In addition, in numerous instances, the Congress has recognized that the areas developed by OMB may be used for differentiating among geographic areas for Medicare payment purposes. For example, in the IPPS statutory section, section 1886(d)(2)(D) of the Act, the Congress defines an “urban area” as “an area within a Metropolitan Statistical Area (as defined by the Office of Management and Budget) or within such similar area as the Secretary has recognized.” Similarly, in the sections of the statute governing the guidelines to be used by the Medicare Geographic Classification Review Board for purposes of reclassification, sections 1886(d)(10)(A) and (D)(i)(II) of the Act, the Congress directed the Secretary to create guidelines for “determining whether the county in which the hospital is located should be treated as being part of a particular [MSA].” Thus, the Congress has accepted and ratified the use of MSAs as an inherently rational manner of dividing up labor-market areas for purposes of Medicare payments.

The process used by OMB to develop the MSAs creates geographic areas that are based upon characteristics we believe also generally reflect the characteristics of unified labor market areas. For example, the CBSAs reflect a core population plus an adjacent territory that reflects a high degree of social and economic integration. This integration is measured by commuting ties, thus demonstrating that these areas may draw workers from the same general areas. In addition, the most recent CBSAs reflect the most up to date information. OMB reviews its MA definitions preceding each decennial census to reflect recent population changes, and the CBSAs are based on the Census 2000 data. Finally, in the context of the inpatient prospective payment system, we have reviewed alternative methods for determining geographic areas for purposes of the wage index, and in each case, have determined to remain with the OMB designations rather than replace these designations with alternatives.

As stated previously, § 418.306(c) requires the hospice wage index to reflect changes to the definitions of MSA. Therefore, we are proposing to adopt the revised labor market area designations based on OMB's CBSA designations.

For the proposed FY 2006 hospice wage index, we would adopt the CBSA designations as finalized in the FY 2005 IPPS. We believe that OMB's CBSA designations, based on Census 2000 data reflect the most recent available geographic classifications (MA definitions). We are not proposing to change at this time, the methodology derived as a result of the negotiated rulemaking committee. We believe that there are factors which require evaluation to determine if the hospice methodology supports the cost of providing hospice services and if the methodology requires modification.

As discussed in the IPPS final rule (69 FR 49032), when the IPPS adopted the revised labor market areas based on OMB's new CBSA designations on October 1, 2004, IPPS established a transition to the new designations to mitigate the resulting adverse impact on certain hospitals. Section 1814(i)(1)(A) of the Act requires hospice payment to be based on “costs which are reasonable and related to the cost of providing hospice care or which are based on such other tests of reasonableness the Secretary may prescribe in regulations * * *.” Our regulations at § 418.306(c) require us to issue annually in the Federal Register “ a hospice wage index based on the most current available CMS hospital data wage data, including any changes to the definitions of Metropolitan Statistical Areas.” This language would not seem to permit us to establish a transition to the new CBSA designations. In addition, unlike IPPS and other payment systems where each entity uses a single MSA (CBSA), hospice agencies may use various wage indices to compute their payments based upon the location of the beneficiary for routine and continuous home care or the MSA (CBSA) for the location of the agency for respite and general inpatient care. The methodology for applying the hospice floor (15 percent) to wage index values below 0.8 is used to leverage areas where there are significantly low wage index values. Moreover, we do not believe that in the aggregate, hospice agencies would be impacted negatively by the new CBSA designations. The existing methodology of computing the hospice wage index, the annual calculation of the hospice payment rates based upon the market basket index, and the variability of CBSAs that may be attributed to different hospice agencies are sufficient to mitigate adverse effects on individual hospice agencies. While we understand that there are CBSAs that decrease based upon the new definitions, there are those that are positively affected. For example, many counties that have been included in the rural definitions under the MSA designations are now designated as urban areas under the CBSA will generally receive an increase in their wage index. We believe that adjustments made to CBSAs because of negative impact would necessitate adjustment to CBSAs that are positively impacted. Variability and changes in wage indices both positively and negatively have occurred under the MSA designations and occur as a result of geographic differences. As a result, we propose to adopt the CBSA definitions and resulting wage indices without transitions. The impact of the CBSA designations is discussed in section V of this proposed rule.

In adopting the CBSA designations, we identified that there were no IPPS hospitals and thus no hospital wage index data on which to base the calculation of the FY 2006 hospice wage index for rural Massachusetts. Because there is no reasonable proxy for more recent rural data within Massachusetts, we are proposing to use the prefloor, preclassified hospital wage index data for FY 2005 and apply the FY 2006 proposed budget neutrality factor of 1.063479. In the event that future rural areas do not have hospital wage index data to derive a hospice wage index, we propose to use a comparable methodology to derive a wage index. Similarly, if there urban areas without hospital wage index data, we propose to use all of the urban areas within the State as a reasonable proxy. We are soliciting comment on these approaches to calculating the wage index value for areas without hospital wage data for FY 2006 and subsequent years.

To facilitate an understanding of the policies related to the proposed changes in the hospice wage index discussed in section II.A of this proposed rule, we are providing the following tables in the Addendum to this proposed rule:

• Table A—Proposed Hospice Wage Index for Urban Areas by CBSA.

• Table B—Proposed Hospice Wage Index for Rural Areas by CBSA.

• Table C—Comparison of Hospice Wage Index for Urban Areas by MSA and CBSA. This table lists the counties by MSA designation and the wage index if we had retained the use of MSAs. It also presents the CBSA designation for these counties and the corresponding wage index using the CBSA designations. The MSA designations include those counties that were classified as rural and indicated the State rural MSA code and the corresponding CBSA for these counties which under the CBSA designation are now urban. We note that some counties that are classified as rural under the MSA designation would become rural under the new CBSA designation and vice versa.

• Table D—Comparison of the Hospice Wage Index for Rural Areas by MSA and CBSA. This table compares the State rural MSA designations and their corresponding wage indices to the CBSA designations and their respective wage indices.

• Table E—Rural Counties Converting to Urban Counties by State. This table presents the rural counties that under the CBSA designations convert to urban counties. The list includes the county name, State county code, MSA designation, MSA name, CBSA name, and CBSA designation. Please note that these conversions are based on the OMB designations.

• Table F—Crosswalk of Counties by State from MSA to CBSA. This table crosswalks all counties in each State from MSA to CBSA and includes the State, State county code, MSA designation, MSA name, CBSA designation, and CBSA name. These tables will assist providers in identifying their location and their catchment area(s) by their previous designations and their CBSA designation as well as the wage indices for those areas based upon the previous MSA designations as well as the CBSA designations.

We have discovered an error in the labeling of the wage index tables that we have been publishing in the annual hospice wage index update. That labeling error is the listing of Stanly County, North Carolina as one of the areas under MSA 1520 when, in fact, we consider Stanly County, NC to be a rural area in North Carolina. Stanly County wage data have always been correctly treated as rural in the actual creation of the hospice wage index values, and it has only been the listing of Stanly County under MSA 1520 that was in error. Consequently, we are correcting our labeling error from past notices for the hospice and have removed Stanly County from the list of areas that fall under the MSA 1520 wage index. Since this is strictly a ministerial correction that does not affect the actual computation of the wage index values, hospice providers in and beneficiaries who reside in Stanly County and receive routine home and continuous home care in Stanly County will continue to fall under, and use, the wage index for rural North Carolina.

(If you choose to comment on issues in this section, please include the caption “MMA Provisions” at the beginning of your comments)

In section I.C of this proposed rule, we note that section 408 of the MMA was effective upon enactment and initially implemented through administrative issuances. This proposed rule would incorporate the provisions in regulation.

Section 408 of the MMA amended sections 1861(dd)(3)(B) and 1814(a)(7) of the Act to add nurse practitioners (NPs) to the definition of an attending physician, for beneficiaries who have elected the hospice benefit. In other words, if a beneficiary's primary care provider is an NP, before the determination of the terminal illness and election of the hospice benefit, the NP can remain as the attending physician, if chosen by the beneficiary. If the beneficiary does not have an attending physician or NP, the beneficiary must be provided with an option of either a physician or an NP (if available and if allowed by State law) to serve as the attending physician. An NP is defined as a registered nurse who performs such services as he or she is legally authorized to perform (in the State in which the services are performed) in accordance with State law (or State regulatory mechanism provided by State law) and who meets the training, education, and experience requirements as the Secretary may prescribe.

As discussed in Change Request 3226 (Transmittals 22 and 304, September 24, 2004), beginning December 8, 2003, Medicare pays for medically reasonable and necessary services provided by NPs to Medicare beneficiaries who have elected the hospice benefit and who have selected a nurse practitioner as their attending physician. Nurse practitioners are paid 85 percent of the fee schedule amount for their services as attending physicians. Services for the terminal and related conditions provided by an NP—

• Serving as the attending physician that are medical in nature must be reasonable and necessary and must be services that, in the absence of an NP, would be performed by a physician; and

• May not be separately billed if the—

++ Services would not be reasonable and necessary if provided by an attending physician;

++ NP is not the patient's attending physician; or

++ Services would be performed by a registered or licensed nurse in the absence of a physician or nurse practitioner.

Since NPs are not physicians, as defined in 1861(r)(1) of the Act, they may not act as medical directors or physicians of the hospice or certify the beneficiary's terminal illness and hospices may not contract for their attending physician services as described in 1861(dd)(2)(B)(i)(III) of the Act. All of these provisions apply to NPs without regard to whether they are hospice employees.

We are proposing to revise § 418.3, 418.22(c)(1)(ii), and § 418.304 to implement the provisions of section 408 of the MMA.

Section 946(a) of the MMA amended section 1861(dd)(5) of the Act by adding the following: “(D) In extraordinary, exigent, or other non-routine circumstances, such as unanticipated periods of high patient loads, staffing shortages due to illness or other events, or temporary travel of a patient outside a hospice program's service area, a hospice program may enter into arrangements with another hospice program for the provision by that other program of services described in paragraph (2)(A)(ii)(I).” Section 946(a) of the MMA is discussed in this proposed rule to assist the reader in understanding how hospices will be reimbursed for these types of arrangements. We will issue more specific regulations regarding section 946(a) of the MMA in future rulemaking.

Section 946(b) of the MMA amended section 1814(i) of the Act to add the following: “(5) In the case of hospice care provided by a hospice program under arrangements under section 1861(dd)(5)(D) made by another hospice program, the hospice program that made the arrangements shall bill and be paid for the hospice care.” This means that the hospice that establishes the contractual arrangement with the hospice that will be providing services to the beneficiary, continues to bill for and receive payment during the hospice election.

Section 4442 of the BBA amended section 1814(i)(2) of the Act, effective for services furnished on or after October 1, 1997, to require hospice agencies to submit claims for payment for hospice services furnished in an individual's home on the basis of the geographic location at which the service is furnished. Therefore, the methodology for applying the wage index to the labor portion of the payment rates remains the same. This means that the wage index for routine and continuous home care would reflect the place where the service is provided, which may be outside of the hospice program's service area during periods of temporary travel. We do not propose in this rule to define “temporary travel” since this would depend upon individual needs and abilities determined by the interdisciplinary group, the beneficiary, and his or her family. The wage index for general inpatient care would reflect the MSA for the hospice agency that retains management responsibility. Payment will continue to be made to the hospice agency for which the beneficiary has made the election. We are proposing to revise § 418.302(d) to implement this provision.

Under the Paperwork Reduction Act of 1995, we are required to provide 30-day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. In order to fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following issues:

• The need for the information collection and its usefulness in carrying out the proper functions of our agency.

• The accuracy of our estimate of the information collection burden.

• The quality, utility, and clarity of the information to be collected.

• Recommendations to minimize the information collection burden on the affected public, including automated collection techniques.

Section 418.22(c)(1) requires for the initial 90-day period, the hospice must obtain written certification statements (and oral certification statements if required under paragraph (a)(3) of this section) from the individual's attending physician, if the individual has an attending physician, that meets the definition of physician specified in § 410.20 of this subchapter.

While this requirement is subject to the PRA it is currently approved by OMB under control number 0938-0302, “ICRs in Hospice Care Regulation and Supporting Regulations”, with a current expiration date of September 30, 2006.

Because of the large number of public comments we normally receive on Federal Register documents, we are not able to acknowledge or respond to them individually. We will consider all comments we receive by the date and time specified in the DATES section of this preamble, and, when we proceed with a subsequent document, we will respond to the comments in the preamble to that document.

We have examined the impacts of this proposed rule as required by Executive Order 12866 (September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132. We estimated the impact on hospices, as a result of the proposed changes to the FY 2006 hospice wage index. As discussed previously, the methodology for computing the wage index was determined through a negotiated rulemaking committee and implemented in the August 8, 1997 final rule (62 FR 42860). This proposed rule updates the hospice wage index in accordance with our regulation and that methodology, incorporating the adoption of the CBSA designations used in the hospital wage index data. Table I reflects the proposed hospice wage index impact using the CBSA designations. Table II indicates the proposed wage index impact using the hospice wage indices under the MSA designations as well as the CBSA designations.

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 603 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 an MSA and has fewer than 100 beds. We have determined that this proposed rule would not have a significant 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 that may result in expenditure in any 1 year by State, local, and tribal governments, in the aggregate, or by the private sector, of $110 million or more. This proposed rule would have no substantial effect on State, local, or tribal governments or on the private sector.

Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent 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 proposed rule under the threshold criteria of Executive Order 13132, Federalism, and have determined that it would not have an impact on the rights, roles, and responsibilities of State, local, or tribal governments.

In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.

The impact of hospice wage index changes have been analyzed according to type of hospice, geographic location, type of ownership, hospice base, and hospice size. Hospice size was determined by the number of routine home care days (RHC). Since routine home care days account for over 70 percent of the services provided by a hospice, we used RHC days as a proxy for the size of the hospice agency. In the past, we had, designated the size by four categories: (1) 0 to 1,754 RHC days representing small agencies; (2) 1,754 to 4,373 RHC days or (3) 4,373 to 9,681 RHC days representing medium-sized agencies; and (4) 9,681 RHC days or more representing large agencies.

To determine the statistical distribution of RHC days, based upon the total number of hospice agencies and their respective RHC days using FY 2003 claims processed through March 2004, were used. In determining the statistical distribution, we deleted data for four hospice agencies with RHC days that greatly exceeded the total number of RHC days of other agencies. However, these data have been included in the impact analysis since we recognize that the skewness existed in the “large” agency size distribution using four size categories and does not change with the use of three size categories.

Based upon this analysis, we are using only three size designations to present the impact analyses. We believe that these three designations better describe the size of the hospice. The three categories are: Small agencies having 0 to 3,499 RHC days; medium agencies having 3,500 to 19,999 RHC days; and large agencies having 20,000 or more RHC days.

Our discussions for this proposed rule will focus on the impact of adopting the CBSA designations. Table I indicates the impact of using the proposed CBSA designations. Table II provides a comparison between impact using the MSA and CBSA designations. As discussed above, we use the latest claims file available to us to develop the impact table when we issue the annual yearly wage index update. For the purposes of this proposed rule, we used the 2003 claims that were processed through June 2004 since this was the latest file available. Thus the projections or anticipated payments indicated in Table I do not represent the expenditures that we anticipate for FY 2006. We anticipate that the final rule will more accurately project payment for FY 2006. For the purposes of this proposed rule, we compared estimated payments using the FY 1983 hospice wage index to estimated payments using the FY 2006 wage index and determined the proposed hospice wage index to be budget neutral. Budget neutrality means that, in a given year, estimated aggregate payments for Medicare hospice services using the proposed FY 2006 wage index would equal estimated aggregate payments that would have been made for the same services if the 1983 wage index had remained in effect. Budget neutrality to 1983 does not imply that estimated payments would not increase since the budget neutrality applies only to the wage index portion and not the total payment rate, which accommodates inflation.

Executive Order 12866 (as amended by Executive Order 13258, which merely reassigns responsibility of duties) 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 major rules with economically significant effects ($100 million or more in any 1 year). We have determined that this proposed rule is not an economically significant rule under this Executive Order.

The RFA requires agencies to analyze options for regulatory relief of small businesses. For purposes of the RFA, small entities include small businesses, nonprofit organizations, and government agencies. Most hospices and most other providers and suppliers are small entities, either by nonprofit status or by having revenues of $6 million to $29 million in any 1 year (for details, see the Small Business Administration's regulation at 65 FR 69432, that sets forth size standards for health care industries). For purposes of the RFA, most hospices are small entities. As indicated in Table I below, there are 2,435 hospices. Approximately 70 percent of Medicare certified hospices are identified as voluntary, government, or other agencies and, therefore, are considered small entities. Because the National Hospice and Palliative Care Organization estimates that approximately 79 percent of hospice patients are Medicare beneficiaries, we have not considered other sources of revenue in this analysis. Furthermore, the wage index methodology was previously determined by consensus, through a negotiated rulemaking committee that included representatives of national hospice associations; rural, urban, large, and small hospices; multisite hospices; and consumer groups. Based on all of the options considered, the committee agreed on the methodology described in the committee statement, and it was adopted into regulation in the August 8, 1997 final rule. In developing the process for updating the wage index in the 1997 final rule, we considered the impact of this methodology on small entities and attempted to mitigate any potential negative effects.

As stated previously, the following discussions are limited to demonstrating trends rather than projected dollars if the subsequent final rule to this proposed rule were implemented for FY 2006. We used the CBSA designations and wage indices as well as the data from FY 2003 claims processed through June 2004 in developing the impact analysis. We will recalculate the impacts for the final rule using the FY 2004 claims file. We will discuss the estimated payments for FY 2006 at that time. Since the impact tables are intended to reflect the implementation of the CBSA in contrast with the current MSA designations, the introduction of the wage indices is the only variable used in the computation. It is important to note that the payment rates used reflect the FY 2005 rates. The FY 2006 payment rates will be adjusted to reflect the full FY 2006 hospital market basket, as required by section 1814(i)(1)(C) (ii)(VII) of the Act. As previously noted, we publish these rates through administrative issuances. As discussed in section II.A.1.a. of this proposed rule, hospice agencies may various wage indices to compute their payments based on the geographic location of the beneficiary for routine and continuous home care or the MSA (CBSA) or the location of the hospice agency for respite and general inpatient care. Therefore, we analyze the impact on hospices using the following parameters: geographic location; hospice size; type of ownership; and hospice base).

Our analysis demonstrates that, under this proposed rule, rural hospices would experience an increase in payment that is greater than that of urban hospices. Rural hospices are anticipated to experience a modest increase of 0.8 percent and urban hospices a slight decrease of 0.2 percent. However, the impact overall is anticipated to remain unchanged if the CBSA designations are adopted. This flat trend is also evident when contrasting the findings with projections using the MSA designations. However, the projections using the MSA designations remain flat for urban areas and decrease slightly by 0.1 percent for rural areas.

Of the urban hospices, we anticipate that most of the regions would experience decreases ranging from a 1.4 for the urban New England region to 0.1 decrease for the South Atlantic. A slight increase is anticipated for the West North Central, West South Central, and Pacific urban regions of 0.1, 0.2, and 0.1, respectively. In contrast, the rural regions are expected to receive an increase for all regions ranging from a substantial increase of 21.7 percent for rural Puerto Rico to a 1 percent increase for East North Central. We believe that that aberration for Puerto Rico can be attributed to the increase in the hospital wage indices in the region as well as the large number of rural counties under the MSA designations in Puerto Rico that have been designated as urban counties under the CBSA designations. Rural New England and West North Central regions are expected to remain flat. Only one rural region, the Mid-Atlantic, is anticipated to experience a decrease of 1.5 percent. The anticipated increase for the rural regions using the MSA designations is in contrast, more modest with increases ranging from 0.1 to 0.3 and decreases anticipated for the rural South Atlantic, East North Central, East South Central, and Middle Atlantic of 0.2, 0.3, 0.6, and 0.7, respectively.

As discussed previously, we have designated three hospice sizes based on routine home care days. Under the Medicare hospice benefit, hospices can provide four different levels of care days. The majority of the days provided by a hospice are routine home care days. Therefore, the number of routine home care days can be used as a proxy for the size of the hospice, that is, the more days of care provided, the larger the hospice. Using routine home care days as a proxy for size, our analysis indicates that the impact of the wage index update on small hospices (those that provide up to 3,499 days of routine home care) will experience a 0.1 percent increase in both the CBSA and MSA projections. The impact remains virtually the same for both the CBSA and MSA designations for all three sizes. As indicated above, a 0.1 percent increase is anticipated for small agencies and remains unchanged for large agencies. There is a scant decrease of 0.1 percent for medium sized agencies (with 3,500 to 19,999 RHC days) using the CBSA designations while it remains unchanged for MSA designations. The lack of variability by agency size indicates that this proposed rule would have no impact on a small number of small entities. Rural Puerto Rico with 6 hospice agencies and 184,000 routine care days, representing the smallest number of hospices and second lowest routine home care days in the rural region, is anticipated to experience a substantial increase of 21.7 percent while rural South Atlantic with 138 hospices and 1,394,000 routine home care days, which represents the highest number of routine home days, will have an increase of 0.6 percent. The rural Mid-Atlantic region with 39 hospices and 280,000 routine home care days is anticipated to decrease by 1.5 percent. Rural New England with 27 hospices representing the second lowest number of agencies with 112,000 routine home care days, and representing the lowest number of rural days, is anticipated to remain unchanged.

Urban Puerto Rico region with 30 hospice agencies with 428,000 routine home care days, representing the lowest number of urban agencies and routine home care days, is anticipated to experience a decrease of 0.5 percent using the CBSA designations in contrast to a 0.2 percent increase using the MSA designation. Urban East North Central with 244 hospice agencies representing the largest number of urban hospice agencies with 5,275,000 routine home care days is anticipated to experience a decrease of 0.3 percent using the CBSA designation and would remain unchanged using the MSA designation. Urban West South Central with the largest number of routine home care days of 5,765,000 is anticipated to experience a 0.2 percent increase using the CBSA designations and 0.4 percent increase using the MSA designations. Based upon these comparisons, the urban regions would expect a slightly larger increase in payment using the MSA designations while the rural areas are anticipated to experience a substantially larger increase using the CBSA designations. However, as indicated above, in the aggregate, hospice agencies overall are anticipated to remain unchanged using either the CBSA or MSA designations.

By type of ownership, proprietary hospice agencies are anticipated to increase by 0.2 percent while voluntary agencies with the largest number of agencies and routine home care days of 1,309 and 23,696,000, respectively, are anticipated to decrease by 0.2 percent and government by 0.3. Since we are unable to determine the ownership type for the unknown category, we are unable to determine the impact of the anticipated decrease of 1.1 percent. By MSA designation, in contrast, voluntary and proprietary hospice agencies are anticipated to remain unchanged with government agencies anticipated to decrease by 0.1 percent.

Freestanding hospice agencies with the largest number of agencies of 1,188 and routine home care days of 29,277,000 are anticipated to remain unchanged when using MSA as well as CBSA designations. Home health-based hospice agencies are anticipated to remain unchanged with the MSA designations but are anticipated to increase by 0.2 percent with CBSA designation. Hospital-based hospice agencies are anticipated to decrease slightly with both MSA and CBSA designations at 0.1 and 0.3 respectively. SNF-based hospice agencies with the lowest number of agencies and routine home care days of 15 and 174,000, respectively, are also anticipated to experience a decrease with both MSA and CBSA designations of 0.6 and 0.9, respectively.

As discussed above, the overall impact for hospice agencies remain unchanged using the CBSA designations with a slight decrease in urban and an increase in rural hospice agencies. While there are more decreases in urban hospice agencies, there is overall increase in the rural agencies. Hospice size remains virtually unchanged when comparing MSA to CBSA designations. Type of ownership and hospice base appear similar between the two designations. As a result, there is no compelling reason to maintain the use of the MSA designations as opposed to the CBSA designations based upon overall hospice agency impact.

We have compared estimated payments using the FY 1983 hospice wage index to estimated payments using the proposed FY 2006 wage index and determined the current hospice wage index to be budget neutral. This impact analysis compares hospice payments using the FY 2005 hospice wage index to the estimated payments using the proposed FY 2006 wage index. The data used in developing the quantitative analysis for this proposed rule were obtained from the June 2004 update of the national claims history file of all FY 2003 claims processed through June 2004. We deleted bills from hospices that have since closed. As discussed above, for the purposes of this proposed rule, this file is adequate to demonstrate the impact of using the MSA and proposed CBSA designations and is not intended to project the anticipated expenditures for FY 2006. We will be using an updated file for the final rule which will more accurately indicate the expected expenditures for FY 2006.

Table I demonstrates the results of our analysis. In column 2 of Table I, we indicate the number of routine home care days that were included in our analysis, although the analysis was performed on all types of hospice care. Column 3 indicates payments that were made using the FY 2005 wage index. Column 4 is based on claims (for hospices in business during that time period) and estimates payments (with the caveat as discussed above) to be made to hospices using proposed CBSA designations and FY 2006 wage index. The final column, which compares columns 3 and 4, shows the percent change in estimated hospice payments made based on the category of the hospice.

Table I categorizes hospices by various geographic and provider characteristics. The first row displays the results of the impact analysis for all Medicare-certified hospices. The second and third rows of the table categorize hospices according to their geographic location (urban and rural). Our analysis indicted that there are 1,494 hospices located in urban areas and 941 hospices located in rural areas. The next two groupings in the table indicate the number of hospices by census region, also broken down by urban and rural hospices. The sixth grouping shows the impact on hospices based on the size of the hospice's program. We determined that the majority of hospice payments are made at the routine home care rate. Therefore, we based the size of each individual hospice's program on the number of routine home care days provided in 2004. The next grouping shows the impact on hospices by type of ownership. The final grouping shows the impact on hospices defined by whether they are provider-based or freestanding.

Table II demonstrates the estimated payments using the CBSA and MSA designations. The groupings as well as columns 1 and 2 are the same as in Table I. Columns 3 and 4 represent the estimated payments using the CBSA and MSA designations, respectively. Column 5 represents the percentage change in the estimated payments using CBSA designations compared with the estimated payments using the MSA designations.

Our analysis shows that the majority of hospices are in urban areas and provide the vast majority of routine home care days. However, rural hospices are anticipated to receive a larger percent increase in payment of 0.8 percent in contrast to a decrease of 0.2 percent for urban hospices if CBSA designations were used in the proposed FY 2006 wage index. However, overall, there is no anticipated change using the CBSA designations.

Since the impact tables are intended to reflect the implementation of the CBSA as opposed to the current MSA designations, the introduction of the wage indices is the only variable used in the computation. It is important to note that the payment rates used reflect the FY2005 rates. The FY 2006 payment rates would be adjusted to reflect the full FY 2006 hospital market basket, as required by section 1814(i)(1)(C)(ii)(VII) of the Act. We publish these rates through administrative issuances.