and without the temporary
adjustment.
We solicit comments on the proposals to apply the permanent
adjustment of -4.059 percent and the -5.0 percent temporary adjustment
to the CY 2026 home health base payment rate.

D. Proposed CY 2026 Home Health Low Utilization Payment Adjustment
(LUPA) Thresholds, Functional Impairment Levels, Comorbidity Sub-
Groups, and Case-Mix Weights

1. Proposed CY 2026 PDGM LUPA Thresholds
Under the HH PPS, LUPAs are paid when a certain numerical minimum
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 would 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 would be made using
the per-visit payment amounts as described in section II.E.3.c. of this
proposed rule. For example, if the LUPA visit threshold is four, and a
30-day period of care has four or more visits, it is paid the full 30-
day period payment amount; if the period of care has three or 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 data available at the time of rulemaking. However, as CY
2020 was the first year of the new case-mix adjustment methodology, we
stated in the CY 2021 HH PPS final rule (85 FR 70305, 70306) that we
would maintain the LUPA thresholds that were finalized and shown in
table 17 of the CY 2020 HH PPS final rule with comment period (84 FR
60522) for CY 2021 payment purposes. We stated that at that time, we
did not have sufficient CY 2020 data to reevaluate the LUPA thresholds
for CY 2021.
In the CY 2022 HH PPS final rule with comment period (86 FR 62249),
we finalized the proposal to recalibrate the PDGM case-mix weights,
functional impairment levels, and comorbidity subgroups while
maintaining the LUPA thresholds for CY 2022. We stated that because
there are several factors that contribute to how the case-mix weight is
set for a particular case-mix group (such as the number of visits,
length of visits, types of disciplines providing visits, and non-
routine supplies) and the case-mix weight is derived by comparing the
average resource use for the case-mix group relative to the average
resource use across all groups, we believe the COVID-19 public health
emergency (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 would be more indicative
of visit patterns in CY 2024 rather than continuing to use the LUPA
thresholds derived from the CY 2018 pre-PDGM data. Therefore, we
finalized a policy to update the LUPA thresholds for CY 2024 using data
from CY 2022.
For CY 2026, we are proposing to update the LUPA thresholds using
CY 2024 home health claims utilization data (as of March 13, 2025), in
accordance with our policy to annually recalibrate the case-mix weights
and update the LUPA thresholds, functional impairment levels, and
comorbidity

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subgroups. After reviewing the CY 2024 home health claims utilization
data, we determined that LUPA visit patterns in 2024 were similar to
visits in 2023 and a total of 15 case-mix groups have a decline in
their LUPA threshold of a single visit and 4 case-mix groups have their
LUPA threshold increase by a single visit. The proposed LUPA thresholds
for the CY 2026 PDGM payment groups with the corresponding Health
Insurance Prospective Payment System (HIPPS) codes and the case-mix
weights are listed in table 25.
We are soliciting public comments on the proposed updates to the
LUPA thresholds for CY 2026. The proposed LUPA thresholds will be
updated based on more complete CY 2024 claims data in the final rule.

2. Proposed CY 2026 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 2026, we are proposing to use CY 2024 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 are proposing to use the same methodology previously finalized to
update the functional impairment levels for CY 2026. The proposed
updated OASIS functional points table and the table of functional
impairment levels by clinical group for CY 2026 are listed in tables 20
and 21, respectively.
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BILLING CODE 4120-01-C
We are soliciting public comments on the proposed updates to
functional points and the functional impairment levels by clinical
group.
3. Proposed CY 2026 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
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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 2026, we are proposing to use the same
methodology used to establish the comorbidity subgroups to update the
comorbidity subgroups using CY 2024 home health data with linked OASIS
data (as of March 13, 2025).
For CY 2026, we are proposing to update the comorbidity subgroups
to include 20 low comorbidity adjustment subgroups and 100 high
comorbidity adjustment interaction subgroups. The proposed CY 2026 low
comorbidity adjustment subgroups and the high comorbidity adjustment
interaction subgroups including those diagnoses within each of these
comorbidity adjustments are shown in tables 22 and 23. The proposed CY
2026 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/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center">https://www.cms.gov/medicare/enrollment-renewal/providers-suppliers/home-health-agency-center</a>.
We invite comments on the proposed updates to the low comorbidity
adjustment subgroups and the high comorbidity adjustment interactions
for CY 2026.
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BILLING CODE 4120-01-C
4. Proposed CY 2026 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
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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 2026 case-mix weights, we used CY
2024 home health claims data with linked OASIS data (as of March 13,
2025). These data are the most current and complete data available at
the time of rulemaking. We believe that recalibrating the case-mix
weights using data from CY 2024 would be reflective of PDGM utilization
and patient resource use for CY 2026. The proposed recalibrated case-
mix weights will be updated in the final rule based on more complete CY
2024 claims data.
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 20 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 2023
home health cost reports. We use 2023 home health cost report data
because it is the most complete cost report data available at the time
of rulemaking. Other variables in the regression model include the 30-
day period's admission source, clinical group, and 30-day period
timing. We also include home health agency level fixed effects in the
regression model. After estimating the regression model using 30-day
periods, we divide the coefficients that correspond to the functional
status and risk of hospitalization items by 10 and round to the nearest
whole number. Those rounded numbers are used to compute a functional
score for each 30-day period by summing together the rounded numbers
for the functional status and risk of hospitalization items that are
applicable to each 30-day period. Next, each 30-day period is assigned
to a functional impairment level (low, medium, or high) depending on
the 30-day period's total functional score. Each clinical group has a
separate set of functional thresholds used to assign 30-day periods
into a low, medium or high functional impairment level. We set those
thresholds so that we assign roughly a third of 30-day periods within
each clinical group to each functional impairment level (low, medium,
or high).
Step 2: A second regression model estimates the relationship
between a 30-day period's resource use and indicator variables for the
presence of any of the comorbidities and comorbidity interactions that
were originally examined for inclusion in the PDGM. Like the first
regression model, this model also includes home health agency level
fixed effects and includes control variables for each 30-day period's
admission source, clinical group, timing, and functional impairment
level. After we estimate the model, we assign comorbidities to the low
comorbidity adjustment if any comorbidities have a coefficient that is
statistically significant (p-value of 0.05 or less) and which have a
coefficient that is larger than the 50th percentile of positive and
statistically significant comorbidity coefficients. If two
comorbidities in the model and their interaction term have coefficients
that sum together to exceed $150 and the interaction term is
statistically significant (p-value of 0.05 or less), we assign the two
comorbidities together to the high comorbidity adjustment.
Step 3: After Step 2, each 30-day period is assigned to a clinical
group, admission source category, episode timing category, functional
impairment level, and comorbidity adjustment category. For each
combination of those variables (which represent the 432 different
payment groups that comprise the PDGM), we then calculate the 10th
percentile of visits across all 30-day periods within a particular
payment group. If a 30-day period's number of visits is less than the
10th percentile for their payment group, the 30-day period is
classified as a Low Utilization Payment Adjustment (LUPA). If a payment
group has a 10th percentile of visits that is less than two, we set the
LUPA threshold for that payment group to be equal to two. That means if
a 30-day period has one visit, it is classified as a LUPA and if it has
two or more visits, it is not classified as a LUPA.
Step 4: Take all non-LUPA 30-day periods and regress resource use
on the 30-day period's clinical group, admission source category,
episode timing category, functional impairment level, and comorbidity
adjustment category. The regression includes fixed effects at the level
of the home health agency. After we estimate the model, the model
coefficients are used to predict each 30-day period's resource use. To
create the case-mix weight for each 30-day period, the predicted
resource use is divided by the overall resource use of the 30-day
periods used to estimate the regression.
The case-mix weight is then used to adjust the base payment rate to
determine each 30-day period's payment. Table 24 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 proposed case-mix weights for CY 2026 are listed in table 25
and will also be posted on the HHA Center web page \7\ upon display of
this proposed rule.
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\7\ HHA Center web page: <a href="https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center">https://www.cms.gov/Center/Provider-Type/Home-Health-Agency-HHA-Center</a>.

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BILLING CODE 4120-01-C
Changes to the PDGM case-mix weights are implemented in a budget
neutral manner by multiplying the CY 2026 national standardized 30-day

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period payment rate by a case-mix budget neutrality factor. Typically,
the case-mix weight recalibration neutrality factor is also calculated
using the most recent, complete home health claims data available. For
CY 2026, we would continue the practice of using the most recent
complete home health claims data at the time of rulemaking, which is CY
2024 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
2026 PDGM case-mix weights (developed using CY 2024 home health claims
data) are applied to CY 2024 utilization (claims) data are equal to
total payments when CY 2025 PDGM case-mix weights (developed using CY
2023 home health claims data) are applied to CY 2024 utilization data.
This produces a case-mix budget neutrality factor for CY 2026 of
1.0051.
We invite public comments on the CY 2026 proposed case-mix weights
and proposed case-mix weight budget neutrality factor.

E. Proposed CY 2026 Home Health Payment Rate Updates

1. Proposed CY 2026 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 as 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 2026 is based on
the estimated home health market basket percentage increase, specified
at section 1895(b)(3)(B)(iii) of the Act, of 3.2 percent (based on IHS
Global Inc.'s first quarter 2025 forecast with historical data through
fourth quarter 2024). The estimated CY 2026 proposed home health market
basket percentage increase of 3.2 percent would then be reduced by a
productivity adjustment, in accordance with section 1895(b)(3)(B)(vi)
of the Act. Based on IGI's first quarter 2025 forecast, the proposed
productivity adjustment is currently estimated to be 0.8 percentage
point for CY 2026. Therefore, the proposed productivity-adjusted CY
2026 home health market basket update is 2.4 percent (3.2 percent
market basket percentage increase, reduced by a 0.8 percentage point
productivity adjustment). Furthermore, we are proposing that if more
recent data become available (for example, a more recent estimate of
the market basket percentage increase and/or productivity adjustment),
we would use such data, if appropriate, to determine the CY 2026 market
basket percentage increase and productivity adjustment in the final
rule.
Section 1895(b)(3)(B)(v) of the Act requires that the home health
percentage update be decreased by 2 percentage points for those HHAs
that do not submit quality data as required by the Secretary. For HHAs
that do not submit the required quality data for CY 2026, the proposed
home health payment update percentage is 0.4 percent (2.4 percent minus
2 percentage points).
We invite public comments on the proposed CY 2026 home health
market basket percentage increase and productivity adjustment.
2. Proposed CY 2026 Home Health Wage Index
a. Background
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 payments. We are proposing to continue this practice for CY
2026, as it is our belief that, in the absence of home health-specific
wage data that accounts for area differences, using inpatient hospital
wage data, including any changes made by the Office of Management and
Budget (OMB) to Metropolitan Statistical Area (MSA) definitions, is
appropriate and reasonable for the HH PPS.
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 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

[[Page 29164]]

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>. 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.
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.bls.gov/bls/omb-bulletin-23-01-revised-delineations-of-metropolitan-statistical-areas.pdf">https://www.bls.gov/bls/omb-bulletin-23-01-revised-delineations-of-metropolitan-statistical-areas.pdf</a>.
In the CY 2025 HH PPS final rule (89 FR 88354), we finalized our
proposal to adopt the revised OMB delineations from OMB Bulletin 23-01
with a 5 percent cap on wage index decreases at the CBSA level as well
as at the county level. In that final rule we stated that 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 also stated that we believe 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.
b. Five Percent Cap on Wage Index Decreases
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 counties that make
up a CBSA or statewide rural area. However, in the CY 2025 HH PPS final
rule (89 FR 88418 through 88421), because of the adoption of the
revised OMB delineations from OMB Bulletin 23-01, we finalized a policy
applying this methodology to individual counties. Specifically, we
finalized a policy applying the 5 percent cap to counties that moved
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 calculating the 5 percent cap for
counties that experienced an OMB designation change, some CBSAs and
statewide rural areas could have had more than one wage index value.
Specifically, some counties that changed OMB designations had a wage
index value that was different than the wage index value assigned to
the other constituent counties that made up that CBSA or statewide
rural area that they moved into after 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, we finalized a policy, beginning in CY
2025, that 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. The 50XXX wage index
transition codes are 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.
We also finalized a policy applying the 5 percent cap to these
specific counties that correspond to a different wage index value 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, an HHA will continue to use
the assigned 50XXX transition code on home health claims for services
in these counties 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.
For CY 2026, the 5 percent cap on wage index decreases will
continue to be calculated at the county level as well as the CBSA and
statewide rural area level. While some counties that required a
transition code for CY 2025 will continue to use the same transition
code for CY 2026, other counties that required a transition code in CY
2025 will no longer require a transition code in CY 2026. In the
counties that will no longer require a transition code beginning in CY
2026 wage index, the CY 2026 wage index of the CBSA or rural area that
the county was redesignated into has a wage index value higher than 95
percent of the county's CY 2025 wage index. Therefore, these counties
will use the CBSA or rural county code of the area they were
redesignated into based on OMB Bulletin No. 23-01.
The complete list of counties and corresponding transition codes
can be found as a separate tab in the calendar year's wage index file
located on the CMS website at <a href="https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health-pps/home-health-pps-wage-index">https://www.cms.gov/medicare/payment/prospective-payment-systems/home-health-pps/home-health-pps-wage-index</a>.
c. Proposed CY 2026 HH PPS Wage index
The appropriate wage index value is applied to the labor portion of
the HH PPS rates based on the site of service for the beneficiary
(defined in section 1861(m) of the Act as the beneficiary's place of
residence). For CY 2026, we are proposing to base the HH PPS wage index
on the FY 2026 hospital pre-floor, pre-reclassified wage index for
hospital cost reporting periods beginning on or after October 1, 2021,
and before October 1, 2022 (FY 2022 cost report data). The proposed CY
2026 HH PPS wage index would not take into account any geographic
reclassification of hospitals, including those in accordance with
sections 1886(d)(8)(B) or 1886(d)(10) of the Act but would include the
5 percent cap on wage index decreases as discussed previously.
There exist some geographic areas where there are no hospitals, and
thus,

[[Page 29165]]

no hospital wage data on which to base the calculation of the HH PPS
wage index. To address those geographic areas in which there are no
inpatient hospitals, and thus, no hospital wage data on which to base
the calculation of the CY 2026 HH PPS wage index, we are proposing to
continue to use the same methodology discussed in the CY 2007 HH PPS
final rule (71 FR 65884) to address those geographic areas in which
there are no inpatient hospitals.
For urban areas without inpatient hospitals, we use the average
wage index of all urban areas within the State as a reasonable proxy
for the wage index for that CBSA. For CY 2026, the only urban area
without inpatient hospital wage data is Hinesville, GA (CBSA 25980).
Using the average wage index of all urban areas in Georgia as a proxy,
we are proposing the CY 2026 wage index value for Hinesville, GA, would
be 0.8800.
For rural areas that do not have inpatient hospitals, we use the
average wage index from all contiguous Core Based Statistical Areas
(CBSAs) as a reasonable proxy. The term ``contiguous'' means sharing a
border (72 FR 49859). In the CY 2025 HH PPS final rule (89 FR 88422),
we finalized a policy that rural North Dakota would become a rural area
without a hospital from which hospital wage data can be derived.
Therefore, in order to calculate the wage index for rural area 99935,
North Dakota, we finalized using as a proxy, the average pre-floor,
pre-reclassified hospital wage data from the contiguous CBSAs: CBSA
13900-Bismark, ND, CBSA 22020-Fargo, ND-MN, CBSA 24220-Grand Forks, ND-
MN, and CBSA 33500, Minot, ND. Using this methodology, we are proposing
that the CY 2026 HH PPS wage index for rural North Dakota would be
0.8346.
Previously, the only rural area without a hospital from which
hospital wage data could be derived was rural Puerto Rico. However, for
rural Puerto Rico, we did not apply this methodology due to the
distinct economic circumstances that exist there (for example, due to
the proximity of almost all of Puerto Rico's various urban and non-
urban areas to one another, this methodology would produce a wage index
for rural Puerto Rico that is higher than that in half of its urban
areas). Instead, we used the most recent wage index previously
available for that area, which was 0.4047. Beginning in CY 2025, due to
the adoption of the revised OMB delineations, there is now a hospital
in rural Puerto Rico from which hospital wage data can be derived.
Therefore, we finalized a policy that the wage index for rural Puerto
Rico would now be based on the hospital wage data for the area instead
of the previously available wage index of 0.4047. The CY 2025 final
unadjusted wage index value for rural Puerto Rico was 0.2510. However,
because 0.2510 is more than a 5 percent decline in the area's CY 2024
wage index, the 5 percent cap was applied and the final CY 2025 5
percent cap adjusted wage index for rural Puerto Rico was set equal to
95 percent of the CY 2024 wage index, which resulted in a final wage
index value of 0.3845.
The unadjusted CY 2026 proposed wage index for rural Puerto Rico is
0.2452. However, because 0.2452 is more than a 5 percent decline in the
CY 2025 wage index, we are proposing that the CY 2026 5 percent cap
adjusted wage index for rural Puerto Rico be set equal to 95 percent of
the CY 2025 wage index, which would result in a proposed wage index
value of 0.3653.
Additionally, due to the adoption of the revised OMB delineations
in the CY 2025 HH PPS final rule, Delaware, which was previously an
all-urban state, now has one rural area with a hospital from which
hospital wage data can be derived. As such, we are proposing that the
CY 2026 wage index for rural Delaware would be 1.0133.
Finally, the Northern Mariana Islands and American Samoa are rural
areas with no hospital data from which a wage index can be calculated.
Consistent with our established methodology, we compute an appropriate
wage index for rural areas with no hospital using the average wage
index values from contiguous CBSAs, to represent a reasonable proxy.
Therefore, we are proposing that HHAs that provide services in the
Northern Mariana Islands and American Samoa would use CBSA 99965 (Guam)
and receive the wage index assigned to CBSA 99965 (Guam) of 0.9611.
While we appreciate that the islands of the Pacific Rim are not
actually contiguous, we believe that same principle applies here, and
that Guam is a reasonable proxy for American Samoa and the Northern
Mariana Islands. We believe that CBSA 99965 (Guam) represents a
reasonable proxy because the islands are located within the Pacific Rim
and share a common status as United States Territories.
The proposed HH PPS wage index file applicable for CY 2026 (January
1, 2026, through December 31, 2026) is available on the CMS website 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>.
3. Proposed CY 2026 Home Health Payment Update
a. Background
The HH PPS has been in effect since October 1, 2000. As set forth
in the July 3, 2000, final rule (65 FR 41128), the base unit of payment
under the HH PPS was a national, standardized 60-day episode payment
rate. As finalized in the CY 2019 HH PPS final rule with comment period
(83 FR 56406), and as described in the CY 2020 HH PPS final rule with
comment period (84 FR 60478), the unit of home health payment changed
from a 60-day episode to a 30-day period effective for those 30-day
periods beginning on or after January 1, 2020.
As set forth in Sec. 484.220, we adjust the national, standardized
prospective payment rates by a case-mix relative weight and a wage
index value based on the site of service for the beneficiary. To
provide appropriate adjustments to the proportion of the payment amount
under the HH PPS to account for area wage differences, we apply the
appropriate wage index value to the labor portion of the HH PPS rates.
In the CY 2024 HH PPS final rule (88 FR 77676), we finalized the
rebasing of the home health market basket to reflect 2021 Medicare cost
report data. We also finalized a policy that, for CY 2024 and
subsequent years, the labor-related share will be 74.9 percent, and the
non-labor-related share will be 25.1 percent. The following are the
steps we take to compute the case-mix and wage-adjusted 30-day period
payment amount for CY 2026:
<bullet> Multiply the national, standardized 30-day period rate by
the patient's applicable case-mix weight.
<bullet> Divide the case-mix adjusted amount into a labor (74.9
percent) and a non-labor portion (25.1 percent).
<bullet> Multiply the labor portion by the applicable wage index
based on the site of service of the beneficiary.
<bullet> Add the wage-adjusted portion to the non-labor portion,
yielding the case-mix and wage adjusted 30-day period payment amount,
subject to any additional applicable adjustments.
We provide annual updates of the HH PPS rate in accordance with
section 1895(b)(3)(B) of the Act. Section 484.225 sets forth the
specific annual percentage update methodology. In accordance with
section 1895(b)(3)(B)(v) of the Act and Sec. 484.225(i), for an HHA
that does not submit home health quality data, as specified by the
Secretary, the unadjusted national prospective 30-day period rate is
equal to the rate for the previous calendar year increased by the
applicable home health payment update

[[Page 29166]]

percentage, minus two percentage points. Any reduction of the
percentage change will apply only to the calendar year involved and
will not be considered in computing the prospective payment amount for
a subsequent calendar year.
The final claim that the HHA submits for payment determines the
total payment amount for the period and whether we make an applicable
adjustment to the 30-day case-mix and wage-adjusted payment amount. The
end date of the 30-day period, as reported on the claim, determines
which calendar year rates Medicare would use to pay the claim.
We may adjust a 30-day case-mix and wage-adjusted payment based on
the information submitted on the claim to reflect the following:
<bullet> A LUPA is provided on a per-visit basis as set forth in
Sec. Sec. 484.205(d)(1) and 484.230.
<bullet> A partial payment adjustment as set forth in Sec. Sec.
484.205(d)(2) and 484.235.
<bullet> An outlier payment as set forth in Sec. Sec.
484.205(d)(3) and 484.240.
b. Proposed CY 2026 National, Standardized 30-Day Period Payment Amount
Section 1895(b)(3)(A)(i) of the Act requires that the standard
prospective payment rate and other applicable amounts be standardized
in a manner that eliminates the effects of variations in relative case-
mix and area wage adjustments among different home health agencies in a
budget-neutral manner. To determine the CY 2026 national, standardized
30-day period payment rate, we would continue our practice of using the
most recent, complete utilization data at the time of rulemaking; that
is, we are using CY 2024 claims data for CY 2026 payment rate updates.
We apply a permanent adjustment factor, a case-mix weights
recalibration budget neutrality factor, a wage index budget neutrality
factor, the home health payment update percentage, and a temporary
adjustment factor to update the CY 2026 payment rate. As discussed in
section II.C.1. of this proposed rule, we are proposing the
implementation of a permanent adjustment of -4.059 percent to ensure
that estimated aggregate expenditures under the PDGM are equal to the
estimated aggregate expenditures that otherwise would have been under
the 153-group payment system as required by law. The proposed permanent
adjustment factor is 0.95941. As discussed previously, to ensure the
changes to the PDGM case-mix weights are implemented in a budget
neutral manner, we apply a case-mix weight budget neutrality factor to
the CY 2026 national, standardized 30-day period payment rate. The
proposed case-mix weight budget neutrality factor for CY 2026 is
1.0051.
Additionally, we apply a wage index budget neutrality factor to
ensure that wage index updates and revisions are implemented in a
budget neutral manner. To calculate the wage index budget neutrality
factor, we first determine the payment rate needed for non-LUPA 30-day
periods using the CY 2026 wage index (with the 5 percent cap) so those
total payments are equivalent to the total payments for non-LUPA 30-day
periods using the CY 2025 wage index (with the 5 percent cap) and the
CY 2025 national standardized 30-day period payment rate adjusted by
the case-mix weights recalibration neutrality factor. Then, by dividing
the payment rate for non-LUPA 30-day periods using the CY 2026 wage
index with the 5 percent cap on wage index decreases) by the payment
rate for non-LUPA 30-day periods using the CY 2025 wage index (with the
5 percent cap on wage index decreases), we obtain a wage index budget
neutrality factor of 1.0019. We then apply the wage index budget
neutrality factor of 1.0019 to the 30-day period payment rate.
Next, we update the 30-day period payment rate by the proposed CY
2026 home health payment update percentage of 2.4 percent. As discussed
in section II.C.1. of this proposed rule, we are also proposing the
implementation of a temporary 5.0 percent reduction to the CY 2026 base
payment rate. The proposed temporary adjustment factor is 0.95000. Per
section 1895(b)(3)(D)(iii) of the Act a temporary adjustment is to be
applied for the applicable year and not included when computing a
payment rate for a subsequent year. In other words, the temporary
adjustment factor for CY 2026 should not be included in the starting
payment rate for CY 2027. Therefore, we have calculated the CY 2026
national, standardized 30-day period payment with and without the
temporary adjustment factor. The CY 2026 national standardized 30-day
period payment rate without a temporary adjustment is only for
illustrative purposes. The actual CY 2026 national standardized 30-day
period payment rate includes the proposed temporary adjustment and is
calculated in table 26.
[GRAPHIC] [TIFF OMITTED] TP02JY25.057

The CY 2026 national standardized 30-day period payment rate for an
HHA that does not submit the required quality data would be updated by
0.4 percent (the proposed CY 2026 home health payment update percentage
of 2.4 percent minus 2 percentage points) and is shown in table 27.

[[Page 29167]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.058

c. Proposed CY 2026 National Per-Visit Rates for 30-Day Periods of Care
The national per-visit rates are used to pay LUPAs and are also
used to compute imputed costs in outlier calculations. The per-visit
rates are paid by type of visit or home health discipline. The six home
health disciplines are as follows:
<bullet> Home health aide (HH aide).
<bullet> Medical Social Services (MSS).
<bullet> Occupational therapy (OT).
<bullet> Physical therapy (PT).
<bullet> Skilled nursing (SN).
<bullet> Speech-language pathology (SLP).
To calculate the proposed CY 2026 national per-visit rates, we
started with the CY 2025 national per-visit rates. Then we applied a
wage index budget neutrality factor to ensure budget neutrality for
LUPA per-visit payments. We calculated the wage index budget neutrality
factor by simulating total payments for LUPA 30-day periods of care
using the CY 2026 wage index with the 5 percent cap on wage index
decreases and comparing it to simulated total payments for LUPA 30-day
periods of care using the CY 2025 wage index with the 5 percent cap. By
dividing the total payments for LUPA 30-day periods of care using the
CY 2026 wage index by the total payments for LUPA 30-day periods of
care using the CY 2025 wage index, we obtained a wage index budget
neutrality factor of 1.0004. As a reminder, the wage index budget
neutrality factors for the national, standardized 30-day period amount
and the national LUPA per-visit rates are not equal because they are
calculated differently. The wage index budget neutrality factor for the
LUPA per-visit payments is calculated by simulating total payments for
LUPA 30-day periods while the 30-day period budget neutrality factor is
calculated by simulating payments for non-LUPA 30-day periods.
The LUPA per-visit rates are not calculated using case-mix weights.
Therefore, no case-mix weight budget neutrality factor is needed to
ensure budget neutrality for LUPA payments. Additionally, we are not
applying the permanent adjustment or the temporary adjustment to the
per-visit payment rates but only to the case-mix adjusted 30-day
payment rate. Lastly, the per-visit rates for each discipline are
updated by the proposed CY 2026 home health payment update percentage
of 2.4 percent. The national per-visit rates are adjusted by the wage
index based on the site of service of the beneficiary. The per-visit
payments for LUPAs are separate from the LUPA add-on payment amount,
which is paid for periods that occur as the only period or initial
period in a sequence of adjacent periods. The proposed CY 2026 national
per-visit rates for HHAs that submit the required quality data are
updated by the proposed CY 2026 home health payment update percentage
of 2.4 percent and are shown in table 28.
[GRAPHIC] [TIFF OMITTED] TP02JY25.059

The CY 2026 per-visit payment rates for HHAs that do not submit the
required quality data would be updated by 0.4 percent, which is the
proposed CY 2026 home health payment update percentage of 2.4 percent
minus 2 percentage points and are shown in table 29.

[[Page 29168]]

[GRAPHIC] [TIFF OMITTED] TP02JY25.060

We are soliciting comments on the proposed CY 2026 30-day home
health payment rates and the per-visit payment rates.
d. LUPA Add-On Factors
Prior to the implementation of the 30-day unit of payment, LUPA
episodes were eligible for a LUPA add-on payment if the episode of care
was the first or only episode in a sequence of adjacent episodes. As
described in the CY 2008 HH PPS final rule, the average visit lengths
in these initial LUPAs are 16 to 18 percent higher than the average
visit lengths in initial non-LUPA episodes (72 FR 49848). LUPA episodes
that occur as the only episode or as an initial episode in a sequence
of adjacent episodes are adjusted by applying an additional amount to
the LUPA payment before adjusting for area wage differences.
In the CY 2014 HH PPS final rule (78 FR 72305), we changed the
methodology for calculating the LUPA add-on amount, whereby we
finalized the approach of multiplying the per-visit payment amount for
the first skilled nursing (SN), physical therapy (PT), or speech
language pathology (SLP) visit in LUPA episodes that occur as the only
episode or an initial episode in a sequence of adjacent episodes by 1 +
the proportional increase in minutes for an initial visit over non-
initial visits. Specifically, we updated the analysis using 100 percent
of LUPA episodes and a 20 percent sample of non-LUPA first episodes
from CY 2012 claims data. At that time, we finalized add-on factors:
1.8451 for SN; 1.6700 for PT; and 1.6266 for SLP. In the CY 2019 HH PPS
final rule with comment period (83 FR 56440), in addition to finalizing
a 30-day unit of payment, we finalized our policy of continuing to
multiply the per-visit payment amount for the first SN, PT, or SLP
visit in LUPA periods that occur as the only period of care or the
initial 30-day period of care in a sequence of adjacent 30-day periods
of care by the appropriate add-on factor (using the already established
LUPA add-on factors of 1.8451 for SN, 1.6700 for PT, and 1.6266 for
SLP) to determine the LUPA add-on payment amount for 30-day periods of
care under the PDGM.
In the CY 2025 HH PPS final rule (89 FR 88426 through 88427), in an
effort to enhance the accuracy and relevance of LUPA add-on factors to
reflect current healthcare practices and costs, we finalized updates to
the LUPA add-on factors for PT, SN, and SLP, which had not been revised
since the CY 2014 HH PPS final rule (using CY 2012 claims data). We
finalized the proposal to use the same methodology to establish the
LUPA add-on amount for CY 2014, using updated claims data.
Specifically, we updated the LUPA add-on factors by using 100
percent of LUPA periods and a 100 percent sample of non-LUPA first
periods from CY 2023 claims data (as of September 11, 2024). Our
analysis found that the average excess of minutes for the first visit
in LUPA periods that were the only period or an initial LUPA in a
sequence of adjacent periods are 29.91 minutes for the first visit if
SN, 28.08 minutes for the first visit if PT, and 31.57 minutes for the
first visit if SLP. The average minutes for all non-first visits in
non-LUPA episodes are 41.54 minutes for SN, 45.11 minutes for PT, and
47.15 minutes for SLP. To determine the LUPA add-on factors for each
discipline, we calculated the ratio of the average excess minutes for
the first visits in LUPA claims to the average minutes for all non-
first visits in non-LUPA claims. We then added one to these ratios to
obtain the final add on factors. Therefore, beginning in CY 2025 the
final LUPA add on factors for SN, PT, and SLP are 1.7200 for SN; 1.6225
for PT; and 1.6696 for SLP.
Additionally, as outlined in the CY 2025 HH PPS proposed rule (89
FR 55378), in order to implement Division CC, section 115, of the
Consolidation Appropriations Act (CAA), 2021, CMS finalized changes to
the regulations at Sec. [thinsp]484.55(a)(2) and (b)(3) that allowed
occupational therapists to conduct initial and comprehensive
assessments for all Medicare beneficiaries under the home health
benefit when the plan of care does not initially include skilled
nursing care, but included OT, as well as either PT or SLP (86 FR
62351). This change necessitated the establishment of a LUPA add-on
factor for calculating the LUPA add-on payment amount for the first
skilled OT visit in LUPA periods that occur as the only period of care
or the initial 30-day period of care in a sequence of adjacent 30-day
periods of care. However, at the time of the implementation, we stated
in the CY 2022 HH PPS final rule (86 FR 62289), there was not
sufficient data regarding the average excess minutes for the first
visit in LUPA periods when the initial and comprehensive assessments
are conducted by occupational therapists. Therefore, we finalized a
policy using the PT LUPA add-on factor as a proxy. We also stated in
the CY 2022 final rule that we will use the PT LUPA add-on factor as a
proxy until we have CY 2022 data to establish a more accurate OT add-on
factor for the LUPA add-on payment amounts (86 FR 62289). Ultimately,
we refrained from using CY 2022 data (and instead utilized the PT LUPA
add-on factor as a proxy for the OT LUPA add-on factor), as we marked
the first year that occupational

[[Page 29169]]

therapists were permitted to conduct the initial assessment. We wanted
to extend our analysis to ensure we had sufficient data to reflect OT
time spent conducting initial assessments to establish a discrete OT
LUPA add-on factor (86 FR 62240).
In the CY 2025 HH PPS final rule (89 FR 88427), we finalized a
proposal to discontinue use of the PT LUPA add-on factor as a proxy and
established a definitive LUPA add-on factor for occupational therapy.
We used the same methodology used to establish the LUPA add-on amount
for CY 2014, as described previously for the SN, PT, and SLP add-on
factors. Specifically, we updated the analysis using 100 percent of
LUPA periods and a 100 percent sample of non-LUPA first periods from CY
2023 claims data. Using updated analysis (as of September 11, 2024), we
found that the average excess of minutes for the first OT visit in LUPA
periods that were the only period or an initial LUPA in a sequence of
adjacent periods is 33.28 minutes for the first visit. The average
number of minutes for all non-first visits in non-LUPA periods is 45.98
minutes for OT. To determine the LUPA add-on factor for OT to account
for the excess minutes during the first visit in a LUPA period, we
finalized calculating the ratio of the average excess minutes for the
first visits in LUPA claims to the average minutes for all non-first
visits in non-LUPA claims. We then added one to this ratio to obtain
the final add on factor of 1.7238 for OT. Therefore, the OT LUPA factor
of 1.7238 is used when occupational therapy is the first skilled visit
in a LUPA period that occurs as the only period or an initial period in
a sequence of adjacent periods.
4. Payments for High-Cost Outliers Under the HH PPS
a. Background
Section 1895(b)(5) of the Act allows for the provision of an
addition or adjustment to the home health payment amount otherwise made
in the case of outliers because of unusual variations in the type or
amount of medically necessary care. Under the HH PPS and the previous
unit of payment (that is, 60-day episodes), outlier payments were made
for 60-day episodes whose estimated costs exceed a threshold amount for
each HHRG. The episode's estimated cost was established as the sum of
the national wage-adjusted per-visit payment amounts delivered during
the episode. The outlier threshold for each case-mix group or PEP
adjustment is defined as the 60-day episode payment or PEP adjustment
for that group plus a fixed-dollar loss (FDL) amount. For the purposes
of the HH PPS, the FDL amount is calculated by multiplying the home
health FDL ratio by a case's wage-adjusted national, standardized 60-
day episode payment rate, which yields an FDL dollar amount for the
case. The outlier threshold amount is the sum of the wage and case-mix
adjusted PPS episode amount and wage-adjusted FDL amount. The outlier
payment is defined as a proportion of the wage-adjusted estimated cost
that surpasses the wage-adjusted threshold. The proportion of
additional costs over the outlier threshold amount paid as outlier
payments is referred to as the loss-sharing ratio.
As we noted in the CY 2011 HH PPS final rule (75 FR 70397 through
70399), section 3131(b)(1) of the Affordable Care Act amended section
1895(b)(3)(C) of the Act to require that the Secretary reduce the HH
PPS payment rates such that aggregate HH PPS payments were reduced by 5
percent. In addition, section 3131(b)(2) of the Affordable Care Act
amended section 1895(b)(5) of the Act by redesignating the existing
language as section 1895(b)(5)(A) of the Act and revised the language
to state that the total amount of the additional payments or payment
adjustments for outlier episodes could not exceed 2.5 percent of the
estimated total HH PPS payments for that year. Section 3131(b)(2)(C) of
the Affordable Care Act also added section 1895(b)(5)(B) of the Act,
which capped outlier payments as a percent of total payments for each
HHA for each year at 10 percent.
As such, beginning in CY 2011, we reduced payment rates by 5
percent and targeted up to 2.5 percent of total estimated HH PPS
payments to be paid as outliers. To do so, we first returned the 2.5
percent held for the target CY 2010 outlier pool to the national,
standardized 60-day episode rates, the national per visit rates, the
LUPA add-on payment amount, and the NRS conversion factor for CY 2010.
We then reduced the rates by 5 percent as required by section
1895(b)(3)(C) of the Act, as amended by section 3131(b)(1) of the
Affordable Care Act. For CY 2011 and subsequent calendar years we
targeted up to 2.5 percent of estimated total payments to be paid as
outlier payments, and apply a 10-percent agency-level outlier cap.
In the CY 2017 HH PPS proposed and final rules (81 FR 43737 through
43742 and 81 FR 76702), we described our concerns regarding patterns
observed in home health outlier episodes. Specifically, we noted the
methodology for calculating home health outlier payments may have
created a financial incentive for providers to increase the number of
visits during an episode of care in order to surpass the outlier
threshold and simultaneously created a disincentive for providers to
treat medically complex beneficiaries who require fewer but longer
visits. Given these concerns, in the CY 2017 HH PPS final rule (81 FR
76702), we finalized changes to the methodology used to calculate
outlier payments, using a cost-per-unit approach rather than a cost-
per-visit approach. This change in methodology allows for more accurate
payment for outlier episodes, accounting for both the number of visits
during an episode of care and the length of the visits provided. Using
this approach, we now convert the national per-visit rates into per 15-
minute unit rates. These per 15-minute unit rates are used to calculate
the estimated cost of an episode to determine whether the claim would
receive an outlier payment and the amount of payment for an episode of
care. In conjunction with our finalized policy to change to a cost-per-
unit approach to estimate episode costs and determine whether an
outlier episode should receive outlier payments, in the CY 2017 HH PPS
final rule we also finalized the implementation of a cap on the amount
of time per day that would be counted toward the estimation of an
episode's costs for outlier calculation purposes (81 FR 76725).
Specifically, we limit the amount of time per day (summed across the
six disciplines of care) to 8 hours (32 units) per day when estimating
the cost of an episode for outlier calculation purposes.
In the CY 2017 HH PPS final rule (81 FR 76724), we stated that we
did not plan to re-estimate the average minutes per visit by discipline
every year. Additionally, the per unit rates used to estimate an
episode's cost were updated by the home health update percentage each
year, meaning we would start with the national per visit amounts for
the same calendar year when calculating the cost-per-unit used to
determine the cost of an episode of care (81 FR 76727). We would
continue to monitor the visit length by discipline as more recent data
becomes available and may propose updating the rates as needed in the
future.
In the CY 2019 HH PPS final rule with comment period (83 FR 56521),
we finalized a policy to maintain the current methodology for payment
of high-cost outliers upon implementation of PDGM beginning in CY 2020
and calculated payment for high-cost outliers based upon 30-day period
of care. Upon implementation of the PDGM and 30-day unit of payment, we
finalized the FDL ratio of 0.56 for 30-

[[Page 29170]]

day periods of care in CY 2020. In the CY 2025 HH PPS final rule (89 FR
88354), using CY 2023 claims data (as of July 11, 2024) we finalized
the FDL ratio of 0.35 for CY 2025.
b. Proposed FDL Ratio for CY 2026
For a given level of outlier payments, there is a trade-off between
the values selected for the FDL ratio and the loss-sharing ratio. A
high FDL ratio reduces the number of periods that can receive outlier
payments but makes it possible to select a higher loss-sharing ratio,
and therefore, increase outlier payments for qualifying outlier
periods. Alternatively, a lower FDL ratio means that more periods can
qualify for outlier payments, but outlier payments per period must be
lower.
The FDL ratio and the loss-sharing ratio are selected so that the
estimated total outlier payments do not exceed the 2.5 percent
aggregate level (as required by section 1895(b)(5)(A) of the Act).
Historically, we have used a value of 0.80 for the loss-sharing ratio,
which we believe preserves incentives for agencies to attempt to
provide care efficiently for outlier cases. With a loss-sharing ratio
of 0.80, Medicare pays 80 percent of the additional estimated costs
that exceed the outlier threshold amount.
Using CY 2024 claims data (as of March 13, 2025) and given the
statutory requirement that total outlier payments do not exceed 2.5
percent of the total payments estimated to be made under the HH PPS, we
are proposing an FDL ratio of 0.46 for CY 2026. CMS would update the
FDL, if needed, in the final rule once we have more complete CY 2024
claims data.

F. Proposed Regulation Change to Face-to-Face Encounter

As a condition for payment, section 6407(a) of the Affordable Care
Act (Pub. L. 111-148, March 23, 2010) requires that prior to certifying
a patient's eligibility for the home health benefit, the physician must
document that the physician himself or herself or a non-physician
practitioner (NPP) has had a face-to-face encounter with the patient.
In the Home Health Prospective Payment System Rate Update for Calendar
Year 2011; Changes in Certification Requirements for Home Health
Agencies and Hospices final rule (75 FR 70427) (hereinafter referred to
as the CY 2011 HH PPS final rule), we established that the certifying
physician must document the face-to-face encounter regardless of
whether the physician himself or herself or one of the permitted NPPs
performed the face-to-face encounter. Sections 6407(a)(1)(B) and
6407(a)(2)(B) of the Affordable Care Act further describes NPPs who may
perform this face-to-face patient encounter.
In the Medicare Program, Home Health Prospective Payment System
Rate Update for Calendar Year 2012 final rule (hereinafter referred to
as the CY 2012 HH PPS final rule), we stated that the Medicare home
health benefit relies on the patient's physician to determine
eligibility for home health services (76 FR 68596), noting that this
type of physician involvement is critical from both a quality of care
and program integrity perspective. Prior to enactment of section
6407(a) of the Affordable Care Act regarding the home health face-to-
face encounter provision, the patient's physician often relied on
information provided by an HHA when making decisions about patient
care. In the CY 2012 HH PPS final rule (76 FR 68597), we stated that,
in addition to the certifying physician and allowed NPPs, the physician
who cared for the patient in an acute or post-acute care facility, and
who had privileges in such facility, could also perform the face-to-
face encounter and inform the certifying physician, who would document
the encounter as part of the certification of eligibility, and that
encounter supported the patient's homebound status and need for skilled
services. During the CY 2012 HH PPS rulemaking comment period,
stakeholders requested that CMS allow any physician to complete the
face-to-face encounter, rather than limiting it to the certifying
physician or allowed NPP; however, CMS referred commenters to the CY
2011 HH PPS final rule where we stated we did not believe that we had
the statutory authority to allow for this additional flexibility (76 FR
68596). The Affordable Care Act established the requirement for a
physician face-to-face encounter prior to certifying a patient's
eligibility for home health services, along with other program
integrity provisions, to address concerns surrounding ineligible
patients receiving home health services and concerns that physicians
who had no firsthand knowledge of the patient's clinical condition were
certifying the patient's eligibility for home health. In the CY 2011 HH
PPS final rule, we described research that showed fewer re-
hospitalizations when the home health patient had a recent encounter
with the physician responsible for the home health care plan. As such,
42 CFR 424.22(a)(1)(v)(A) requires that a face-to-face encounter be
performed by the certifying physician; the certifying allowed
practitioner (for example, nurse practitioner, clinical nurse
specialist, physician assistant); or a certified nurse midwife.
Additionally, 42 CFR 424.22(a)(1)(v)(C) requires that a face-to-face
encounter be performed by the certifying physician or allowed
practitioner unless the encounter is performed by a certified nurse
midwife or a physician, physician assistant, nurse practitioner, or
clinical nurse specialist with privileges who cared for the patient in
an acute or post-acute care facility from which the patient was
directly admitted to home health and who is different from the
certifying practitioner.
Section 3708 of the Coronavirus Aid, Relief, and Economic Security
Act, 2020 (CARES Act) (Pub. L.116-136, March 27, 2020) amended sections
1814(a) and 1835(a) of the Act to allow nurse practitioners (NPs),
clinical nurse specialists (CNSs), and physician assistants (PAs) (as
those terms are defined in section 1861(aa) of the Act), to order and
certify patients for eligibility under the Medicare home health benefit
and establish a plan of care. Since its implementation in the March 31,
2020 COVID-19 interim final rule with comment period (85 FR 27550), CMS
has received requests from stakeholders to change the current face-to-
face encounter policy to allow any practitioner to perform the face-to-
face encounter and not limit this regulation to the certifying
practitioner, a permitted NPP, or a physician or allowed practitioner
with privileges who cared for the patient in an acute or post-acute
care facility from which the patient was directly admitted to home
health, as set out at Sec. 424.22(a)(1)(v)(C). Commenters have stated
that the CARES Act language allows this additional flexibility.
Additionally, commenters have stated, and CMS agrees, that the current
regulation text at Sec. 424.22(a)(1)(v)(A)(1) through(4) can be read
to allow NPs, CNSs, and PAs to perform the face-to-face encounter
regardless of whether they certify the patient for home health
services, but limits the provision of the face-to-face encounter to the
certifying physician or a physician, with privileges, who cared for the
patient in an acute or post-acute care facility from which the patient
was directly admitted to home health. Therefore, stakeholders have
requested that any physician, in addition to NPs, CNSs, and PAs, be
allowed to perform the face-to-face encounter regardless of whether
they are the certifying practitioner or whether they cared for the
patient in the acute or post-acute facility from which the patient was
directly admitted to home health and who is different from the
certifying practitioner. Some commenters have

[[Page 29171]]

referenced situations in which a patient sees a physician in the same
practice as the patient's primary care physician (PCP), but where the
patient's PCP was unavailable to see the patient on a particular date.
We agree that it would be reasonable for the patient's PCP to
certify eligibility under the Medicare home health benefit and
establish the plan of care even though a different physician or allowed
practitioner in the same practice conducted the face-to-face encounter.
However, we note that it would not be appropriate for a practitioner
who specializes in optometry to certify a patient for home health
services that are needed due to orthopedic reasons. These are only a
couple of examples of circumstances that could occur, and we do not
plan to enumerate in this rulemaking all situations in which the
certifying provider may be different than the provider who conducted
the face-to-face encounter.
Regarding our original concern in limiting the face-to-face
encounter to the certifying provider (or the provider who cared for the
patient in the inpatient facility), we still believe physician or
allowed practitioner involvement is critical from both a quality of
care and program integrity perspective. However, we note that
additional program integrity protections exist currently in the
certification policies. To be eligible for Medicare home health
services, in accordance with Sec. 424.22(a)(1)(iv) a patient must be
under the care of a physician or an allowed practitioner. Additionally,
in accordance with Sec. 424.22(a)(1)(v), the face-to-face encounter
documentation must be related to the primary reason the patient
requires home health services, occur in the required time frame by an
allowed provider type, and the certifying practitioner must include a
signature and the date of the encounter as part of the certification.
Furthermore, our subregulatory guidance in the Medicare General
Information, Eligibility and Entitlement Manual (Pub. 100-01, chapter
4, section 30.1) provides that physicians and allowed practitioners
should complete the certification when the plan of care is established,
or as soon as possible thereafter, and that it is not acceptable to
wait until the end of the required time frame to complete the
requirements. As such, the certification also cannot be completed after
a patient is discharged from home health services.
Additionally, our subregulatory guidance in the Medicare General
Information, Eligibility and Entitlement Manual (Pub. 100-01, chapter
4, section 30.1), the Medicare Benefit Policy Manual (Pub. 100-02,
chapter 7, section 30.5), and the Medicare Program Integrity Manual
(Pub. 100-08, chapter 6 section 6.2.1 and 6.2.3) also supports our
program integrity and quality goals. Specifically, the subregulatory
guidance provides additional details on requirements that include the
following: specific signature and date requirements; a requirement for
an actual clinical note from the certifying practitioners for the face-
to-face encounter visit; specific information that must be present in
face-to-face encounter documentation; a requirement that a new face-to-
face encounter is required if the patient's condition has changed; a
requirement that home health eligibility must be supported by other
medical entries in the certifying provider's medical record for the
patient and this documentation must be available for medical reviews as
needed; and a requirement that documentation of the face-to-face
encounter can only be from physicians or allowed NPPs who do not have a
financial relationship with the HHA.
We believe the regulations at 42 CFR 424.22(a)(1), in conjunction
with the Medicare home health eligibility requirements at 42 CFR
424.22(c), finalized in the CY 2019 final rule (83 FR 56627), provide
sufficient preservation of our original intent of ensuring that the
home health benefit relies on the patient's physician (or subsequently,
the allowed practitioner) to determine eligibility for home health
services, and that the physician or NPP performing the face-to-face
encounter should be a practitioner who is most knowledgeable and has
firsthand information of the patient's current clinical condition when
certifying the patient's eligibility for home health services and
establishing a patient's plan of care.
As such, we propose to revise Sec. 424.22(a)(1)(v)(A) to state
that the face-to-face encounter must be performed by one of the
following: a physician, a nurse practitioner, a clinical nurse
specialist, or a physician assistant as defined at 42 CFR 484.2; or a
certified nurse-midwife as defined in section 1861(gg)) of the Act as
authorized by State law. We also propose to remove Sec.
424.22(a)(1)(v)(C), which limits the face-to-face encounter to the
certifying physician or allowed practitioner unless the encounter is
performed by either of the following:
<bullet> A certified nurse midwife as described in paragraph
(a)(1)(v)(A)(4) of this section.
<bullet> A physician, physician assistant, nurse practitioner, or
clinical nurse specialist with privileges who cared for the patient in
the acute or post-acute facility from which the patient was directly
admitted to home health and who is different from the certifying
practitioner.
The proposed additional flexibility should decrease ambiguity
regarding which providers are able to complete the face-to-face
encounter and potentially improve access to home health services by
increasing the number of providers allowed to perform the face-to-face
encounter. These proposed revisions would also address concerns that
the current regulations do not align with the CARES Act language. We
solicit comments on these proposed revisions to 42 CFR 424.22(a)(1)(v).

III. Home Health Quality Reporting Program (HH QRP)

A. Background and Statutory Authority

The HH QRP is authorized by section 1895(b)(3)(B)(v) of the Act.
Section 1895(b)(3)(B)(v)(II) of the Act requires that, for 2007 and
subsequent years, each home health agency (HHA) submit to the Secretary
in a form and manner, and at a time, specified by the Secretary, such
data that the Secretary determines are appropriate for the measurement
of health care quality. To the extent that an HHA does not submit data
in accordance with this clause, the Secretary shall reduce the home
health market basket percentage increase applicable to the HHA for such
year by 2 percentage points pursuant to section 1895(b)(3)(B)(v)(I) of
the Act. As provided at section 1895(b)(3)(B)(vi) of the Act, depending
on the market basket percentage increase applicable for a particular
year, as further reduced by the productivity adjustment (except in 2018
and 2020) described in section 1886(b)(3)(B)(xi)(II) of the Act, the
reduction of that increase by 2 percentage points for failure to comply
with the requirements of the HH QRP may result in the home health
market basket percentage increase being less than 0.0 percent for a
year, and may result in payment rates under the HH PPS for a year being
less than payment rates for the preceding year. Section 1890A of the
Act requires that the Secretary establish and follow a pre-rulemaking
process, in coordination with the consensus-based entity (CBE) with a
contract under section 1890 of the Act, to solicit input from certain
groups regarding the selection of quality and efficiency measures for
the HH QRP. The HH QRP regulations can be found at 42 CFR 484.245 and
484.250.

[[Page 29172]]

B. Summary of the Provisions of This Proposed Rule

In accordance with the statutory authority at section
1895(b)(3)(B)(v) of the Act, we are proposing the following policies
and requests for information: We are proposing to remove the ``COVID-19
Vaccine: Percent of Patients Who Are Up to Date'' measure and the item
related to the measure and corresponding data element. CMS is proposing
the removal of four assessment items: one Living Situation item, two
Food items, and one Utilities item. We are also proposing to revise the
policy to allow for providers that fail to provide complete, timely
data to CMS to submit a request for reconsideration if they can
demonstrate full compliance. In very limited circumstances, we would
permit the HHA to request an extension to file a reconsideration
request if the HHA was affected by an extraordinary circumstance beyond
the control of the HHA (that is, a natural disaster such as a hurricane
tornado or earthquake) during the 30-day reconsideration period. CMS is
also proposing to implement a revised HHCAHPS Survey beginning with the
April 2026 sample month. This rule also includes a proposal to update
regulatory text to account for all-payer data submission of OASIS data.
We are seeking feedback on a potential change to the final data
submission deadline from 4.5 months to 45 days after the close of the
period. We are also seeking feedback on the digital quality measurement
(DQM) transition for HHAs. We aim to solicit feedback from the public
on the current adoption of health information technology (IT) and
standards including Fast Healthcare Interoperability Resources (FHIR),
what related challenges or barriers HHAs are facing. Finally, we are
seeking input on future HH QRP quality measure (QM) concepts of
interoperability, cognitive function, nutrition, and patient well-
being.
For a detailed discussion of the considerations, we historically
use for measure selection for the HH QRP quality, resource use, and
other measures, we refer readers to the CY 2016 HH PPS final rule (80
FR 68695 through 68696). In the CY 2019 HH PPS final rule with comment
period (83 FR 56548 through 56550), we finalized the factors we
consider for removing previously adopted HH QRP measures.

C. Quality Measures Currently Adopted for the CY 2026 HH QRP

The HH QRP currently includes 19 measures for the CY 2026 program
year, as described in table 30.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TP02JY25.061

[[Page 29174]]

BILLING CODE 4120-01-C

D. Proposed Removal of the ``COVID-19 Vaccine: Percent of Patients/
Residents Who Are Up to Date'' (Patient/Resident COVID-19 Vaccine
Measure) Beginning With the CY 2026 HH QRP

We refer readers to the CY 2024 HH PPS final rule, where we adopted
the ``COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to
Date'' (``Patient/Resident COVID-19 Vaccine measure'') into the HH QRP
(88 FR 77762 through 77764). For the HH QRP, we propose to remove the
Patient/Resident COVID-19 Vaccine measure beginning with the CY 2026 HH
QRP under removal Factor 8, the costs associated with a measure
outweigh the benefit of its continued use in the program (Sec.
484.245(b)(3)(viii)). The estimated burden of collecting this
information annually across all 11,904 active HHAs is 47,168 hours at a
cost of $4,326,249. We refer readers to section VII of this proposed
rule for more details on the estimated burden reduction related to this
proposal.
When we adopted the Patient/Resident COVID-19 Vaccine measure,
COVID-19 continued to be a major challenge for HHAs, with older adults
at a significantly higher risk of mortality, severe disease, and death
following infection (88 FR 77762). HHAs have expressed concerns about
data collection challenges and increased provider burden in collecting
patient immunization data.\8\ Providers were required to integrate the
required Patient/Resident COVID-19 Vaccine OASIS item into their
assessment instrument and ensure accurate assessment for all their
patients. While preventing the spread of COVID-19 remains a public
health goal, the number of COVID-19 cases and deaths \9\ is declining,
and we believe the continued costs and burden to providers of reporting
this measure outweigh the benefit of continued information collection
on COVID-19 vaccination coverage among patients in HHAs. For the COVID-
19 items collected at transfer of care, death at home, and discharge,
we estimate a decrease in clinician cost of $4,326,249 or $363
($4,326,249/11,904) for each of the 11,904 active HHAs. We refer
readers to section VII.A.3. of this proposed rule for more details on
this estimated burden reduction.
---------------------------------------------------------------------------

\8\ Standing Technical Expert Panel for the Development,
Evaluation, and Maintenance of Post-Acute Care (PAC) and Hospice
Quality Reporting Program (QRP) Measurement Sets Summary Report
December 15, 2023. <a href="https://www.cms.gov/files/document/december-2023-pac-and-hospice-cross-setting-tep-summary-report.pdf-1">https://www.cms.gov/files/document/december-2023-pac-and-hospice-cross-setting-tep-summary-report.pdf-1</a>.
\9\ Provisional COVID-19 Deaths, by Week, in The United States,
Reported to CDC. Accessed on March 18, 2025, via <a href="https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00">https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00</a>.
---------------------------------------------------------------------------

We propose that, effective with assessments completed on or after
the date of publication of the CY 2026 HH PPS final rule, the data from
the ``Patient/Resident COVID-19 Vaccination is Up to Date'' OASIS item
(O0350) would no longer be used in the calculation of the Patient/
Resident COVID-19 Vaccine measure, and the measure itself would be
withdrawn pursuant to measure removal factor eight (set out at 42 CFR
484.245(b)(3)(viii)). We propose to remove the Patient/ResidentCOVID-19
Vaccination is Up to Date item (O0350) from the OASIS effective April
1, 2026, since it is not technically feasible to remove this item
earlier. However, under our proposal, until this item could be removed
from the OASIS, HHAs may submit any valid response (0--No, 1--Yes or
dash) on a Transfer, Death at home, or Discharge OASIS assessment,
without any future quality measure implications. Note that the item
must be completed with one of these three valid responses (must not be
left blank) in order for the submitted assessment to not be rejected by
the iQIES under existing submission specification edits.
We invite public comment on our proposal to remove the COVID-19
Vaccine: Percent of Patients/Residents Who Are Up to Date measure from
the HH QRP beginning with the CY 2026 HH QRP.

E. Proposed Removal of Four Standardized Patient Assessment Data
Elements Beginning With the CY 2026 HH QRP

We refer readers to the CY 2025 HH PPS final rule (88 FR 88433
through 88439) where we finalized the adoption of four items as
standardized patient assessment data elements under the social
determinants of health (SDOH) category: one item for Living Situation
(R0310); two items for Food (R0320A and R0320B); and one item for
Utilities (R0330). As finalized in the CY 2025 HH PPS final rule, HHAs
would be required to report these data elements using the OASIS
beginning with patients discharged in the CY 2027 HH QRP and each
program year after (89 FR 88433 through 88439).
In this proposed rule, we are proposing to remove these four
standardized patient assessment data elements under the SDOH category
as we acknowledge the burden associated with these items at this time.
We continuously look for ways to balance the need for data collections
regarding quality care and the burden of data collection on health care
providers. CMS has a goal to facilitate improved health care delivery
by requiring different systems and software applications to communicate
and exchange data. Therefore, we would like to work towards the
workflow for these specific data elements being part of a low burden
interoperable electronic system. The focus would turn towards how these
data and associated recommendations exchanged can improve care
coordination, efficiency, reduction in errors and patient experience.
As health information technology (HIT) advances and
interoperability of data becomes more standardized, the burden to
collect and share clinical data on these and other relevant patient
information would become less burdensome allowing for better outcomes
for HH patients and their families. The objectives of the HH QRP
continue to be the improvement of care, quality and health outcomes for
all patients through transparency and quality measurement, while not
imposing undue burden on essential health providers. HHAs and providers
across the industry play a vital role in improving the health of all
patients, including those who may be experiencing unstable housing,
food insecurity or challenges paying utilities. At the same time, we
recognize the burden that the collection of these additional data would
impose on already overextended staff. We also acknowledge the
additional cost and resources HHAs would bear for training HH staff and
altering their workflows if they were required to collect and submit
these items. The objectives of the HH QRP continue to be the
improvement of care, quality and health outcomes for all patients
through transparency and quality measurement. The estimated savings
from not collecting this information annually across all 11,904 HHAs is
158,835 hours, with total savings of $13,484,033 (or $1,132 per HH). We
refer readers to section VII.A.3. of this proposed rule for more
details on this estimated burden reduction.
Under our proposal, HHAs would no longer be required to collect and
submit Living Situation (R0310), Food (R0320A and R0320B), and
Utilities (R0330) beginning with patients discharged on or after April
1, 2026. Under our proposal, these items would not be required to meet
HH QRP requirements beginning with the CY 2026 HH QRP.
We invite public comment on our proposal to remove four
standardized patient assessment data elements collected under the SDOH
category from

[[Page 29175]]

the HH QRP beginning with the CY 2026 HH QRP.

F. Amending the Data Non-Compliance Reconsideration Request Policy and
Process Beginning With the CY 2026 HH QRP

1. Background
The HH QRP reconsiderations and appeals process was finalized in
the CY 2013 HH PPS final rule (77 FR 67096). At the conclusion of the
required quality data reporting and submission period, we review the
data received from each HHA during that reporting period to determine
if the HHA met the HH QRP reporting requirements. HHAs that are found
to be non-compliant with the HH QRP reporting requirements for the
applicable calendar year will receive a 2-percentage point reduction to
its market basket percentage update for that calendar year. In the CY
2018 HH PPS final rule (82 FR 52738 through 51740), CMS finalized a
process for HHAs to request and for us to grant exceptions and
extensions for the reporting requirements of the HH QRP for one or more
quarters beginning with the CY 2019 HH QRP when there are certain
extraordinary circumstances outside the control of the HHA. When an
exception or extension is granted, we finalized that we would not
reduce the HHA's PPS payment for failure to comply with the
requirements of the HH QRP.
In that rule, we finalized a policy that, in very limited
circumstances, CMS could grant a request by an HHA to extend the
proposed deadline for their reconsideration requests (82 FR 52738
through 51740). We stated that, to extend the deadline, HHAs would have
to request an extension and demonstrate that ``extenuating
circumstances'' existed which prevented the filing of the
reconsideration request by the proposed 30-day deadline (82 FR 52738
through 51740).
In the CY 2018 HH PPS final rule (82 FR 51752), we codified the
reconsideration policy and process for HHAs at Sec. [thinsp]484.250.
As codified, our regulation at Sec. [thinsp]484.250 addressed how we
send our written notification of non-compliance to an HHA, the process
for an HHA to request reconsideration, what information an HHA must
include with its reconsideration request (for example, documentation
that demonstrates the HHA's compliance HH QRP requirements), and how we
would notify the HHA of our final decision regarding its
reconsideration request. In 2019, we moved the regulatory text to Sec.
[thinsp]484.245 and updated and clarified the regulatory text in the CY
2020 HH PPS final rule (84 FR 60645).
We have become aware that there are inconsistencies in our preamble
and regulation text regarding HHA requests for reconsideration. On this
basis, in this proposed rule, we seek to address these inconsistencies.
2. HH QRP Reconsideration Policy: Proposal To Amend and Codify
Requirements Related to Requests for Extension To File Reconsideration
Request Beginning With the CY 2027 HH QRP
As noted previously, in the CY 2018 HH PPS final rule (82 FR 51738
through 51740), we provided that, in very limited circumstances, we may
grant a request by an HHA to extend the deadline to submit its
reconsideration request, so long as the HHA requested the extension and
demonstrated that extenuating circumstances existed that prevented it
from filing a reconsideration request by the 30-day deadline (82 FR
51738 through 51740). However, we did not codify this policy--
permitting HHAs to request an extension to file their reconsideration
request--in our regulation text at Sec. 484.245(d).
In implementing this finalized policy, we have noted an area where
further clarity would be beneficial to HHAs. Specifically, we have
noted that HHAs may benefit from clearly demarcated deadlines. Although
we believe an HHA would have an interest in asking for an extension to
file a reconsideration request prior to the deadline, our policy
currently does not specify a deadline for an HHA to submit its request
for such an extension (82 FR 51738 through 51740), Our policy also
provides that, to support such request, the HHA must demonstrate that
extenuating circumstances existed that prevented filing the
reconsideration request by the 30-day deadline (82 FR 51738 through
51740). However, we have not specified a deadline from when the
extenuating circumstances occurred. We believe HHAs may benefit from
further specificity by setting a deadline for submitting a request to
extend the deadline to file a reconsideration request.
On this basis, we propose to amend our reconsideration policy as
codified at Sec. 484.245(d) to permit a HHA to request, and CMS to
grant, an extension to file a request for reconsideration of a non-
compliance determination if, during the period to request a
reconsideration as set forth in Sec. 484.245(d), the HHA was affected
by an extraordinary circumstance beyond the control of the HHA (for
example, a natural or man-made disaster such as a cyber-attack,
hurricane, tornado, or earthquake). We propose that the HHA submit its
request for an extension to file a reconsideration request to CMS via
email no later than 30 calendar days from the date of the written
notification of non-compliance. We propose that the HHA's extension
request, submitted to CMS, must contain all of the following
information: (1) the CCN for the HHA; (2) the business name of the HHA;
(3) the business address of the HHA; (4) certain contact information
for the HHA's chief executive officer or designated personnel; (5) a
statement of the reason for the request for the extension; and (6)
evidence of the im

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