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«DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Parts 409, 424, and 484 [CMS-1560-F] RIN 0938-AP55 Medicare ...»

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Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U.S.C.


Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for rules with economically significant effects ($100 million or more in any 1 year). We estimate that this rulemaking is “economically significant” as measured by the $100 million threshold and hence also a major rule under the Congressional Review Act. Accordingly, we have prepared a Regulatory Impact Analysis, which to the best of our ability, presents the costs and benefits of the rulemaking.

1. HHA Provisions Regarding Ownership Changes and Reactivation of Billing Privileges For the proposed rule, we estimated that a total of 2,000 deactivated HHAs and 2,000 HHAs undergoing a change of ownership

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provisions. Yet we believe that the actual budgetary impact will be minimal, as these estimated figures were very high-end estimates and were used so as not to underestimate the potential burden on HHAs. The reality is that the annual number of deactivated HHAs that will seek to reactivate their billing privileges will very likely be substantially less than 2,000.

This is primarily because the requirements in 42 CFR 424.540(b)(3)(i) will encourage some deactivated HHAs to remain in a deactivated status rather than undergo a State survey, especially if they plan to only infrequently bill Medicare after the reactivation of their Medicare billing privileges. It is for this same reason that we believe that the number of ownership changes will be less than 2,000. Some entities and individuals may be reluctant to sell or buy a Medicare-enrolled HHA if they know that the HHA will first have to undergo an initial Medicare enrollment and survey. While it is not possible for us to place a precise figure on the number of HHAs that will forgo reactivation or an ownership change due to the survey requirement, we do believe that it will be significant enough to mitigate the overall budgetary impact.

Moreover, and as previously stated, we believe that these

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prospective HHAs are billing for the services provided and are in compliance with the conditions of participation in 42 CFR Part 484, and all other Medicare requirements.

As for the issue of beneficiary access, the number of affected HHAs is such that we do not believe that beneficiaries will be adversely impacted by these provisions. To the contrary, any reduction in the number of enrolled HHAs that will result from the implementation of these provisions will be more than offset by the assurance that those HHAs that cannot meet Medicare requirements and quality standards are no longer in the program.

We are unable to determine the exact extent to which currently enrolled and prospective HHAs would be able to meet the requirements outlined in the provisions. In addition, as a result of a dearth of quantifiable data, we cannot effectively derive an estimate of the monetary impacts of these provisions.

Accordingly, we are seeking public comment so that the public may provide any data available that provides a calculable impact or any alternative to these provisions.

2. CY 2010 Update The update set forth in this rule applies to Medicare

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analysis describes the impact in CY 2010 only. We estimate that the net impact of the proposals in this rule, including a 2.75 percent reduction to the national standardized 60-day episode payment rates and the NRS conversion factor to account for the case-mix change adjustment, is approximately $140 million in CY 2010 savings. The estimated $140 million impact reflects the distributional effects of an updated wage index (-$10 million) as well as the final 2.0 percent home health market basket increase (an additional $350 million in CY 2010 expenditures attributable only to the CY 2010 home health market basket), and the 2.75 percent decrease (-$480 million for the third year of a 4-year phase-in) to the HH PPS national standardized 60-day episode rates and the NRS conversion factors to account for the case-mix change adjustment under the HH PPS. The $140 million is reflected in column 5 of Table 7 as a 1.03 percent decrease in expenditures when comparing the current CY 2009 system to the CY 2010 system.

The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses, nonprofit

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hospitals and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $7 million to $34.5 million in any 1 year. For the purposes of the RFA, approximately 75 percent of HHAs are considered to small businesses according to the Small Business Administration’s size standards with total revenues of $13.5 million or less in any 1 year. Individuals and States are not included in the definition of a small entity. Excluding HHAs in areas of the country where high and suspect outlier payments exist, this rule is estimated to have an overall positive effect upon small entities (see section V.B “Anticipated Effects”, of this final rule, for supporting analysis).

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis, if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a Metropolitan Statistical Area and has fewer than 100 beds. This rule applies to home

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this rule will not have a significant economic impact on the operations of a substantial number of small rural hospitals.

Section 202 of the Unfunded Mandates Reform Act of 1995 also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of about $100 million or more in 1995 dollars, updated for inflation. That threshold is currently approximately $133 million in 2009. This final rule is not anticipated to have an effect on State, local, or tribal governments, in the aggregate, or by the private sector, of $133 million or more.

Executive Order 13132 established certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications. We have reviewed this final rule under the threshold criteria of Executive Order 13132, Federalism, and have determined that it will not have substantial direct effects on the rights, roles, and responsibilities of States, local, or tribal governments.

B. Anticipated Effects

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contained in the CY 2009 notice (73 FR 65351, November 3, 2008).

The impact analysis of this final rule presents the estimated expenditure effects of policy changes in this rule. We use the latest data and best analysis available, but we do not make adjustments for future changes in such variables as number of visits or case-mix.

This analysis incorporates the latest estimates of growth in service use and payments under the Medicare home health benefit, based on Medicare claims from 2007. We note that certain events may combine to limit the scope or accuracy of our impact analysis, because such an analysis is future-oriented and, thus, susceptible to errors resulting from other changes in the impact time period assessed. Some examples of such possible events are newly-legislated general Medicare program funding changes made by the Congress, or changes specifically related to HHAs. In addition, changes to the Medicare program may continue to be made as a result of the BBA, the BBRA, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, the MMA, the DRA, MIPPA, ARRA, or new statutory provisions. Although these changes may not be specific to the HH PPS, the nature of the Medicare program is such that the

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these changes could make it difficult to predict accurately the full scope of the impact upon HHAs.

Table 7 represents how home health agency revenues are likely to be affected by the policy changes described in this rule. For this analysis, we used linked home health claims and OASIS assessments; the claims represented a 20-percent sample of 60-day episodes occurring in CY 2007. Column one of this table classifies HHAs according to a number of characteristics including provider type, geographic region, and urban versus rural location.

For the purposes of analyzing impacts on payments, we performed three simulations and compared them to each other.

Based on our assumption that outliers, as a percentage of total HH PPS payments, will be no more than 5 percent in CY 2009, the 2009 baseline, for the purposes of these simulations, we assumed that the full 5 percent outlay for outliers will be paid under our policy in 2009 of a 0.89 FDL ratio. As described in section III.A. of this final rule, given our CY 2010 policies of a 0.67 FDL ratio and a 10 percent cap on outlier payments, we will return 2.5 percent back into the national standardized 60-day episode payment rates, the national per-visit rates, the LUPA

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estimate outlier payments to be approximately 2.5 percent of total HH PPS payments in CY 2010. All three simulations use a CBSA-based wage index reported on the 2007 claims to determine the appropriate wage index.

The first simulation estimates CY 2009 payments under the current system (to include the 2009 wage index). The second simulation estimates CY 2009 payments under the current system, but with the 2010 wage index. The second simulation produces an estimate of what total payments using the sample data will have been in CY 2009 without any of the provisions in this rule, except for that of the 2010 wage index. The third simulation estimates CY 2010 payments with the 2010 wage index, incorporating our maintaining of the 2.75 percent reduction to the HH PPS rates, as well as all the provisions of this rule.

These simulations demonstrate the effects of: a new 2010 wage index, a 2.75 percent reduction to account for the increase in nominal case-mix, a 2.0 percent market basket update, a 2.5 percent increase to account for a new outlier target of 2.5 percent, a 0.67 FDL ratio, and a 10 percent cap on outlier payments. Specifically, the second column of Table 7 shows the percent change due to the effects of the 2010 wage index. The

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combined effects of the 2010 wage index, our maintaining of a

2.75 percent reductions to the rates to account for the increase in nominal case-mix, the 2.0 percent home health market basket update, the 2.5 percent increase to the HH PPS rates to account for an approximate 2.5 percent target for outliers as a percentage of total HH PPS payments, a 0.67 FDL ratio, and a 10 percent outlier cap.

The overall percentage change, for all HHAs, in estimated total payments from CY 2009 to CY 2010 is a decrease of approximately 1.03 percent. Rural HHAs, however, are estimated to see an increase in payments from CY 2009 to CY 2010 of about

3.27 percent. On the other hand, urban HHAs are expected to see a decrease of approximately 1.81 percent in payments from CY 2009 to CY 2010.

Voluntary non-profit HHAs (3.36 percent), facility-based HHAs (3.72 percent), and government owned HHAs (2.94 percent) are estimated to see an increase in the percentage change in estimated total payments from CY 2009 to CY 2010. Proprietary and freestanding HHAs, on the other hand, are estimated to see decreases of 3.32 percent and 1.90 percent, respectively, in estimated total payments from CY 2009 to CY 2010. Freestanding

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governmental HHAs are estimated to see increases of 3.47 percent and 3.48 percent, respectively, in estimated total payments from CY 2009 to CY 2010.

HHAs in the North and Midwest regions are expected to experience a percentage change increase in the estimated total payments from CY 2009 to CY 2010 of 3.66 percent and 3.48 percent, respectively. HHAs in the South and West regions of the country are estimated to experience decreases in the percentage change in estimated total payments from CY 2009 to CY 2010 of 4.19 percent and 1.70 percent. We believe that the major contributors to the estimated decreases in payments in these areas of the country are those with high and suspect outlier payments.

Breaking this down even further, it is estimated that New England, Mid Atlantic, East South Central, East North Central, West North Central, and Mountain area HHAs are all expected to experience increases in their payments in CY 2010 ranging from almost 2 percent to almost 5 percent. Conversely, South Atlantic and Pacific HHAs are expected to experience decreases,

11.84 percent and 3.09 percent respectively, in the percentage change in estimated total payments from CY 2009 to CY 2010.

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decreases in payments in these areas of the country are those with high and suspect outlier payments.

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