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NHPCO Regulatory Alert on NPRM

NHPCO Regulatory Alert: Information and Assessment on NPRM Issued by CMS (Wage Index)

To:       NHPCO Membership
From:  NHPCO Regulatory Team
Date:   April 30, 2008
(Additional information/links added May 8, 2008)

Summary:  On April 28, 2008, CMS issued a Notice of Proposed Rulemaking (NPRM) for an adjustment in the FY2009 Hospice Wage Index.  Specifically the proposed rule would phase out the Medicare budget neutrality adjustment factor (BNAF) and clarify two wage index issues, pertaining to the definition of rural and urban areas and the use of multi-campus hospital facilities.

History:  The hospice wage index was originally adjusted in 1995, when a Negotiated Rulemaking Committee was appointed to address the inaccuracies in the original hospice wage index, account better for disparities from one geographic location to another and develop a wage index that would be as accurate, reliable and equitable as possible.  At that time, the committee agreed to implement a special adjustment (BNAF) to ensure payments in the aggregate are budget neutral to payments using the original 1983 hospice wage index.  The adjustment is still in place today and results in providers currently receiving about 4 percent more in payments than they would receive if the adjustment facter were not applied.

What does budget neutrality mean?  Budget neutrality means that in a given year, estimated aggregate payments for Medicare hospice services using the updated hospital wage index values will equal estimated payments that would have been made for these services if the 1983 hospice wage index values had remained in effect, after adjusting the payment rates for inflation. In other words, the BNAF provided an increase in hospice rates each year.  The impact in FY1998 was an increase of approximately 2%.  CMS reports that by FY2008, the BNAF had increased so that rates were an average of 4% higher. 

What does the proposed rule do?  CMS is proposing a three year phase out of the BNAF beginning in FY2009, effective October 1, 2008.  The proposed rule sets out the following schedule for the phase out:

FY2009:  Reduce the BNAF by 25% FY2010:  Reduce the BNAF by an additional 50% FY2011:  Complete elimination of the BNAF

CMS states that this first year of implementation would “only” reduce rates by an average of 1.1%.  In some parts of the country, the reduction in rates this first year is significantly greater, with a reduction in some areas of between five and ten percent.

Charts showing impact: NHPCO has creating charts that will provide detail for each county in every state and the percent change from the FY2008 wage index published last summer:

Summary of impact on hospice providers:  NHPCO has analyzed the impact of the first year of the proposed rule on counties throughout the country.  Final implementation of the phase in could produce dramatically worse impacts within the hospice community.

In the first year of implementation:

  • 80.8% of counties would have their wage index decreased and 3.4% of counties would have their wage index decreased by 5% or more.
  • 165 (5.1%) counties would have no change to their wage index.
  • 14.1% counties would have their wage index increased, including 1.9% counties who would have their wage index increased by 5% or more.

What you can do?  CMS has issued this as a proposed rule, with a 60 day comment period.  Comments are due back to CMS by June 28, 2008.  NHPCO will be preparing a comment letter and would encourage members to respond as well, through state organizations and as individual providers to see how the proposed rule impacts care and services.  Watch the NHPCO Web site at www.nhpco.org/regulatory for talking points and further analysis.