Vol. 77 Wednesday, 

No. 133 July 11, 2012 

Part II 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Parts 413 and 417 

Medicare Program; End-Stage Renal Disease Prospective Payment 

System, Quality Incentive Program, and Bad Debt Reductions for All 

Medicare Providers; Proposed Rule 

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40952 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 413 and 417 

[CMS–1352–P] 

RIN 0938–AR13 

Medicare Program; End-Stage Renal 

Disease Prospective Payment System, 

Quality Incentive Program, and Bad 

Debt Reductions for All Medicare 

Providers 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This rule proposes to update 

and make revisions to the End-Stage 

Renal Disease (ESRD) prospective 

payment system (PPS) for calendar year 

(CY) 2013. This rule also proposes to set 

forth requirements for the ESRD quality 

incentive program (QIP), including for 

payment year (PY) 2015 and beyond. 

This proposed rule will implement 

changes to bad debt reimbursement for 

all Medicare providers, suppliers, and 

other entities eligible to receive bad 

debt. (See the Table of Contents for a 

listing of the specific issues addressed 

in this proposed rule.) 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. E.S.T. on August 31, 2012. 

ADDRESSES: In commenting, please refer 

to file code CMS 1352 P. Because of staff 

and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

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–1352–P, P.O. Box 8010, Baltimore, 

MD 21244–8010. 

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 to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1352–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4.By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786 9994 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Michelle Cruse or Terri Deutsch, (410) 

786–4533, for issues related to ESRD. 

Heidi Oumarou, (410) 786–7942, for 

issues related to the ESRD market 

basket. 

Teresa Casey, (410) 786–7215, for issues 

related to the QIP. 

Kellie Shannon, (410) 786–0416 for 

information regarding Medicare bad 

debt. 

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 Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 

8:30 a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Printing Office. This 

database can be accessed via the 

internet at http://www.gpo.gov/fdsys/. 

Addenda Are Only Available Through 

the Internet on the CMS Web Site 

In the past, a majority of the Addenda 

referred to throughout the preamble of 

our proposed and final rules were 

available in the Federal Register. 

However, the Addenda of the annual 

proposed and final rules will no longer 

be available in the Federal Register. 

Instead, these Addenda to the annual 

proposed and final rules will be 

available only through the Internet on 

the CMS Web site. The Addenda to the 

End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) rules 

are available at: http://www.cms.gov/ 

ESRDPayment/PAY/list.asp. Readers 

who experience any problems accessing 

any of the Addenda to the proposed and 

final rules of the ESRD PPS that are 

posted on the CMS Web site identified 

above should contact Michelle Cruse at 

410–786–7540. 

Table of Contents 

To assist readers in referencing 

sections contained in this preamble, we 

are providing a Table of Contents. Some 

of the issues discussed in this preamble 

affect the payment policies, but do not 

require changes to the regulations in the 

Code of Federal Regulations (CFR). 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

2. End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) 

3. Reductions to Bad Debt Payments for all 

Medicare Providers 

B. Summary of the Major provisions 

1. ESRD PPS 

2. ESRD QIP 

3. Reductions to Bad Debt Payments for all 

Medicare Providers 

C. Summary of Cost and Benefits 

1. Impacts of the Proposed ESRD PPS 

2. Impacts for ESRD QIP 

3. Impacts of Bad Debt Provisions 

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Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 40953 

II. Calendar Year (CY) 2013 End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

A. Background on the End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

B. Routine Updates and Proposed Policy 

Changes to the CY 2013 ESRD PPS 

1. Composite Rate Portion of the ESRD PPS 

Blended Payment 

a. Proposed Update to the Drug Add-On to 

the Composite Rate Portion of the ESRD 

Blended Payment Rate 

i. Estimating Growth in Expenditures for 

Drugs and Biologicals in CY 2013 

ii. Estimating per Patient Growth 

iii. Applying the Proposed Growth Update 

to the Drug Add-On Adjustment 

iv. Proposed Update to the Drug Add-On 

Adjustment for CY 2013 

2. ESRD PPS Base Rate 

3. ESRD Bundled Market Basket 

a. Overview and Background 

b. Proposed Market Basket Update Increase 

Factor and Labor-Related Share for ESRD 

Facilities for CY 2013 

c. Proposed Productivity Adjustment 

d. Calculation of the ESRDB Market Basket 

Update Adjusted for Multifactor 

Productivity for CY 2013 

4. Transition Budget-Neutrality 

Adjustment for CY 2013 

5. Proposed Updates to the Wage Index 

Values and Wage Index Floor for the 

Composite Rate Portion of the Blended 

Payment and the ESRD PPS Payment 

a. Reduction to the ESRD Wage Index Floor 

b. Policies For Areas With No Wage Data— 

Segment 1 

c. Proposed Wage Index Budget-Neutrality 

Adjustment 

d. ESRD PPS Wage Index Tables 

6. Proposed Drug Policy Changes 

a. Daptomycin 

b. Alteplase and Other Thrombolytics 

c. Part B Drug Pricing 

7. Proposed Revisions to the Outlier Policy 

a. Impact of Proposed Changes to the 

Outlier Policy 

b. Outlier Policy Percentage 

C. Clarifications Regarding the ESRD PPS 

1. Reporting Composite Rate Items and 

Services 

2. ESRD Facility Responsibilities for ESRDRelated Drugs and Biologicals 

3. Use of AY Modifier 

III. End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) for Payment 

Year (PY) 2015 

A. Background 

B. Considerations in Updating and 

Expanding Quality Measures under the 

ESRD QIP for PY 2015 and Subsequent 

PYs 

1. Value-Based Purchasing (VBP) Overview 

2. Brief Overview of Proposed PY 2015 

Measures 

3. PY 2014 Mineral Metabolism Measure 

4. Measures Application Partnership 

Review 

C. Proposed Measures for the PY 2015 

ESRD QIP and Subsequent PYs of the 

ESRD QIP 

1. PY 2014 Measures Continuing for PY 

2015 and Subsequent Payment Years 

2. Expansion of Two PY 2014 Measures for 

PY 2015 and Subsequent Payment Years 

a. Proposed Expanded NHSN Dialysis 

Event Reporting Measure 

b. Proposed Expanded Mineral Metabolism 

Reporting Measure 

3. New Measures Proposed for PY 2015 

and Subsequent Payment Years of the 

ESRD QIP 

a. Proposed Kt/V Dialysis Adequacy 

Measure Topic 

b. Hypercalcemia 

c. Proposed Anemia Management 

Reporting Measure 

4. Measures Under Consideration for 

Future Payment Years of the ESRD QIP 

a. Standardized Hospitalization Ratio 

(SHR) 

b. Standardized Mortality Ratio (SMR) 

c. Public Reporting of SHR and SMR 

Measures 

5. Other Potential Future Measures Under 

Development 

a. Thirty-Day Hospital Readmissions 

b. Efficiency 

c. Population/Community Health 

6. Proposed Scoring for the PY 2015 ESRD 

QIP 

7. Proposed Performance Period for the PY 

2015 ESRD QIP 

8. Proposed Performance Standards for the 

PY 2015 ESRD QIP 

a. Proposed Clinical Measure Performance 

Standards 

b. Estimated Performance Standards 

c. Proposed Performance Standards for PY 

2015 Reporting Measures 

9. Proposed Scoring for the PY 2015 ESRD 

QIP Proposed Measures 

a. Proposals for Scoring Facility 

Performance on Clinical Measures Based 

on Achievement 

b. Proposals for Scoring Facility 

Performance on Clinical Measures Based 

on Improvement 

c. Proposals for Calculating the Reporting 

Measure Scores 

10. Proposals for Weighting the PY 2015 

ESRD QIP Measures and Calculation of 

the PY 2015 ESRD QIP Total 

Performance Score 

a. Proposals for Weighting Individual 

Measures To Compute Measure Topic 

Scores for the Kt/V Dialysis Adequacy 

Measure Topic and the Vascular Access 

Type Measure Topic 

b. Proposals for Weighting the Total 

Performance Score 

c. Examples of the Proposed PY 2015 ESRD 

QIP Scoring Methodology 

11. Proposed Minimum Data for Scoring 

Measures for the PY 2015 ESRD QIP 

a. Proposed Minimum Data for Scoring 

Measures for the PY 2015 ESRD QIP 

i. Proposed Case Minimum for Clinical 

Measures 

ii. Proposed Adjustment Methodology 

b. Proposed Minimum Data Requirements 

for Reporting Measures From New 

Facilities 

12. Proposed Payment Reductions for the 

PY 2015 ESRD QIP 

13. Data Validation 

14. Proposals for Scoring Facilities Whose 

Ownership has Changed 

15. Proposals for Public Reporting 

Requirements 

IV. Limitation on Payments to All Providers, 

Suppliers and Other Entities Entitled to 

Bad Debt 

A. Background 

B. Section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 

(Pub. L. 112–96) 

C. Summary of Provisions of the Proposed 

Rule 

1. Section 3201 of the Middle Class Tax 

Extension and Job Creation Act of 2012 

(Pub. L. 112–96) 

2. Remove and Reserve § 413.178 

3. Technical Corrections 

D. Proposed Changes to Medicare Bad Debt 

Policy 

1. Proposed Changes to 42 CFR 413.89(h) 

2. Rationale for Removing 42 CFR 413.178 

3. Technical Corrections to 42 CFR 

417.536(f)(1) 

V. Collection of Information Requirements 

A. Legislative Requirement for Solicitation 

of Comments 

B. Requirements in the Regulation Text 

C. Additional Information Collection 

Requirements 

1. ESRD PPS 

2. QIP 

VI. Response to Comments 

VII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impact 

B. Detailed Economic Analysis 

1. CY 2013 End-Stage Renal Disease 

(ESRD) Prospective Payment System 

(PPS) 

a. Effects on ESRD Facilities 

b. Effects on Other Providers 

c. Effects on the Medicare Program 

d. Effects on Medicare Beneficiaries 

e. Alternatives Considered 

2. QIP 

C. Accounting Statement 

VIII. Regulatory Flexibility Act Analysis 

IX. Unfunded Mandates Reform Act Analysis 

X. Federalism Analysis— 

XI. Files Available to the Public via the 

Internet 

Regulations Text 

Acronyms 

Because of the many terms to which 

we refer by acronym in this proposed 

rule, we are listing the acronyms used 

and their corresponding meanings in 

alphabetical order below: 

AMCC Automated Multi-Channel 

Chemistry 

ASP Average Sales Price 

AV Arteriovenous 

BLS Bureau of Labor Statistics 

BMI Body Mass Index 

BSA Body Surface Area 

CBSA Core-Based Statistical Area 

CCN CMS Certification Number 

CDC Centers for Disease Control and 

Prevention 

CLABSI Central Line Access Bloodstream 

Infections 

CFR Code of Federal Regulations 

CIP Core Indicators Project 

CMS Centers for Medicare & Medicaid 

Services 

CPM Clinical Performance Measure 

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40954 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

CPT Current Procedural Terminology 

CROWNWeb Consolidated Renal 

Operations in a Web-Enabled Network 

CY Calendar Year 

DFC Dialysis Facility Compare 

DFR Dialysis Facility Report 

DME Durable Medical Equipment 

ESA Erythropoiesis Stimulating Agent 

ESRD End-Stage Renal Disease 

ESRDB End-Stage Renal Disease Bundled 

FDA Food and Drug Administration 

FI/MAC Fiscal Intermediary/Medicare 

Administrative Contractor 

FY Fiscal Year 

GDP Gross Domestic Product 

HAI Healthcare-Associated Infections 

HCPCS Healthcare Common Procedure 

Coding System 

HD Hemodialysis 

HHD Home Hemodialysis 

ICD–9–CM International Classification of 

Diseases, 9th Edition, Clinical 

Modifications 

ICH CAHPS In-Center Hemodialysis 

Consumer Assessment of Healthcare 

Providers and Systems 

IGI IHS Global Insight 

IPPS Inpatient Prospective Payment System 

KDIGO Kidney Disease: Improving Global 

Outcomes 

KDOQI Kidney Disease Outcome Quality 

Initiative 

Kt/V A measure of dialysis adequacy where 

K is dialyzer clearance, t is dialysis time, 

and V is total body water volume 

LDO Large Dialysis Organization 

MAP Medicare Allowable Payment 

MCP Monthly Capitation Payment 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008 (Pub. L. 110– 

275) 

MMA Medicare Prescription Drug, 

Improvement and Modernization Act of 

2003 

MMEA Medicare and Medicaid Extenders 

Act of 2010 Pub. L. 111–309 

MFP Multifactor Productivity 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

PD Peritoneal Dialysis 

PFS Physician Fee Schedule 

PPS Prospective Payment System 

PSR Performance Score Report 

PY Payment Year 

QIP Quality Incentive Program 

REMIS Renal Management Information 

System 

RFA Regulatory Flexibility Act 

RUL Reasonable Useful Lifetime 

SBA Small Business Administration 

SIMS Standard Information Management 

System 

SHR Standardized Hospitalization Ratio 

SSA Social Security Administration 

The Act Social Security Act 

The Affordable Care Act The Patient 

Protection and Affordable Care Act 

URR Urea Reduction Ratio 

VBP Value Based Purchasing 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

This rule proposes to update and 

make revisions to the End-Stage Renal 

Disease (ESRD) prospective payment 

system (PPS) for calendar year (CY) 

2013. In accordance with section 

1881(b)(14) of the Social Security Act 

(the Act), as added by section 153(b) of 

the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA) 

(Pub. L. 110–275), Centers for Medicare 

& Medicaid Services (CMS) 

implemented a case-mix adjusted 

bundled PPS for Medicare outpatient 

ESRD dialysis services beginning 

January 1, 2011. The ESRD PPS replaced 

the basic case-mix adjusted composite 

payment system and the methodologies 

for the reimbursement of separately 

billable outpatient ESRD services. 

Also, section 1881(b)(14)(F) of the 

Act, as added by section 153(b) of 

MIPPA and amended by section 3401(h) 

of the Affordable Care Act (Pub. L. 111– 

148), established that beginning CY 

2012, and each subsequent year, the 

Secretary shall reduce the market basket 

increase factor by a productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. In 

addition, the application of the 

productivity adjustment may result in 

the increase factor being less than 0.0 

percent for a year. 

2. End-Stage Renal Disease (ESRD) 

Quality Incentive Program (QIP) 

This rule also proposes to set forth 

requirements for the ESRD Quality 

Incentive Program (QIP), including 

payment year (PY) 2015. The program is 

authorized under section 153(c) of 

MIPPA, which added section 1881(h) to 

the Social Security Act (the Act). The 

ESRD QIP is the most recent step in 

fostering improved patient outcomes by 

establishing incentives for dialysis 

facilities to meet performance standards 

established by CMS. 

3. Reductions to Bad Debt Payments for 

All Medicare Providers 

This proposed rule would also 

implement the changes to the 

limitations on payments for bad debt 

reimbursement set forth in section 3201 

of The Middle Class Tax Extension and 

Job Creation Act of 2012 (Pub. L. 112– 

96) by revising 42 CFR 413.89, Bad 

debts, charity, and courtesy allowances. 

B. Summary of the Major Provisions 

1. ESRD PPS 

• Update to the composite and ESRD 

PPS base rate for CY 2013: For CY 2013, 

we propose an ESRD PPS base rate of 

$240.88. This amount reflects the 

application of the ESRD bundled 

(ESRDB) market basket reduced by the 

productivity adjustment, or 2.5 percent, 

and the wage index budget-neutrality 

adjustment factor of 1.000826 to the CY 

2012 ESRD PPS base rate of $234.81. 

The proposed base rate is applicable to 

both the ESRD PPS portion of the 

blended payment under the transition 

and payments under the full PPS. For 

CY 2013, we propose a composite rate 

portion of the ESRD PPS blended 

payment of $145.49. This amount 

reflects the CY 2012 composite rate of 

$141.94, increased by the ESRDB market 

basket reduced by the productivity 

adjustment. 

• Update to the composite rate drug 

add-on for CY 2013: We are not 

proposing any changes to the 

methodology used to compute the drug 

add-on for CY 2013; we are only 

updating the data used to calculate the 

drug add-on for CY 2013. Using 6 years 

of ASP drug expenditure data, and other 

data, we estimate a 3.0 percent decrease 

in aggregate drug expenditures and a 4.6 

percent increase in enrollment. Using 

these estimates, we project a 7.3 percent 

decrease in per patient growth of drug 

expenditures for CY 2013. Thus, we are 

projecting that the combined growth in 

per patient utilization and pricing for 

CY 2013 would result in a decrease to 

the drug add-on equal to 1.0 percentage 

points. We are, however, proposing to 

apply a zero update to the drug add-on 

adjustment and maintain the $20.33 per 

treatment drug add-on amount for CY 

2013. Because the market basket minus 

productivity that is applied to the 

composite rate increases the composite 

rate, the add-on adjustment of 14.3 

percent is reduced to 14.0 percent to 

maintain the drug add-on at $20.33. 

• Market basket and productivity 

adjustment: Under section 

1881(b)(14)(F) of the Act, beginning in 

CY 2012, ESRD PPS payment amounts 

and the composite rate portion of the 

transition blended payment amounts 

shall be annually increased by an ESRD 

market basket percentage increase factor 

reduced by a multi-factor productivity 

(MFP) adjustment. The proposed CY 

2013 ESRDB market basket increase 

factor is 3.2 percent. The current 

forecast of the proposed CY 2013 MFP 

adjustment is 0.7 percent. The resulting 

proposed CY 2013 MFP-adjusted ESRDB 

market basket update is equal to 2.5 

percent. 

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Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 40955 

• The transition budget-neutrality 

adjustment factor: For CY 2013, we are 

proposing to apply the transition budget 

neutrality adjustment methodology 

established in CY 2011. This results in 

a 0 percent adjustment. Therefore, for 

CY 2013 we propose a 0 percent 

reduction to be applied to both the 

blended payments made under the 

transition and payments made under the 

100 percent ESRD PPS for renal dialysis 

services furnished January 1, 2013 

through December 31, 2013. 

• Updates to the wage index and 

wage index floor: We adjust wage 

indices on an annual basis using the 

most current hospital wage data to 

account for differing wage levels in 

areas in which ESRD facilities are 

located. In CY 2013, we are not 

proposing any changes to the 

application of the wage index budgetneutrality adjustment factor and will 

continue to apply the budget-neutrality 

adjustment to the pre-floor, prereclassified wage index values for the 

composite rate portion of the blended 

payment and to the base rate for the 

ESRD PPS. Over the past several years, 

we have been gradually decreasing the 

wage index floor by 0.05 in an effort to 

gradually phase out the floor and in CY 

2013 will continue to do so. Therefore, 

in CY 2013, we are reducing the wage 

index floor from 0.55 to 0.50. We also 

applied the wage index budgetneutrality adjustment factor to the wage 

index floor of 0.500 which results in an 

adjusted wage index floor of 0.501 

(0.500 × 1.001538) for CY 2013. 

• Update to the outlier policy: We are 

updating the outlier services fixed 

dollar loss amounts and Medicare 

Allowable Payments (MAPs) for CY 

2013 using 2011 data. Based on the use 

of more current data, the fixed-dollar 

loss amount for pediatric patients would 

decrease from $71.64 to $50.15 and the 

MAP amount would decrease from 

$45.44 to $43.63 as compared to CY 

2012 values. For adult patients, the 

fixed-dollar loss amount drops from 

$141.21 to $113.35 and the MAP 

amount drops from $78.00 to $61.06. 

Because of the decline in utilization 

associated with the implementation of 

the expanded bundle, the 1 percent 

target for outlier payments was not 

achieved in CY 2011. Use of 2011 data 

to recalibrate the thresholds, reflecting 

lower utilization of EPO and other 

outlier services, is expected to result in 

aggregate outlier payments close to the 

1 percent target in CY 2013. We believe 

this update to the outlier MAP and fixed 

dollar loss amounts for CY 2013 will 

increase payments for ESRD 

beneficiaries requiring higher resource 

utilization in accordance with a 1 

percent outlier policy. 

• Policy reiteration (composite rate 

drugs and AY modifier): Under the 

composite and basic case-mix adjusted 

composite rate payment systems, certain 

drugs were included in the composite 

rate and were not eligible for separate 

payment. Our analyses of claims show 

that ESRD facilities are continuing to 

report composite rate drugs. In this 

proposed rule, we are reiterating that 

any item or service included in the 

composite rate should not be identified 

on ESRD claims. 

• An AY modifier can be appended to 

claims for drugs and laboratory tests 

that are not ESRD-related to allow for 

separate payment. Our analyses of 

claims show that there are ESRD 

facilities and laboratories that are 

appending the AY modifier to drugs and 

laboratory tests that we believe are 

ESRD-related, resulting in separate 

payment. In this proposed rule, we are 

reiterating the purpose of the AY 

modifier and emphasizing that we are 

continuing our monitoring efforts. We 

are also indicating that we may consider 

eliminating the AY modifier in future 

rulemaking. 

2. ESRD QIP 

This proposed rule proposes to 

implement new requirements for the 

ESRD QIP. It proposes to continue some 

of the previous ESRD QIP measures, add 

new measures, and expand the scope of 

some of the existing measures to cover 

the measure topics as follows: 

• To evaluate anemia management: 

Æ Hemoglobin Greater Than 12 g/dL, 

a clinical measure. 

Æ Anemia Management, a reporting 

measure.* 

• To evaluate dialysis adequacy: 

Æ A clinical Kt/V measure for adult 

hemodialysis patients.* 

Æ A clinical Kt/V measure for adult 

peritoneal dialysis patients.* 

Æ A clinical Kt/V measure for 

pediatric hemodialysis patients.* 

• To determine whether patients are 

treated using the most beneficial 

type of vascular access: 

Æ Vascular Access Type, a clinical 

measure topic comprised of an 

arteriovenous fistula and catheter 

measure. 

• To address effective bone mineral 

metabolism management: 

Æ Hypercalcemia, a clinical 

measure.* 

Æ Mineral Metabolism, a reporting 

measure. 

• To address safety: 

Æ NHSN Dialysis Event reporting 

measure. 

• To assess patient and caregiver 

experience: 

Æ ICH CAHPS survey reporting 

measure. 

* Denotes that this measure is new to 

the ESRD QIP. 

It also proposes to establish CY 2013 

as the performance period for the PY 

2015 ESRD QIP, establish performance 

standards for each measure, and adopt 

scoring and payment reduction 

methodologies that are similar to those 

finalized for the PY 2014 ESRD QIP. 

3. Reductions to Bad Debt Payments for 

all Medicare Providers 

This rule would also implement the 

statutory changes to the limitations on 

payments for bad debt reimbursement 

by revising 42 CFR 413.89, Bad debts, 

charity, and courtesy allowances. We 

are also proposing to move 42 CFR 

413.178(a) to 42 CFR 413.89(h)(3), and 

to move 42 CFR 413.178(d)(2) to 42 CFR 

413.89(i)(2) and to remove 42 CFR 

413.178(b), (c) and (d)(1), as they are 

duplicated and discussed at 42 CFR 

413.89. Additionally, we are making a 

technical correction to the cross 

reference in 42 CFR 417.536(f)(1) to 

Medicare bad debt reimbursement 

policy. 

C. Summary of Costs and Benefits 

In section VII of this proposed rule, 

we set forth a detailed analysis of the 

impacts that the proposed changes 

would have on affected entities and 

beneficiaries. The impacts include the 

following: 

1. Impacts of the Proposed ESRD PPS 

The impact chart in section VII.B.1.a 

of this proposed rule displays the 

estimated change in payments to ESRD 

facilities in CY 2013 as compared to 

estimated payments in CY 2012. The 

overall impact of the CY 2013 changes 

is projected to be a 3.1 percent increase 

in payments. Hospital-based ESRD 

facilities have an estimated 3.7 percent 

increase in payments compared with 

freestanding facilities with an estimated 

3.0 percent increase. Urban facilities are 

expected to receive an estimated 

payment increase of 3.1 percent 

compared to an estimated 3.0 percent 

increase for rural facilities. We expect a 

2.4 percent decrease in estimated 

payments as a result of wage index 

adjustments for Puerto Rico and the 

Virgin Islands. However, this is offset by 

the impact of the outlier policy, 

resulting in an estimated 0.4 percent 

increase in payment. The estimated 3.1 

percent overall payment increase would 

result in a $250 million cost to Medicare 

and a $70 million cost to beneficiaries. 

In 2013, a 2.5 percent market basket 

increase would result in a $200 million 

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40956 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

cost to Medicare and a $50 million cost 

to beneficiaries. The outlier fixed dollar 

loss and MAP adjustments in CY 2013 

would result in a $30 million cost to 

Medicare and a $10 million cost to 

beneficiaries. 

2. Impacts for ESRD QIP 

The overall economic impact of the 

proposed ESRD QIP is an estimated 

$20.9 million for PY 2015. We expect 

the total payment reductions to be 

approximately $8.5 million, and the 

costs associated with the collection of 

information requirements for certain 

measures to be approximately $12.4 

million. 

The estimated payment reduction will 

continue to incentivize facilities to 

provide higher quality care to 

beneficiaries. The reporting measures 

that result in costs associated with the 

collection of information are critical to 

better understanding the quality of care 

beneficiaries receive, particularly a 

patient’s experience of care, and will be 

used to incentivize improvements in the 

quality of care provided. 

3. Impacts of Bad Debt Provisions 

We are codifying the provisions of 

section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 

that requires reductions in bad debt 

reimbursement to all providers eligible 

to receive bad debt reimbursement; 

these provisions are specifically 

prescribed by statute and thus, are selfimplementing. There will be a $10.9 

billion savings to the program over 10 

years resulting from these selfimplementing reductions in bad debt 

reimbursement. 

II. Calendar Year (CY) 2013 End-Stage 

Renal Disease (ESRD) Prospective 

Payment System (PPS) 

A. Background on the End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

On August 12, 2010, we published in 

the Federal Register a final rule (75 FR 

49030 through 49214) titled, ‘‘End-Stage 

Renal Disease Prospective Payment 

System’’, hereinafter referred to as the 

CY 2011 ESRD PPS final rule. In the CY 

2011 ESRD PPS final rule, we 

implemented a case-mix adjusted 

bundled PPS for Medicare outpatient 

ESRD dialysis services beginning 

January 1, 2011, in accordance with 

section 1881(b)(14) of the Act, as added 

by section 153(b) of MIPPA. 

On November 10, 2011, we published 

in the Federal Register, a final rule (76 

FR 70228 through 70316) titled, 

‘‘Medicare Program; End-Stage Renal 

Disease Prospective Payment System 

and Quality Incentive Program; 

Ambulance Fee Schedule; Durable 

Medical Equipment; and Competitive 

Acquisition of Certain Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies (hereinafter referred to as the 

CY 2012 ESRD PPS final rule). In that 

final rule, for the ESRD PPS, we made 

a number of routine updates for CY 

2012, implemented the second year of 

the transition to the ESRD PPS, made 

several policy changes and 

clarifications, and made technical 

changes with regard to the CY 2011 

ESRD PPS final rule. In that rule, we 

finalized the following: 

• A composite rate of $141.94 per 

treatment for renal dialysis services that 

is used in the composite rate portion of 

the ESRD PPS payment for ESRD 

facilities receiving blended payments 

during the transition. The $141.94 

reflected the addition of the CY 2011 

Part D per treatment amount ($.49) for 

oral ESRD drugs with an injectable 

equivalent to the CY 2011 composite 

rate of $138.53, and the application of 

the ESRD Bundled (ESRDB) market 

basket update of 3.0 percent minus a 

multifactor productivity adjustment of 

0.9 percent, that is, a 2.1 percent 

increase. 

• A zero update to the drug add-on 

adjustment and maintaining the $20.33 

per treatment drug add-on amount for 

the composite rate portion of the ESRD 

PPS blended payment. This results in a 

14.3 percent drug add-on adjustment to 

the composite rate portion of the ESRD 

PPS blended payment. 

• An ESRD PPS base rate of $234.81 

per treatment for renal dialysis services. 

The ESRD PPS base rate applies to the 

ESRD PPS portion of the blended 

payments during the transition and to 

the ESRD PPS payments. This amount 

reflected the CY 2012 ESRDB market 

basket update of 3.0 percent minus a 

multifactor productivity adjustment of 

0.9 percent, that is, a 2.1 percent 

increase. This amount also reflected the 

application of the wage index budgetneutrality adjustment of 1.001520. 

• A zero percent transition budgetneutrality adjustment factor for claims 

for renal dialysis services furnished 

from April 1, 2011 through December 

31, 2011 and for CY 2012. 

• The labor-related share of 41.737 

percent for the CY 2012 ESRD PPS 

payment and the labor-related share of 

53.711 percent for the CYs 2012 and 

2013 ESRD composite rate portion of the 

blended payment for those ESRD 

facilities receiving a blended payment 

during the transition. 

• The methodology for CY 2012 and 

subsequent years for computing the 

wage index budget-neutrality 

adjustment factors. For CY 2012, the 

wage index budget-neutrality 

adjustment factor for the composite 

portion of the ESRD PPS blended 

payment is 1.002830, and is applied to 

the wage index values. The wage index 

budget-neutrality adjustment factor for 

the ESRD PPS portion of the blended 

payment and for the ESRD PPS is 

1.001520, and is applied to the ESRD 

PPS base rate. 

• A 0.05 reduction to the wage index 

floor for CYs 2012 and 2013 which 

resulted in a wage index floor of 0.550 

and 0.500, respectively. For CY 2012, 

the wage index floor under the 

composite rate portion of the blended 

payment is 0.552 after the wage index 

budget-neutrality adjustment factor is 

applied to 0.550. The wage index floor 

under the ESRD PPS is 0.550. 

• The methodologies used for CY 

2012 and subsequent years of 

computing a wage index value for areas 

without hospital data for urban and 

rural geographic areas and for Puerto 

Rico. 

• Using the ESRDB market basket 

forecasts for the ESRD PPS transition 

payment updates. 

• The methodology for calculating 

and applying the multifactor 

productivity adjustment to the ESRDB 

market basket. 

• An annual deadline of November 

1st for ESRD facilities to submit an 

attestation if they believe that they are 

eligible for the low-volume payment 

adjustment. 

• Changes to 42 CFR 413.232(b)(1) 

and (b)(2) to indicate that in the absence 

of an ESRD facility’s final settled 12- 

consecutive month cost report, a fiscal 

intermediary (FI) or A/B Medicare 

Administrative Contractor (MAC) can 

review the ESRD facility’s as-filed 12- 

consecutive month cost report when 

determining if an ESRD facility meets 

the low-volume criteria. 

• Eliminating the restriction on 

vancomycin to allow ESRD facilities to 

receive separate payment by appending 

the AY modifier on the claim for 

vancomycin when the diagnosis 

reported on the claim indicates the drug 

was used to treat a non-ESRD related 

condition. 

• Incorporating the Part B drug 

overfill policy into our outlier policy 

and for purposes of the composite rate 

portion of the blended payment during 

the transition, that is, ESRD facilities 

may only report units and charges for 

drugs and biologicals actually 

purchased. 

• Using a body surface area (BSA) 

national average of 1.87, which is the 

latest national average as the reference 

point for the computation of the BSA 

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adjustment for both the composite rate 

portion of the ESRD PPS blended 

payment and for the ESRD PPS. We will 

also review the BSA national average on 

the CY 2012 claims and every 5 years 

thereafter. 

• Changes to the outlier provision 

which included: (1) Eliminating the 

issuance of a specific list of eligible 

outlier service drugs, (2) including 

antibiotics furnished in the home to 

treat catheter site infections or 

peritonitis associated with peritoneal 

dialysis as an eligible outlier service, (3) 

excluding thrombolytic drugs and 

biologicals from the outlier policy, (4) 

including testosterone and anabolic 

steroids that are used for anemia 

management as an eligible outlier 

service, and (5) excluding the laboratory 

tests that comprise the Automated 

Multi-Channel Chemistry panel from 

the definition of outlier services and 

revising § 413.237 to indicate this 

change. Finally, in the CY 2012 ESRD 

PPS final rule (76 FR 70228), we 

clarified the following: 

• For the low-volume payment 

adjustment, (1) ‘‘payment year’’ was 

defined as the period of time that we 

use for determining payment to ESRD 

facilities, which is a calendar year; (2) 

‘‘eligibility’’ years was defined as the 3 

years preceding the payment year and 

are based on cost reporting years; (3) for 

the cost reporting years, ESRD facilities 

must report costs for 12-consectutive 

months; (4) in the absence of a finalsettled cost report, an FI or A/B MAC 

can review the ESRD facility’s as-filed 

cost report when verifying eligibility; 

and (5) if the FI or A/B MAC finds that 

the ESRD facility did not meet lowvolume eligibility based on the final 

settled cost report, they should 

discontinue application of the lowvolume adjustment and recoup the 

inappropriate payments. 

• The ICD–9–CM diagnosis codes that 

are eligible for the co-morbidity 

payment adjustments are subject to the 

annual ICD–9–CM coding changes that 

occur in the hospital inpatient PPS final 

rule and effective October 1st of every 

year. 

• Laboratory tests that are performed 

for Medicare ESRD beneficiaries in an 

emergency room or emergency 

department as part of the general workup of the patient necessary for diagnosis 

are not considered to be renal dialysis 

services. 

B. Routine Updates and Proposed Policy 

Changes to the CY 2013 ESRD PPS 

1. Composite Rate Portion of the ESRD 

PPS Blended Payment 

Section 1881(b)(14)(E)(i) of the Act 

requires a 4-year transition under the 

ESRD PPS. This proposed rule would 

implement the third year of the 

transition period for those ESRD 

facilities going through the transition 

rather than electing to receive payment 

based on 100 percent of the payment 

amount under the ESRD PPS. For CY 

2013, under 42 CFR § 413.239(a)(3), 

facilities that go through the transition 

will receive a blended rate equal to the 

sum of 75 percent of the full ESRD PPS 

amount and 25 percent of the basic casemix adjusted composite payment 

amount. Accordingly, as a result of the 

transition period under the ESRD PPS, 

we continue to update the composite 

rate portion of the blended payment 

during the 4-year transition, (that is, CY 

2011 through 2013), which would 

include updates to the drug add-on 

adjustment required by section 

1881(b)(12)(F) of the Act, as well as the 

wage index values (which includes a 

budget-neutrality factor) used to adjust 

the labor component of the composite 

rate. The proposed updates to the drug 

add-on adjustment under the composite 

rate portion of the blended rate can be 

found in section II.B.1.a of this 

proposed rule and the wage index is 

discussed in section II.B.5 of this 

proposed rule. For CY 2013, we are also 

proposing to update the second part of 

the transition budget-neutrality 

adjustment to reflect updated data. The 

transition budget-neutrality adjustment 

is applied to both the blended payments 

under the transition and payments 

under the ESRD PPS. The discussion 

regarding the proposed transition 

budget-neutrality adjustment can be 

found in section II.B.4 of this proposed 

rule. 

As discussed in section II.B.3 of this 

proposed rule, section 1881(b)(14)(F)(ii) 

of the Act, as added by section 153(b) 

of MIPPA and amended by section 

3401(h) of the Affordable Care Act, 

provides that, for years during which 

the transition applies, the composite 

rate portion of the blend shall be 

annually increased by the ESRDB 

market basket and, for CY 2012 and 

each subsequent year, the ESRDB 

market basket shall be reduced by the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act. 

In sections II.B.3.b and II.B.3.c of this 

proposed rule, we describe the basis for 

the proposed CY 2013 ESRDB market 

basket increase of 3.2 percent, and the 

productivity offset of 0.7 percent, 

yielding a proposed forecasted rate of 

increase in the base rate of 2.5 percent. 

For CY 2013, the composite rate 

portion of the ESRD PPS blended 

payment would be $145.49. The $145.49 

reflects the CY 2012 composite rate of 

$141.94 increased by the ESRDB market 

basket reduced by the productivity 

adjustment (3.2 percent minus 0.7 

percent) of 2.5 percent. 

a. Proposed Update to the Drug Add-on 

to the Composite Rate Portion of the 

ESRD Blended Payment Rate 

Section 1881(b)(14)(E)(i) of the Act 

requires a 4-year transition under the 

ESRD PPS. Under § 413.239, ESRD 

facilities were permitted to make a onetime election by November 1, 2010, to 

be excluded from the transition and 

receive full payment under the ESRD 

PPS. Section 413.239(a)(3) provides for 

ESRD facilities that elected to receive 

payment under the transition to be paid 

a blended amount that will consist of 25 

percent of the basic case-mix adjusted 

composite payment system and 75 

percent of the ESRD PPS payment in CY 

2013. Thus, during the ESRD PPS 

transition, we must continue to update 

the composite rate portion of the 

blended payment amount which 

includes an update to the drug add-on. 

As required under section 1881(b)(12) 

of the Act, the basic case-mix adjusted 

composite payment system includes 

services in the composite rate and an 

add-on to the composite rate to account 

for the difference between pre-MMA 

payments for separately billed drugs 

and the revised drug pricing specified in 

the statute. In this proposed rule, we are 

not proposing any changes to the drug 

add-on methodology in CY 2013, but are 

merely updating the data used in 

computing the drug add-on as described 

below. 

i. Estimating Growth in Expenditures for 

Drugs and Biologicals in CY 2013 

Section 1881(b)(12)(F) of the Act 

specifies that the drug add-on increase 

must reflect ‘‘the estimated growth in 

expenditures for drugs and biologicals 

(including erythropoietin) that are 

separately billable * * *’’. By referring 

to ‘‘expenditures’’, we believe the 

statute contemplates that the update 

would account for both increases in 

drug prices, as well as increases in 

utilization of those drugs. 

In order to account for increases in 

drug prices and utilization, since we 

now have 6 years of drug expenditure 

data based on ASP pricing, for CY 2013, 

we continue estimating growth in drug 

expenditures based on the trends in 

available data. We then removed growth 

in enrollment for the same time period 

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from the expenditure growth so that the 

residual reflects the per patient 

expenditure growth (which includes 

price and utilization combined). 

To estimate drug expenditure growth 

using trend analysis, for CY 2013, we 

looked at the average annual growth in 

total drug expenditures between 2006 

and 2011. First, we estimated the total 

drug expenditures for all ESRD facilities 

in CY 2011. We used the final CY 2006 

through CY 2010 ESRD claims data and 

the latest available CY 2011 ESRD 

facility claims, updated through 

December 31, 2011 (that is, claims with 

dates of service from January 1 through 

December 31, 2011, that were received, 

processed, paid, and passed to the 

National Claims History File as of 

December 31, 2011). For the CY 2013 

PPS final rule, we intend to use 

additional updated CY 2011 claims with 

dates of service for the same timeframe. 

This updated CY 2011 data file will 

include claims received, processed, 

paid, and passed to the National Claims 

History File as of June 30, 2012. While 

the CY 2011 claims file used in this 

proposed rule is the most current 

available, we recognize that it does not 

reflect a complete year, as claims with 

dates of service towards the end of the 

year have not all been processed. To 

more accurately estimate the update to 

the drug add-on, completed aggregate 

drug expenditures are required. 

Next, for CY 2013, based on analysis 

of the 2010 claims, we inflated the CY 

2011 drug expenditures to estimate the 

June 30, 2012 update of the 2011 claims 

file. We used the relationship between 

the December 2010 and the June 2011 

versions of 2010 claims to estimate the 

more complete 2011 claims that will be 

available in June 2012 and applied that 

ratio to the 2011 claims data from the 

December 2011 claims file. The net 

adjustment to the CY 2011 claims data 

is an increase of 9.7 percent to the 2011 

expenditure data. This adjustment 

allows us to more accurately compare 

the 2010 and 2011 drug expenditure 

data to estimate per patient growth. 

Using the completed full-year 2011 

drug expenditure figure, we calculated 

the average annual change in drug 

expenditures from 2006 through 2011. 

This average annual change showed a 

decrease of 3.0 percent in drug 

expenditures from 2006 through 2011. 

We used this 3.0 percent decrease to 

project drug expenditures for both 2012 

and 2013. 

ii. Estimating per Patient Growth 

Once we had the projected growth in 

drug expenditures from 2012 to 2013, 

we calculated per patient growth 

between CYs 2012 and 2013 by 

removing the estimated growth in 

enrollment data between CYs 2012 and 

2013. We estimate a 4.6 percent growth 

in fee for service Medicare dialysis 

beneficiary enrollment between CYs 

2012 and 2013. To obtain the perpatient estimated growth in 

expenditures, we divided the total drug 

expenditure change of a 3 percent 

decrease between 2012 and 2013 (0.97) 

by enrollment growth of 4.6 percent 

(1.046) for the same timeframe. The 

result is a per-patient growth factor 

equal to 0.927 (0.97/1.046 = 0.927). 

Thus, we are projecting a 7.3 percent 

decrease (¥7.3% = ¥ .073 = 0.927 ¥ 

1) in per patient growth in drug 

expenditures between 2012 and 2013. 

iii. Applying the Proposed Growth 

Update to the Drug Add-On Adjustment 

In the CY 2012 ESRD PPS proposed 

and final rules, we provided an 

incorrect citation to the CY 2006 PFS 

final rule with comment in the 

discussion of the application of the 

projected growth update percentages. 

The correct citationto this discussion in 

the CY 2006 PFS final rule with 

comment is 70 FR 70166 and 70167. In 

that rule, we applied the projected 

growth percentage to the total amount of 

drug add-on dollars established for CY 

2005 to establish a dollar amount for the 

CY 2006 growth. In addition, we 

projected the growth in dialysis 

treatments for CY 2006 based on the 

projected growth in ESRD enrollment. 

We divided the projected total dollar 

amount of the CY 2006 growth by the 

projected total dialysis treatments to 

develop the per treatment growth 

update amount. This growth update 

amount, combined with the CY 2005 per 

treatment drug add-on amount, resulted 

in a 14.7 percent adjustment to the 

composite rate for CY 2006. 

Subsequent to the publication of the 

CY 2006 PFS final rule with comment, 

the Deficit Reduction Act (DRA) of 2005 

(Pub. L. 109–171) was enacted on 

February 8, 2006. Section 5106 of the 

DRA amended section 1881(b)(12) of the 

Act to require the Secretary to increase 

the amount of the composite rate 

component of the basic case-mix 

adjusted system for dialysis services 

furnished on or after January 1, 2006 by 

1.6 percent above the amount of the 

composite rate for such services 

furnished on December 31, 2005. We 

issued Change Request (CR) 4291, 

Transmittal 849, entitled, ‘‘Update to 

the ESRD Composite Payment Rates’’ on 

February 10, 2006 to instruct contractors 

to implement this change. We stated in 

CR 4291 that because the drug add-on 

adjustment is determined as a 

percentage of the composite rate, it was 

necessary to adjust the drug add-on 

percentage to account for the 1.6 percent 

increase in the composite payment rate. 

Therefore, the total drug add-on 

adjustment to the composite payment 

rate for 2006 was 14.5 percent instead 

of 14.7 percent. 

In the CY 2007 PFS final rule with 

comment period (71 FR 69683 and 

69684), we revised our update 

methodology by applying the growth 

update to the per treatment drug add-on 

amount. That is, for CY 2007, we 

applied the growth update factor of 4.03 

percent to the $18.88 per treatment drug 

add-on amount resulting in an updated 

per treatment drug add-on amount of 

$19.64 per treatment (71 FR 69684). For 

CY 2008, the per treatment drug add-on 

amount was updated to $20.33. In the 

CYs 2009, 2010, and 2011 PFS final rule 

with comment period (73 FR 69755 

through 69757, 74 FR 61923, 75 FR 

73485, respectively) and the CY 2012 

ESRD PPS final rule (76 FR 70239), we 

applied a zero update to the per 

treatment drug add-on amount resulting 

in a per treatment drug add-on amount 

of $20.33. As discussed in detail below, 

for CY 2013, we are again proposing no 

update to the per treatment drug add-on 

amount of $20.33 established in CY 

2008. 

iv. Proposed Update to the Drug AddOn Adjustment for CY 2013 

As discussed above, we estimate a 3.0 

percent decrease in drug expenditures 

between CYs 2012 and CY 2013. 

Combining this decrease with a 4.6 

percent increase in enrollment, as 

described above, we are projecting a 7.3 

percent decrease in per patient growth 

of drug expenditures between CYs 2012 

and CY 2013. Therefore, we are 

projecting that the combined growth in 

per patient utilization and pricing for 

CY 2013 would result in a decrease to 

the drug add-on equal to 1.0 percentage 

points (out of the 14.3 percent add-on 

for 2012). This figure is derived by 

applying the 7.3 percent decrease to the 

CY 2012 drug add-on of $20.33. This 

would result in a revised drug add-on of 

$18.85, which is 13.0 percent of the 

proposed CY 2013 base composite rate 

of $145.49. If we were to apply no 

decrease to the drug add-on of $20.33, 

this would result in a 14.0 percent drug 

add-on. However, similar to last year 

and as indicated above, we are 

proposing a zero update to the drug addon adjustment. We believe this 

approach is consistent with the 

language under section 1881(b)(12)(F) of 

the Act which states in part that ‘‘the 

Secretary shall annually increase’’ the 

drug add-on amount based on the 

growth in expenditures for separately 

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billed ESRD drugs. Therefore, we 

propose to apply a zero update and 

maintain the $20.33 per treatment drug 

add-on amount for CY 2013. We are 

seeking comment on our proposed zero 

update to the drug add-on. 

The current $20.33 per treatment drug 

add-on reflected a 14.3 percent drug 

add-on adjustment to the composite rate 

in effect for CY 2012. As discussed in 

section II.B.3.a. of this proposed rule, 

section 1881(b)(14)(F) of the Act 

requires that an ESRDB market basket 

minus productivity adjustment be used 

to update the composite rate portion of 

the ESRD PPS payment (proposed 

forecast of 2.5 percent in 2013 effective 

January 1, 2013), resulting in a proposed 

decrease to the CY 2013 drug add-on 

adjustment from 14.3 to 14.0 percent, to 

maintain the drug add-on at $20.33. 

This decrease occurs because the drug 

add-on adjustment is a percentage of the 

composite rate. Since the proposed CY 

2013 composite rate is higher than the 

CY 2012 composite rate, and since the 

drug add-on remains at $20.33, the 

percentage decreases. Therefore, we are 

proposing a drug add-on adjustment to 

the composite rate for CY 2013 of 14.0 

percent. 

2. ESRD PPS Base Rate 

In the CY 2012 ESRD PPS final rule 

(76 FR 70231), we discussed the 

development of the ESRD PPS per 

treatment base rate that is codified in 

the Medicare regulations at § 413.220 

and § 413.230. We explained that the CY 

2011 ESRD PPS final rule (75 FR 49071 

through 49082) provides a detailed 

discussion of the methodology used to 

calculate the ESRD PPS base rate and 

the computation of factors used to 

adjust the ESRD PPS base rate for 

projected outlier payments and budgetneutrality in accordance with sections 

1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) 

of the Act, respectively. Specifically, the 

ESRD PPS base rate was developed from 

CY 2007 claims (that is, the lowest per 

patient utilization year), updated to CY 

2011, and represented the average per 

treatment Medicare Allowable Payment 

(MAP) for composite rate and separately 

billable services. We further explained 

that in accordance with § 413.230, the 

ESRD PPS base rate is adjusted for the 

patient-specific case-mix adjustments, 

applicable facility adjustments, 

geographic differences in area wage 

levels using an area wage index, as well 

as any outlier payment or training 

payments (if applicable). For CY 2012, 

the ESRD PPS base rate was $234.81 

(76 FR 70231). 

As discussed previously, section 

1881(b)(14)(F)(i) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, provides that, beginning in 

2012, the ESRD PPS payment amounts 

are required to be annually increased by 

the rate of increase in the ESRD market 

basket, reduced by the productivity 

adjustment. Accordingly, for this 

proposed rule, we applied the 2.5 

percent increase to the CY 2012 ESRD 

PPS base rate of $234.81, which results 

in a CY 2013 ESRD PPS base rate of 

$240.68 ($234.81 × 1.025 = $240.68). 

The proposed CY 2013 ESRD PPS base 

rate is applicable to both the ESRD PPS 

portion of the blended payment under 

the transition and payments under the 

full ESRD PPS. 

In addition, as discussed in section 

II.B.5.c. of this proposed rule, for CY 

2013 we are applying the wage index 

budget-neutrality adjustment factor of 

1.000826 to the CY 2013 ESRD PPS base 

rate (that is, $240.68), yielding a 

proposed CY 2013 ESRD PPS wageindex budget-neutrality adjusted base 

rate of $240.88 ($240.68 × 1.000826 = 

$240.88). 

3. ESRD Bundled Market Basket 

a. Overview and Background 

In accordance with section 

1881(b)(14)(F)(i) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, beginning in 2012, the ESRD 

bundled payment amounts are required 

to be annually increased by an ESRD 

market basket increase factor that is 

reduced by the productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) 

of the Act. The application of the 

productivity adjustment described may 

result in the increase factor being less 

than 0.0 for a year and may result in 

payment rates for a year being less than 

the payment rates for the preceding 

year. The statute further provides that 

the market basket increase factor should 

reflect the changes over time in the 

prices of an appropriate mix of goods 

and services used to furnish renal 

dialysis services. Under section 

1881(b)(14)(F)(ii) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, the ESRDB rate market basket 

increase factor will also be used to 

update the composite rate portion of 

ESRD payments during the ESRD PPS 

transition period from CYs 2011 through 

2013; though beginning in CY 2012, 

such market basket increase factor will 

be reduced by the productivity 

adjustment. Therefore, a full market 

basket was applied to the composite rate 

portion of the blended payment in CY 

2011 during the first year of the 

transition. 

b. Proposed Market Basket Update 

Increase Factor and Labor-Related Share 

for ESRD Facilities for CY 2013 

As required under section 

1881(b)(14)(F) of the Act, CMS 

developed an all-inclusive ESRDB input 

price index (75 FR 49151 through 

49162). Although ‘‘market basket’’ 

technically describes the mix of goods 

and services used to produce ESRD care, 

this term is also commonly used to 

denote the input price index (that is, 

cost categories, their respective weights, 

and price proxies combined) derived 

from that market basket. Accordingly, 

the term ‘‘ESRDB market basket,’’ as 

used in this document, refers to the 

ESRDB input price index. 

For this proposed rule, we are 

proposing to use the same methodology 

described in the CY 2011 ESRD PPS 

final rule (75 FR 49151 through 49162) 

to compute the CY 2013 ESRDB market 

basket increase factor and labor-related 

share based on the best available data 

(76 FR 40503). Consistent with 

historical practice, we estimate the 

ESRDB market basket update based on 

IHS Global Insight (IGI), Inc.’s forecast 

using the most recently available data. 

IGI is a nationally recognized economic 

and financial forecasting firm that 

contracts with CMS to forecast the 

components of the market baskets. 

Using this methodology and the IGI 

forecast for the first quarter of 2012 of 

the CY 2008-based ESRDB market 

basket (with historical data through the 

fourth quarter of 2011), and consistent 

with our historical practice of 

estimating market basket increases 

based on the best available data, the 

proposed CY 2013 ESRDB market basket 

increase factor is 3.2 percent. For the CY 

2013 ESRD payment update, we will 

continue to use a labor-related share of 

41.737 percent for the ESRD PPS 

payment and the ESRD PPS portion of 

the blended payment, which was 

finalized in the CY 2011 ESRD final rule 

(75 FR 49161). We will also continue to 

use a labor-related share of 53.711 

percent for the ESRD composite rate 

portion of the blended payment for all 

years of the transition. This laborrelated share was developed from the 

labor-related components of the 1997 

ESRD composite rate market basket that 

was finalized in the CY 2006 Physician 

Fee Schedule (PFS) final rule (70 FR 

70168), and is consistent with the mix 

of labor-related services paid under the 

composite rate, as well as the method 

finalized in the CY 2011 ESRD PPS final 

rule (75 FR 49116). 

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c. Proposed Productivity Adjustment 

The ESRDB market basket must be 

annually adjusted by changes in 

economy-wide productivity. 

Specifically, under section 

1881(b)(14)(F)(i) of the Act, as amended 

by section 3401(h) of the Affordable 

Care Act, for CY 2012 and each 

subsequent year, the ESRD market 

basket percentage increase factor shall 

be reduced by the productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. The 

statute defines the productivity 

adjustment to be equal to the 10-year 

moving average of changes in annual 

economy-wide private nonfarm business 

multifactor productivity (MFP) (as 

projected by the Secretary for the 10- 

year period ending with the applicable 

fiscal year, year, cost reporting period, 

or other annual period) (the ‘‘MFP 

adjustment’’). The Bureau of Labor 

Statistics (BLS) is the agency that 

publishes the official measure of private 

nonfarm business MFP. Please see 

http://www.bls.gov/mfp to obtain the 

BLS historical published MFP data. 

CMS notes that the proposed and final 

methodology for calculating and 

applying the MFP adjustment to the 

ESRD payment update is similar to the 

methodology used in other payment 

systems, as required by section 3401 of 

the Affordable Care Act. 

The projection of MFP is currently 

produced by IGI. The details regarding 

the methodology for forecasting MFP 

and how it is applied to the market 

basket was finalized in the CY 2012 

ESRD PPS final rule (76 FR 70232 

through 70234). Using this method and 

the IGI forecast for the first quarter of 

2012 of the 10-year moving average of 

MFP, the proposed CY 2013 MFP factor 

is 0.7 percent. 

d. Calculation of the ESRDB Market 

Basket Update, Adjusted for Multifactor 

Productivity for CY 2013 

Under section 1881(b)(14)(F) of the 

Act, beginning in CY 2012, ESRD PPS 

payment amounts and the composite 

rate portion of the transition blended 

payment amounts shall be annually 

increased by an ESRD market basket 

percentage increase factor reduced by a 

productivity adjustment. We are 

proposing to follow the same 

methodology for calculating the ESRDB 

market basket updates adjusted for MFP 

that was finalized in the CY 2012 ESRD 

PPS final rule (76 FR 70234). 

Thus, in accordance with section 

1881(b)(14)(F)(i) of the Act, the 

proposed market basket increase factor 

for CY 2013 for the ESRDB market 

basket is based on the 1st quarter 2012 

forecast of the CY 2008-based ESRDB 

market basket update, which is 

estimated to be 3.2 percent. This market 

basket percentage is then reduced by the 

MFP adjustment (the 10-year moving 

average of MFP for the period ending 

CY 2013) of 0.7 percent, which is based 

on IGI’s 1st quarter 2012 forecast. The 

resulting proposed MFP-adjusted 

ESRDB market basket update for CY 

2013 is equal to 2.5 percent, or 3.2 

percent less 0.7 percentage point. If 

more recent data is subsequently 

available (for example, a more recent 

estimate of the market basket and MFP 

adjustment), we will use such data, if 

appropriate, to determine the CY 2013 

market basket update and MFP 

adjustment in the CY 2013 ESRD PPS 

final rule. 

4. Transition Budget-Neutrality 

Adjustment for CY 2013 

Section 1881(b)(14)(E)(i) of the Act 

requires the Secretary to provide a 4- 

year phase-in of the payments under the 

ESRD PPS for renal dialysis services 

furnished on or after January 1, 2011, 

with payments under the ESRD PPS 

fully implemented for renal dialysis 

services furnished on or after January 1, 

2014. We use the term ‘‘transition’’ 

rather than ‘‘phase-in’’ to be consistent 

with other Medicare payment systems. 

Section 1881(b)(14)(E)(ii) of the Act 

permitted ESRD facilities to make a onetime election to be excluded from the 

transition. An ESRD facility that elected 

to be excluded from the transition 

receives payment for renal dialysis 

services furnished on or after January 1, 

2011, based on 100 percent of the 

payment rate under the ESRD PPS 

rather than a blended payment based in 

part on the payment under the basic 

case-mix adjusted composite payment 

system and in part on the payment 

under the ESRD PPS. Section 

1881(b)(14)(E)(iii) of the Act also 

requires that we make an adjustment to 

payments during the transition so that 

the estimated total amount of payments 

under the ESRD PPS, including 

payments under the transition, equals 

the estimated total amount of payments 

that would otherwise occur under the 

ESRD PPS without such a transition. We 

refer to this provision as the transition 

budget-neutrality adjustment. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70235), we discussed the 

methodology used to develop the 

transition budget-neutrality adjustment 

factor. We explained that there were two 

parts that comprised the adjustment. For 

the first part, we created a one-time 

payment adjustment to the composite 

rate portion of the blended payment 

during the transition to account for the 

per treatment costs of ESRD drugs with 

an injectable equivalent that were paid 

under Part D. We finalized the one-time 

addition of the CY 2011 Part D per 

treatment amount of $0.49 to the 

composite rate (76 FR 70231). For the 

second part, we computed a factor that 

would make the estimated total amount 

of payments under the ESRD PPS, 

including payments under the 

transition, equal to the estimated total 

amount of payments that would 

otherwise occur without such a 

transition. We finalized in the CY 2011 

ESRD PPS final rule a transition budgetneutrality adjustment of 3.1 percent 

based on estimates of ESRD facilities 

that would elect to be excluded from the 

transition. On April 6, 2011, we 

published an interim final rule (76 FR 

18930) in which we revised the 

transition budget-neutrality adjustment 

from 3.1 to 0.0 percent for treatments 

furnished from April 1, 2011 through 

December 31, 2011. For CY 2012, we 

did not make any changes to our 

methodology for computing the second 

part of the transition budget-neutrality 

adjustment. In the CY 2012 ESRD PPS 

final rule (76 FR 70236), we finalized a 

zero percent reduction to all payments 

made to ESRD facilities for CY 2012 

(that is, the zero percent adjustment was 

applied to both the blended payments 

under the transition and payments made 

under the 100 percent ESRD PPS). 

Given that the transition budgetneutrality adjustment required under 

section 1881(b)(14)(E)(iii) of the Act 

applies in each year of the transition, we 

must update the transition budgetneutrality adjustment for CY 2013, the 

third year of the transition. As discussed 

in detail below, and in accordance with 

section 1881(b)(14)(E)(iii) of the Act, an 

adjustment is made to payments so that 

estimated total payments under the 

transition equal estimated total payment 

amounts without such a transition. In 

this proposed rule, we are not proposing 

for CY 2013 to change the methodology 

used to calculate either part of the 

transition budget-neutrality adjustment 

factor. We are, however, proposing to 

use updated data. The first part, which 

was addressed and finalized in the CY 

2012 ESRD PPS final rule, is the Part D 

payment amount added to the 

composite rate. Therefore, this amount 

is updated annually by the ESRDB 

market basket reduced by the 

productivity adjustment. The second 

part is updated as described below. 

For CY 2013, we started with 2011 

utilization data from claims, as 2011 is 

the latest complete year of claims data 

available. For this proposed rule, we 

used the December claims file. We 

updated the CY 2011 utilization data to 

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CYs 2012 and 2013 payments by using 

the price growth factors for CYs 2012 

and 2013, as discussed in the impact 

analysis in section VII.B.1.a. of this 

proposed rule. We then took the 

estimated payments under the full CY 

2013 ESRD PPS and the blended 

payments under the transition based on 

actual facility election data and 

compared these estimated payments to 

the total estimated payments in CY 2013 

as if all facilities had elected to receive 

payment under the ESRD PPS. We then 

calculated the transition budgetneutrality factor to be 1 minus the ratio 

of estimated payments under the ESRD 

PPS if there were no transition to the 

total estimated payments under the 

transition, which results in 0 percent 

reduction factor for CY 2013. Therefore, 

for CY 2013, we are proposing a 0 

percent reduction to all payments made 

to ESRD facilities (that is, the 0 percent 

adjustment would be applied to both the 

blended payments made under the 

transition and payments made under the 

100 percent ESRD PPS) for renal 

dialysis items and services furnished 

January 1, 2013 through December 31, 

2013. We solicit comments on the 

proposed second part of CY 2013 

transition budget-neutrality adjustment. 

5. Proposed Updates to the Wage Index 

Values and Wage Index Floor for the 

Composite Rate Portion of the Blended 

Payment and the ESRD PPS Payment 

Section 1881(b)(14)(D)(iv)(II) of the 

Act provides that the ESRD PPS may 

include such other payment 

adjustments as the Secretary determines 

appropriate, such as a payment 

adjustment by a geographic wage index, 

such as the index referred to in section 

1881(b)(12)(D) of the Act. In the CY 

2011 ESRD PPS final rule (75 FR 49117), 

we finalized the use of the OMB’s 

CBSA-based geographic area 

designations to define urban/rural areas 

and corresponding wage index values. 

In the CY 2012 ESRD PPS final rule (76 

FR 70241), we finalized the wage index 

policy that is used under the ESRD PPS. 

Under the ESRD PPS, we have adopted 

the same method and source of wage 

index values used previously to 

compute the wage index values for the 

basic case-mix adjusted composite 

payment system. Specifically, we 

finalized our policies to continue to 

utilize the methodology established 

under the composite payment system 

for updating the wage index values 

using the OMB’s CBSA-based 

geographic area designations to define 

urban and rural areas and corresponding 

wage index value values; the gradual 

reduction of the wage index floor during 

the transition; and the policies for areas 

with no hospital data. For CY 2013, we 

are not proposing any changes to the 

methodology finalized in the CY 2012 

final rule and will update the wage 

index values using the FY 2013 IPPS 

pre-floor, pre-reclassified hospital wage 

data. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70242), we explained that we 

would continue to use the labor-related 

share of 53.711 finalized in the 2005 

PFS final rule (70 FR 70168) for the 

composite rate portion of the blended 

payment during the transition and 

continue to use a labor-related share of 

41.737 for the ESRD PPS payment for 

CY 2012. We also discussed that the 

wage data used to construct the wage 

index under the ESRD PPS is updated 

annually, based on the most current 

data available and based on OMB’s 

urban and rural definitions and 

corresponding wage index values. 

Additional discussion on the laborshare can be found in section II.B.3.b. of 

this proposed rule. For CY 2013, we are 

not proposing to change the laborrelated shares as finalized in the CY 

2012 rule and as discussed in section 

II.B.3.b of this proposed rule. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70240), we discussed that during 

the transition we would continue to 

update the composite rate portion of the 

ESRD PPS blended payment, including 

adjusting payments for geographic 

differences in area wage levels, as noted 

above. We also discussed the 

application of the wage index budgetneutrality adjustment factor to the area 

wage index values for the composite 

rate portion of the ESRD PPS blended 

payment. In this proposed rule, for CY 

2013 we are not proposing any changes 

to the methodology for the wage index 

used to adjust the composite rate 

portion of the ESRD PPS blended 

payment. 

a. Reduction to the ESRD Wage Index 

Floor 

In the CY 2012 ESRD PPS final rule 

(76 FR 70239 through 70241), we 

finalized that we will continue to 

reduce the wage index floor by 0.05 for 

each of the remaining years of the 

transition. That is, we finalized the 0.05 

reduction to the wage index floor for 

CYs 2012 and 2013, resulting in a wage 

index floor of 0.550 and 0.500, 

respectively. The wage index floor value 

is used in lieu of wage index values 

below the floor. In CY 2013, the wage 

index floor only applies to areas located 

in Puerto Rico because those are the 

only areas that have wage index values 

below the wage index floor value of 

0.500 in CY 2013. The wage index floor 

is applied to both the composite rate 

portion of the blend and to the ESRD 

PPS. In this proposed rule, we are not 

proposing any changes to the wage 

index floor methodology or reduction. 

Consequently for CY 2013, we will 

continue to reduce the wage index floor 

by 0.05 which will reduce the wage 

index value from 0.550 to 0.500. The 

ESRD wage index floor value of 0.500 

would be applied to areas that are below 

the wage index floor. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70241), we explained that 

continuing to artificially adjust the wage 

index values after the transition by 

substituting a wage index floor is not an 

appropriate method to address low 

wages in certain geographic locations. 

Therefore, we would no longer apply a 

wage index floor beginning January 1, 

2014 because the wage index floor 

would be lower than areas with low 

wage index values. 

b. Policies for Areas With No Wage Data 

In the CY 2012 ESRD PPS final rule 

(76 FR 70241), we explained that we 

adopted the CBSA designations for the 

basic case-mix adjusted composite rate 

payment system and for the ESRD PPS. 

We also discussed and finalized the 

methodologies we use to calculate wage 

index values for ESRD facilities that are 

located in urban and rural areas where 

there are no hospital data. That is, for 

urban areas with no hospital data we 

compute the average wage index value 

of all urban areas within the State and 

use that value as the wage index. For 

rural areas with no hospital data, we 

compute the wage index using the 

average wage index values from all 

contiguous CBSAs to represent a 

reasonable proxy for that rural area. For 

rural Puerto Rico, we use the wage 

index floor as the wage index value, 

since all rural Puerto Rico areas are 

subject to the floor. 

We further explained that for rural 

Massachusetts, we determined that the 

borders of Dukes and Nantucket 

Counties are contiguous with Barnstable 

and Bristol counties. Under the 

methodology, the values for these 

counties are averaged to establish the 

wage index value for rural 

Massachusetts. In the CY 2012 ESRD 

PPS final rule (76 FR 70241), we 

finalized that for CY 2012 and 

subsequent years, we will continue to 

follow these methodologies for 

computing a wage index value for areas 

without hospital data for urban and 

rural geographic areas and for Puerto 

Rico. 

Subsequent to the issuance of the CY 

2012 ESRD PPS final rule, we 

determined that for CY 2012 there was 

a rural hospital with wage data to base 

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40962 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

an area wage index on for rural 

Massachusetts. We note that the wage 

index value for rural Massachusetts was 

correctly identified on the wage index 

table for CY 2012 based on the wage 

data for that rural hospital. 

Consequently, in this proposed rule we 

are correcting the statement in the CY 

2012 final rule that ‘‘For rural 

Massachusetts, we determined that the 

borders of Dukes and Nantucket 

Counties are contiguous with Barnstable 

and Bristol counties. Under the 

methodology, the values for these 

counties are averaged to establish the 

wage index value for rural 

Massachusetts’’ (76 FR 70241). 

Therefore, for CY 2012 and subsequent 

years, the area wage index value for 

rural Massachusetts is based on wage 

index data of the rural hospital. 

For CY 2013, we will continue to use 

the statewide urban average based on 

the average of all urban areas within the 

state for urban areas without hospital 

data. We note that Yuba City, California 

now has hospital data to calculate a 

wage index. Therefore, the methodology 

for computing a wage index for urban 

areas without hospital data no longer 

applies to that area. The only urban area 

without wage index data is HinevilleFort Stewart, GA. 

c. Proposed Wage Index BudgetNeutrality Adjustment 

In the CY 2012 ESRD PPS final rule 

(76 FR 70241 and 70242), we explained 

that we have broad discretion under 

section 1881(b)(14)(D)(iv)(II) of the Act 

to develop a geographic wage index. We 

explained that in addition to being 

given broad discretion, the section cites 

the wage index under the basic case-mix 

adjusted composite payment system as 

an example. We have previously 

interpreted the statutory requirement in 

section 1881(b)(12)(D) of the Act for the 

geographic adjustment for the basic 

case-mix adjusted composite payment 

system as requiring that the geographic 

adjustment be made in a budget-neutral 

manner. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70241 and 70242), we finalized 

the policy to apply the wage index in a 

budget-neutral manner under the ESRD 

PPS using a wage index budgetneutrality adjustment factor. We further 

explained that in the first year of the 

ESRD PPS, CY 2011, we did not apply 

a wage index budget-neutrality 

adjustment factor under the ESRD PPS 

because budget-neutrality was achieved 

through the overall 98 percent budgetneutrality requirement in section 

1881(b)(14)(A)(ii) of the Act. In the CY 

2012 ESRD PPS final rule (76 FR 70242), 

we finalized that for CY 2012 and CY 

2013 we will apply the wage index 

budget-neutrality adjustment to the 

wage index values for the composite 

rate portion of the blended payment and 

that for CY 2012 and subsequent years 

we will apply the wage index budgetneutrality adjustment to the ESRD PPS 

base rate for purposes of the ESRD PPS 

portion of the blended payment during 

the transition and the ESRD PPS 

payment. We are not proposing any 

changes to the wage index budgetneutrality adjustment methodology for 

CY 2013. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70242), we also finalized the 

methodology for computing the wage 

index budget-neutrality adjustment 

factor for CY 2012 and subsequent 

years. For CY 2013, we are not 

proposing any changes to the 

methodology. Consequently, for CY 

2013 wage index budget-neutrality 

adjustment factors, we use the fiscal 

year (FY) 2013 pre-floor, prereclassified, non-occupational mixadjusted hospital data to compute the 

wage index values, 2011 outpatient 

claims (paid and processed as of 

December 31, 2011), and geographic 

location information for each facility 

which may be found through Dialysis 

Facility Compare. Dialysis Facility 

Compare can be found at the Dialysis 

Facility Compare Web page on the CMS 

Web site at http://www.cms.hhs.gov/

DialysisFacilityCompare/. The FY 2013 

hospital wage index data for each urban 

and rural locale by CBSA may also be 

accessed on the CMS Web site at 

http://www.cms.hhs.gov/AcuteInpatient

PPS/WIFN/list.asp. The wage index data 

are located in the section entitled, ‘‘FY 

2013 Proposed Rule Occupational Mix 

Adjusted and Unadjusted Average 

Hourly Wage and Pre-Reclassified Wage 

Index by CBSA’’. 

To compute the CY 2013 wage index 

budget-neutrality adjustment factor for 

this proposed rule, using treatment 

counts from the 2011 claims and 

facility-specific CY 2012 payment rates, 

we computed the estimated total dollar 

amount that each ESRD facility would 

have received in CY 2012. The total of 

these payments became the target 

amount of expenditures for all ESRD 

facilities for CY 2013. Next, we 

computed the estimated dollar amount 

that would have been paid for the same 

ESRD facilities using the final ESRD 

wage index for CY 2013. The total of 

these payments becomes the new CY 

2013 amount of wage-adjusted 

expenditures for all ESRD facilities. 

After comparing these two dollar 

amounts (target amount divided by the 

new CY 2013 amount), we calculated 

two wage index budget-neutrality 

adjustment factors that, when 

multiplied by the applicable CY 2013 

estimated payments, would result in 

aggregate payments to ESRD facilities 

that would remain budget-neutral when 

compared to the target amount of 

expenditures. The first factor was 

applied to the ESRD PPS base rate. The 

second factor would be applied to the 

wage index values for the composite 

rate portion of the blended payment. 

Therefore, we are proposing for CY 

2013, a wage index budget-neutrality 

adjustment factor for the composite 

portion of the ESRD PPS blended 

payment of 1.001538, which would be 

applied directly to the ESRD wage index 

values. For the ESRD PPS (that is, for 

the full ESRD PPS payments and the 

ESRD PPS portion of the blended 

payments during the transition), we are 

proposing a wage index budgetneutrality adjustment factor of 1.000826 

would be applied to the ESRD PPS base 

rate. 

Because we apply the wage index 

budget-neutrality adjustment factor to 

the wage index values to ensure budgetneutrality under the composite rate 

portion of the blended payment, we also 

apply the wage index budget-neutrality 

adjustment factor to the wage index 

floor. Therefore, for the composite rate 

portion of the blended payment, for CY 

2013, we would apply the wage index 

budget-neutrality adjustment factor to 

the wage index floor of 0.500 which 

results in an adjusted wage index floor 

of 0.501 (1.001538 × 0.500). Under the 

ESRD PPS, the wage index floor for CY 

2013 is 0.500 because the wage index 

budget-neutrality adjustment factor is 

applied to the base rate. 

d. ESRD PPS Wage Index Tables 

The CY 2013 ESRD proposed wage 

index tables, referred to as Addendum 

A (ESRD facilities located in urban 

areas), and Addendum B (ESRD 

facilities located in rural areas) are 

posted on the CMS Web site at http:// 

www.cms.gov/ESRDPayment/PAY/ 

list.asp. The wage index tables list two 

separate columns of wage index values. 

One column represents the wage index 

values for the composite rate portion of 

the blended payment to which the wage 

index budget-neutrality adjustment 

factor has been applied. Another 

column lists the wage index values for 

the ESRD PPS, which does not reflect 

the application of the wage index 

budget-neutrality adjustment factor, 

because we have finalized for CY 2012 

and subsequent years, that we will 

apply the wage index budget-neutrality 

adjustment factor to the ESRD PPS base 

rate. 

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6. Proposed Drug Policy Changes 

a. Daptomycin 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050 through 49052), we stated 

that antibiotics used for the treatment of 

venous access infections and peritonitis 

are renal dialysis services under the 

ESRD PPS. Payments for anti-infective 

drugs in injectable forms (covered under 

Part B) and oral or other forms of 

administration (formerly covered under 

Part D) used in the treatment of ESRD, 

were included in computing the final 

ESRD PPS base rate and, therefore, 

would not be separately paid under the 

ESRD PPS. This policy also applies to 

any drug or biological that may be 

developed in the future. 

Subsequent to the publication of the 

CY 2011 ESRD PPS final rule, we 

received numerous comments 

indicating that vancomycin is indicated 

in the treatment of both ESRD and nonESRD conditions, such as skin 

infections. In the CY 2012 ESRD PPS 

final rule (75 FR 70243), we eliminated 

the restriction on vancomycin to allow 

ESRD facilities to receive separate 

payment by placing the AY modifier on 

the claim for vancomycin when 

furnished to treat non-ESRD related 

conditions. We also stipulated that in 

accordance with ICD–9 guidelines as 

described in the CY 2011 ESRD PPS 

final rule (75 FR 49107), an ESRD 

facility must report the diagnosis code 

for which vancomycin is indicated. We 

also reiterated that treatment of any skin 

infection that is related to renal dialysis 

access management would be 

considered a renal dialysis service paid 

under the ESRD PPS, and that no 

separate payment would be made. 

Finally, in response to comments, we 

stated that we would consider removing 

the system edit for daptomycin in future 

rulemaking. 

After consultation with our medical 

experts, we are proposing to eliminate 

the restriction on daptomycin to allow 

ESRD facilities to receive separate 

payment by placing the AY modifier on 

the claim for daptomycin when 

furnished to treat non-ESRD related 

conditions for CY 2013 and subsequent 

years. In accordance with ICD–9–CM 

coding guidelines, the ESRD facility 

would also be required to report the 

diagnosis code for which the 

daptomycin is indicated. We solicit 

public comments on our proposal to 

eliminate the restriction on daptomycin 

to allow ESRD facilities to receive 

separate payment for these drugs when 

furnished to treat non-ESRD related 

conditions. We will continue to monitor 

the use of anti-infectives furnished by 

ESRD facilities including those that are 

identified as non-ESRD related. 

b. Alteplase and Other Thrombolytics 

Medicare regulations at 

§ 413.237(a)(2) through (a)(6), and (b) 

specify the methodology used to 

calculate outlier payments. An ESRD 

facility is eligible for an outlier payment 

if its actual or imputed Medicare 

Allowable Payment (MAP) amount per 

treatment for ESRD outlier services 

exceeds a threshold. The MAP amount 

represents the average incurred amount 

per treatment for services that were or 

would have been considered separately 

billable services prior to January 1, 

2011. The discussion on the outlier 

policy is in section II.B.7. of this 

proposed rule. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70246), we explained that 

subsequent to the publication of the CY 

2011 ESRD PPS final rule, our clinical 

review of the 2007 ESRD claims used to 

develop the ESRD PPS revealed that 

dialysis facilities routinely used 

alteplase and other thrombolytic drugs 

for access management purposes. We 

explained that under the Medicare 

Benefit Policy Manual, Pub. 100–02, 

chapter 11, section 30.4.1, drugs used as 

a substitute for any of the listed items, 

or used to accomplish the same effect 

were covered under the composite rate. 

We further explained that because 

heparin is a composite rate drug and 

could be used for access management, 

any drug or biological used for the same 

purpose may not be separately paid. 

Section 413.237(a)(1) provides the 

definition of ESRD outlier services. 

Specifically, § 413.237(a)(1)(i) includes 

‘‘ESRD related drugs and biologicals 

that were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B.’’ 

Because outlier payments are 

restricted under § 413.237(a) to those 

items or services that were or would 

have been considered separately billable 

prior to January 1, 2011, in the CY 2012 

ESRD PPS final rule (76 FR 70249), we 

excluded thrombolytic drugs from the 

outlier policy and we recomputed the 

outlier MAP amounts to reflect this 

change. However, for CY 2012 we did 

not propose to exclude separate 

payment of thrombolytic drugs under 

the composite rate portion of the 

blended payment. 

For CY 2013, we are proposing that 

thrombolytic drugs would not be 

considered eligible for separate payment 

under the composite rate portion of the 

blended payment for those ESRD 

facilities that are receiving a blended 

payment under the transition. We 

believe that this proposal is consistent 

with the changes we made to our outlier 

policy regarding excluding thrombolytic 

drugs from outlier eligibility as 

discussed above. We solicit comment on 

our proposal to exclude thrombolytic 

drugs from separate payment under the 

composite rate portion of the blended 

payment during the transition. 

c. Part B Drug Pricing 

In the CY 2011 ESRD PPS proposed 

rule (74 FR 49991), with respect to 

estimating the imputed MAP amounts of 

ESRD outlier services that are separately 

billable under Part B, we proposed to 

use Average Sales Price (ASP) data for 

Part B ESRD-related drugs (which is 

updated quarterly). We did not make 

any changes to this proposed 

methodology in the CY 2011 final rule. 

In the CY 2012 ESRD PPS final rule (76 

FR 70243), we explained that ESRD 

facilities receiving blended payments 

under the transition would receive 

payments based on ASP for separately 

billable ESRD drugs and biologicals for 

the composite rate portion of the blend. 

In the CY 2012 ESRD PPS final rule (76 

FR 70244), we stated that under the 

outlier policy, we use the ASP 

methodology. 

We are proposing for CY 2013 and 

subsequent years to continue to use the 

ASP methodology, including any 

modifications finalized in the Physician 

Fee Schedule (PFS) final rules, to 

compute our outlier MAP amounts, the 

drug add-on, and any other policy that 

requires the use of payment amounts for 

drugs and biologicals that would be 

separately paid absent the ESRD PPS 

and for the composite rate portion of the 

blended payment during the transition. 

We also would use this methodology for 

payment analyses that CMS may 

perform. We are seeking comment on 

our proposal to apply the ASP 

methodology or any modifications to the 

ASP for these purposes, as updated from 

time to time in the PFS rule or in 

updating the ASP pricing. 

7. Proposed Revisions to the Outlier 

Policy 

Section 1881(b)(14)(D)(ii) of the Act 

requires that the ESRD PPS include a 

payment adjustment for high cost 

outliers due to unusual variations in the 

type or amount of medically necessary 

care, including variability in the amount 

of erythropoiesis stimulating agents 

(ESAs) necessary for anemia 

management. Our regulations at 42 CFR 

413.237(a)(1) provides that ESRD outlier 

services include: (i) ESRD-related drugs 

and biologicals that were or would have 

been, prior to January 1, 2011, 

separately billable under Medicare Part 

B; (ii) ESRD-related laboratory tests that 

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were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B; (iii) medical/ 

surgical supplies, including syringes 

used to administer ESRD-related drugs, 

that were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B; and (iv) renal 

dialysis service drugs that were or 

would have been, prior to January 1, 

2011, covered under Medicare Part D, 

excluding ESRD-related oral-only drugs. 

In the CY 2011 ESRD PPS final rule, 

we stated that for purposes of 

determining whether an ESRD facility 

would be eligible for an outlier 

payment, it would be necessary for the 

facility to identify the actual ESRD 

outlier services furnished to the patient 

by line item on the monthly claim (75 

FR 49142). 

Drugs, laboratory tests, and medical/ 

surgical supplies that we would 

recognize as outlier services were 

specified in Attachment 3 of Change 

Request 7064, Transmittal 2033 issued 

August 20, 2010 rescinded and replaced 

by Transmittal 2094, dated November 

17, 2010. With respect to the outlier 

policy, Transmittal 2094 identified 

additional drugs and laboratory tests 

that may be eligible for ESRD outlier 

payment. Transmittal 2094 was 

rescinded and replaced by Transmittal 

2134, dated January 14, 2011 which was 

issued to correct the subject on the 

Transmittal page and made no other 

changes. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70246), we finalized our 

proposal to eliminate the issuance of a 

specific list of eligible outlier service 

drugs which were or would have been 

separately billable under Medicare Part 

B prior to January 1, 2011. We stated in 

that rule, however, that we planned to 

use separate guidance to continue to 

identify renal dialysis service drugs 

which were or would have been covered 

under Part D for outlier eligibility 

purposes in order to provide unit prices 

for calculating imputed outlier services. 

We also plan to identify, through our 

monitoring efforts, items and services 

that are incorrectly being identified as 

eligible outlier services. Any updates to 

the list of renal dialysis items and 

services that qualify as outlier services 

will be made through administrative 

issuances, if necessary. 

Our regulations at 42 CFR 

413.237(a)(2) through (a)(6), and (b) 

specify the methodology used to 

calculate outlier payments. An ESRD 

facility is eligible for an outlier payment 

if its actual or imputed Medicare 

Allowable Payment (MAP) amount per 

treatment for ESRD outlier services 

exceeds a threshold. The MAP amount 

represents the average incurred amount 

per treatment for services that were or 

would have been considered separately 

billable services prior to January 1, 

2011. The threshold is equal to the 

ESRD facility’s predicted ESRD outlier 

services MAP amount per treatment 

(which is case-mix adjusted) plus the 

fixed dollar loss amount. In accordance 

with § 413.237(c) of the regulations, 

facilities are paid 80 percent of the per 

treatment amount by which the imputed 

MAP amount for outlier services (that is, 

the actual incurred amount) exceeds 

this threshold. ESRD facilities are 

eligible to receive outlier payments for 

treating both adult and pediatric 

dialysis patients. 

In the CY 2011 ESRD PPS final rule, 

using 2007 data, we established the 

outlier percentage at 1.0 percent of total 

payments (75 FR 49142 through 49143). 

We also established the fixed dollar loss 

amounts that are added to the predicted 

outlier services MAP amounts. The 

outlier services MAP amounts and fixed 

dollar loss amounts are different for 

adult and pediatric patients due to 

differences in the utilization of 

separately billable services among adult 

and pediatric patients (75 FR 49140). 

As we explained in the CY 2011 ESRD 

PPS final rule (75 FR 49138 and 49139), 

the predicted outlier services MAP 

amounts for a patient would be 

determined by multiplying the adjusted 

average outlier services MAP amount by 

the product of the patient-specific casemix adjusters applicable using the 

outlier services payment multipliers 

developed from the regression analysis 

to compute the payment adjustments. 

The average outlier services MAP 

amount per treatment for CY 2011 was 

based on payment amounts reported on 

2007 claims and adjusted to reflect 

projected prices for 2011. For CY 2012, 

the outlier services MAP amounts and 

fixed dollar loss amounts were based on 

2010 data (76 FR 70250). That is, for 

CYs 2011 and 2012, the MAP and fixed 

dollar loss amounts were computed 

based on pre-ESRD PPS claims data and 

utilization. 

a. Impact of Proposed Changes to the 

Outlier Policy 

For CY 2013, we are not proposing 

any changes to the methodology used to 

compute the MAP or fixed dollar loss 

amounts. Rather, in this proposed rule, 

we are updating the outlier services 

MAP amounts and fixed dollar loss 

amounts to reflect the utilization of 

outlier services reported on the 2011 

claims using the December 2011 claims 

file. That is, for CY 2013, the MAP and 

fixed dollar loss amounts are based on 

ESRD PPS claims and utilization. The 

impact of this update is shown in Table 

1 which compares the outlier services 

MAP amounts and fixed dollar loss 

amounts used for the outlier policy in 

CY 2012 with the updated estimates for 

this proposed rule. The estimates for the 

proposed outlier CY 2013 outlier policy, 

which are included in Column III of 

Table 1, were inflation adjusted to 

reflect projected 2013 prices for outlier 

services. 

TABLE 1—OUTLIER POLICY: IMPACT OF USING UPDATED DATA TO DEFINE THE OUTLIER POLICY

Column I 

Outlier policy for CY 2012 

(based on 2010 

data price inflated to 

2012) * 

Column II 

Updated outlier estimates 

based on 2011 

data price inflated to 

2012 * 

Column III 

Proposed outlier policy for 

CY 2013 (based on 2011 

data price inflated to 

2013) * 

Age <18 Age >=18 Age <18 Age >=18 Age <18 Age >=18 

Average outlier services MAP amount per treatment 1 ... $46.26 $81.73 $40.20 $60.58 $41.49 $62.95 

Adjustments: 

Standardization for outlier services 2 ........................ 1.0024 0.9738 1.0731 0.9898 1.0731 0.9898 

MIPPA reduction ....................................................... 0.98 0.98 0.98 0.98 0.98 0.98 

Adjusted average outlier services MAP amount 3 .... $45.44 $78.00 $42.27 $58.76 $43.63 $61.06 

Fixed dollar loss amount that is added to the predicted 

MAP to determine the outlier threshold 4 ..................... $71.64 $141.21 $46.70 $105.96 $50.15 $113.35 

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TABLE 1—OUTLIER POLICY: IMPACT OF USING UPDATED DATA TO DEFINE THE OUTLIER POLICY—Continued 

Column I 

Outlier policy for CY 2012 

(based on 2010 

data price inflated to 

2012) * 

Column II 

Updated outlier estimates 

based on 2011 

data price inflated to 

2012 * 

Column III 

Proposed outlier policy for 

CY 2013 (based on 2011 

data price inflated to 

2013) * 

Age <18 Age >=18 Age <18 Age >=18 Age <18 Age >=18 

Patient months qualifying for outlier payment ................. 5.7% 5.4% 7.6% 5.2% 7.4% 5.1% 

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated prices for outlier services (that is, 

2012 prices in Columns I and II and projected 2013 prices in Column III). 1Excludes patients for whom not all data were available to calculate projected payments under an expanded bundle. The outlier services MAP 

amounts are based on 2011 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are in place under 

the ESA claims monitoring policy were applied. 2Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing Case Mix Adjusters for adult and 

pediatric patient groups. 3This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP for 

each patient. 4The fixed dollar loss amounts were calculated using 2011 data to yield total outlier payments that represent 1% of total projected payments 

for the ESRD PPS. 

As seen in Table 1, the estimated 

fixed dollar loss amounts that determine 

the 2013 outlier threshold amounts 

(Column III) are lower than those used 

for the 2012 outlier policy (Column I). 

The main reason for these reductions is 

the lower utilization of epoetin and 

other outlier services in the first year of 

the PPS. This can be seen by comparing 

the outlier service MAP amounts in 

Column I (which are based on 2010 

data) vs. Column II (which is based on 

2011 data). 

The fixed dollar loss amounts which 

are added to the predicted MAP 

amounts per treatment to determine the 

outlier thresholds are being updated 

from $141.21 to $113.35 for adult 

patients and from $71.64 to $50.15 for 

pediatric patients compared with CY 

2012 values. We estimate that the 

percentage of patient months qualifying 

for outlier payments under the current 

policy will be 5.1 percent and 7.4 

percent for adult and pediatric patients, 

respectively, based on our use of 2011 

data. The pediatric outlier MAP and 

fixed dollar loss amounts continue to be 

lower for pediatric patients than adults 

due to the continued lower use of 

outlier services (primarily reflecting 

lower use of epoetin and other 

injectable drugs). 

b. Outlier Policy Percentage 

Section 413.220(b)(4) stipulates that 

the per treatment base rate is reduced by 

1 percent to account for the proportion 

of the estimated total payments under 

the ESRD PPS that are outlier payments. 

Because of the decline in utilization 

associated with the implementation of 

the expanded bundle, the 1 percent 

target for outlier payments was not 

achieved in CY 2011. Based on the 2011 

claims, outlier payments represented 

approximately 0.52 percent of total 

payments. That is, the historical data 

previously used to set the outlier 

thresholds for CY 2011 overestimated 

the use of outlier services under the 

expanded ESRD PPS, leading to lower 

outlier payments than expected. Use of 

2011 data to recalibrate the thresholds, 

reflecting lower utilization of EPO and 

other outlier services, is expected to 

result in aggregate outlier payments 

close to the 1 percent target in CY 2013. 

We believe this update to the outlier 

MAP and fixed dollar loss amounts for 

CY 2013 will increase payments for 

ESRD beneficiaries requiring higher 

resource utilization in accordance with 

a 1 percent outlier policy. 

We note that recalibration of the fixed 

dollar loss amounts in this proposed 

rule for CY 2013 outlier payments 

results in no change in payments to 

ESRD facilities for beneficiaries with 

renal dialysis items and services that are 

not eligible for outlier payments, but 

raises payments to providers for 

beneficiaries with renal dialysis items 

and services that are eligible for outlier 

payments. Therefore, beneficiary coinsurance obligations would increase for 

renal dialysis services eligible for outlier 

services and would remain unchanged 

for those not eligible. 

C. Clarifications Regarding the ESRD 

PPS 

1. Reporting Composite Rate Items and 

Services 

In the CY 2011 ESRD PPS final rule 

(75 FR 49036), we explained that 

section 1881(b)(14)(B)(i) of the Act 

requires that the ESRD PPS payment 

bundle include composite rate services. 

The basic case-mix adjusted composite 

payment system represented a limited 

PPS for a bundle of routine outpatient 

maintenance renal dialysis services. We 

defined composite rate services at 

§ 413.171 as ‘‘items and services used in 

the provision of outpatient maintenance 

dialysis for the treatment of ESRD and 

included in the composite payment 

system established under section 

1881(b)(7) [of the Act] and the basic 

case-mix adjusted composite payment 

system established under section 

1881(b)(12) of the Act.’’ In § 413.171 we 

also defined renal dialysis services as 

including, ‘‘items and services included 

in the composite rate for renal dialysis 

services as of December 31, 2010.’’ 

The composite rate included a 

number of items and services beyond 

the dialysis treatment itself. In the CY 

2011 ESRD PPS final rule (75 FR 49173), 

we explained that currently services 

that are billed on the ESRD claim do not 

provide any detail of the composite rate 

items and services that are furnished to 

the patient. As we discussed in the 

Medicare Claims Processing Manual, 

Pub. 100–04, chapter 8, sections 50.1 

and 50.2., laboratory tests and drugs 

covered under the facility’s composite 

rate may not be billed separately. As 

mentioned above, the composite rate 

represented the routine items and 

services provided to Medicare 

beneficiaries for outpatient maintenance 

dialysis, therefore was full payment for 

those items and services. It would not 

have been appropriate for ESRD 

facilities to bill for items and services in 

the composite rate because this would 

result in duplicate payments made by 

Medicare. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49048), we also explained that in 

our analysis of the ESRD claims we 

identified drugs and biologicals that 

were included in the composite 

payment rate but for which ESRD 

facilities received separate payment in 

addition to the composite rate payment. 

Because these composite rate drugs and 

biologicals were listed separately on the 

ESRD claims, separate payment was 

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inadvertently made. We further 

explained that we excluded those 

payments from the final ESRD PPS base 

rate calculation. We also noted that the 

Medicare Benefit Policy Manual, Pub. 

100–02, chapter 11, section 30.4.1 lists 

the drugs and fluids that were included 

under the composite payment system as 

heparin, antiarrythmics, protamine, 

local anesthetics, apresoline, dopamine, 

insulin, lidocaine, mannitol, saline, 

pressors, heparin antidotes, benadryl, 

hydralazine, lanoxin, solu-cortef, 

glucose, antihypertensives, 

antihistamines, dextrose, inderal, 

levophed, and verapamil. The Medicare 

Benefit Policy Manual, Pub. 100–02, 

chapter 11, section 30.4.1 also explicitly 

states, ‘‘* * * drugs used in the dialysis 

procedure are covered under the 

facility’s composite rate and may not be 

billed separately. Drugs that are used as 

a substitute for any of these items, or are 

used to accomplish the same effect, are 

also covered under the composite rate.’’ 

The manual further provides that 

‘‘administration of these items (both the 

staff time and supplies) is covered 

under the composite rate and may not 

be billed separately’’ (75 FR 49048). In 

the CY 2012 final rule (76 FR 70243), 

with regards to antibiotics, we provided 

for separate payment for vancomycin 

when furnished to treat non-ESRD 

related conditions. Also, in section 

II.B.6.a of this proposed rule, we 

proposed to provide for separate 

payment for daptomycin if furnished for 

non-ESRD-related conditions. We also 

eliminated the payment distinction for 

antibiotics furnished in an ESRD facility 

or in the home used to treat access 

infections or peritonitis. We finalized 

that antibiotics furnished in the home to 

treat access site infections and 

peritonitis would be eligible for outlier 

payment (76 FR 70246). 

As described at § 413.239, there are 

ESRD facilities receiving reimbursement 

under the transition, that is, receiving a 

blended payment of the basic case-mix 

adjusted composite rate payment system 

and the ESRD PPS. If an ESRD facility 

receives payment under the transition 

and reports a drug, biological, or 

laboratory test that was included in the 

composite rate on the ESRD claim, it 

could receive separate payment for that 

item or service within the portion of the 

blended payment that is based on the 

basic case-mix adjusted composite 

payment system. 

As mentioned above and defined at 

§ 413.237, ESRD-related drugs, 

biologicals, and laboratory tests that 

were or would have been separately 

payable under the basic case-mix 

adjusted composite payment system 

qualify as eligible outlier services. In the 

CY 2012 ESRD PPS final rule (76 FR 

70246), we finalized the elimination of 

the issuance of a specific list of eligible 

outlier service drugs which were or 

would have been separately billable 

under Medicare Part B prior to January 

1, 2011. Therefore, if an ESRD facility 

reports a drug or biological that was 

included in the basic case-mix adjusted 

composite payment system on the ESRD 

claim, it would inappropriately be 

applied toward an outlier calculation. 

This is because all drugs and biologicals 

with a rate available on the ASP pricing 

file when the modifier AY is not present 

are eligible for outlier consideration. 

As a result of our monitoring efforts, 

we continue to see composite rate drugs 

reported on ESRD claims. Therefore, in 

this proposed rule we are reiterating 

that composite rate items and services 

are not to be reported on the ESRD 

facility claim. We are instituting 

measures to ensure that composite rate 

drugs will be prevented from being 

applied to the outlier payment. These 

measures will be discussed through 

administrative issuances. We are 

continuing to monitor the reporting of 

composite rate items and services on 

ESRD claims and plan to take actions to 

recoup inappropriate and duplicative 

payments. If the inclusion of composite 

rate items and services such as 

laboratory tests, drugs and supplies on 

claims will be required, we will discuss 

this requirement in future rulemaking. 

2. ESRD Facility Responsibilities for 

ESRD-Related Drugs and Biologicals 

It has come to our attention that some 

ESRD facilities are requiring ESRD 

beneficiaries to purchase renal dialysis 

drugs and are informing beneficiaries 

not to use their Part D plan for their 

purchases. 

Section 1866(a)(1)(A) of the Act as 

codified in regulations at 42 CFR 489.21 

prohibits providers from billing 

beneficiaries for services for which the 

beneficiary would have been entitled to 

have payment made under Medicare if 

the provider appropriately filed claims. 

Furthermore, section 1881(b)(2)(A) of 

the Act states that payments shall be 

made to a renal dialysis facility only if 

it agrees to accept such payments as 

payment in full for covered services 

except for the beneficiary co-insurance 

and deductible amounts. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49045), we explained that the 

ESRD PPS bundled base rate reflects 

Medicare payment for the average ESRD 

patient. We stated that we had 

incorporated payments under the basic 

case-mix adjusted composite rate 

payment system as well as payments for 

separately billable items and services 

into the ESRD PPS base rate. As a result, 

we believe the ESRD PPS payments are 

sufficient and reflect the average cost of 

providing care to the average patient 

with ESRD and therefore, we expect 

that, on average, high cost patients 

would be offset by low cost patients. In 

the CY 2011 ESRD PPS final rule (75 FR 

49045), we also explained that we had 

provided for higher acuity patients with 

patient case-mix adjusters and outlier 

payments for high-cost patients. We 

further cited 42 CFR § 494.90 of the 

ESRD Conditions for Coverage which 

requires the development of an 

individualized patient plan of care to 

address patient needs and concluded 

that we believe ESRD facilities should 

make medical decisions based on 

patient needs and not solely on a 

financial basis. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050), we stipulated that any 

drug or biological (that is injectable, oral 

or other forms of administration) 

furnished for the purpose of access 

management, anemia management, 

vascular access or peritonitis, cellular 

management and bone and mineral 

metabolism would be considered renal 

dialysis services under the ESRD PPS. 

Any drug or biological used as a 

substitute for a drug or biological that 

was included in the ESRD PPS bundled 

base rate would also be a renal dialysis 

service and would not be eligible for 

separate payment. Antiemetics, antiinfectives, antipruritics, anxiolytic, 

excess fluid management, fluid and 

electrolyte management and pain 

management could be used for dialysis 

purposes and therefore, considered 

ESRD related. We indicated that we 

presumed these drugs and biologicals in 

whatever form they are furnished to be 

renal dialysis services unless indicated 

that they are used for non-ESRD related 

conditions. Drugs and biologicals paid 

under Part D that are furnished by an 

ESRD facility for ESRD-related 

purposes, would be considered renal 

dialysis services (75 FR 49050 and 

49051). 

We are reiterating in this proposed 

rule that ESRD facilities are responsible 

for furnishing renal dialysis items and 

services that are required to meet 

patient needs. This would include oral 

or other forms of administration of 

injectable drugs and biologicals that are 

furnished for ESRD-related conditions. 

We would also expect that ESRD 

facilities would not restrict access to 

necessary drugs for financial purposes, 

requiring patients to purchase medically 

necessary drugs and biologicals. We 

expect that ESRD facilities would 

furnish drugs and biologicals that had 

been considered medically necessary 

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prior to the implementation of the ESRD 

PPS and not exclude them because the 

ESRD facility is now financially 

responsible for these drugs and 

biologicals. Because of the reasons cited 

above, ESRD facilities may not require, 

induce or coerce beneficiaries to 

purchase any renal dialysis item or 

service. 

3. Use of AY Modifiers 

In response to comments received, in 

the CY 2011 ESRD PPS final rule, we 

stated that we had developed a 

mechanism to be used by ESRD 

facilities to identify and be paid 

separately for non-ESRD-related drugs 

and biologicals (75 FR 49052 and 75 FR 

49168). We provided this mechanism in 

order to support a Medicare 

beneficiary’s need for the furnishing of 

non-ESRD-related items and services 

(that is, predominantly drugs and 

laboratory tests) during a dialysis 

treatment to mitigate the need for the 

beneficiary to receive additional 

injections or health care visits. We 

further stated that in the event that 

supplies or equipment are not ESRDrelated, ESRD facilities would be 

required to place a modifier for those 

supplies and equipment signifying that 

they were used for services that are not 

ESRD-related and eligible for separate 

payment (75 FR 49168). Change Request 

7064, Transmittal 2033, entitled ‘‘End 

Stage Renal Disease (ESRD) Prospective 

Payment System (PPS) and 

Consolidated Billing for Limited Part B 

Services, issued on August 20, 2010, reissued November 17, 2010 under 

Transmittal 2094, and re-issued January 

14, 2011 under Transmittal 2134, 

provided instructions in the use of the 

modifier. In that Change Request, we 

indicated that the claim lines for 

laboratory tests and drugs provided to a 

beneficiary for reasons other than the 

treatment of ESRD, must be submitted 

with the AY modifier to allow for 

separate payment outside of the ESRD 

PPS. In the CY 2012 final rule, we 

provided for the use of the AY modifier 

with vancomycin, if used for non-ESRDrelated conditions with the requirement 

that the ESRD facilities include the 

diagnosis code of the condition (76 FR 

70243). In this proposed rule, in section 

II.B.6.a, we are also proposing the use of 

the AY modifier with daptomycin for 

non-ESRD related conditions. ESRD 

facilities will also be required to 

indicate the ICD–9–CM code on the 

claim that reflects the condition 

requiring the use of daptomycin. 

Our monitoring activities have 

identified that there are ESRD facilities 

and clinical laboratories that are 

appending the AY modifier for items 

that we believe are ESRD-related. 

Additionally, some ESRD facilities and 

clinical laboratories appear to be 

appending the AY modifier on many 

items and services reported on the 

claims. We are reiterating in this 

proposed rule that the purpose of the 

AY modifier is to allow beneficiaries the 

convenience to receive non-ESRDrelated items (that is, drugs and 

laboratory tests) during their dialysis 

treatment and to allow the ESRD facility 

to receive payment for furnishing those 

items. The AY modifier is also intended 

to allow separate payment to 

laboratories in the event an ESRDrelated laboratory test was required for 

non-ESRD conditions. The AY modifier 

is not intended to be used to receive 

separate payment for items that are 

ESRD-related and therefore are included 

in the ESRD PPS base rate. We are 

continuing to monitor the use of the AY 

modifier and intend to take steps to 

recoup inappropriate payments. In the 

event that we believe that the AY 

modifier is not being used for the 

purpose intended, we may be forced to 

discontinue the AY modifier and cease 

to provide separate payment for any 

non-ESRD-related drug or laboratory test 

furnished. 

III. End-Stage Renal Disease (ESRD) 

Quality Incentive Program (QIP) for 

Payment Year (PY) 2015 

A. Background 

For over 30 years, monitoring the 

quality of care provided to end-stage 

renal disease (ESRD) patients by dialysis 

providers or facilities (hereinafter 

referred to collectively as ‘‘facility’’ or 

‘‘facilities’’) has been an important 

component of the Medicare ESRD 

payment system. The ESRD quality 

incentive program (QIP) is the most 

recent step in fostering improved 

patient outcomes by establishing 

incentives for dialysis facilities to meet 

or exceed performance standards 

established by CMS. The ESRD QIP is 

authorized by section 153(c) of MIPPA, 

which added section 1881(h) to the Act. 

CMS established the ESRD QIP for PY 

2012, the initial year of the program in 

which payment reductions are being 

made, in two rules published in the 

Federal Register on August 12, 2010 

and January 5, 2011 (75 FR 49030 and 

76 FR 628, respectively). On November 

10, 2011, CMS published a rule in the 

Federal Register outlining the PY 2013 

and PY 2014 ESRD QIP (76 FR 70228). 

Section 1881(h) of the Act requires 

the Secretary to establish an ESRD QIP 

by (i) selecting measures; (ii) 

establishing the performance standards 

that apply to the individual measures; 

(iii) specifying a performance period 

with respect to a year; (iv) developing a 

methodology for assessing the total 

performance of each facility based on 

the performance standards with respect 

to the measures for a performance 

period; and (v) applying an appropriate 

payment reduction to facilities that do 

not meet or exceed the established Total 

Performance Score. This proposed rule 

discusses each of these elements and 

our proposals for their application to PY 

2015 and future years of the ESRD QIP. 

B. Considerations in Updating and 

Expanding Quality Measures Under the 

ESRD QIP for PY 2015 and Subsequent 

PYs 

1. Value-Based Purchasing (VBP) 

Overview 

Throughout the past decade, Medicare 

has been transitioning from a program 

that pays for healthcare based solely on 

the number of services furnished to a 

beneficiary to a program that ties 

portions of payments to providers and 

suppliers to the quality of services they 

deliver. By paying for the quality of 

care, rather than merely the quantity of 

care, we believe we are strengthening 

the healthcare system while also 

advancing the National Quality Strategy 

and the three part aim which promote 

(i) better care for the individual thereby 

(ii) advancing the health of the entire 

population while also (iii) reducing 

costs. CMS specifies the domains and 

specific measures of quality for our 

value-based purchasing (VBP) programs 

and we are working to link the aims of 

the National Quality Strategy with our 

payment policies on a national scale. 

There are currently six domains of 

measurement for our VBP programs, 

based on the six priorities of the 

National Quality Strategy: (i) Care 

coordination; (ii) population/ 

community health; (iii) efficiency and 

cost reduction; (iv) safety; (v) patientand caregiver-centered experience and 

outcomes; and (vi) clinical care. 

Together these domains not only 

encourage better care at the facility 

level, but also encourage different care 

settings to interface to comprehensively 

improve healthcare. Although currently 

none of the VBP programs measure 

quality across all of the six domains, we 

are working to ensure that each program 

considers measures supporting the six 

national priorities where feasible. 

Furthermore, we are working in 

partnership with facilities, beneficiaries, 

the National Quality Forum (NQF), the 

Measures Application Partnership, 

sister agencies in the Department of 

Health and Human Services (HHS), and 

other stakeholders to develop new 

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measures where gaps exist, refine 

measures requiring adjustment, and 

remove measures when appropriate. We 

are also working with stakeholders to 

ensure that the ESRD QIP serves the 

needs of our beneficiaries and also 

advances the goals of the National 

Quality Strategy. 

We believe that the development of an 

ESRD QIP that is successful in 

promoting the delivery of high quality 

healthcare services in dialysis facilities 

is paramount. We seek to adopt 

measures for the ESRD QIP that promote 

better, safer, and more efficient care. 

Our measure development and selection 

activities for the ESRD QIP take into 

account national priorities, such as 

those established by the National 

Priorities Partnership (http://www.

nationalprioritiespartnership.org/), HHS 

Strategic Plan (http://www.hhs.gov/

secretary/about/priorities/

priorities.html), the National Strategy 

for Quality Improvement in Healthcare 

(http://www.healthcare.gov/center/

reports/quality03212011a.html), and the 

HHS National Action Plan to Prevent 

Healthcare Associated Infections (HAIs) 

(http://www.hhs.gov/ash/initiatives/hai/

esrd.html). To the extent practicable, we 

have sought to adopt measures that have 

been endorsed by a national consensus 

organization, recommended by multistakeholder organizations, and 

developed with the input of facilities, 

purchasers/payers, beneficiaries, and 

other stakeholders. 

2. Brief Overview of Proposed PY 2015 

Measures 

Thus far, we have adopted measures 

for the ESRD QIP that fall under three 

of the six National Quality Strategy 

measure priority domains: 

• Safety: National Healthcare Safety 

Network (NHSN) Dialysis Event 

reporting; 

• Patient- and Caregiver-Centered 

Experience: In-Center Hemodialysis 

Consumer Assessment of Healthcare 

Providers and Systems (ICH CAHPS) 

survey reporting; and 

• Clinical Quality of Care: (i) 

Hemoglobin Greater Than 12 g/dL; (ii) 

Hemodialysis Adequacy (Urea 

Reduction Ratio (URR)); (iii) Vascular 

Access Type; (iv) and Mineral 

Metabolism reporting (76 FR 70228). 

For PY 2015, we are proposing to add 

new measures in the clinical quality of 

care domain and to expand the scope of 

the NHSN Dialysis Event reporting 

measure (safety domain) and the 

Mineral Metabolism reporting measure 

(clinical quality of care domain). We 

believe that the PY 2015 ESRD QIP not 

only further promotes the health of 

ESRD patients, but also strengthens the 

goals of the National Quality Strategy. 

To that end, and as proposed and 

further discussed below, we are 

proposing to include 11 measures in the 

PY 2015 ESRD QIP. We also propose to 

include these measures and measure 

topics in subsequent payment years. 

The following measures seek to evaluate 

facilities on the clinical quality of care 

which they deliver. 

• For purposes of evaluating anemia 

management: 

Æ Hemoglobin Greater Than 12 g/dL, 

a clinical measure. 

Æ Anemia Management, a reporting 

measure.* 

• To evaluate dialysis adequacy: 

Æ A clinical Kt/V measure for adult 

hemodialysis patients.* 

Æ A clinical Kt/V measure for adult 

peritoneal dialysis patients.* 

Æ A clinical Kt/V measure for 

pediatric hemodialysis patients.* 

• To determine whether patients are 

treated using the most beneficial 

type of vascular access: 

Æ An arteriovenous fistula measure. 

Æ A catheter measure. 

• To address effective bone mineral 

metabolism management: 

Æ Hypercalcemia, a clinical 

measure.* 

Æ Mineral Metabolism, a reporting 

measure (expansion proposed). 

Additionally, we are proposing to 

expand a previously adopted reporting 

measure addressing safety: 

• NHSN Dialysis Event reporting 

measure. 

We are also proposing to continue 

using a previously adopted reporting 

measure assessing patient- and 

caregiver-centered experience: 

• ICH CAHPS survey reporting 

measure. 

* Indicates that the measure is new to the 

ESRD QIP. 

Although, at this time, we are not 

proposing to adopt measures that 

address care coordination, population/ 

community health, or efficiency and 

cost of care, we are soliciting comments 

in this proposed rule on potential 

measures that would fall into each of 

these areas. We also discuss below the 

following measures that are under 

consideration for future adoption: a 30- 

Day Hospital Readmission measure to 

address care coordination; an access to 

care measure to address population/ 

community health; and an efficiency 

measure. We also discuss below the 

Standardized Hospitalization Ratio 

Admissions (SHR) measure and the 

Standardized Mortality Ratio (SMR) 

measure that we are considering for 

program adoption in future years. We 

welcome further comments on these and 

the other potential measures for future 

program years. 

3. PY 2014 Mineral Metabolism Measure 

As noted above, in the CY 2012 ESRD 

PPS final rule, we adopted the Mineral 

Metabolism reporting measure which 

requires each facility to attest that it 

monitored serum calcium and serum 

phosphorus at least once a month for 

each Medicare ESRD patient (76 FR 

70271). We have since realized, 

however, that it may be difficult for 

some facilities to make this attestation 

if, for example, a patient is seen at the 

beginning of the month, his or her blood 

is not drawn, and then he or she is 

hospitalized or transient for the 

remainder of the month. While it is our 

intention to encourage facilities to put 

systems and processes into place to 

ensure at least monthly serum calcium 

and phosphorus monitoring, we believe 

it is reasonable to give consideration to 

situations where the monthly blood 

draw does not happen within the 

dialysis facility given these scenarios. 

Therefore, for PY 2014, we propose to 

change the Mineral Metabolism 

reporting requirement. 

We considered proposing to require 

facilities to report the required 

information for less than 100 percent of 

their patients. Specifically, we 

considered lowering the threshold to 

require that a facility attest that it 

monitored on a monthly basis the serum 

calcium and serum phosphorus levels 

for 98 percent of its patients. We 

ultimately decided that a facility should 

be required to take and report these 

values for every patient at least once per 

month so that each beneficiary receives 

the highest standard of care. We realize, 

however, that there are circumstances 

beyond a facility’s control wherein it 

may not be able to draw a sample for 

this patient. Therefore, for purposes of 

scoring the measure, we propose to now 

require that, in order for a facility to 

receive 10 points on the PY 2014 

Mineral Metabolism measure, it must 

attest that it monitored on a monthly 

basis the serum calcium and serum 

phosphorus levels for every Medicare 

ESRD patient provided that: (i) The 

patient is alive for the entirety of the 

applicable month; (ii) if the patient is 

treated in-center, that patient was 

treated at that facility at least twice 

during the claim month; and (iii) if the 

patient receives dialysis at home, a 

facility must report this information 

regardless of the number of treatments, 

provided that a claim is submitted for 

that patient. Additionally, we propose 

that if a patient is hospitalized or 

transient during a claim month, the 

facility may monitor the serum calcium 

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and serum phosphorus readings for that 

patient for the month if a patient has 

labs drawn by another provider/facility, 

those labs are evaluated by an 

accredited laboratory (a laboratory that 

is accredited by, for example, Joint 

Commission, College of American 

Pathologists, AAB (American 

Association of Bioanalysts), or State or 

Federal agency), and the dialysis facility 

reviews the serum calcium and serum 

phosphorus readings. We believe that 

these proposals will provide more 

flexibility for facilities and will also 

prevent facilities from drawing blood, 

even when not necessary, each time a 

patient visits for fear that he or she will 

fail to come to the facility again during 

that month. We request comment on 

this proposal. We also request comment 

on our consideration to lower the 

attestation to monthly monitoring of 98 

percent of Medicare ESRD patients. We 

chose 98 percent in order to encourage 

improvement, and to ensure that we do 

not undermine the current level of highreporting (based on the CrownWeb pilot 

data). We recognize that 100 percent 

might not be appropriate due to some 

individual cases that may not fit 

specified criteria. 

Additionally, for purposes of 

clarification, we note that the PY 2014 

attestations for both the Mineral 

Metabolism and ICH CAHPS measures 

will become available in CROWNWeb in 

December. As noted in the CY 2011 

ESRD PPS final rule, these attestations 

must be made before January 31, 2013 

(76 FR 70269, 70271). 

4. Measures Application Partnership 

Review 

In addition to the considerations 

discussed above, in selecting measures 

for the PY 2015 ESRD QIP, we 

considered input from the multistakeholder group, the Measures 

Application Partnership (http:// 

www.qualityforum.org.map/). Section 

1890A(a)(1) of the Act, as added by 

section 3014(b) of the Affordable Care 

Act, requires the entity with a contract 

under section 1890(a) of the Act, 

currently NQF, to convene multistakeholder groups to provide input to 

the Secretary on the selection of quality 

and efficiency measures for use in 

certain programs. Section 1890A(a)(2) of 

the Act requires the Secretary, not later 

than December 1 of each year, to make 

available to the public a list of quality 

and efficiency measures that are under 

consideration for use in certain 

programs. Section 1890A(a)(3) of the 

Act requires the entity with a contract 

under section 1890(a) of the Act to 

transmit the input of the multistakeholder groups to the Secretary not 

later than February 1 of each year, 

beginning in 2012. Section 1890A(a)(4) 

of the Act requires the Secretary to take 

into consideration the input of the 

multi-stakeholder groups in selecting 

quality and efficiency measures. The 

Measures Application Partnership is the 

public-private partnership comprised of 

multi-stakeholder groups convened by 

NQF for the primary purpose of 

providing input on measures as required 

by sections 1890A(a)(1) and (3) of the 

Act. The Measures Application 

Partnership’s input on the quality and 

efficiency measures under consideration 

for adoption in CY 2012 was transmitted 

to the Secretary on February 1, 2012 and 

is available at (http://www.qualityforum.

org/WorkArea/linkit.aspx?LinkIdentifier

=id&ItemID=69885). As required by 

section 1890A(a)(4) of the Act, we 

considered these recommendations in 

selecting quality and efficiency 

measures for the ESRD QIP. 

Four proposed measures for the PY 

2015 ESRD QIP (that is, three for 

dialysis adequacy and one for 

hypercalcemia) were made publicly 

available in accordance with section 

1890A(a)(2) of the Act and were 

reviewed by the Measures Application 

Partnership. The Measures Application 

Partnership gave support to two of the 

proposed measures, NQF #1454: 

Proportion of patients with 

hypercalcemia and NQF #1423: 

Minimum spKt/V for Pediatric 

Hemodialysis Patients. The Measures 

Application Partnership supported the 

direction of a proposed composite 

measure comprised of two NQFendorsed measures, NQF #0249: 

Hemodialysis Adequacy Clinical 

Performance Measure III: Hemodialysis 

Adequacy—HD Adequacy—Minimum 

Delivered Hemodialysis Dose and NQF 

#0318: Peritoneal Dialysis Adequacy 

Clinical Performance Measure III— 

Delivered Dose of Peritoneal Dialysis 

Above Minimum. The Measures 

Application Partnership recommended 

that the composite measure comprised 

of the two NQF dialysis adequacy 

measures be tested to ensure feasibility. 

We have taken these comments into 

consideration for the PY 2015 ESRD 

QIP. We will further discuss these 

considerations and our proposals for the 

PY 2015 ESRD QIP measures in the 

section below. 

C. Proposed Measures for the PY 2015 

ESRD QIP and Subsequent PYs of the 

ESRD QIP 

Similar to our other quality reporting 

and pay for performance programs, we 

are proposing that once a quality 

measure is selected and finalized for the 

ESRD QIP through rulemaking, the 

measure would continue to remain part 

of the program for all future years, 

unless we remove or replace it through 

rulemaking or notification. We believe 

that this will streamline the rulemaking 

process, provide continuity of quality 

measurement, and allow ESRD facilities 

to plan both quality reporting and 

quality improvement activities. In 

general, we anticipate considering 

quality measures for removal or 

replacement if: (1) Measure performance 

among the majority of ESRD facilities is 

so high and unvarying that meaningful 

distinctions in improvements or 

performance can no longer be made; (2) 

performance or improvement on a 

measure does not result in better or the 

intended patient outcomes; (3) a 

measure no longer aligns with current 

clinical guidelines or practice; (4) a 

more broadly applicable (across settings, 

populations, or conditions) measure for 

the topic becomes available; (5) a 

measure that is more proximal in time 

to desired patient outcomes for the 

particular topic becomes available; (6) a 

measure that is more strongly associated 

with desired patient outcomes for the 

particular topic becomes available; or 

(7) collection or public reporting of a 

measure leads to negative unintended 

consequences. If there is reason to 

believe that a measure raises potential 

safety concerns, we are proposing that 

we would take immediate action to 

remove the measure from the ESRD QIP 

and not wait for the annual rulemaking 

cycle. Such measures would be 

promptly removed from the measure set, 

and we would confirm the removal in 

the next ESRD QIP rulemaking cycle. 

ESRD facilities and the public would be 

immediately notified of our decision to 

remove a measure that raises potential 

safety concerns through the usual ESRD 

program communication channels, 

including memos, email notification, 

and web postings. 

Many of the quality measures used in 

different Medicare and Medicaid 

reporting programs are endorsed by 

NQF. As part of its regular maintenance 

process for endorsed performance 

measures, the NQF requires measure 

stewards to submit annual measure 

maintenance updates and undergo 

maintenance of endorsement review 

every 3 years. Under the measure 

maintenance process, the measure 

steward (owner/developer) is 

responsible for updating and 

maintaining the currency and relevance 

of the measure and confirming 

specification changes to NQF on an 

annual basis. NQF solicits information 

from measure stewards for annual 

reviews in order to review measures for 

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continued endorsement in a specific 3- 

year cycle. Non-NQF-endorsed 

measures may also go through similar 

maintenance by their measure stewards; 

such maintenance includes reviewing 

and updating measures. 

Through the measure maintenance 

process, measures are sometimes 

updated to incorporate changes that we 

believe do not substantially change the 

nature of the measures. Examples could 

be changes to exclusions to the patient 

population, changes to definitions, or 

extension of the measure endorsement 

to apply to other settings. We believe 

these types of maintenance changes are 

distinct from more substantive changes 

to measures that result in what are 

considered new or different measures, 

and that they do not trigger the same 

agency obligations under the 

Administrative Procedure Act. 

In this proposed rule, we are 

proposing that if a measure that we have 

adopted for the ESRD QIP is updated in 

a manner that we consider to not 

substantially change the nature of the 

measure, we would use a subregulatory 

process to incorporate those updates to 

the measure specifications that apply to 

the program. Specifically, we would 

revise our previously adopted measure 

specifications to clearly identify the 

updates made by the NQF or other 

measure steward and either post the 

updates directly on the CMS Web site or 

provide links to where the updates can 

be found. We would also provide 

sufficient lead time for facilities to 

implement the changes where changes 

to the data collection systems would be 

necessary. 

We would continue to use the 

rulemaking process to adopt changes to 

a measure that we consider to 

substantially change the nature of the 

measure. We believe that this proposal 

adequately balances our need to 

incorporate updates to ESRD QIP 

measures in the most expeditious 

manner possible, while preserving the 

public’s ability to comment on updates 

that so fundamentally change an 

endorsed measure that it is no longer 

the same measure that we originally 

adopted. We invite public comment on 

this proposal and on our proposal that 

once a quality measure is adopted, it is 

retained for use in the subsequent ESRD 

QIP payment years unless we remove or 

replace it as discussed above. 

Consistent with these goals and 

policies, we previously finalized six 

measures (including one measure with 

two measure sub-components) (Table 2) 

for the PY 2014 ESRD QIP (76 FR 

70228). We propose to continue to use 

five of these measures for the PY 2015 

ESRD QIP; however, we propose to 

augment two (NHSN Dialysis Event 

reporting and Mineral Metabolism 

reporting) of these five measures used in 

PY 2014 to continue to promote 

improvement in the PY 2015 ESRD QIP. 

We are proposing to remove the PY 

2014 URR Dialysis Adequacy measure. 

In addition, we are proposing to add 

three new measures of dialysis 

adequacy, an anemia management 

reporting measure, and a hypercalcemia 

clinical measure. 

TABLE 2—MEASURES ADOPTED FOR THE PY 2014 ESRD QIP 

NQF No. Measure title 

N/A ................................ Percent of Patients with Hemoglobin Greater Than 12 g/dL* 

N/A ................................ URR Hemodialysis Adequacy 

N/A for composite 

measure.

Vascular Access Type Hemodialysis Vascular Access- Maximizing Placement of Arterial Venous Fistula (AVF)* 

(NQF#0257). 

Hemodialysis Vascular Access- Minimizing use of Catheters as Chronic Dialysis Access* 

(NQF#0256). 

N/A1 ............................... NHSN Dialysis Event Reporting*+

Enroll and report 3 months of dialysis event data. 

N/A2 ............................... In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH 

CAHPS) Survey Reporting* 

Facilities are required to attest that they administered the ICH CAHPS survey via a third 

party during the performance period. 

N/A3 ............................... Mineral Metabolism Reporting. 

Facilities are required to attest that they have monitored each of their Medicare patient’s 

phosphorus and calcium levels monthly throughout the performance period.*+

1We note that an NQF-endorsed bloodstream infection measure (NQF#1460) exists, and data for this measure is collected as part of dialysis 

event reporting in NHSN. It is our intention to use this measure in future years of the ESRD QIP. We believe that a reporting measure is a necessary step in reaching our goal to use NQF#1460. 2We note that a related measure utilizing the results of this survey has been NQF-endorsed (#0258), and it is our intention to use this measure in future years of the ESRD QIP. We believe that a reporting measure is a necessary step in reaching our goal to use NQF#0258. 3We note that the NQF has previously endorsed phosphorus and calcium monitoring measures (#0261 and #0255) upon which this measure 

is based. * Indicates a measure we are proposing for PY 2015 and future years of the ESRD QIP. 

+ Indicates a measure we are proposing to augment for PY 2015 and future years of the ESRD QIP. 

Along with the measures that have 

been previously adopted and which we 

propose to continue for use in the PY 

2015 ESRD QIP as well as subsequent 

years of the program, Table 3, below, 

lists the new measures that are being 

proposed for the PY 2015 ESRD QIP and 

subsequent years of the program. Table 

4 lists the measures we are considering 

for future years of the ESRD QIP. 

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TABLE 3—NEW MEASURES PROPOSED FOR THE ESRD QIP PY 2015 AND FUTURE YEARS OF THE PROGRAM

NQF No. Measure title 

N/A .................................. Anemia Management Reporting. 

0249 ................................ Hemodialysis Adequacy Clinical Performance Measure III: Hemodialysis Adequacy—HD Adequacy—Minimum Delivered Hemodialysis Dose. 

0318 ................................ Peritoneal Dialysis Adequacy Clinical Performance Measure III—Delivered Dose of Peritoneal Dialysis Above Minimum. 

1423 ................................ Minimum spKt/V for Pediatric Hemodialysis Patients. 

1454 ................................ Proportion of Patients with Hypercalcemia. 

TABLE 4—MEASURES UNDER CONSIDERATION FOR FUTURE YEARS OF THE ESRD QIP 

NQF No. Measure title 

1463 ................................ Standardized Hospitalization Ratio for Admissions (SHR). 

0369 ................................ Dialysis Facility Risk-Adjusted Standardized Mortality Ratio (SMR). 

1. PY 2014 Measures Continuing for PY 

2015 and Subsequent Payment Years 

We are proposing to continue using 

two measures and one measure topic 

adopted in PY 2014 for the PY 2015 

ESRD QIP and future years of the 

program. Proposals for scoring these 

measures are discussed below. For the 

reasons stated in the CY 2012 ESRD PPS 

final rule (76 FR 70262, 70264 through 

65, 70269), we propose to continue 

using: (i) The Hemoglobin Greater than 

12 g/dL measure; (ii) the Vascular 

Access Type measure topic comprised 

of two measures, (a) the Hemodialysis 

Vascular Access-Maximizing Placement 

of AVF (NQF #0257) measure, and (b) 

the Hemodialysis Vascular AccessMinimizing use of Catheters as Chronic 

Dialysis Access (NQF #0256) measure; 

and (iii) the ICH CAHPS survey 

reporting measure. The technical 

specifications for these measures can be 

found at http://www.dialysisreports.org/ 

pdf/esrd/public-measures/Anemia

Management-HGB-2015-NPRM.pdf; 

http://www.dialysisreports.org/pdf/esrd/

public-measures/VascularAccessCatheter-2015-NPRM.pdf; http://www.

dialysisreports.org/pdf/esrd/publicmeasures/VascularAccess-Fistula-2015- 

NPRM.pdf; and http://www.dialysis

reports.org/pdf/esrd/public-measures/

ICHCAHPS-2015-NPRM.pdf. We request 

comment on the proposed continuation 

of these measures. 

2. Expansion of Two PY 2014 Measures 

for PY 2015 and Subsequent Payment 

Years 

As stated earlier, we believe it is 

important to continue using measures 

from one payment year to the next 

payment year of the program to 

encourage continued improvements in 

patient care. Since we believe that 

continued improvement in patient care 

is important, we are proposing to 

expand the requirements under two 

reporting measures that we adopted for 

the PY 2014 ESRD QIP. These proposed 

expanded requirements would apply to 

the measures for PY 2015 and future 

payment years of the ESRD QIP. 

a. Proposed Expanded NHSN Dialysis 

Event Reporting Measure 

HAIs are a leading cause of 

preventable mortality and morbidity 

across different settings in the 

healthcare sector, including dialysis 

facilities. In a national effort to reduce 

this outcome, HHS agencies, including 

CMS, are partnering with the Centers for 

Disease Control and Prevention (CDC) to 

encourage facilities to report to the 

NHSN as a way to track and facilitate 

action intended to reduce HAIs. The 

NHSN is currently a secure, internetbased surveillance system that 

integrates patient and healthcare 

personnel safety surveillance systems 

managed by the Division of Healthcare 

Quality Promotion at the CDC. NHSN 

has been operational since 2006 and 

tracks data from acute care hospitals, 

long-term care hospitals, psychiatric 

hospitals, rehabilitation hospitals, 

outpatient dialysis centers, ambulatory 

surgery centers, and long term care 

facilities. We believe that reporting 

dialysis events to the NHSN by all 

facilities supports national goals for 

patient safety, particularly goals for the 

reduction of HAIs. 

For the reasons stated above, we are 

proposing to retain the NHSN Dialysis 

Event reporting measure that we 

adopted for the PY 2014 ESRD QIP (76 

FR 70268 through 70269), but with an 

expanded reporting period. For PY 

2014, ESRD QIP facilities were required 

to: (i) Enroll in the NHSN and complete 

any training required by the CDC related 

to reporting dialysis events via the 

NHSN system; and (ii) submit three or 

more consecutive months of dialysis 

event data to the NHSN. For the PY 

2015 ESRD QIP and future payment 

years, we propose to retain the NHSN 

measure and expand the reporting 

period to a full 12 months of dialysis 

event data. Although we expect most 

facilities to have enrolled and trained in 

the NHSN dialysis event system by the 

end of CY 2012, we note that facilities 

that have not done so by January 1, 2013 

or facilities that receive a CMS 

certification number (CCN) during 2013 

must enroll and complete this training 

before reporting the data in order to 

fulfill the requirements of this reporting 

measure. The information reported to 

NHSN would be provided by the CDC 

to CMS for use in the ESRD QIP. 

As discussed in more detail below, we 

are proposing that the performance 

period for the PY 2015 ESRD QIP would 

be CY 2013. We propose that facilities 

must report dialysis event data monthly 

to the NHSN. We also propose that 

facilities be granted a ‘‘grace period’’ of 

one month to report this data. For 

example, a facility’s dialysis event data 

for January 2013 must be reported on or 

before February 28, 2013. The final 

month of data from the performance 

period would be reported on or before 

January 31, 2014. For further 

information regarding the NHSN’s 

dialysis event reporting protocols, 

please see http://www.cdc.gov/nhsn/ 

psc_da_de.html. This link provides 

general information and links to more 

detailed, specialized information. 

We note that this proposed measure 

only applies to facilities treating incenter patients. For purposes of the 

NHSN Dialysis Event reporting measure, 

we determine whether a facility treats 

in-center patients by referencing the 

facility’s information in CMS data 

sources (that is, SIMS and 

CROWNWeb). Facilities report the types 

of patients that they serve in these data 

sources. If a facility lists in-center 

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services, we are proposing that the 

facility would be required to comply 

with the NHSN dialysis event reporting 

measure. 

Section 1881(h)(2)(B)(i) of the Act 

requires that, unless the exception set 

forth in section 1881(h)(2)(B)(ii) of the 

Act applies, the measures specified for 

the ESRD QIP under section 

1881(h)(2)(A)(iii) of the Act must have 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act (which is currently NQF). Under the 

exception set forth in 1881(h)(2)(B)(ii) of 

the Act, in the case of a specified area 

or medical topic determined appropriate 

by the Secretary for which a feasible and 

practical measure has not been endorsed 

by the entity with a contract under 

section 1890(a) of the Act, the Secretary 

may specify a measure that is not so 

endorsed so long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

An NQF-endorsed bloodstream 

infection measure (NQF#1460) exists 

and is collected by the CDC as part of 

dialysis event reporting in NHSN. This 

measure assesses the number of 

hemodialysis patients with positive 

blood cultures. This measure differs 

from the dialysis event reporting 

measure that we adopted for the PY 

2014 ESRD QIP and are proposing to 

expand beginning with the PY 2015 

program because it evaluates the 

number of hemodialysis outpatients 

with positive blood cultures over a 

specified time period. By contrast, the 

proposed NHSN Dialysis Event 

reporting measure assesses facilities 

based on whether they enroll and report 

dialysis event data to the NHSN, not 

based on what the data reported are. We 

intend to propose to adopt NQF #1460 

once facilities have reported enough 

data to enable us to compute 

performance standards, achievement 

thresholds, improvement thresholds, 

and benchmarks for the measure. 

For the reasons stated in the CY 2012 

ESRD PPS final rule (76 FR 70268 

through 69), we propose to retain the 

measure and expand the reporting 

period for PY 2015 and future years of 

the program. We request comment on 

this proposal. The technical 

specifications for this measure are 

located at http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/ 

NHSNDialysisReporting-2015- 

NPRM.pdf. 

b. Proposed Expanded Mineral 

Metabolism Reporting Measure 

Undertreatment of bone mineral 

metabolism disease can cause severe 

consequences for ESRD patients. For PY 

2014, it was not yet feasible to adopt a 

clinical measure evaluating facilities 

based on their patients’ bone mineral 

metabolism rates because facilities did 

not report serum phosphorus and serum 

calcium values during the baseline and 

performance periods that we finalized 

with respect to that year. Instead, for PY 

2014, we finalized a measure assessing 

whether facilities routinely monitored 

the serum calcium and serum 

phosphorus levels in their patients. For 

PY 2015, we propose to expand this 

measure by requiring facilities to report 

a serum calcium and serum phosphorus 

level for each qualifying patient each 

month according to the requirements in 

CROWNWeb. Facilities would be 

required to enter these values into 

CROWNWeb on a monthly basis. 

Facilities would be granted a ‘‘grace 

period’’ of one month to enter the data. 

For example, we would require a facility 

to report serum calcium and serum 

phosphorus data for January 2013 on or 

before February 28, 2013. The final 

month of data from the performance 

period would be reported on or before 

January 31, 2014. 

We do not intend for this proposed 

measure to encourage unnecessary 

testing or unduly burden a facility. 

Consequently, for purposes of scoring 

the measure, we considered proposing 

to require facilities to report the 

required information for less than 100 

percent of their patients. Specifically, 

we considered lowering the threshold to 

reporting 98 percent of patients for a 

month in order to receive credit for that 

month. We chose 98 percent in order to 

encourage improvement, and to ensure 

that we do not undermine the current 

level of high-reporting (based on the 

CrownWeb pilot data). We recognize 

that 100 percent might not be 

appropriate due to some individual 

cases that may not fit specified criteria. 

We ultimately decided that a facility 

should be required to take and report 

these values for every patient at least 

once per month so that each beneficiary 

receives the highest standard of care. 

We realize, however, that there are 

circumstances beyond a facility’s 

control wherein it may not be able to 

draw a sample for this patient. 

Therefore, we are not proposing that the 

facility itself must draw the serum 

phosphorus and serum calcium levels. 

If, for example, a patient is hospitalized 

or transient during a claim month, the 

facility may report the serum calcium 

and serum phosphorus readings for the 

patient for a month if a patient has labs 

drawn by another provider/facility and 

those labs are evaluated by an 

accredited laboratory (a laboratories that 

is accredited by, for example, the Joint 

Commission, the College of American 

Pathologists, the AAB (American 

Association of Bioanalysts), or State or 

Federal agency), and the dialysis facility 

obtains the serum calcium and serum 

phosphorus readings. Additionally, we 

propose to only consider a patient 

qualified for this measure (i) if the 

patient is alive at the end of the month; 

(ii) if the patient is treated in-center, 

that patient was treated at that facility 

at least twice during the claim month; 

and (iii) if the patient receives dialysis 

at home, a claim is submitted for that 

patient. We believe that these proposals 

will provide more flexibility for 

facilities and will also discourage 

facilities from drawing blood, even 

when not necessary, for fear that the 

patient will fail to come to the facility 

again during that month. We request 

comment on this proposal. We also 

request comment on whether facilities 

should only have to report data for 98 

percent of their patients. 

Section 1881(h)(2)(B)(i) of the Act 

requires that, unless the exception set 

forth in section 1881(h)(2)(B)(ii) applies, 

the measures specified for the ESRD QIP 

under section 1881(h)(2)(A)(iii) of the 

Act must have been endorsed by the 

entity with a contract under section 

1890(a) of the Act (which is currently 

NQF). Under the exception set forth in 

1881(h)(2)(B)(ii) of the Act, in the case 

of a specified area or medical topic 

determined appropriate by the Secretary 

for which a feasible and practical 

measure has not been endorsed by the 

entity with a contract under section 

1890(a) of the Act, the Secretary may 

specify a measure that is not so 

endorsed so long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

An NQF-endorsed measure assessing 

hypercalcemia exists (NQF #1454) and 

we are proposing to adopt this measure 

for the PY 2015 ESRD QIP and 

subsequent payment years, as further 

discussed below. The NQF-endorsed 

hypercalcemia measure, however, does 

not score facilities based only on 

whether or not that facility reported 

serum calcium values. The Mineral 

Metabolism reporting measure, unlike 

the Hypercalcemia measure, would 

assess only whether facilities report 

serum calcium and serum phosphorus 

values. It would not score facilities 

based on the actual values that they 

report. We believe it is important to 

continue to encourage reporting 

independent of a measure that scores 

based on the actual values reported 

because we need such values to monitor 

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aspects of bone mineral metabolism, for 

example phosphorus management, 

independent of hypercalcemia; this 

information will allow us to develop 

comprehensive bone mineral 

metabolism measures for use in future 

years of the ESRD QIP. 

In the CY 2012 ESRD PPS final rule, 

we discussed the basis for the Mineral 

Metabolism reporting measure (76 FR 

70270 through 71). We stated that ‘‘the 

NQF has previously endorsed 

phosphorus and calcium monitoring 

measures (NQF #0261 and NQF #0255) 

and, in 2008, we adopted serum calcium 

and serum phosphorus monitoring as 

Clinical Performance Measures (http://

www.dialysisreports.org/

ESRDMeasures.aspx).’’ The NQF 

measures referenced above call for 

monitoring these serum calcium and 

serum phosphorus values, but they do 

not require actual reporting of these 

values, as is the intent of the Mineral 

Metabolism reporting measure. 

For these reasons, we propose to 

expand the Mineral Metabolism 

reporting measure for PY 2015 and 

subsequent payment years under 

1881(h)(2)(B)(ii) of the Act. The 

technical specifications for this measure 

can be found at http://www.dialysis

reports.org/pdf/esrd/public-measures/

MineralMetabolism-Reporting-2015- 

NPRM.pdf. We further note that 

requiring the reporting of serum calcium 

and serum phosphorus levels for the PY 

2015 ESRD QIP will allow us to develop 

mineral metabolism measures based on 

clinical data in the future. We request 

comment on this proposal to expand the 

Mineral Metabolism reporting measure. 

3. New Measures Proposed for PY 2015 

and Subsequent Payment Years of the 

ESRD QIP 

As the program evolves, we believe it 

is important to continue to evaluate and 

expand the measures selected for the 

ESRD QIP. Therefore, for the PY 2015 

ESRD QIP and subsequent payment 

years, we are proposing to adopt five 

new measures. The proposed new 

measures include: three measures of 

dialysis adequacy (together comprising 

one dialysis adequacy measure topic); 

one measure of hypercalcemia, and one 

reporting measure involving 

hemoglobin and ESA dosages for all 

patients. 

a. Proposed Kt/V Dialysis Adequacy 

Measure Topic 

Section 1881(h)(2)(A)(i) states that the 

ESRD QIP must evaluate facilities based 

on measures of ‘‘dialysis adequacy’’. For 

PYs 2012–2014, the ESRD QIP included 

a hemodialysis adequacy measure 

evaluating the number of patients with 

a URR of at least 65 percent. For the PY 

2015 ESRD QIP, and future payment 

years, we are proposing to remove the 

URR Hemodialysis Adequacy measure. 

In its place, we are proposing to adopt 

three measures of dialysis adequacy 

(together comprising one dialysis 

adequacy measure topic) based on Kt/V 

(K = clearance, t = dialysis time, and 

V = volume of distribution) for the PY 

2015 ESRD QIP and future payment 

years of the program. Kt/V is a widely 

accepted measure of dialysis adequacy 

in the ESRD community because it takes 

into account the amount of urea 

removed with excess fluid. Further, 

while the URR Hemodialysis Adequacy 

measure only applies to in-center 

hemodialysis patients, the proposed 

Kt/V measures will allow us to evaluate 

dialysis adequacy in adult hemodialysis 

(HD) patients (in-center and home 

hemodialysis (HHD)) receiving three 

treatments weekly, adult peritoneal 

dialysis (PD) patients, and pediatric HD 

patients receiving three to four 

treatments weekly. We are proposing to 

adopt the following NQF-endorsed Kt/V 

measures of dialysis adequacy, each one 

applicable to a different patient 

population: 

(i) NQF #0249: Hemodialysis 

Adequacy Clinical Performance 

Measure III: Hemodialysis Adequacy— 

HD Adequacy—Minimum Delivered 

Hemodialysis Dose; 

(ii) NQF #0318: Peritoneal Dialysis 

Adequacy Clinical Performance 

Measure III—Delivered Dose of 

Peritoneal Dialysis Above Minimum; 

and 

(iii) NQF #1423: Minimum spKt/V for 

Pediatric Hemodialysis Patients. 

The proposed measures assess 

whether Medicare dialysis patients (PD, 

HD, and pediatric hemodialysis) 

meeting the modality specific Kt/V 

threshold. Performance on the measures 

are expressed as a proportion of patientmonths meeting the measure threshold. 

For the reasons stated above, we are 

proposing to use Kt/V as the measure of 

dialysis adequacy for the PY 2015 ESRD 

QIP and future payment years of the 

program. Kt/V would be measured for 

adult HD patients using NQF #0249, 

adult PD patients using NQF #0318, and 

pediatric hemodialysis patients using 

NQF #1423. Additionally, we are 

proposing to remove the URR 

Hemodialysis Adequacy measure; we 

request comments on these proposals. 

The technical specifications for this 

measure can be found at http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/ 

PediatricHemodialysisAdequacy-ktv2015-NPRM.pdf; http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/ 

PeritonealDialysisAdequacy-ktv-2015- 

NPRM.pdf; and http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/ 

HemodialysisAdequacy-ktv-2015- 

NPRM.pdf. We request comment on 

these proposals. The proposed scoring 

and weighting of the Kt/V Dialysis 

Adequacy measure topic is discussed 

below. 

b. Hypercalcemia 

Section 1881(h)(2)(A)(iii) of the Act 

states that the measures specified for the 

ESRD QIP shall include other measures 

as the Secretary specifies, including, to 

the extent feasible, measures of bone 

mineral metabolism. Abnormalities of 

bone mineral metabolism are 

exceedingly common and contribute 

significantly to morbidity and mortality 

in patients with advanced Chronic 

Kidney Disease (CKD). Numerous 

studies have associated disorders of 

mineral metabolism with morbidity, 

including fractures, cardiovascular 

disease, and mortality. Therefore, we 

believe it is necessary to adopt a clinical 

measure that encourages proper bone 

mineral metabolism management. 

One indicator of bone mineral 

metabolism management is 

hypercalcemia. We are, therefore, 

proposing to use the NQF-endorsed 

measure, NQF #1454: Proportion of 

patients with hypercalcemia, to evaluate 

ESRD facilities for the PY 2015 and 

future payment years of the ESRD QIP. 

This measure assesses the number of 

patients with uncorrected serum 

calcium greater than 10.2 mg/dL for a 3- 

month rolling average. ‘‘Uncorrected’’ 

means not corrected for serum albumin 

concentration. Performance on this 

measure is expressed as a proportion of 

patient-months for which the 3-month 

rolling average exceeds the measure 

threshold. Because the NQF-endorsed 

measure calls for a 3-month rolling 

average, we are proposing that the first 

measure rate for this measure would be 

calculated using the first 3 months of 

data collected during the proposed 

performance period (that is, there would 

be no measure rate for the first 2 months 

of the performance period; we would 

calculate the first measure rate for the 

performance period using the first 3 

months of data and would then 

calculate a rate each successive month, 

dropping the oldest month and adding 

the newest month). Because we are 

proposing to adopt this measure not 

only for PY 2015, but also subsequent 

payment years, we also propose that, 

beginning with the PY 2016 program, 

we would measure hypercalcemia 

beginning in January of the applicable 

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1Hematocrit values are used to calculate 

hemoglobin levels by taking the hematocrit value 

and dividing by three. 

performance period. This will allow us 

to have a 3-month rolling average for all 

months in the performance period. We 

propose that the 3-month rolling average 

rate for January would be calculated 

using the rates from November and 

December of the previous year as well 

as January of that year. Likewise, we 

propose that the rate for February would 

be calculated using the rates from 

December, January and February to 

calculate the 3-month rolling average, 

and so on. Technical specifications for 

this measure can be found at http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/MineralMetabolismHypercalcemia-2015-NPRM.pdf. We 

welcome comments on these proposals. 

c. Proposed Anemia Management 

Reporting Measure 

Section 1881(h)(2)(A)(i) requires 

‘‘measures on anemia management that 

reflect the labeling approved by the 

Food and Drug Administration (FDA) 

for such management.’’ Although the 

current FDA-approved label for 

Erythropoiesis-Stimulating Agents 

(ESAs) only specifically addresses 

hemoglobin levels greater than 11 g/dL, 

previous FDA-approved labels 

suggested patients on ESAs maintain a 

hemoglobin level of 10–12 g/dL. As we 

noted in the CY 2012 ESRD PPS final 

rule, upon further research, the FDA 

determined that there is no evidence 

suggesting a lower target level at which 

hemoglobin does not cause increased 

risks of death, serious adverse 

cardiovascular reactions, and stroke 

and, therefore, changed its approved 

label on June 24, 2011 (76 FR 70257). 

As a result of the changes in the FDA 

approved-label and the implementation 

of the ESRD QIP, we are monitoring 

trends and indicators of anemia 

management for the Medicare ESRD 

population. We have found that the 

average monthly blood transfusion rate 

increased from 2.7 percent in 2010 to 

3.2 percent in 2011. We are working 

through our ESRD QIP monitoring and 

evaluation program to further assess this 

issue. We believe that it is important 

that we continue monitoring 

hemoglobin levels in patients to ensure 

that anemia is properly treated, and we 

are proposing to adopt a measure for PY 

2015, and future payment years, which 

requires facilities to report ESA dosage 

(if applicable) and hemoglobin and/or 

hematocrit levels for patients on at least 

one monthly claim. In addition to this 

measure, proposed below, we plan to 

continue to monitor the rate of 

transfusions and may consider the 

adoption of relevant quality measures 

through future rulemaking if necessary. 

Since January 1, 2012, facilities have 

been required to report hemoglobin or 

hematocrit1 levels for each patient on 

every claim (CR 7640). Beginning April 

1, 2012, if a hemoglobin or hematocrit 

value is not included in the claim, the 

claim is returned to the facility (CR 

7593). If a hemoglobin or hematocrit 

value is not available for a patient, a 

facility can enter a default value of 

99.99 on the claim and the claim will 

not be returned, provided the facility is 

not billing for an ESA. The default value 

is not acceptable when the claim 

includes an ESA, in such a case, the 

claim will be returned to the provider. 

We are concerned that our current 

policy of paying claims that include a 

default hemoglobin or hematocrit value 

of 99.99 could lead to the underreporting of patients’ hemoglobin or 

hematocrit levels and ESA dosage by 

facilities; we are specifically concerned 

that we will not receive complete and 

accurate hemoglobin/hematocrit 

readings for those patients not receiving 

ESAs because a default value of 99.99 

can be reported on claims, and these 

claims will be paid, if no ESA is 

administered to the patient. 

Additionally, we believe that facilities 

might choose to strategically not report 

certain patients’ hemoglobin or 

hematocrit levels on certain claims— 

those where the patient’s hemoglobin 

levels are greater than 12 g/dL—in order 

to make the performance rate of their 

Hemoglobin Greater Than 12 g/dL 

measure seem better and reduce the 

likelihood of a payment reduction under 

the ESRD QIP. 

Because it is possible that facilities 

could under-report hemoglobin or 

hematocrit levels, we are proposing to 

adopt an Anemia Management reporting 

measure for the PY 2015 ESRD QIP, and 

future payment years of the program. 

For this measure, we propose to require 

facilities to report a hemoglobin or 

hematocrit value and, as applicable, an 

ESA dosage for all Medicare patients at 

least once per month via claims. We 

propose to consider claims with 99.99 

values as not meeting the requirements 

of this measure (that is, claims reporting 

99.99 will be counted as if the 

hemoglobin or hematocrit value were 

left blank). 

We do not intend for this proposed 

measure to encourage unnecessary 

testing or unduly burden a facility. 

Consequently, for purposes of scoring 

the measure, we considered proposing 

to require facilities to report the 

required information for less than 100 

percent of their patients. Specifically, 

we considered lowering the threshold to 

reporting 98 percent of patients for a 

month in order to receive credit for that 

month. We ultimately decided that a 

facility should be required to take and 

report these values for every patient at 

least once per month so that each 

beneficiary receives the highest 

standard of care. We realize, however, 

that there are circumstances beyond a 

facility’s control wherein it may not be 

able to draw a sample for this patient. 

Therefore, we are not proposing that the 

facility itself must draw blood for each 

patient. If, for example, a patient is 

hospitalized or transient during a claim 

month, the facility may report the 

hemoglobin/hematocrit readings and 

ESA dosage (if applicable) for the 

patient for a month if a patient has labs 

drawn by another provider/facility and 

those labs are evaluated by an 

accredited laboratory (a laboratories that 

is accredited by, for example, the Joint 

Commission, the College of American 

Pathologists, the AAB (American 

Association of Bioanalysts), or State or 

Federal agency), and the dialysis facility 

obtains the hemoglobin/hematocrit 

readings and ESA dosage. Additionally, 

we propose to only consider a patient 

qualified for this measure (i) if the 

patient is alive at the end of the month; 

(ii) if the patient is treated in-center, 

that patient was treated at that facility 

at least twice during the claim month; 

and (iii) if the patient receives dialysis 

at home, a claim is submitted for that 

patient. We believe that these proposals 

will provide more flexibility for 

facilities and will also discourage 

facilities from drawing blood, even 

when not necessary, for fear that the 

patient will fail to come to the facility 

again during that month. We request 

comment on this proposal. We also 

request comment on whether facilities 

should only have to report data for 98 

percent of their patients. 

The proposed Anemia Management 

reporting measure was not included in 

the list of measures under consideration 

in accordance with section 1890A(a)(2) 

of the Act because we had not yet fully 

assessed the impact of the new FDAendorsed ESA label on the ESRD 

population. We have since received and 

analyzed more, but still incomplete, 

anemia management data; we believe it 

is necessary to require facilities to 

provide complete data so that we may 

fully understand the effect of the FDA 

guidance and other factors. The 

proposed Anemia Management 

reporting measure will play a critical 

role in patient safety. As noted above, 

our monitoring activities indicate that 

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there has been a slight but noticeable 

increase in transfusions since the 

adoption of the ESRD PPS. 

Additionally, a United States Renal Data 

System analysis presented in May 2012 

found an increase in blood transfusion 

rates among ESRD patients concurrent 

with the implementation of the ESRD 

PPS. Although the association of 

changes in transfusion rates with the 

ESRD PPS, FDA label changes, and 

other factors are not yet known, we 

believe proactive facility engagement in 

regular monitoring of patient 

hemoglobin or hematocrit levels 

regardless of ESA use is critical to 

maintaining safe care, protecting the 

safety of beneficiaries, and monitoring 

the program effectively. We further 

believe that the data collected from the 

proposed measure are necessary for 

measure development in a clinical area 

of critical significance to patient 

safety—anemia and transfusion. Delay 

in proposing to adopt this reporting 

measure may prevent us from creating 

clinical measures for use in future years 

of the program and pose a risk to 

patients. Finally, we note that section 

1881(h) of the Act specifically 

highlights the importance of anemia 

management measures, and we do not 

believe it would be in the best interest 

of the program to wait an additional 

year to propose this measure. 

For the reasons stated above, we 

propose to adopt an Anemia 

Management reporting measure for the 

PY 2015 ESRD QIP and subsequent 

payment years. For the technical 

specifications for this measure, see 

http://www.dialysisreports.org/pdf/esrd/ 

public-measures/AnemiaManagementReporting-2015-NPRM.pdf. We request 

public comment on this proposal. 

4. Measures Under Consideration for 

Future Payment Years of the ESRD QIP 

In addition to the PY 2015 ESRD QIP, 

we are also considering measures for 

future payment years of the program. 

We are specifically considering whether 

we should propose in future rulemaking 

to adopt the following two measures, 

• NQF #1463: Standardized 

Hospitalization Ratio for Admissions 

(SHR) and 

• NQF #0369: Dialysis Facility Riskadjusted Standardized Mortality Ratio 

(SMR). 

We intend to adopt these measures for 

future payment years of the ESRD QIP, 

possibly beginning with the PY 2018 

program. We are notifying facilities of 

our intent and soliciting comments on 

incorporating these measures into future 

payment years of the ESRD QIP. 

a. Standardized Hospitalization Ratio 

(SHR) 

Hospitalizations are an important 

indicator of patient quality of life and 

morbidity. The SHR is an NQF-endorsed 

(#1463), risk-adjusted measure of 

hospitalization for dialysis patients. The 

measure is claims-based and describes, 

as a ratio, the number of ESRD Medicare 

patient actual admissions versus 

expected hospitalizations adjusted for 

the facility’s Medicare patient case mix. 

Please refer to the NQF Measures Web 

site (www.qualityforum.org) to obtain 

more detail about this measure. 

b. Standardized Mortality Ratio (SMR) 

The SMR measure is an NQFendorsed (#0396) critical patientcentered, outcome measure of overall 

patient care furnished by facilities. We 

believe that the SMR measure would 

encourage appropriate overall patient 

care by facilities and incentivize 

facilities to examine the holistic health 

of the patient rather than treating the 

patient based on an individual measureby-measure basis. The SMR measure 

describes, as a ratio, the number of 

ESRD Medicare patient actual deaths 

versus expected deaths adjusted for the 

facility’s Medicare patient case mix. 

Please refer to the NQF Measures Web 

site (www.qualityforum.org) to obtain 

more detail about this measure. 

c. Public Reporting of SHR and SMR 

Measures 

Although the SHR and SMR measures 

may not be adopted for the ESRD QIP 

until a future payment year, we intend 

to publicly report these measure rates/ 

ratios to the public via Dialysis Facility 

Compare (DFC) to encourage facilities to 

improve their care. Section 4558(b) of 

the Balanced Budget Act of 1997 (Pub. 

L. 105–33) (BBA) directs the Secretary 

to develop, not later than January 1, 

1999, and implement, not later than 

January 1, 2000, a method to measure 

data reflective of the quality of renal 

dialysis services provided under the 

Medicare program. Under this authority, 

we began reporting the SMR measure on 

DFC in January, 2001 as a survival 

measure and used three categories to 

rate facility performance: ‘‘as expected,’’ 

‘‘worse than expected,’’ and ‘‘better than 

expected.’’ The SMR measure that we 

are considering adopting for the ESRD 

QIP was developed in 1999 and 

facilities are required to submit this data 

via form 2746. The SHR measure that 

we are considering adopting for the 

ESRD QIP was developed in 1995, 

presented to a Technical Expert Panel 

after modifications to risk adjustment 

and statistical modeling in 2007, and 

received NQF-endorsement in 2011. The 

data needed to calculate the SHR 

measure have been regularly reported to 

DFR since 1995 and have been used by 

facilities for quality improvement 

activities. We plan to add the SHR data 

to the DFC effective January 2013; 

additionally we will report the actual 

SMR rates/ratio on the DFC beginning 

January 2013. 

We originally proposed to adopt the 

SHR measure for the PY 2014 program, 

but did not finalize the proposal, in 

part, because commenters voiced 

concerns regarding accuracy of the comorbidity data used in the calculation 

of the measures. Details on public 

comments and why we did not adopt 

the SHR measure are articulated in the 

CY 2012 ESRD PPS final rule (76 FR 

70267). Since that time, we have 

identified that the claim form UB 92 

with the type of bill (TOB) field 72X 

allows a facility to input up to 17 comorbid conditions per claim 

submission. We acknowledge that 

patient co-morbidities can change with 

time and since the capability already 

exists on the UB 92 TOB, we believe the 

best means for facilities to update 

patient co-morbidities is through the 

ESRD 72x claims form. Details on this 

form can be found in the Medicare 

Claims Processing Manual, Chapter 8— 

Outpatient ESRD Hospital, Independent 

Facility, and Physician/Supplier Claims 

(https://www.cms.gov/manuals/ 

downloads/clm104c08.pdf). 

In addition, because the NQFendorsed SHR and SMR measures are 

risk-adjusted for ESRD patients that 

reside in nursing homes, in order to 

calculate the measure rates on DFC, we 

will utilize data from the Minimum Data 

Set (MDS) to identify those individuals 

in nursing homes. We would use this 

data not only for reporting the measure 

rates on DFC at present, but also for 

calculating the measures if we adopted 

them for us in future years of the ESRD 

QIP. The Omnibus Budget 

Reconciliation Act (OBRA) of 1987 

requires that all Medicare and Medicaid 

certified nursing homes complete MDS 

assessments on all of their patients. 

We request comment regarding the 

feasibility of adopting these measures 

for future payment years of the ESRD 

QIP. 

5. Other Potential Future Measures 

Under Development 

As part of our effort to continuously 

improve the ESRD QIP, we are working 

on developing additional, robust 

measures that provide valid assessments 

of the quality of care furnished to ESRD 

beneficiaries by facilities. Some areas of 

measure development are discussed 

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below. In addition, we are considering 

the feasibility of developing quality 

measures in other areas such as kidney 

transplantation, quality of life, health 

information technology for quality 

improvement at the point of care and 

the electronic exchange of information 

for care coordination, and transfusions. 

We request comment on these potential 

areas of future measurement and 

welcome suggestions on other topics for 

measure development. 

a. Thirty-Day Hospital Readmissions 

One of the major areas our VBP 

programs seek to promote is care 

coordination. Care coordination 

measures assess caregivers not only on 

the care directly under their control, but 

also on their success in coordinating 

care with other providers and suppliers. 

Hospital readmission is often the 

outcome of uncoordinated care. Care 

coordination measures encourage 

primary caregivers, ESRD facilities, 

physicians, and hospitals to work 

together to improve the quality of care. 

A 30-day hospital readmissions measure 

is a primary example of care 

coordination. This measure is currently 

under development for ESRD, and we 

request comment regarding our use of 

such a measure in future payment years. 

b. Efficiency 

One of the main goals of our VBP 

programs is not only to enhance quality 

of care but also efficiency in providing 

that care. At present, we are not aware 

of an efficiency measure that is 

appropriate for the ESRD population. 

We are, however, interested in receiving 

comments regarding this concept. 

c. Population/Community Health 

We are aware that unintended 

consequences, specifically those 

involving access to care, may result 

from the ESRD QIP. To address these 

concerns, we are currently monitoring 

access to care and exploring the 

development of new measures or 

adjustments to existing measures that 

would mitigate the unintended 

consequences and/or incentivize 

facilities caring for patients who may, 

generally, contribute to lower facility 

measure rates. We request comment on 

developing such a measure or 

adjustments to measures, specifically 

with regard to access to care issues. 

6. Proposed Scoring for the PY 2015 

ESRD QIP 

Section 1881(h)(3)(A)(i) of the Act 

requires the Secretary to develop a 

methodology for assessing the total 

performance of each facility based on 

the performance standards established 

with respect to the measures selected for 

the performance period. For the PY 

2014 ESRD QIP, we adopted a 

performance scoring methodology that 

assessed facilities on both their 

achievement and improvement on 

clinical measures. We stated that we 

believe that this scoring methodology 

will more accurately reflect a facility’s 

performance on the measures because it 

will enable us to differentiate between 

facilities that simply meet the 

performance standards, those that 

exceed the performance standards by 

varying amounts, and those that fall 

short of the performance standards. We 

also stated that we believe that the PY 

2014 methodology appropriately 

incentivizes facilities to both achieve 

high Total Performance Scores and 

improve the quality of care they provide 

(76 FR 70272). We believe that the 

methodology set forth for PY 2014 

continues to incentivize facilities to 

meet the goals of the ESRD QIP; 

therefore, with the exception of the 

proposed changes further discussed in 

the applicable section below, we 

propose to adopt a scoring methodology 

for the PY 2015 ESRD QIP that is nearly 

identical to the PY 2014 ESRD QIP. 

7. Proposed Performance Period for the 

PY 2015 ESRD QIP 

Section 1881(h)(4)(D) of the Act 

requires the Secretary to establish the 

performance period with respect to a 

year. For the PY 2014 ESRD QIP, we 

finalized a performance period of CY 

2012. We stated that we believe that, at 

this point, a 12-month performance 

period is the most appropriate for the 

program because this period accounts 

for any potential seasonal variations that 

might affect a facility’s score on some of 

the measures, and also provides 

adequate incentive and feedback for 

facilities and Medicare beneficiaries (76 

FR 70271). We continue to believe that 

a 12-month performance period will 

best meet these policy objectives, and 

we considered what 12-month period 

would be closest in time to the payment 

year but would still allow us to time to 

operationalize the program, calculate 

scores, and grant facilities a period of 

time to preview and ask questions 

regarding these scores before they are 

published and impact payment. We 

have determined that CY 2013 is the 

latest period of time during which we 

can collect a full 12 months of data and 

still implement the payment reductions 

beginning with January 1, 2015 services. 

Therefore, for the PY 2015 ESRD QIP, 

we propose to establish CY 2013 as the 

performance period for all of the 

measures. We request comments on this 

proposal. 

8. Proposed Performance Standards for 

the PY 2015 ESRD QIP 

Similar to the PY 2014 ESRD QIP, we 

propose to adopt performance standards 

for the PY 2015 ESRD QIP measures 

under section 1881(h)(4)(A) of the Act. 

This section provides that ‘‘the 

Secretary shall establish performance 

standards with respect to measures 

selected * * * for a performance period 

with respect to a year.’’ Section 

1881(h)(4)(B) of the Act further provides 

that the ‘‘performance standards * * * 

shall include levels of achievement and 

improvement, as determined 

appropriate by the Secretary.’’ We use 

the performance standards to establish 

the minimum score a facility must 

achieve to avoid a payment reduction. 

a. Proposed Clinical Measure 

Performance Standards 

With respect to the seven proposed 

clinical measures, we propose to set the 

PY 2015 improvement performance 

standard and achievement performance 

standard (collectively, the ‘‘performance 

standard’’) for each measure at the 

national performance rate (which we 

would define as the 50th percentile) of 

all facilities’ performance on the 

measure during CY 2011 (the proposed 

comparison period—discussed in more 

detail below). 

For the PY 2014 ESRD QIP, we set the 

performance standards at the national 

performance rate during a baseline 

period of July 1, 2010–June 30, 2011. 

This period of time, however, did not 

allow us to publish the numerical 

values for the performance standards 

concurrently with the final rule because 

of the length of time needed for us to 

compile claims-based measure data at 

the individual facility level and 

calculate the measure rates. Instead, we 

included an estimate of the numerical 

values for the performance standards in 

the final rule, using nine months of 

data, and posted the numerical values of 

the performance standards based on the 

full 12 months of data on http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014-FR.pdf by the end of December 

2011. In order to ensure that we have 

enough time to calculate and assign 

numerical values to the proposed 

performance standards for the PY 2015 

program, we are proposing to set the 

performance standards based on the 

national performance rate (that is, the 

50th percentile) of facility performance 

in CY 2011. By choosing this time 

period for PY 2015, however, the data 

on which we base the performance 

standards would only capture 6 months 

of more recent data when compared to 

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2http://www.esrdnet11.org. 

3Note that, as further explained below, the issue 

we have discussed with respect to the reporting of 

Kt/V values prior to CY 2012 would not be an issue 

for the calculation of improvement scores because 

we are proposing CY 2012 as the period used to 

calculate the improvement threshold; beginning 

January 1, 2012, all facilities are required to report 

Kt/V uniformly on their claims. 

PY 2014 and would also overlap with 6 

months of the data used to calculate the 

PY 2014 performance standards. We are 

also concerned that if we finalize this 

period of time, we would not be 

adequately addressing stakeholder 

requests that we take steps to minimize 

the length of ‘‘data lag’’ between the 

dates used to calculate the performance 

standards and the payment year. We 

recognize that stakeholders might prefer 

that we base performance standards on 

data as close in time to PY 2015 as 

possible. 

The period of time closest to the 

payment year that would allow us to 

post the numerical values for the 

performance standards before the end of 

the first month of the performance 

period is parallel to that of PY 2014, 

from July 1, 2011 through June 30, 2012. 

As with PY 2014, selecting this time 

period for purposes of calculating 

numerical values for the performance 

standards would not allow us to publish 

these numerical values until late 2012 

or early 2013, which is closer in time 

and may possibly be during the 

performance period. However, as in PY 

2014, we would still be able to provide 

estimates for the numerical values of the 

performance standards at the time of 

final rule publication and post the 

actual numbers as soon as they are 

available in December 2012 or January 

2013. 

Based on these considerations, we are 

proposing CY 2011 as the basis for the 

performance standards (that is, the 

national performance rates). We do, 

however, request comment concerning 

whether we should instead use data 

closer in time to the payment year and 

set the performance standards using July 

1, 2011 through June 30, 2012 data. 

For two of the PY 2015 measure 

topics, Kt/V Dialysis Adequacy and 

Hypercalcemia, we do not possess data 

for the entirety of CY 2011, the year on 

which we propose to base the 

performance standards. We did not 

begin collecting uniform data on the Kt/ 

V hemodialysis adequacy measure until 

January 1, 2012 (see Change Request 

7460), and, under the conditions for 

coverage, facilities were not required to 

report serum calcium values that will be 

used to calculate the Hypercalcemia 

clinical measure until their submission 

of May 2012 data with the June 2012 

national implementation of 

CROWNWeb. Despite these issues, we 

do have data on which we can base 

performance standards. Although 

facilities are not yet required to report 

serum calcium levels, approximately 63 

percent of facilities, which treat 

approximately 80 percent of the 

Medicare ESRD patient population, 

have been voluntarily reporting this 

data via CROWNWeb piloting since July 

2008. Additionally, we have compared 

the serum calcium values reported by 

facilities in 2010 as part of a clinical 

data reporting program called ELab,2 to 

values that have been voluntarily 

reported by facilities in 2010 through 

CROWNWeb, and the values are 

significantly similar. We believe that 

these similarities will also extend to 

data reported in 2011. Therefore, we 

propose to calculate performance 

standards for the Hypercalcemia 

measure using the data that we collected 

via CROWNWeb Pilots collected during 

CY 2011. 

Uniform Kt/V reporting for 

hemodialysis patients did not begin 

until January 1, 2012 (CR 7640). Before 

this time, facilities could use a number 

of different methodologies to calculate 

Kt/V values, with the result that the 

values could be different depending on 

which methodology was used. We have 

analyzed the data collected during the 

CROWNWeb pilot and found that 88 

percent of facilities that reported to 

CROWNWeb had reported Kt/V values 

using a NQF specified calculation 

method (this method is also specified in 

Change Request 7640) that yields 

consistent results and that is part of the 

specifications for each of the 

hemodialysis Kt/V measures that we are 

proposing to adopt for the PY 2015 

program. Though we are not able to tell 

what calculation method a facility used 

by reviewing a claim, we believe it is 

reasonable to assume that roughly the 

same percentage of facilities reported 

Kt/V on their claims prior to 2012 using 

the same formula that they used to 

report it under the CROWNWeb pilot. 

For this reason, we propose to calculate 

the performance standards for the three 

proposed Kt/V measures using CY 2011 

claims data. This is the best data we 

have available at this time to set reliable 

performance standards for Kt/V. We 

understand, however, that stakeholders 

may be concerned about the nuances of 

the data and we invite public comment 

on this proposal. 

If, after consideration of the 

comments, we decide to not adopt the 

adult, hemodialysis Kt/V measure for 

PY 2015, we propose to continue to use 

URR as a measure of hemodialysis 

adequacy for this population. As we 

have noted, Kt/V is preferred over URR. 

Because the pediatric hemodialysis 

measure faces the same methodological 

issues as the adult hemodialysis 

measure, we propose that if we do not 

adopt the Kt/V measure for adult 

hemodialysis patients, we would also 

not adopt the Kt/V measure for pediatric 

hemodialysis patients. We note that the 

NQF endorsed measure for Kt/V 

measure for peritoneal dialysis 

adequacy does not specify the body 

surface area formulas or the total body 

water formulas to utilize; and we would 

accept the submission of peritoneal 

adequacy Kt/V values that utilize the 

methods currently in use as industry 

standards. We believe it is important to 

include peritoneal dialysis patients in 

the ESRD QIP and are soliciting 

comments on the inclusion of the 

peritoneal dialysis Kt/V adequacy 

measure. We propose that, were we to 

retain the URR measure for adult 

hemodialysis, we would still adopt the 

Kt/V peritoneal dialysis measure. We 

propose that these measures would still 

comprise a Dialysis Adequacy measure 

topic and would be scored in the same 

manner as we propose for the Kt/V 

measures, below. 

Even with the challenges outlined 

above, we believe that the advantages of 

adopting the Kt/V hemodialysis 

measure for PY 2015 outweigh the 

disadvantages. Therefore, we propose 

Kt/V as the measure for hemodialysis 

adequacy for PY 2015, but we 

specifically solicit comments regarding 

whether we should continue to use URR 

for adult hemodialysis patients for PY 

2015.3

We also considered calculating 

performance standards for the Kt/V 

Dialysis Adequacy measure topic based 

on data from January 1, 2012–June 30, 

2012, to ensure that the data was 

calculated consistently. We are, 

however, aware that a shortened data 

period may affect the measure rates’ 

reliability. Therefore, we are proposing 

to calculate performance standards 

based on the data from CY 2011 

discussed above, but we invite comment 

on an alternative 6 month period 

beginning on or after the date on which 

uniform reporting began, January 1, 

2012. 

b. Estimated Performance Standards 

At this time, we do not have the 

necessary data to assign numerical 

values to the proposed performance 

standards for the clinical measures 

because we do not yet have all of the 

data from CY 2011. However, we are 

able to estimate these numerical values 

based on the latest full year of data 

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available. In Table 5, we have provided 

the estimated performance standards for 

all of the measures, except for the 

Hypercalcemia measure, based on data 

from October 1, 2010–September 30, 

2011. For the Hypercalcemia measure, 

we currently have only 6 months of data 

based on approximately 63 percent of 

facilities reporting; the estimate, 

therefore, is based on data from April 

2011–October 2011. 

TABLE 5—ESTIMATED NUMERICAL VALUES FOR THE PERFORMANCE STANDARDS FOR THE PY 2015 ESRD QIP 

CLINICAL MEASURES USING THE

MOST RECENTLY AVAILABLE DATA

Measure Performance 

standard (%) 

Hemoglobin >12 g/dL ........... 2 

Vascular Access Type: 

%Fistula ............................ 59 

%Catheter ......................... 13 

Kt/V: 

Adult Hemodialysis ........... 93 

Adult, Peritoneal Dialysis .. 83 

Pediatric Hemodialysis ...... 90 

Hypercalcemia ...................... 1 3 

1As noted above, the performance standard 

for the Hypercalcemia measure is based on 

approximately 63 percent of facilities (accounting for approximately 80 percent of the Medicare ESRD population) reporting serum calcium values in CROWNWeb. 

In accordance with our statements in 

the CY 2012 ESRD PPS final rule (76 FR 

70273), if the final numerical values for 

the PY 2015 performance standards are 

worse than PY 2014 for a measure, we 

propose to substitute the PY 2014 

performance standard for that measure. 

We believe that the ESRD QIP should 

not have lower standards than previous 

years. We request comments on this 

proposal. 

c. Proposed Performance Standards for 

PY 2015 Reporting Measures 

We established the performance 

standards for the reporting measures for 

PY 2014 based upon whether facilities 

met certain reporting requirements 

rather than achieved or improved on 

specific clinical values. We propose to 

establish the same performance 

standard for the ICH CAHPS reporting 

measure for PY 2015 that we established 

for PY 2014. Under this proposed 

performance standard, facilities would 

be required to provide an attestation 

that they successfully administered the 

ICH CAHPS survey via a third party in 

accordance with the measure 

specifications. We propose that this 

attestation must be completed in 

CROWNWeb by January 31, 2014. 

For the NHSN Dialysis Event 

reporting measure we propose to set the 

performance standard as successfully 

reporting 12 months of data from CY 

2013. If a facility has not yet enrolled 

and trained in the NHSN dialysis event 

system, we are proposing that the 

performance standard for that facility 

would also include completion of these 

requirements. 

For the Mineral Metabolism reporting 

measure we propose to set the 

performance standard as successfully 

reporting serum phosphorus and 

calcium values for all 12 months of the 

performance period for (i) in-center 

hemodialysis patients the facility treats 

at least twice during the applicable 

month and (ii) all peritoneal and home 

hemodialysis patients that the facility 

treats. 

For the Anemia Management 

reporting measure we propose to set the 

performance standard as successfully 

reporting hemoglobin or hematocrit and 

ESA dosage (if applicable) for all 12 

months of the performance period for (i) 

in-center hemodialysis patients the 

facility treats at least twice during the 

applicable month and (ii) all peritoneal 

and home hemodialysis patients that the 

facility treats. 

Further information regarding the 

reporting requirements is found in 

sections III.C.2.a, III.C.2.b, III.C.3.c, and 

III.C.9.c of this proposed rule. We 

request comment on these proposals. 

9. Proposed Scoring for the PY 2015 

ESRD QIP Proposed Measures 

In order to assess whether a facility 

has met the performance standards, we 

finalized a methodology for the PY 2014 

program under which we separately 

score each clinical and reporting 

measure. We score facilities based on an 

achievement and improvement scoring 

methodology for purposes of assessing 

their performance on the clinical 

measures. Under the PY 2014 ESRD QIP 

scoring methodology, a facility’s 

performance on each of the clinical 

measures is determined based on the 

higher of (i) an achievement score or (ii) 

an improvement score (76 FR 70273). 

We propose to use a similar 

methodology for purposes of scoring 

facilities performance on each of the 

clinical measures for the PY 2015 ESRD 

QIP. 

As in PY 2014, in determining a 

facility’s achievement score for the PY 

2015 program, we propose that facilities 

would, based on their performance in 

CY 2013 (the proposed performance 

period), receive points along an 

achievement range, which we would 

define as a scale that runs from the 

achievement threshold to the 

benchmark. We propose to define the 

achievement threshold for each of the 

proposed clinical measures as the 15th 

percentile of national facility 

performance during CY 2011. We 

believe that this achievement threshold 

will provide an incentive for facilities to 

continuously improve their performance 

while not reducing the incentives to 

facilities that score at or above the 

national performance rate for the 

clinical measures (76 FR 70276). We 

propose to define the benchmark as the 

90th percentile of the national facility 

performance during CY 2011 because it 

represents a demonstrably high but 

achievable standard of excellence that 

the best performing facilities reached. 

We further propose that, for the 

proposed Kt/V Dialysis Adequacy 

measures and the proposed 

Hypercalcemia measure, we would use 

the same data we proposed above to use 

to calculate the performance standards 

for purposes of calculating the 

achievement thresholds and the 

benchmarks for these measures. We 

request comment on these proposals. 

In determining an improvement score 

for the clinical measures, we propose 

that facilities receive points along an 

improvement range, defined as a scale 

running between the improvement 

threshold and the benchmark. We 

propose to define the improvement 

threshold as the facility’s rate on the 

measure during CY 2012. The facility’s 

improvement score would be calculated 

by comparing its performance on the 

measure during CY 2013 (the proposed 

performance period) to its performance 

on the measure during CY 2012. We are 

proposing to base the improvement 

threshold on data from CY 2012 rather 

than CY 2011 (the period of time we 

have proposed to use to calculate the 

performance standards, achievement 

thresholds, and benchmarks) because, as 

we explain above, we do not have 

complete facility level CY 2011 data that 

we can use to calculate an improvement 

threshold for every facility on the Kt/V 

Dialysis Adequacy measures and the 

Hypercalcemia measure. Rather than 

proposing to adopt a policy under 

which no facility could receive an 

improvement score on these measures, 

we are proposing to use data from CY 

2012 to calculate the improvement 

thresholds. Additionally, we believe by 

using CY 2012 to calculate the 

improvement thresholds, we will more 

closely align timing of the payment 

reduction with the period of time we 

use to calculate improvement 

thresholds. Note that, for the proposed 

Hypercalcemia measure, we did not 

require data collection via CROWNWeb 

until June 2012, and, therefore, the data 

we are proposing to use to set the 

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improvement threshold for each facility 

would only include May 2012– 

December 2012 data. 

Our proposals for the time periods 

used for the various calculations for 

clinical measures are depicted below in 

Table 6. We request comments on our 

proposal to use data from CY 2012 to 

calculate improvement thresholds. 

When considering the time period we 

would use to calculate improvement 

thresholds, we sought to mitigate data 

lag issues as much as possible by 

selecting a period in time as close as 

possible to the performance period. 

However, to entirely mitigate this data 

lag, we also considered a period that 

would take place during the 

performance period. Using this 

approach, to calculate an improvement 

score, we would derive an improvement 

threshold from either the first quarter of 

CY 2013 or the first 6 months of CY 

2013 and compare it to the facility’s 

measure rate in the last quarter of CY 

2013 or the last 6 months of CY 2013, 

respectively. We ultimately decided not 

to propose this approach because, when 

possible, we prefer to use 12 months of 

data to calculate measure rates to ensure 

more reliable rates, particularly for lowvolume facilities. Additionally, using 

this approach, part of the performance 

period for purposes of calculating the 

facility’s performance rate and 

achievement score (all of CY 2013) 

could overlap with the data we use to 

calculate the improvement threshold 

(first quarter or 6 months of CY 2013). 

Although we are proposing to calculate 

improvement thresholds based on data 

from CY 2012, we also request comment 

regarding use of these alternative 

periods for purposes of calculating the 

improvement threshold. 

TABLE 6—PROPOSED PERIODS USED FOR PY 2015 CALCULATIONS

Measure 

Proposed period of time used in calculating 

achievement thresholds, benchmarks, and 

performance standards 

Proposed period of time used in calculating 

improvement thresholds 

Hemoglobin >12 g/dL ......................................... CY 2011 ........................................................... CY 2012. 

Vascular Access Type: 

%Fistula ....................................................... CY 2011 ........................................................... CY 2012. 

%Catheter ................................................... CY 2011 ........................................................... CY 2012. 

Kt/V: 

Adult Hemodialysis ...................................... CY 2011 (data from facilities using all methods to calculate Kt/V).CY 2012. 

Adult, Peritoneal Dialysis ............................ CY 2011 (data from facilities using all methods to calculate Kt/V).CY 2012. 

Pediatric Hemodialysis ................................ CY 2011 (data from facilities using all methods to calculate Kt/V).CY 2012. 

Hypercalcemia ............................................. CY 2011 (data from CROWNWeb Pilot reporting).CROWNWeb—May 1, 2012 to December 31, 

2012. 

Like the performance standards, at 

this time, we do not have the necessary 

data to assign numerical values to the 

proposed achievement thresholds and 

benchmarks for the clinical measures. 

However, we are able to estimate them 

based on the latest full year of data 

available. In Table 7, we have provided 

the estimated achievement thresholds 

and benchmarks for all of the measures, 

except for Hypercalcemia, based on data 

from October 1, 2010–September 30, 

2011. For the Hypercalcemia measure, 

we currently have only 7 months of 

data; the estimate, therefore, is based on 

data from April 2011–October 2011. 

TABLE 7—ESTIMATED PROPOSED ACHIEVEMENT THRESHOLDS AND BENCHMARKS FOR THE PROPOSED PY 2015 ESRD 

QIP CLINICAL MEASURES USING THE MOST RECENTLY AVAILABLE DATA

Measure 

Achievement 

threshold 

(%) 

Benchmark 

(%) 

Hemoglobin >12 g/dL .............................................................................................................................................. 7 0 

Vascular Access Type: 

%Fistula ............................................................................................................................................................ 46 74 

%Catheter ......................................................................................................................................................... 23 5 

Kt/V: 

Adult Hemodialysis ........................................................................................................................................... 86 97 

Adult, Peritoneal Dialysis .................................................................................................................................. 58 94 

Pediatric Hemodialysis ..................................................................................................................................... 78 96 

Hypercalcemia ......................................................................................................................................................... 1 6 1 0 

1As noted above, the performance standard for the Hypercalcemia measure is based on approximately 63 percent of facilities (accounting for 

approximately 80 percent of the Medicare ESRD population) reporting serum calcium values in CROWNWeb. 

In accordance with our statements in 

the CY 2012 ESRD PPS final rule (76 FR 

70273), if the final PY 2015 numerical 

values for the achievement thresholds 

and benchmarks are worse than PY 2014 

for a measure, we propose to substitute 

the PY 2014 achievement thresholds 

and benchmarks for that measure. We 

believe that the ESRD QIP should not 

have lower standards than previous 

years. We request comments on this 

proposal. 

a. Proposals for Scoring Facility 

Performance on Clinical Measures 

Based on Achievement 

We propose to award between 0 and 

10 points for each of the clinical 

measures. As noted, we propose that 

this score be based upon the higher of 

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an achievement or improvement score 

on the measure. For purposes of scoring 

achievement for the measures, we 

propose to base the score on where a 

facility’s performance falls relative to 

the achievement threshold and the 

benchmark for that measure. We 

propose that, identical to PY 2014, if a 

facility’s measure rate during the 

performance period is: 

• Equal to or greater than the 

benchmark, the facility would receive 

10 points for achievement; 

• Less than the achievement 

threshold, the facility would receive 0 

points for achievement; or 

• Equal to or greater than the 

achievement threshold, but below the 

benchmark, the following formula 

would be used to derive the 

achievement score: [9 * ((Facility’s 

performance period rate ¥ achievement 

threshold)/(benchmark ¥ achievement 

threshold))] + .5, with all scores 

rounded to the nearest integer, with half 

rounded up. 

Using this formula, a facility would 

receive a score of 1 to 9 points based on 

a linear scale disturbing all points 

proportionately between the 

achievement threshold and the 

benchmark so that the interval in 

performance between the score needed 

to receive a given number of 

achievement points and one additional 

achievement point is the same 

throughout the range of performance 

from the achievement threshold to the 

benchmark. 

b. Proposals for Scoring Facility 

Performance on Clinical Measures 

Based on Improvement 

We propose that facilities would earn 

between 0 and 9 points for each of the 

clinical measures based on how much 

their performance on the measure 

during CY 2013 improved from their 

performance on the measure during CY 

2012. A unique improvement range for 

each measure would be established for 

each facility. We propose that if a 

facility’s measure rate during the 

performance period is: 

• Less than the improvement 

threshold, the facility would receive 0 

points for improvement; or 

• Equal to or greater than the 

improvement threshold, but below the 

benchmark, the following formula 

would be used to derive the 

improvement score: [10 * ((Facility 

performance period rate¥ 

Improvement threshold)/(Benchmark ¥ 

Improvement threshold))] ¥ .5, with all 

scores rounded to the nearest integer, 

with half rounded up. 

Note that if the facility score is equal to 

or greater than the benchmark, it would 

receive 10 points on the measure per the 

achievement score methodology 

discussed above. 

c. Proposals for Calculating the 

Reporting Measure Scores 

As noted, reporting measures differ 

from clinical measures in that they are 

not scored based on clinical values, but 

rather, are scored based on whether 

facilities are successful in achieving the 

reporting requirements associated with 

each of these proposed measures. The 

proposed criteria that would apply to 

each reporting measure is discussed 

below. 

With respect to the proposed Anemia 

Management, Mineral Metabolism, and 

NHSN Dialysis Event reporting 

measures, we propose, for each 

measure, to award facilities: 

(i) 5 points for meeting the reporting 

requirements for at least 6-consecutive 

months during the performance period; 

(ii) 10 points for meeting the reporting 

requirements for all 12 months of the 

performance period; and 

(iii) 0 points for meeting the reporting 

requirements for less than 6-consecutive 

months during the performance period. 

We believe that requiring 6- 

consecutive months of data rather than 

6 non-consecutive months of data for a 

facility to receive points on these 

measures will hold facilities to the 

highest level of quality; facilities will be 

encouraged to continue to improve their 

reporting mechanisms throughout the 

performance period. We are concerned 

that awarding points for 6 nonconsecutive months of reporting may 

cause facilities to be less diligent in 

their reporting efforts overall. We 

specifically request comment regarding 

whether the proposed 6-consecutive 

month reporting requirement will 

improve quality more than a nonconsecutive month reporting 

requirement. We also propose, as 

discussed in more detail below, that 

facilities would need to receive a CCN 

prior to July 1, 2013 in order to receive 

a score on a reporting measure. Finally, 

for purposes of the NHSN Dialysis Event 

reporting measure, we propose that to 

be awarded 5 or 10 points, any facility 

that has not yet enrolled and trained in 

the NHSN dialysis event system must 

do so and must agree to the required 

consent (http://www.cdc.gov/nhsn/ 

PDFs/PurposesEligibilityRequirements

Confidentiality.pdf). 

With respect to the proposed ICH 

CAHPS reporting measure, we propose 

to retain the PY 2014 scoring 

methodology for the PY 2015 ESRD QIP. 

An in-center hemodialysis facility will 

receive a score of 10 points if it attests 

that it successfully administered the 

ICH CAHPS survey via a third party 

during the performance period 

according to the specification found at 

https://www.cahps.ahrq.gov/SurveysGuidance/ICH.aspx. Eligible facilities 

(facilities providing adult, in-center 

hemodialysis) that do not provide such 

an attestation would receive 0 points on 

the measure. We propose that this 

attestation must be entered via 

CROWNWeb by January 31, 2014. We 

note that the ICH CAHPS survey is only 

available to adult patients who are 

treated in-center. For purposes of the 

ICH CAHPS reporting measure, we 

determine whether a facility treats 

adult, in-center patients by referencing 

the facility’s information in CMS data 

sources (that is, SIMS and 

CROWNWeb). Facilities report the types 

of patients that they serve in these data 

sources. If a facility lists adult in-center 

services, we are proposing that the 

facility would be required to comply 

with the ICH CAHPS reporting measure. 

We request comment on the proposed 

methodology for scoring the PY 2015 

ESRD QIP reporting measures. We also 

request comment regarding whether 

facilities should receive points for 

partially reporting data and whether 

such reporting need be for consecutive 

months. 

10. Proposals for Weighting the PY 2015 

ESRD QIP Measures and Calculation of 

the PY 2015 ESRD QIP Total 

Performance Score 

Section 1881(h)(3)(A)(iii) of the Act 

provides that the methodology for 

assessing facility total performance shall 

include a process to weight the 

performance scores with respect to 

individual measures to reflect priorities 

for quality improvement such as 

weighting the scores to ensure that 

facilities have strong incentives to meet 

or exceed anemia management and 

dialysis adequacy performance 

standards, as determined appropriate by 

the Secretary. In determining how to 

appropriately weight the PY 2015 ESRD 

QIP measures for purposes of 

calculating Total Performance Scores, 

we considered two criteria. Specifically, 

we considered the number of measures 

we have proposed to include in the PY 

2015 ESRD QIP as well as the National 

Quality Strategy priorities. 

a. Proposals for Weighting Individual 

Measures To Compute Measure Topic 

Scores for the Kt/V Dialysis Adequacy 

Measure Topic and the Vascular Access 

Type Measure Topic 

Because the Kt/V Dialysis Adequacy 

measure topic and the Vascular Access 

Type measure topic are comprised of 

multiple measures, it is necessary for us 

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to discuss how we will derive an overall 

score for each measure topic. For these 

measure topics, we propose that each 

measure be scored separately for each 

facility using the achievement and 

improvement methodology discussed 

above. After calculating the individual 

measure scores within a measure topic, 

we propose to calculate a measure topic 

score using the following steps: (1) 

Dividing the number of patients in the 

denominator of each measure by the 

sum of the denominators for all of the 

applicable measures in the measure 

topic; (2) multiplying that figure by the 

facility’s score on the measure; (3) 

summing the results achieved for each 

measure; and (4) rounding this sum 

(with half rounded up). We are 

proposing that, if a facility does not 

have enough patients to receive a score 

on one of the measures in the measure 

topic (this proposal is discussed below), 

that measure would not be included in 

the measure topic score for that facility. 

Only one measure within the measure 

topic need have enough cases to be 

scored in order for the measure topic to 

be scored and included in the 

calculation of the Total Performance 

Score. We believe it is important to 

proportionately weight the measures 

within a measure topic because we seek 

to give equal importance to each patient. 

Finally, we are proposing that the 

measure topic score would be equal to 

one clinical measure in the calculation 

of the Total Performance Score. 

For additional explanation of our 

proposal to calculate measure topic 

scores, please see the following 

examples: 

Example 1: Facility X serves hemodialysis 

(HD), peritoneal dialysis (PD), and pediatric 

patients. For HD patients, Facility X’s Kt/V 

measure rate is 50/60. For PD patients, 

Facility’s X’s Kt/V measure rate is 15/20. For 

pediatric patients, Facility X’s Kt/V measure 

rate is 10/20. There are 100 patients included 

in the measure topic (60 + 20 + 20). Assume 

that the facility’s measure rates lead to the 

following measure scores: HD—7; PD—8; 

pediatric—5. To compute the Kt/V Dialysis 

Adequacy measure topic score for Facility X, 

we would calculate the following: (7 * 60/ 

100) + (8 * 20/100) + (5 * 20/100) = 6.8, 

which we would round to 7. The Kt/V 

Dialysis Adequacy measure topic score 

would then be treated as one clinical 

measure when calculating the Total 

Performance Score. 

Example 2: Facility Y serves HD patients 

and PD patients. For HD patients, Facility Y’s 

Kt/V measure rate is 50⁄60; assume that this 

rate leads to a score of 6. For PD patients, 

Facility Y’s Kt/V measure rate is 4⁄7. Facility 

Y has no Kt/V measure rate for pediatric 

patients because it does not serve this 

population. Assume that the minimum case 

number for scoring a measure is 11. Because 

there are only seven cases in Facility Y’s 

denominator, Facility Y would not receive a 

PD Kt/V measure score. Furthermore, Facility 

Y did not treat any pediatric patients, so it 

would not receive a pediatric Kt/V measure 

score. Therefore, the Kt/V Dialysis Adequacy 

measure topic score for Facility Y would be 

6. The Kt/V Dialysis Adequacy would then 

be treated as one clinical measure when 

calculating the Total Performance Score. 

We request comment on the proposed 

method of weighting individual 

measure scores to derive a measure 

topic score. 

b. Proposals for Weighting the Total 

Performance Score 

We believe that weighting the 

finalized clinical measures/measure 

topics equally will incentivize facilities 

to improve and achieve high levels of 

performance across all of the measures, 

resulting in overall improvement in the 

quality of care provided to ESRD 

patients. We also believe that, while the 

reporting measures are valuable, the 

clinical measures value actual patient 

outcomes and therefore justify a higher 

combined weight. We do, however, 

propose to weight the clinical measures 

slightly less for the PY 2015 ESRD QIP 

than we did for the PY 2014 ESRD QIP. 

For the PY 2015 ESRD QIP, we believe 

it is important to begin to more 

rigorously incentivize reporting, 

specifically since for three of the four 

reporting measures, we now require 

actual data submission. We intend to 

use these data for purposes of 

developing and creating clinical 

measures in the future; thus, complete 

and correct data submission in these 

areas is essential to the program’s 

overall goal of continued and improved 

ESRD quality care. For these reasons, we 

propose to equally weight the clinical 

measures/measure topics for which a 

facility receives a score equal to 80 

percent of the Total Performance Score; 

we also propose to equally weight the 

reporting measures for which a facility 

receives a score as 20 percent of the 

Total Performance Score. We request 

comment on this proposed methodology 

for weighting the clinical and reporting 

measures. 

We have also considered the issue 

with awarding a Total Performance 

Score to facilities that do not report data 

on the proposed minimum number of 

cases with respect to one or more of the 

finalized measures/measure topics. As 

we stated in the CY 2012 ESRD PPS 

final rule, we believe it is important to 

include as many facilities as possible in 

the ESRD QIP. We have, however, 

revisited our policy of including any 

facility that receives a score on one 

measure, whether that measure is a 

clinical or reporting measure, and we 

have decided to propose a different 

approach for PY 2015. We believe it is 

preferable to require a facility to have at 

least one clinical and one reporting 

measure to receive a Total Performance 

Score. By requiring this minimum, we 

ensure that a facility is not included in 

the program unless it meets the 

minimum case requirement for at least 

one clinical measure/measure topic. In 

the case of a facility that has sufficient 

data (11 cases, as proposed below) from 

the performance period, but lacks 

sufficient data (11 cases, as proposed 

below) to calculate the improvement 

threshold, we propose to only calculate 

its achievement score, because it would 

not be possible to calculate its 

improvement score. We request 

comment on our proposals to require a 

facility to qualify for a score on at least 

one reporting and one clinical measure 

in order to receive a Total Performance 

Score. 

Finally, we propose that all Total 

Performance Scores be rounded to the 

nearest integer, with half being rounded 

up, and we request comment on this 

proposal. For further examples 

regarding measure and Total 

Performance Score calculations, we 

refer readers to the figures below. 

c. Examples of the Proposed PY 2015 

ESRD QIP Scoring Methodology 

Below, we provide examples to 

illustrate the proposed scoring 

methodology for PY 2015. Figures 1–3 

illustrate the scoring for a clinical 

measure. Figure 1 shows Facility A’s 

performance on an example clinical 

measure. Note that for this example 

clinical measure, the facility is 

attempting to achieve a high rate (that 

is, the higher the measure rate, the 

higher the measure score). The example 

benchmark (which is the 90th percentile 

of performance nationally in CY 2011) 

calculated for this measure is 74 

percent, and the example achievement 

threshold (which is the 15th percentile 

of performance nationally in CY 2011) 

is 46 percent. Facility A’s performance 

rate of 86 percent during the 

performance period meets or exceeds 

the benchmark of 76 percent, so Facility 

A would earn 10 points (the maximum) 

for achievement for this measure. 

(Because, in this example, Facility A has 

earned the maximum number of points 

possible for this measure, its 

improvement score is irrelevant.) 

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Figure 2 shows the scoring for another 

facility, Facility B. As illustrated below, 

the facility’s performance on the 

example clinical measure improved 

from 26 percent in CY 2012 to 54 

percent during the performance period. 

The achievement threshold is 46 

percent, the performance standard is 58 

percent, and the benchmark is 74 

percent. 

Because the facility’s performance 

during the performance period is within 

both the achievement range and the 

improvement range, we must calculate 

both the improvement and achievement 

score to find the example clinical 

measure score. To calculate the 

achievement score, we would employ 

the formula discussed above. 

The result of this formula for this 

example is [9 * ((54 ¥ 46)/(74 ¥ 46))] 

+ .5, which equals 3.07 and we round 

to 3. 

Likewise, to calculate the 

improvement score, we employ the 

improvement formula discussed above. 


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The result of this formula for this 

example is [10 * ((54 ¥ 26)/(74 ¥ 26))] 

¥ .5, which equals 5.33 and we round 

to 5. Therefore, for this example clinical 

measure, Facility B’s achievement score 

is 3, and its improvement score is 5. We 

award Facility B the higher of the two 

scores. Thus, Facility B’s score on this 

example measure is 5. 

In Figure 3 below, Facility C’s 

performance on the example clinical 

measure drops from 53 percent in CY 

2012 to 40 percent in CY 2013, a decline 

of 13 percent. 

Because Facility C’s performance 

during the performance period falls 

below the achievement threshold of 46 

percent, it receives 0 points for 

achievement. Facility C also receives 0 

points for improvement because its 

performance during the performance 

period was lower than its performance 

during CY 2012. Therefore, in this 

example, Facility C would receive 0 

points for the example clinical measure. 

The method illustrated above would 

be applied to each clinical measure in 

order to obtain a score for each measure. 

Scores for reporting measures are 

calculated based upon their individual 

criteria, as proposed. 

After calculating the scores for each 

measure, we would calculate the Total 

Performance Score. As an example, 

applying the weighting criteria to a 

facility that receives a score on all 

finalized measures, we would calculate 

the facility’s Total Performance Score 

using the following formula: 

Total Performance Score = [(.200 * 

Hemoglobin Greater Than 12g/dL Measure) + 

(.200 * Kt/V Dialysis Adequacy Measure 

Topic) + (.200 * Vascular Access Type 

Measure Topic) + (.200 * Hypercalcemia 

Measure) + (.05 * NHSN Dialysis Event 

Reporting Measure) + (.05 * ICH CAHPS 

Survey Reporting Measure) + (.05 * Mineral 

Metabolism Reporting Measure) + (.05 * 

Anemia Management Reporting Measure)] * 

10. 

The Total Performance Score would 

be rounded to the nearest integer (and 

any individual measure values ending 

in .5 would be rounded to the next 

higher integer). 

However, if, for example, a facility 

did not receive a score on the proposed 

Hypercalcemia measure, the facility’s 

Total Performance Score would be 

calculated as follows: 

Total Performance Score = [(.267 * 

Hemoglobin Greater Than 12g/dL Measure) + 

(.267 * Kt/V Dialysis Adequacy Measure 

Topic) + (.267 * Vascular Access Type 

Measure Topic) + (.05 * NHSN Dialysis Event 

Reporting Measure) + (.05 * ICH CAHPS 

Survey Reporting Measure) + (.05 * Mineral 

Metabolism Reporting Measure) + (.05 * 

Anemia Management Reporting Measure)] * 

10. 

Again, the Total Performance Score 

would be rounded to the nearest integer 

(and any individual measure values 

ending in .5 would be rounded to the 

next higher integer). 

Finally, if, for example, a facility 

qualified for only two of the reporting 

measures, the facility’s Total 

Performance Score would be calculated 

as follows: 

Total Performance Score = [(.200 * 

Hemoglobin Greater Than 12g/dL Measure) + 

(.200 * Kt/V Dialysis Adequacy Measure 

Topic) + (.200 * Vascular Access Type 

Measure Topic) + (.200 * Hypercalcemia 

Measure) + (.100 * Mineral Metabolism 

Reporting Measure) + (.100 * Anemia 

Management Reporting Measure)] * 10. 

Again, the Total Performance Score 

would be rounded to the nearest integer 

(and any individual measure values 

ending in .5 would be rounded to the 

next higher integer). 

11. Proposed Minimum Data for Scoring 

Measures for the PY 2015 ESRD QIP 

We are proposing to only score 

facilities on clinical measures for which 

they have a minimum number of cases 

during the performance period. We have 

assessed how reliable each proposed 

clinical measure is using the currently 

available data. Specifically, we studied 

the degree the measures assess the 

actual differences in performance 


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among facilities as opposed to the 

variation within a facility. Thus, in 

order for a facility to be scored on any 

clinical measure, we are proposing that 

the facility must report a minimum 

number of cases qualifying for that 

measure over the course of the 

12-month performance period. This 

proposed minimum seeks to ensure that 

facilities are being evaluated based on 

the care they provide. 

a. Proposed Minimum Data for Scoring 

Measures for the PY 2015 ESRD QIP 

Dialysis facilities tend to have a small, 

relatively stable patient census, with 

each facility reporting on an average of 

50–60 cases per measure. In previous 

rules, commenters have asked that we 

consider the effect of case size on 

measure reliability in the context of the 

ESRD QIP. We recognize that as a 

general principle, reliability improves 

with increasing case size; that is, the 

reliability of a measure or score 

describes numerically to what extent 

that measure or score assesses the actual 

differences in performance among 

facilities as opposed to the random 

variation within facilities. Furthermore, 

we wish to be responsive to public 

comment and to ensure that dialysis 

facilities with extremely small numbers 

of patients are not penalized by the 

ESRD QIP due to random variation in 

their patient samples. Thus, we have 

developed and propose here a new 

methodology to make favorable 

adjustments to the clinical measure 

rates of facilities with very small 

numbers of patients. We also propose a 

case minimum for clinical measures to 

protect patient privacy, which we 

believe could be compromised if the 

publicly reported data for a facility is 

based on a small patient population. 

i. Proposed Case Minimum for Clinical 

Measures 

Given the ESRD QIP’s potential to 

encourage quality improvement, our 

goal is to ensure the full participation of 

as many facilities as possible in the 

program. However, we must ensure that 

all measure rates capture a large enough 

number of patients so that the privacy 

of each patient is protected. A case 

minimum allows us to achieve these 

policy objectives of measurement 

reliability and patient privacy. 

For the first 3 payment years of the 

ESRD QIP, we set the minimum number 

of cases to be scored on a clinical 

measure at 11. Eleven cases has 

historically been the case minimum for 

displaying measures on DFC. We have 

determined that in the context of DFC, 

11 cases will meet the requirement that 

individual patients are not identifiable 

in the aggregate measure rate. Given that 

we believe that 11 cases is sufficient to 

address privacy concerns and that our 

policy objective is to maximize the 

number of facilities that participate in 

the ESRD QIP, we propose to set a 

proposed case minimum threshold of 11 

cases. Under this proposal, facilities 

must report at least 11 qualifying cases 

over the course of the 12-month 

performance period to be scored on a 

given clinical measure. We seek public 

comment on this proposal. 

ii. Proposed Adjustment Methodology 

for Clinical Measures 

We indicated in the CY 2012 ESRD 

PPS final rule that we would continue 

to assess the reliability of our measures 

in future payment years of the program 

(76 FR 70259). To further explore this 

issue in response to comments, we 

evaluated the reliability of measure rates 

and the Total Performance Score for 

facilities of various sizes using the PY 

2014 program clinical measures. 

Specifically, we performed a simulation 

of the PY 2014 QIP to calculate the 

Inter-Unit Reliability (IUR) stratified by 

facility size. The IUR is a statistic 

commonly adopted for assessing the 

reliability of measures or scores, and is 

the ratio of the between-facility variance 

to the sum of the between-facility 

variance and the within-facility 

variance. 

We found the reliability of the Total 

Performance Score to be acceptable for 

all strata (IUR>0.6). However, we 

recognize that facilities with very small 

numbers of patients are more likely to 

have a lower IUR. In a facility with a 

low IUR, the case mix might potentially 

shift its measure rate higher or lower 

than the rate the same facility would 

report if it were treating an ‘‘average’’ 

ESRD population. In the context of the 

ESRD QIP, a favorable skew would not 

have a negative effect on facility 

payment, but an unfavorable skew 

potentially could result in the facility 

receiving a payment reduction. We 

cannot identify which specific facilities 

will have a low IUR until after the 

performance period has concluded. 

However, in performing the 

stratification analysis, we found that a 

favorable adjustment to the two strata 

with the lowest number of cases would 

reduce the risk of penalizing facilities in 

those strata for random within-facility 

variation. The average number of cases 

contributing to the Total Performance 

Score in the second stratum is 25. 

Accordingly, we have developed and 

propose below a favorable adjustment to 

the measure rates for facilities with at 

least the minimum case threshold of 11 

and fewer than the adjustment threshold 

of 26 cases. This methodology would 

give facilities ‘‘the benefit of the doubt’’ 

and ensure that any error in measure 

rates due to a small number of cases will 

not adversely affect payment. 

Specifically, if a facility reports at least 

a proposed adjustment threshold of 26 

cases during the 12-month performance 

period on a measure, it would be scored 

based on its raw performance rate on the 

measure. If the facility reports between 

11 and 25 cases during the 12-month 

performance period, it would be scored 

based on its raw performance rate plus 

a favorable reliability adjustment to 

account for a possible unfavorable skew 

in the measure rate due to small sample 

size. 

We propose the following 

methodology to adjust the measure rate 

used to score facilities with 11–25 cases 

for a given measure. The adjustment 

factors in facility size and the standard 

error of the measure, which can be 

estimated using an analysis of variance 

(ANOVA). This analysis allows us to 

estimate how much better the measure 

rate could have been if that facility were 

treating an ‘‘average’’ population of 

patients and make a favorable 

adjustment to the facility’s score in that 

amount. For example, as a facility treats 

more patients, the reliability of the 

measure rate improves, and the 

difference between the facility’s 

measure rate and the measure rate we 

statistically would expect to see if the 

facility were treating an ‘‘average’’ panel 

of patients decreases. Thus, the 

magnitude of the adjustment factor 

increases as the number of cases 

decreases from 25 to 11. 

Because the adjustment factor takes 

into account a facility’s performance 

(standard error of the measure) and the 

number of cases for the measure, it is 

computed separately for each measure. 

The specific methodology we propose 

follows: 

• ANOVA provides an estimate sw of 

the square root of within facility 

variance, given by the within 

subject mean square. 

• Then for the ith facility, the standard 

error of the average measure 

(denoted by xi) is given by 

where ni is the number of patients in the 

ith facility. Now denote C as the 

minimum case number. We propose the 

following adjustment for the original 

score by introducing a weight 

depending on facility size. 

• Let 


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and wi = 0 if ni ≥ C, where C is the lower 

bound of cases for facilities that will not 

receive any adjustment. 

• For measures where large values of xi

are good (i.e., for the PY 2015 ESRD 

QIP, the fistula measure and the Kt/ 

V Dialysis Adequacy measure 

topic): 

Æ The new score is: ti = xi + wi * 

SE(xi). (If ti > 100%, we set ti = 

100%). 

• In cases where lower values of xi are 

better (i.e., for the PY 2015 ESRD 

QIP, the Hemoglobin Greater Than 

12g/dL, catheter, and 

Hypercalcemia measures): 

Æ The new score is: ti = xi ¥ wi * 

SE(xi). (If ti < 0%, we set ti = 0%). 

This approach gives facilities an 

allowance to account for the uncertainty 

in the estimatexi by accounting for the 

size of the patient population in both 

weights and standard errors. As 

explained above, this allowance 

decreases when the case size increases 

(from 11 to 26 or more)—the larger the 

case size, the smaller the allowance. For 

example, when ¿=26, this implies that 

for measures with 26 cases and above, 

no allowance is made. We seek public 

comment on this methodology and the 

proposed adjustment threshold. 

In summary, based on these analyses, 

we propose for PY 2015 a new approach 

to account for facilities with low case 

numbers. A facility would fall into one 

of three categories with respect to each 

clinical measure. 

• If the facility reported at least the 

adjustment threshold for a clinical 

measure (that is, at least 26 cases 

meeting the measure specifications), we 

would calculate the measure score with 

no adjustment. 

• If the facility reported fewer cases 

than the case minimum for a clinical 

measure (that is, fewer than 11 cases 

meeting the measure specifications), we 

would not calculate a score for the 

measure. 

• If the facility reported at least the 

case minimum, but fewer than the 

adjustment threshold for a measure (that 

is, at least 11 but fewer than 26 cases 

meeting the measure specifications), we 

would use an adjustment to calculate a 

score for the measure. 

We believe that this proposal balances 

the competing interests of privacy, 

measure and Total Performance Score 

reliability, and allows for the inclusion 

of as many facilities in the ESRD QIP as 

possible. We request public comment on 

the case minimum proposals. 

While one model is presented above, 

we invite comment on alternative 

approaches that are consistent with our 

intent to include as many facilities as 

possible in the ESRD QIP and at the 

same time address concerns from 

stakeholders regarding the reliability of 

measures where there are small 

numbers of cases. We believe that this 

adjustment is appropriate for the ESRD 

QIP considering the particular measure 

set and scoring methodology for PY 

2015. As the program grows and 

evolves, we will continue to assess 

reliability based on the measures and 

scoring methodology for that payment 

year. 

b. Proposed Minimum Data 

Requirements for Reporting Measures by 

New Facilities 

For purposes of the PY 2014 ESRD 

QIP, we stated that a facility that 

receives a CCN on or after July 1, 2012 

has the option to choose whether or not 

it is scored on each reporting measure 

(76 FR 70275). We considered using the 

same approach for PY 2015 as we did 

in PY 2014 (that is, allowing new 

facilities to choose whether or not they 

will be scored on each reporting 

measure). Under that approach, if a new 

facility reports enough information to 

receive 10 points on a reporting 

measure, the facility is scored on that 

measure. If a new facility scores zero or 

5 points on a reporting measure, it is not 

scored on that measure. As the program 

evolves, we believe it is important to 

continuously push improvement in all 

facilities—both old and new. 

Additionally, we wish to incentivize 

new facilities to put reporting 

mechanisms in place as soon as 

possible. For these reasons, we propose 

to modify the reporting measure 

minimum data requirement from that of 

PY 2014. 

For PY 2015, we propose that any 

facility receiving a CCN before July 1, 

2013 be scored on the reporting 

measures. However, since a facility 

receiving a CCN after January 1, 2013 

would not be able to report a full 12 

months of data, we do not believe it is 

appropriate to require it to do so in 

order to receive a full 10 points on the 

reporting measures. Instead, we propose 

to score these facilities proportionately 

for the time for which they have a CCN 

during the performance period. To earn 

10 points on the ICH CAHPS reporting 

measure, we propose to require that a 

facility receiving a CCN between 

January 1, 2013 and June 30, 2013 attest 

that it successfully administered the 

survey during the time for which it had 

a CCN during the performance period. 

For purposes of the Anemia 

Management, NHSN Dialysis Event, and 

Mineral Metabolism reporting measures, 

we propose that if a facility receives a 

CCN on or after January 1, 2013, but 

before July 1, 2013, it would receive 10 

points for reporting for all months for 

which it has a CCN and 5 points for 

consecutively reporting half of the 

months for which it has a CCN during 

the performance period. If a facility has 

a CCN for an odd number of months, we 

would round down to calculate the 

number of months for which it must 

report to receive 5 points. Finally, we 

propose to begin counting the number of 

months for which a facility is open on 

the first day of the month after the 

facility receives a CCN. For example, 

assume a facility receives a CCN on 

March 15, 2013. In order for this facility 

to receive 10 points on the applicable 

reporting measure, it must report data 

from April 1, 2013—December 31, 2013 

(or 9 months of data). In order for it to 

receive 5 points, it must report half of 

the months for which it is open, 

consecutively. For this facility to receive 

5 points, it would need to report 4.5 

months of data. Since we have proposed 

to round down, this facility would be 

required to report 4 months of data to 

receive 5 points. 

We realize that facilities receiving a 

CCN on or after July 1, 2013, may have 

difficulty meeting the requirements of 

the reporting measures, such as 

enrolling and training for the NHSN 

Dialysis Event reporting measure or 

hiring a third-party to administer the 

ICH CAHPS survey, because of the short 

period of time left in the performance 

period. We also do not believe it is 

appropriate to reduce payment for a one 

year period based on less than 6 months 

of performance. Therefore, we propose 

to exclude facilities receiving a CCN on 

or after July 1, 2013 from the 

requirements of the reporting measures. 

Because we have proposed, as discussed 

above, that a facility will not receive a 

Total Performance Score unless it 

receives a score on at least one clinical 

and one reporting measure, finalizing 

this proposal would result in facilities 

not being eligible for a payment 

reduction if they receive a CCN on or 

after July 1, 2013. We request comment 

regarding these proposals. We also elicit 

comments regarding whether there 

would be a more appropriate way to 

score these new facilities on reporting 

measures so that they may be eligible for 

inclusion in the ESRD QIP. 

12. Proposed Payment Reductions for 

the PY 2015 ESRD QIP 

Section 1881(h)(3)(A)(ii) of the Act 

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

payment reductions across facilities 

such that facilities achieving the lowest 

Total Performance Scores receive the 

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largest payment reductions. For PY 

2014, we adopted an approach under 

which a facility did not have to meet or 

exceed the performance standards with 

respect to each of the finalized clinical 

measures to avoid receiving a payment 

reduction under the ESRD QIP. Rather, 

even if a facility failed to meet or exceed 

the performance standards with respect 

to one or more of these measures, the 

facility could avoid a payment 

reduction if it achieved a minimum 

Total Performance Score that is equal to 

or greater than the minimum Total 

Performance Score it would receive if it 

had met the performance standards for 

each of the clinical measures or, in the 

case of the Vascular Access Type 

Measure, for the two subcomponent 

measures. 

For PY 2014, in calculating this 

minimum Total Performance Score, we 

excluded the reporting measures 

because we believed this approach best 

underscored the importance of the 

clinical measures. For PY 2015, we 

propose to retain the same approach as 

in PY 2014. We discuss the 

methodology for deriving the 

performance standards for the measure 

topics, above. We request comments on 

these proposals. 

Alternately, in order to better 

incentivize compliance with reporting 

measures, we also considered raising 

the minimum Total Performance Score 

to include 50 percent of the total points 

a facility could have received had it met 

all of the reporting requirements for 

each measure. In other words, because 

a facility could receive up to 40 points 

in PY 2015 for meeting all of the 

reporting measure requirements, we 

considered raising the minimum Total 

Performance Score by 20 points (onehalf of 40). This approach would ensure 

that facilities receiving a CCN before 

August 1, 2013 could still achieve the 

minimum Total Performance Score by 

meeting, on average, the performance 

standards for the clinical measures and 

achieving as many points on the 

reporting measures as is possible. We 

request comment regarding whether the 

reporting measures should be scored at 

greater than 0 when calculating the 

minimum Total Performance Score. 

Section 1881(h)(3)(A)(ii) of the Act 

requires that facilities achieving the 

lowest Total Performance Scores receive 

the largest payment reductions. For PY 

2014, we adopted an approach we 

intend to continue for PY 2015. We 

believe that this consistency will allow 

the program to be more understandable 

to both facilities and the general public. 

Therefore, we propose that the payment 

reduction scale be the same as the PY 

2014 program. Therefore, for each 10 

points a facility falls below the 

minimum Total Performance Score, it 

would receive an additional 0.5 percent 

payment reduction on its ESRD 

payments for PY 2015, with a maximum 

reduction of 2.0 percent. As we stated 

in the CY 2012 ESRD PPS final rule, we 

believe that such a sliding scale will 

incentivizes facilities to meet the 

performance standards and continue to 

improve their performance because even 

if a facility fails to achieve the minimum 

Total Performance Score, such facility 

will still be incentivized to strive for, 

and attain, better performance rates in 

order to reduce the amount of its 

payment reduction (76 FR 70281). We 

request comments on the proposed 

payment reduction scale. 

Because we are not yet able to 

calculate the performance standards for 

each of the clinical measures, we are 

also not able to calculate the minimum 

Total Performance Score. Based on the 

estimated performance standards listed 

above, we estimate that a facility must 

meet or exceed a minimum Total 

Performance Score of 52 to avoid a 

payment reduction. Facilities failing to 

meet this minimum will receive 

payment reductions in the estimated 

amounts indicated in the Table 8 below. 

TABLE 8—ESTIMATED PAYMENT REDUCTION SCALE FOR PY 2015 

BASED ON THE MOST RECENTLY

AVAILABLE DATA

Total performance score Reduction 

% 

100–52 * .................................... 0 

51–42 ........................................ 0.5 

41–32 ........................................ 1.0 

31–22 ........................................ 1.5 

21–0 .......................................... 2.0 

13. Proposed Data Validation 

One of the critical elements of the 

ESRD QIP’s success is ensuring that the 

data submitted to calculate measure 

scores and Total Performance Scores is 

accurate. To that end, we have procured 

the services of a data validation 

contractor who will be tasked with 

validating a national sample of facilities’ 

records as they report data under the 

ESRD QIP. Beginning in CY 2013, we 

propose to begin a pilot data validation 

program for the ESRD QIP. Because data 

validation for the ESRD QIP is new to 

both facilities as well as CMS, we 

believe that the first year of validation 

should result in no payment reductions 

to facilities. Accordingly, we propose 

that, beginning in CY 2013, we would 

randomly sample the records of 

approximately 750 facilities. We 

anticipate that a CMS-designated 

contractor would request approximately 

10 records from each of these facilities. 

We propose that the facility must 

comply with this request for records 

within 60-days of receiving notice. The 

contractor would review these records 

to ensure accuracy and reliability of the 

data reported by the facility for 

purposes of the ESRD QIP. 

As noted above, we propose that, in 

the first year of this program, no facility 

will receive a payment reduction 

resulting from the data validation 

process. In future years of the program, 

we intend to evolve our pilot program 

into a full, data validation effort. We are 

also discussing a data validation 

measure whereby facilities would be 

scored based on the accuracy of their 

records. Finally, we are contemplating 

increasing a facility’s payment 

reduction by one tier (for example, from 

0.5 percent to 1.0 percent) if its data is 

incorrect beyond a certain threshold. In 

future years, we intend to propose more 

detailed procedures regarding data 

validation process that may result in 

penalties. We request comment on our 

data validation proposals for PY 2015 

and the methods we are considering for 

PY 2016. 

14. Proposals for Scoring Facilities 

Whose Ownership Has Changed 

During our first year of 

implementation of the ESRD QIP, PY 

2012, facilities requested guidance 

regarding how a change in ownership 

affects any applicable ESRD QIP 

payment reduction. We propose that, for 

all future years of the ESRD QIP, the 

application of an ESRD QIP payment 

reduction would depend on whether the 

facility retains its CCN after the 

ownership transfer. If the facility’s CCN 

remains the same after the facility is 

transferred, for purposes of the ESRD 

QIP, we would consider the facility to 

be the same facility (despite the change 

in ownership) and we would apply any 

ESRD QIP payment reduction for the 

transferor to the transferee. Likewise, as 

long as the facility retains the same 

CCN, we would calculate the measure 

scores using the data submitted during 

the applicable period regardless of 

whether the ownership changed during 

one of these periods. If, however, a 

facility receives a new CCN as a result 

of a change in ownership, we would 

treat the facility as a new facility for 

purposes of the ESRD QIP as of the date 

it received the new CCN. We believe 

that these proposals are the most 

operationally efficient and will allow 

facilities the most certainty when they 

change ownership. We propose to apply 

these rules beginning with the PY 2014 

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ESRD QIP, and we request public 

comment on these proposals. 

15. Proposals for Public Reporting 

Requirements 

Section 1881(h)(6)(A) of the Act 

requires the Secretary to establish 

procedures for making information 

regarding facilities’ performance under 

the ESRD QIP available to the public, 

including information on the Total 

Performance Score (as well as 

appropriate comparisons of facilities to 

the national average with respect to 

such scores) and performance scores for 

individual measures achieved by each 

facility. Section 1881(h)(6)(B) of the Act 

further requires that a facility have an 

opportunity to review the information to 

be made public with respect to that 

facility prior to such information’s 

publication. In addition, section 

1881(h)(6)(C) of the Act requires the 

Secretary to provide each facility with a 

certificate containing its Total 

Performance Score to post in patient 

areas within the facility. Finally, section 

1881(h)(6)(D) of the Act requires the 

Secretary to post a list of facilities and 

performance-score data on the CMS 

Web site. 

In the PY 2012 ESRD QIP final rule, 

we adopted uniform requirements based 

on sections 1881(h)(6)(A) through 

1881(h)(6)(D) of the Act, establishing 

procedures for facilities to review the 

information to be made public and the 

procedures for informing the public 

through facility-posted certificates for 

the first 3 payment years of the ESRD 

QIP (76 FR 636 through 639). We 

propose that these requirements 

generally apply to PY 2015 and 

subsequent payment years. However, we 

are proposing to make some 

modifications, as outlined below, to 

these requirements and that these 

modifications, if finalized, become 

effective upon the effective date of this 

final rule; thus, these requirements, if 

finalized, would apply in PY 2014 and 

for subsequent payment years. All other 

previously finalized requirements 

would remain the same. First, for the 

first year of the program, PY 2012, we 

did not explicitly state that we would be 

publishing a list of facility performance 

on or after December 1 of the year before 

the payment consequence year. We did, 

however, make this list available for the 

pubic via the CMS Web site. For the PY 

2013 ESRD QIP and subsequent 

payment years, and in accordance with 

section 1881(h)(6)(D) of the Act, we 

propose to publish such aggregate list 

on the CMS Web site at www.cms.gov 

and any other Web site controlled by 

CMS. This list will include information 

on the facility, specifically: 

(i) Name and address; 

(ii) Measure rates (which may include 

numerators and denominators) and 

scores; 

(iii) And Total Performance Scores. 

This list will also indicate those 

facilities which do not have enough data 

to calculate one or more measure rates 

and/or a Total Performance Score. We 

believe it is important to publish such 

a list because it allows beneficiaries, the 

public, and facilities access to this 

information without having to 

individually download a certificate for 

each facility, and, because of such 

access, we believe it will ultimately 

improve quality. The data will be more 

accessible, Medicare beneficiaries and 

their families will have the information 

more easily to make choices about their 

care, and facilities can more readily 

compare their performance to other 

facilities or across facilities. Therefore, 

beginning in January 2013, we propose 

to publish a list of facility information 

described above for each payment year 

after facilities have the ability to review 

their scores. 

Second, for PY 2012, we required 

facilities to prominently post certificates 

within five days of us making these 

certificates available for download from 

Dialysis Facility Reports (DFR) in 

accordance with section 1881(h)(6)(C) of 

the Act (76 FR 637). We are proposing 

to modify the previously finalized 

requirements for posting certificates in 

two ways. We no longer believe it is 

necessary for facilities to post these 

certificates within five days of their 

availability. The certificates are 

provided in late December, and it was 

our experience in the PY 2012 program 

that many individuals responsible for 

the certificates were away on holiday 

during this period of time. Therefore, 

we are proposing to change this 

requirement so that, beginning with the 

PY 2014 program, facilities will be 

required to post their certificates on or 

before the first business day after 

January 1 of each payment year. 

Certificates are typically available for 

download on or around December 15, 

and we believe that this two week 

amount of time is long enough to allow 

facilities to post them. Therefore, 

beginning PY 2014, we propose that 

facilities be required to post their 

Performance Score Certificates on or 

before the first business day after 

January 1 of each payment year in a 

prominent place for the duration of that 

payment year and otherwise comply 

with the requirements listed in the PY 

2012 final rule (76 FR 637). 

Third, for the PY 2012 ESRD QIP, we 

required facilities to post one copy of 

the certificate in their facility (76 FR 

637). Beginning PY 2014, we propose to 

require facilities to post two copies of 

this certificate, one copy in English and 

one copy in Spanish. Both of these 

certificates (which are posted as a single 

file) will be provided by CMS, both 

must be posted by the first business day 

after January 1 of the payment year, and 

both must be posted for the entirety of 

such year in a prominent location. We 

are proposing to require the certificate 

to be posted in both English and 

Spanish to make the certificate more 

understandable to native Spanish 

speakers. Thus, to best serve a greater 

number of ESRD patients, we propose to 

finalize the requirement that facilities 

must post both an English and a 

Spanish certificate prominently in their 

facility. The only additional burden for 

facilities in adding this Spanish 

certificate is its printing and posting. 

IV. Limitation on Payments to All 

Providers, Suppliers and Other Entities 

Entitled to Bad Debt 

A. Background 

Under section 1861(v)(1) of the Act 

and current regulations at 42 CFR 

413.89 and 413.178, Medicare pays 

some or all of the uncollectible 

deductible and coinsurance amounts to 

those entities eligible to receive 

reimbursement for bad debt. To 

determine if bad debt amounts are 

allowable, the requirements at § 413.89 

must be met. Chapter 3 of the Provider 

Reimbursement Manual (PRM) (CMS 

Pub. 15, Part I) provides guidance on the 

standards governing bad debt 

reimbursement. 

Under section 1861(v)(1)(T) of the Act 

and § 413.89(h)(1) of the regulations, 

Medicare payments for allowable bad 

debt amounts for hospitals are reduced 

by 30 percent for cost reporting periods 

beginning on or after October 1, 2001. 

Also, under section 1861(v)(1)(V) of the 

Act and § 413.89(h)(2) of the 

regulations, Medicare payments for 

allowable bad debt amounts for patients 

that are not dual eligible individuals in 

skilled nursing facilities (SNFs) with 

cost reporting periods beginning on or 

after October 1, 2005, are currently 

reduced by 30 percent. Section 

413.89(h)(2) also defines a dual eligible 

individual for bad debt purposes as an 

individual that is entitled to benefits 

under Part A of Medicare and is 

determined eligible by the State for 

Medical Assistance under Title XIX of 

the Act as described in 42 CFR 423.772 

paragraph (2) under the definition of a 

‘‘full-benefit dual eligible individual.’’ 

For all other providers, suppliers, and 

entities eligible to receive bad debt 

payment, including critical access 

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hospitals (CAHs), rural health clinics 

(RHCs), Federally qualified health 

centers (FQHCs), community mental 

health centers (CMHCs), swing bed 

hospitals, as defined at 42 CFR 

413.114(b), and patients that are dual 

eligible individuals in SNFs, Medicare 

pays 100 percent of allowable bad debt 

amounts. Although Medicare pays endstage renal disease (ESRD) facilities 100 

percent of allowable bad debt amounts, 

these payments are currently capped at 

the facility’s reasonable cost in 

accordance with § 413.178(a). In 

addition, for health maintenance 

organizations (HMOs) reimbursed on a 

cost basis and competitive medical 

plans (CMPs) defined under section 

1876 of the Act, and for health care 

prepayment plans (HCPPs) defined 

under section 1833(a)(1)(A) of the Act, 

Medicare pays a portion of bad debt 

amounts under 42 CFR 417.536(f) of our 

regulations. 

B. Section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 

Public Law 112–96 

Sections 3201(a) and (b) of the Middle 

Class Tax Extension and Job Creation 

Act of 2012 (Pub. L. 112–96) amended 

section 1861(v)(1)(T) and section 1861 

(v)(1)(V) of the Act, respectively, by 

further reducing the percentage of 

allowable bad debt attributable to the 

deductibles and coinsurance amounts 

payable to hospitals and SNFs. Section 

3201(b) of The Middle Class Tax 

Extension and Job Creation Act of 2012 

revised the SNF bad debt reductions to 

include both dual eligible beneficiaries 

and non-dual eligible beneficiaries 

under section 1861(v)(1)(V) of the Act 

and to apply such reductions to swing 

bed hospitals for cost reporting periods 

beginning during fiscal year 2013 and 

subsequent fiscal years. 

Finally, section 3201(c) of The Middle 

Class Tax Extension and Job Creation 

Act of 2012 added a new subparagraph 

1861(v)(1)(W) to the Act, which applied 

a reduction in bad debt payments to 

‘‘providers’’ not addressed under 

subparagraphs 1861(v)(1)(T) or 1861 

(v)(1)(V) of the Act. For the purpose of 

subparagraph 1861(v)(1)(W) of the Act, 

section 3201(c) of The Middle Class Tax 

Extension and Job Creation Act of 2012 

defined ‘‘providers’’ as a supplier or any 

other type of entity that receives 

payment for bad debts under the 

authority of section 1861(v)(1)(A) of the 

Act. These providers include, but are 

not limited to, CAHs, RHCs, FQHCs, 

CMHCs, HMOs reimbursed on a cost 

basis, CMPs, HCPPs and ESRD facilities. 

C. Summary of Provisions of This 

Proposed Rule 

1. Self-Implementing Provisions of 

Section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 

(Pub. L. 112–96) 

The provisions of subsections 3201(a), 

(b), and (c) of The Middle Class Tax 

Extension and Job Creation Act of 2012 

permit no discretion on the part of the 

Secretary and thus, are self 

implementing, with the exception of 

ESRD facilities as discussed below. We 

are proposing to codify these provisions, 

as summarized below, in our 

regulations. 

• Payment of allowable bad debt to 

hospitals for cost reporting periods 

beginning during fiscal year 2013 and 

subsequent fiscal years would be 

reduced by 35 percent. 

• Payment of allowable bad debt to 

SNFs and swing bed hospitals for cost 

reporting periods beginning during 

fiscal year 2013 or a subsequent fiscal 

year would be reduced by 35 percent for 

coinsurance amounts for services 

furnished to a beneficiary who is not a 

dual eligible individual. 

• Payment of allowable bad debt to 

SNFs and swing bed hospitals for 

coinsurance for services furnished 

to a beneficiary who is a dual 

eligible individual would be: 

• For cost reporting periods 

beginning during fiscal year 2013, 

reduced by 12 percent; 

• For cost reporting periods 

beginning during fiscal year 2014, 

reduced by 24 percent and; 

• For cost reporting periods 

beginning during fiscal year 2015, 

reduced by 35 percent. 

• Payment of allowable bad debt to all 

other providers, suppliers and any 

other entity that receives payment 

for bad debts under the authority of 

section 1861(v)(1)(A) of the Act 

would be: 

• For cost reporting periods 

beginning during fiscal year 2013, 

reduced by 12 percent; 

• For cost reporting periods 

beginning during fiscal year 2014, 

reduced by 24 percent; 

• And for cost reporting periods 

beginning during fiscal year 2015 

and subsequent fiscal years, by 35 

percent. 

A summary of the changes in 

Medicare bad debt payment percentages 

required by section 3201 of The Middle 

Class Tax Extension and Job Creation 

Act of 2012 is reflected in Table 9 

below: 

TABLE 9—SUMMARY OF MEDICARE BAD DEBT REIMBURSEMENT BY PROVIDER TYPES FOR COST REPORTING PERIODS

THAT BEGIN DURING FY 2013, 2014, 2015 AND SUBSEQUENT YEARS 4

Provider type 

Allowable bad 

debt amount 

during FY 2012 

(percent) 

Allowable bad 

debt amount 

during FY 2013 

(percent) 

Allowable bad 

debt amount 

during FY 2014 

(percent) 

Allowable bad 

debt amount 

during FY 2015 

& subsequent 

FYs 

(percent) 

Hospitals .......................................................................................... 70 65 65 65 

SNFs: Non-Full Dual Eligibles ......................................................... 70 65 65 65 

Swing Bed Hospitals: Non-Full Dual Eligibles ................................. 100 65 65 65 

SNFs: Full Dual Eligibles ................................................................. 100 88 76 65 

Hospital Swing Beds: Full Dual Eligibles ......................................... 100 88 76 65 

CAHs ................................................................................................ 100 88 76 65 

ESRD Facilities ................................................................................ 100 88 76 65 

CMHCs ............................................................................................ 100 88 76 65 

FQHCs ............................................................................................. 100 88 76 65 

RHCs ............................................................................................... 100 88 76 65 

Cost Based HMOs ........................................................................... 100 88 76 65 

Health Care Pre-Payment Plans ..................................................... 100 88 76 65 

Competitive Medical Health Plans ................................................... 100 88 76 65 

ESRD facility bad debt payments will continue to be subject to the cap up to the facility’s reasonable costs. 

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2. Remove and Reserve § 413.178 

We are proposing to move specific 

requirements to reimburse ESRD bad 

debt amounts from § 413.178 to § 413.89 

and remove and reserve § 413.178. 

3. Technical Corrections 

We are also proposing a technical 

correction to 42 CFR 417.536(f)(1) to 

refer to 42 CFR 413.89 as the 

appropriate cross reference to Medicare 

bad debt reimbursement policy, to 

revise the existing language describing 

bad debt to conform to § 413.89(a), and 

to remove requirements that already are 

set out at § 413.89. 

D. Proposed Changes to Medicare Bad 

Debt Policy 

In this rule, we are proposing to 

conform existing regulations text found 

at § 413.89(h) to the self-implementing 

provisions of section 3201 of The 

Middle Class Tax Extension and Job 

Creation Act of 2012. We currently cap 

bad debt reimbursement to an ESRD 

facility’s reasonable costs under 

§ 413.178(a). In this rule, we are 

proposing to move the current provision 

at § 413.178(a) to proposed 

§ 413.89(h)(3), and to add ESRD 

facilities to the list of facilities to which 

§ 413.89 ‘‘Bad debts, charity, and 

courtesy allowances,’’ applies. We also 

propose to remove duplicate provisions 

and reserve § 413.178 for further use. In 

addition, we are making a technical 

correction to § 417.536(f)(1) to clarify 

Medicare bad debt reimbursement 

policy. 

1. Proposed Changes to 42 CFR 

413.89(h) 

Under each paragraph of our existing 

regulations at § 413.89(h), we describe 

the limits on bad debt payment to be 

reductions to the amount of bad debt 

otherwise treated as allowable costs. 

Under § 413.89(a), bad debts are 

deductions from revenue and are not to 

be included in allowable cost. 

Therefore, we are proposing to clarify 

that the limits on bad debt payments are 

reductions to amount of allowable bad 

debt. 

We propose to revise 

§ 413.89(h)(1)(iv) to set forth the 

percentage reduction in reimbursable 

bad debt payments to hospitals for cost 

reporting periods beginning during 

fiscal years 2001 through 2012. 

We propose to add a new 

§ 413.89(h)(1)(v), which would set forth 

the percentage reduction in 

reimbursable bad debt payments 

required by section 1861(v)(1)(T)(v) of 

the Act to hospitals for cost reporting 

periods beginning during fiscal year 

2013 and subsequent fiscal years. 

We propose to revise § 413.89(h)(2) to 

add paragraphs (h)(2)(i) and (h)(2)(ii). 

Paragraph (h)(2)(i) would set forth the 

percentage reduction in reimbursable 

bad debt payments required by section 

1861(v)(1)(V)(ii) of the Act for SNFs and 

swing bed hospitals for cost reporting 

periods beginning during fiscal year 

2006 and subsequent fiscal years for a 

patient that was not a dual eligible 

individual. Paragraph (h)(2)(ii) would 

set forth the reduction in reimbursable 

bad debt payments for SNFs and swing 

bed hospitals, for cost reporting periods 

beginning during fiscal year 2013, fiscal 

year 2014, fiscal year 2015, and 

subsequent fiscal years, for a patient 

that was a dual eligible individual. 

We propose to revise § 413.89(h)(3) to 

set forth the percentage reduction in 

allowable bad debt payments required 

by section 1861(v)(1)(W) of the Act for 

ESRD facilities for cost reporting 

periods beginning during fiscal year 

2013, fiscal year 2014, fiscal year 2015 

and subsequent fiscal years and to 

reimburse the reduced amount of bad 

debt up to the facility’s costs as 

discussed below. 

We propose to add a new 

§ 413.89(h)(4) to set forth the percentage 

reduction in reimbursable bad debt 

payments for all other entities required 

by section 1861(v)(1)(W) of the Act not 

described in § 413.89(h)(1), (h)(2), or 

(h)(3) that would be eligible to receive 

reimbursement of bad debt for cost 

reporting periods beginning during 

fiscal year 2013, fiscal year 2014, fiscal 

year 2015 and subsequent fiscal years. 

2. Rationale for Removing 42 CFR 

413.178 

For ESRD facilities, § 413.178(a) states 

that CMS will reimburse each facility its 

allowable Medicare bad debts, as 

defined in § 413.89(b), up to the 

facility’s costs, as determined under 

Medicare principles, in a single lump 

sum payment at the end of the facility’s 

cost reporting period. This cap on bad 

debt payments will remain in place 

along with applying the reductions in 

bad debt payments discussed above. 

Currently, we reimburse an ESRD 

facility 100 percent of its allowable bad 

debt up to the facility’s reasonable cost. 

We considered applying the FY 

reduction percentage after the cap is 

applied, however, we are proposing to 

apply the FY reduction percentage to 

allowable bad debt prior to applying the 

cap. We believe that our proposed 

application of the reduction percentage 

is more appropriate and consistent with 

how we currently determine the amount 

of allowable bad debt that is capped at 

the facility’s cost. 

We are proposing to make the 

following revisions to § 413.89(h)(3) to 

implement the ESRD facilities’ bad debt 

reduction effective October 1, 2012 in 

accordance with section 1861(v)(1)(W) 

of the Act and to apply the cap on ESRD 

facilities’ bad debt payments as required 

under § 413.178(a). For illustrative 

purposes only, we have included 

examples of the computation of bad 

debt payments for each proposed 

revision to § 413.89(h)(3). 

We are proposing to add § 413.89(h)(3)(i) 

for cost reporting periods that begin before 

October 1, 2012, where the cap on bad debt 

payments would be applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 is capped 

at the unrecovered costs of $90.00, 

therefore, the facility would receive $90.00. 

We are proposing to add § 413.89(h)(3)(ii) 

for cost reporting periods that begin during 

FY 2013, where the amount of allowable bad 

debt is reduced by 12 percent and the cap 

would be applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 would be 

reduced by 12 percent to $96.80 which is 

capped at the unrecovered costs, therefore, 

the facility would receive $90.00. 

We are proposing to add § 413.89(h)(3)(iii) 

for cost reporting periods that begin during 

FY 2014, where the amount of allowable bad 

debt is reduced by 24 percent and the cap 

would be applied as follows: 

1. Unrecovered costs = $90.00 

2. Allowable bad debt = $110.00 

3. Allowable bad debt of $110.00 would be 

reduced by 24 percent to $83.60 which 

does not exceed the unrecovered costs, 

therefore, the facility would receive $83.60. 

We are proposing to add § 413.89(h)(3)(iv) 

for cost reporting periods that begin during 

a subsequent FY, where the amount of 

allowable bad debt is reduced by 35 percent 

and the cap would be applied as follows: 

1. Unrecovered costs = $50.00 

2. Allowable bad debt = $110.00 

3. In this example, allowable bad debt of 

$110.00 would be reduced by 35 percent to 

$71.50 which is capped at the unrecovered 

costs. Because, under this example, 

unrecovered costs are set at $50.00, the 

facility would receive $50.00. 

We propose to remove current 

regulations text at § 413.178(a) since the 

requirement to apply the cap on bad 

debt payments will be at proposed 

§ 413.89(h)(3). We also propose to 

remove current regulations text at 

§ 413.178(b), (c), and (d)(1) since these 

provisions already exist in the 

discussions of our bad debt 

requirements § 413.89, Chapter 3 of the 

PRM Part I, and in the Medicare cost 

report instructions in the PRM Part II. In 

addition, we are proposing to move the 

current general bad debt exception at 

§ 413.89(i) to new paragraph 

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§ 413.89(i)(1) in order to propose 

moving the ESRD facilities’ bad debt 

exception provision currently discussed 

at § 413.178(d)(2) to proposed new 

paragraph § 413.89(i)(2). Since we are 

proposing to remove all existing 

regulations under § 413.178 we are 

proposing to reserve this section for 

future use. 

3. Technical Corrections to 42 CFR 

417.536(f)(1) 

In this rule, we are proposing to revise 

the regulations text at 417.536(f)(1) to 

correct the cross-reference to the 

Medicare bad debt reimbursement 

regulation, so that § 417.536(f)(1) would 

reference 42 CFR 413.89 instead of the 

current outdated reference to § 413.80. 

In addition, we are revising the existing 

language at 42 CFR 417.536(f)(1) to 

conform to the description of bad debt 

in § 413.89(a) and we are removing 

§§ 417.536(f)(1)(i) and (ii) since these 

provisions already exist in the 

discussions of our bad debt 

requirements § 413.89, Chapter 3 of the 

PRM Part I, and in the Medicare cost 

report instructions in the PRM Part II. 

V. Collection of Information 

Requirements 

A. Legislative Requirement for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

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. 

B. Requirements in Regulation Text 

In this proposed rule, we are not 

proposing any changes to regulatory text 

for the ESRD PPS in CY 2013. 

C. Additional Information Collection 

Requirements 

This proposed rule does not impose 

any new information collection 

requirements in the regulation text, as 

specified above. However, this proposed 

rule does make reference to several 

associated information collections that 

are not discussed in the regulation text 

contained in this document. The 

following is a discussion of these 

information collections. 

1. ESRD QIP 

a. Display of Certificates for the PY 2015 

ESRD QIP 

Section III.C.15 of this proposed rule 

discusses a disclosure requirement for 

the PY 2014 and PY 2015 ESRD QIP. As 

stated earlier in this proposed rule, 

section 1881(h)(6)(C) of the Act requires 

the Secretary to provide certificates to 

dialysis care providers and facilities 

with their Total Performance Scores 

under the ESRD QIP. This section also 

requires each facility that receives an 

ESRD QIP certificate to display it 

prominently at the facility. 

To comply with this requirement, we 

proposed to issue one English and one 

Spanish ESRD QIP certificate beginning 

in PY 2014 to facilities via a generally 

accessible electronic file format. We 

have previously finalized other display 

requirements for the program, including 

that each facility prominently display 

the applicable ESRD QIP certificate in 

the patient area, take the necessary 

measures to ensure the security of the 

certificate in the patient areas, and have 

staff available to answer questions about 

the certificate in an understandable 

manner, taking into account that some 

patients might have limited English 

proficiency. 

The burden associated with the 

aforementioned requirements is the time 

and effort necessary for facilities to print 

the applicable ESRD QIP certificates, 

display the certificates prominently in 

patient areas, ensure the safety of the 

certificates, and respond to patient 

inquiries in reference to the certificates. 

We do not anticipate that posting the 

Spanish certificate will add more time 

or burden to the Collection of 

Information requirements outlined in 

the CY 2011 ESRD PPS final rule (76 FR 

70298 through 70299) for the PY 2014 

ESRD QIP. Therefore, this analysis only 

applies to the burden associated with 

the PY 2015 and beyond requirements. 

We estimate that approximately 5,633 

facilities will receive ESRD QIP 

certificates in PY 2015 and will be 

required to display them. We also 

estimate that it will take each facility 10 

minutes per year to print, prominently 

display, and secure the ESRD QIP 

certificates, for a total estimated annual 

burden of 939 hours (10/60 hours * 

5,633 facilities). According to the 

Bureau of Labor Statistics, the mean 

hourly wage of a registered nurse is 

$33.23. Since we anticipate nurses (or 

administrative staff) will post these 

certificates, we estimate that the 

aggregate cost of this requirement will 

be $31,203 ($33.23/hour × 939 hours). 

We estimate that approximately onethird of ESRD patients, or 100,000 

patients, will ask a question about the 

ESRD QIP certificate. We further 

estimate that it will take each facility 

approximately five minutes to answer 

each patient question about the 

applicable ESRD QIP certificate, or 1.52 

hours per facility each year. The total 

estimated annual burden associated 

with this requirement is 8,563 hours 

(1.52 hours/facility × 5,633 facilities). 

The total estimated annual burden for 

both displaying the ESRD QIP 

certificates and answering patient 

questions about the certificates is 9,502 

hours (8,563 hours + 939 hours). While 

the total estimated annual burden 

associated with both of these 

requirements as discussed is 9,502 

hours, we do not believe that there will 

be a significant cost associated with 

these requirements because we are not 

proposing to require facilities to 

complete new forms. We estimate that 

the total cost for all ESRD facilities to 

comply with the collection of 

information requirements associated 

with the certificates each year would be 

less than $315,752 ($33.23/hour × 9,502 

hours). 

b. Proposed NHSN Dialysis Event 

Reporting Requirement for the PY 2015 

ESRD QIP 

As stated above in section III.C.2 of 

this proposed rule, we propose to 

include reporting dialysis events to the 

NHSN as a reporting measure for the PY 

2015 ESRD QIP. Specifically, we would 

require facilities to submit 12 months of 

dialysis event data to the NHSN. The 

burden associated with this requirement 

for existing facilities is the time and 

effort necessary for facilities to submit 

12 months of data. According to our 

most recent data, 5,490 facilities treat 

in-center hemodialysis and/or pediatric 

hemodialysis patients and are, then, 

eligible to receive a score on this 

measure; therefore, we estimate that 

approximately 5,490 facilities will 

submit the required data. Based on data 

previously collected, we further 

estimate that the average number of 

dialysis events is 0.08 per patient per 

month and that each facility has 

approximately 75 patients. Accordingly, 

we estimate the number of dialysis 

events in a 12-month period for all 

facilities to be 395,230 (0.08 events/ 

patient/month × 75 patients/facility × 

5,490 facilities × 12 months) for the PY 

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5Last year, we stated that we believed that 200 

surveys would be administered per facility per year 

(76 FR 70299). Upon further review, however, we 

note that the ICH CAHPS specifications require a 

sample of 200 surveys only for those facilties with 

a large patient population. Facilties with fewer than 

200 patients are required to survey a sample of 

patients, aiming for a 40 percent response rate. 

(http://www.cahps.ahrq.gov/∼/media/Files/ 

SurveyDocuments/ICH/Admin_Survey/ 

53_fielding_the_ich_survey.pdf). Since we estimate 

that each facility serves approximately 75 patients, 

we believe that the average facility, at most, would 

survey 75 patients per year. 

2015 ESRD performance period. We 

estimate it will require 10 minutes to 

collect and submit data on these events 

and the estimated burden for submitting 

12 months of data will be 65,880 hours 

(395,230 dialysis events × 10/60 

minutes). If the dialysis events were 

distributed evenly across all 5,490 

facilities that would result in an 

additional 12 hour (67,596 hours/5,490 

facilities) burden for each facility at a 

cost of $399 ($33.23/hour × 12 hours) 

per facility. In total, we believe that the 

cost for all ESRD facilities to comply 

with the reporting requirements 

associated with NHSN Dialysis Event 

measure would be approximately $2.2 

million ($399 × 5,490 facilities = 

$2,190,510) per year. 

In addition, we recognize that some 

facilities are new and would not have 

completed the required training and 

enrollment required by the NHSN. We 

estimate that the number of ESRD 

facilities increases by 3 percent per year. 

Accordingly, we believe that 169 

facilities (.03 × 5,633 facilities) will be 

new in PY 2015. As noted in the CY 

2011 ESRD QIP final rule (76 FR 70299), 

we estimate that it will take each new 

provider 8 hours to enroll and complete 

the required training. The total 

estimated burden for these facilities to 

enroll and train is 1,352 hours (169 × 8 

hours) or $44,927 ($33.23/hour × 1,352 

hours). In sum, we estimate the total 

cost for all facilities to comply with the 

NHSN Dialysis Events reporting 

requirement to be less than $2.2 million 

($2,190,510 + $44,927). 

c. ICH CAHPS Survey Attestation 

Requirement for the PY 2015 ESRD QIP 

As stated above in section III.C.1 of 

this proposed rule, we proposed to 

include a measure that assesses facility 

usage of the ICH CAHPS survey as a 

reporting measure for the PY 2015 ESRD 

QIP. The burden associated with this 

requirement is the time and effort 

necessary for facilities to administer the 

ICH CAHPS survey through a third 

party and submit an attestation to CMS 

that they successfully administered the 

survey. 

We estimate that approximately 5,489 

facilities treat adult, in-center 

hemodialysis patients and are, therefore, 

eligible to receive a score on this 

measure. We estimate that all 5,489 

facilities will administer the ICH 

CAHPS survey through a third-party 

and submit an attestation to that effect. 

We estimate that it will take each 

facility’s third-party administrator 16 

hours per year to be trained on the 

survey features. We further estimate that 

it will take each facility approximately 

five minutes to submit the attestation 

each year. The estimated total annual 

burden on facilities is 88,281 hours ((16 

hours × 5,489 facilities) + ((5/60 

minutes) × 5,489 facilities) which is 

valued at approximately $3 million 

(88,281 hours × $33.23), or $547 per 

facility ($3,000,000/5,489). We estimate 

that it would take each patient 30 

minutes to complete the survey (to 

account for variability in education 

levels) and that approximately 75 

surveys per year would be taken per 

facility.5 Interviewers from each facility 

would spend a total of approximately 

37.5 hours per year with patients 

completing these surveys (30/60 

minutes * 75 minutes) or $1,247 (37.5 

hours × $33.23) for an estimated annual 

burden of 205,838 hours (37.5 hours * 

5,489 facilities) which is valued at 

approximately $6.9 million (205,838 

hours × 33.23/hour). We estimate that 

time burden for ESRD facilities to 

comply with the collection of 

information requirements associated 

with administering the ICH CAHPS 

survey each year would be 

approximately $1,794 ($547 + $1,247) or 

$9.9 million ($1,794 × 5,489 facilities = 

$9,847,266) across all ESRD facilities. 

d. Data Validation Requirements 

Section III.C.13 of the proposed rule 

outlines our data validation proposals. 

We proposed to randomly sample 

records from 750 facilities; each 

sampled facility would be required to 

produce approximately 10 records. The 

burden associated with this validation 

requirement is the time and effort 

necessary to submit validation data to a 

CMS contractor. We estimate that it will 

take each facility approximately 2.5 

hours to comply with these 

requirements. If 750 facilities are tasked 

with providing the required 

documentation, the estimated annual 

burden across all facilities would be 

1,875 hours (750 facilities × 2.5 hours) 

at a total of $62, 307 (1,875 hours × 

$33.23/hour) or $83.08 ($62,307/750) 

per facility in the sample. We also 

anticipate that the sampled facilities 

will be reimbursed by our validation 

contractor for the costs associated with 

copying and mailing the requested 

records. 

To obtain copies of the supporting 

statement and any related forms for the 

proposed paperwork collections 

referenced above, access CMS’ Web site 

at http://www.cms.gov/ 

PaperworkReductionActof1995/PRAL/ 

list.asp#TopOfPage. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

[CMS–1352–P], Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

2. Reductions to Bad Debt Payments for 

All Medicare Providers 

The statutorily mandated reductions 

of bad debt payments to providers, 

suppliers, and other entities that are 

currently receiving bad debt payments 

will not result in any changes to or any 

additional collection of information 

requirements. 

VI. Response to Comments 

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. 

VII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We examined the impacts of this 

proposed rule as required by Executive 

Order 12866 (September 30, 1993, 

Regulatory Planning and Review) and 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011). Executive Orders 

12866 and 13563 direct 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). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

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40992 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated economically 

significant under section 3(f)(1) of 

Executive Order 12866. Accordingly, 

the rule has been reviewed by the Office 

of Management and Budget. We have 

prepared a Regulatory Impact Analysis 

that to the best of our ability presents 

the costs and benefits of the proposed 

rule. We solicit comments on the 

regulatory impact analysis provided. 

2. Statement of Need 

This rule proposes a number of 

routine updates for renal dialysis 

services in CY 2013, proposes to 

implement the third year of the ESRD 

PPS transition, and proposes to make 

several policy changes and clarifications 

to the ESRD PPS. These include 

proposed updates and changes to the 

ESRD PPS and composite rate base 

rates, wage index values, wage index 

budget-neutrality adjustment factors, 

outlier payment policy, and transition 

budget-neutrality adjustment. Failure to 

publish this proposed rule would result 

in ESRD facilities not receiving 

appropriate payments in CY 2013. 

This rule proposes to implement the 

QIP for PY 2015 and beyond by 

establishing measures, scoring, and 

payment reductions to incentivize 

improvements in dialysis care as 

directed by section 1881(h) of the Act. 

Failure to establish QIP program 

parameters in this rule would prevent 

continuation of the QIP beyond PY 

2014. 

This proposed rule implements the 

reduction percentages of bad debt 

reimbursement required by section 3201 

of The Middle Class Tax Extension and 

Job Creation Act of 2012. Section 

3201(c) of The Middle Class Tax 

Extension and Job Creation Act of 2012 

added a new subparagraph1861(v)(1)(W) to the Act, which applied 

a reduction in bad debt payments to 

‘‘providers’’ not addressed under 

subparagraphs 1861(v)(1)(T) or 1861 

(v)(1)(V) of the Act. For the purpose of 

subparagraph 1861(v)(1)(W) of the Act, 

section 3201(c) of The Middle Class Tax 

Extension and Job Creation Act of 2012 

defined ‘‘providers’’ as a supplier or any 

other type of entity that receives 

payment for bad debts under the 

authority of section 1861(v)(1)(A) of the 

Act. These providers include, but are 

not limited to, CAHs, RHCs, FQHCs, 

CMHCs, HMOs reimbursed on a cost 

basis, CMPs, HCPPs and ESRD facilities. 

3. Overall Impact 

We estimate that the proposed 

revisions to the ESRD PPS will result in 

an increase of approximately $320 

million in payments to ESRD facilities 

in CY 2013, which includes the amount 

associated with the increase in the 

ESRDB market basket reduced by the 

productivity adjustment, updates to 

outlier amounts, and the effect of 

changing the blended payments from 

50 percent under the composite rate 

payment and 50 percent under the 

ESRD PPS to 25 percent under the 

composite rate payment and 75 percent 

under the ESRD PPS. 

We estimate that the proposed 

requirements related to the ESRD QIP 

for PY 2015 will cost approximately 

$12.4 million and the predicted 

payment reductions will equal about 

$8.5 million to result in a total impact 

from the proposed ESRD QIP 

requirements of $20.9 million. 

In section IV of this proposed rule, we 

discuss the provisions required by 

section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012, 

which apply percentage reductions in 

bad debt reimbursement to all providers 

eligible to receive bad debt 

reimbursement; these provisions are 

specifically prescribed by statute and 

thus, are self-implementing. Table 9 in 

section IV.C.1 of this proposed rule 

depicts a comparison of the bad debt 

payment percentages prior to and after 

FY 2013. We estimate these self 

implementing provisions of section 

3201 of The Middle Class Tax Extension 

and Job Creation Act of 2012 will result 

in savings to the Medicare program of 

$10.92 billion over the period from 2012 

through 2022. 

B. Detailed Economic Analysis 

1. CY 2013 End-Stage Renal Disease 

Prospective Payment System 

a. Effects on ESRD Facilities 

To understand the impact of the 

changes affecting payments to different 

categories of ESRD facilities, it is 

necessary to compare estimated 

payments (that is, payments made under 

the 100 percent ESRD PPS and those 

under the ESRD PPS blended payment 

during the transition) in CY 2012 to 

estimated payments in CY 2013. To 

estimate the impact among various 

classes of ESRD facilities, it is 

imperative that the estimates of 

payments in CY 2012 and CY 2013 

contain similar inputs. Therefore, we 

simulated payments only for those 

ESRD facilities for which we are able to 

calculate both current payments and 

new payments. 

For this proposed rule, we used the 

December 2011 update of CY 2011 

National Claims History file as a basis 

for Medicare dialysis treatments and 

payments under the ESRD PPS. We 

updated the 2011 claims to 2012 and 

2013 using various updates. The 

updates to the ESRD PPS base rate and 

the base composite rate portion of the 

blended rate during the transition are 

described in section II.B. of this 

proposed rule. In addition, in order to 

prepare an impact analysis, since some 

ESRD facilities opted to be paid the 

blended payment amount during the 

transition, we made various 

assumptions about price growth for the 

formerly separately billable drugs and 

laboratory tests with regard to the 

composite portion of the ESRD PPS 

blended payment during the transition. 

These rates of price growth are briefly 

outlined below, and are described in 

more detail in the CY 2011 ESRD PPS 

final rule (75 FR 49078 through 49080). 

We used the CY 2011 amounts for the 

CYs 2012 and 2013 amounts for 

Supplies and Other Services, since this 

category primarily includes the $0.50 

administration fee for separately billable 

Part B drugs and this fee continues to be 

an appropriate amount. Because some 

ESRD facilities will receive blended 

payments during the transition and 

receive payment for ESRD drugs and 

biologicals based on their average sales 

price plus 6 percent (ASP+6), we 

estimated price growth for these drugs 

and biologicals based on ASP+6 

percent. We updated the last available 

quarter of actual ASP data for the top 

twelve drugs (the second quarter of 

2012) thru 2013 by using the quarterly 

growth in the Producer Price Index (PPI) 

for Drugs, consistent with the method 

for addressing price growth in the 

ESRDB market basket. This resulted in 

increases of 1.5 percent, 0.6 percent, 2.8 

percent, 0.3 percent, 0.9 percent and 1.4 

percent, respectively, for the third 

quarter of 2012 thru the fourth quarter 

of 2013. Since the top twelve drugs 

account for over 99 percent of total 

former separately billable Part B drug 

payments, we used a weighted average 

growth of the top twelve drugs for the 

remainder. Table 10 below shows the 

updates used for the drugs. 

We updated payments for laboratory 

tests paid under the laboratory fee 

schedule to 2012 and 2013 using the 

statutorily required update of the CPI– 

U increase with any legislative 

adjustments. For this proposed rule, the 

growth from 2011 to 2012 is 0.7 percent 

and the growth from 2011 to 2013 is 0.3 

percent. 

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TABLE 10—PRICE INCREASES FROM 2011 TO 2012 AND 2011 TO 2013 OF FORMER SEPARATELY BILLABLE PART B 

DRUGS

Price update 

2011 to 2012 

(%) 

Price update 

2011 to 2013 

(%) 

EPO ................................................................................................................................................................. 0.3 5.8 

Paricalcitol ........................................................................................................................................................ ¥27.4 ¥25.5 

Sodium_ferric_glut ........................................................................................................................................... ¥20.3 ¥20.7 

Iron_sucrose .................................................................................................................................................... ¥13.1 ¥11.0 

Levocarnitine .................................................................................................................................................... 22.7 29.3 

Doxercalciferol ................................................................................................................................................. ¥72.2 ¥77.1 

Calcitriol ........................................................................................................................................................... 90.7 65.7 

Vancomycin ..................................................................................................................................................... ¥8.2 ¥1.9 

Alteplase .......................................................................................................................................................... 13.2 19.4 

Aranesp ............................................................................................................................................................ 6.4 12.3 

Daptomycin ...................................................................................................................................................... 9.5 15.0 

Ferumoxytol ..................................................................................................................................................... ¥7.0 ¥2.9 

Other Injectibles ............................................................................................................................................... ¥7.4 ¥3.1 

Table 11 shows the impact of the 

estimated CY 2013 ESRD payments 

compared to estimated payments to 

ESRD facilities in CY 2012. 

TABLE 11—IMPACT OF PROPOSED CHANGES IN PAYMENTS TO ESRD FACILITIES FOR CY 2013 ESRD PROPOSED RULE

[Percent change in total payments to ESRD facilities (both program and beneficiaries)] 

Facility type Number of 

facilities 

Number of 

treatments 

(in millions) 

Effect of 2013 

changes in 

outlier policy 

(%) 

Effect of 2013 

changes in 

wage indexes 

(%) 

Effect of total 

2013 

changes 3

(%) 

A B C D E 

All Facilities .......................................................................... 5,633 37.0 0.4 0.0 3.1 

Type: 

Freestanding ................................................................. 5,089 34.0 0.4 0.0 3.0 

Hospital based .............................................................. 544 2.9 0.2 0.2 3.7 

Ownership Type: 

Large dialysis organization ........................................... 3,663 24.5 0.5 0.0 3.0 

Regional chain .............................................................. 915 6.3 0.3 0.1 3.1 

Independent .................................................................. 617 3.9 0.2 0.0 3.2 

Hospital based 1 ............................................................ 429 2.2 0.2 0.3 3.7 

Unknown ....................................................................... 9 0.0 0.3 1.3 4.2 

Geographic Location: 

Rural ............................................................................. 1,249 6.1 0.5 ¥0.2 3.0 

Urban ............................................................................ 4,384 30.9 0.4 0.0 3.1 

Census Region: 

East North Central ........................................................ 916 5.5 0.5 0.1 3.2 

East South Central ....................................................... 464 2.8 0.6 ¥0.4 2.7 

Middle Atlantic .............................................................. 623 4.5 0.4 0.1 3.2 

Mountain ....................................................................... 332 1.7 0.3 ¥0.2 2.8 

New England ................................................................ 167 1.2 0.5 0.6 3.6 

Pacific ........................................................................... 662 5.0 0.2 0.5 3.3 

Puerto Rico and Virgin Islands ..................................... 41 0.3 ¥0.2 ¥2.4 0.4 

South Atlantic ................................................................ 1,244 8.5 0.5 ¥0.3 2.9 

West North Central ....................................................... 411 2.0 0.3 0.2 3.4 

West South Central ...................................................... 773 5.4 0.4 ¥0.1 3.0 

Facility Size: 

Less than 4,000 treatments 2 ........................................ 1,043 2.8 0.3 0.2 3.4 

4,000 to 9,999 treatments ............................................ 2,163 10.4 0.5 0.0 3.1 

10,000 or more treatments ........................................... 2,270 23.4 0.4 0.0 3.1 

Unknown ....................................................................... 157 0.3 0.3 0.0 2.9 

Percentage of Pediatric Patients: 

Less than 2% ................................................................ 5,524 36.6 0.4 0.0 3.1 

Between 2% and 19% .................................................. 45 0.3 0.3 0.0 3.1 

Between 20% and 49% ................................................ 9 0.0 ¥1.9 ¥0.1 2.0 

More than 50% ............................................................. 55 0.0 ¥0.3 0.1 2.2 

1 Includes hospital based facilities not reported to have large dialysis organization or regional chain ownership. 

2Of the 1,043 Facilities with less than 4,000 treatments, only 322 qualify for the low-volume adjustment. The low-volume adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these Low volume Facilities is a 3.5% increase in payments. 

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3 Includes the effect of ESRDB Market Basket minus productivity increase of 2.5% to the ESRD PPS base and the Composite Rate. Includes 

the effect of the change in the drug add-on percentage from 14.3% to 14.0% for those facilities that opted to be paid under the transition. Includes the effect of the blend changing from 50/50 to 25/75 for CY 2012 to CY 2013 for those facilities that choose to be paid under the transition. 

Note: Totals do not necessarily equal the sum of rounded parts. 

Column A of the impact table 

indicates the number of ESRD facilities 

for each impact category and column B 

indicates the number of dialysis 

treatments (in millions). The overall 

effect of the proposed changes to the 

outlier payment policy described in 

section II.B.7 of this proposed rule, is 

shown in column C. For CY 2013, the 

impact on all facilities as a result of the 

changes to the outlier payment policy 

would be a 0.4 percent increase in 

estimated payments. The estimated 

impact of the changes to outlier 

payment policy ranges from a 1.9 

percent decrease to a 0.6 percent 

increase. Most ESRD facilities are 

anticipated to experience a positive 

effect in their estimated CY 2013 

payments as a result of the proposed 

outlier policy changes. 

Column D shows the effect of the 

wage index on ESRD facilities and 

reflects the CY 2013 wage index values 

for the composite rate portion of the 

blended payment during the transition 

and the ESRD PPS payments. Facilities 

located in the census region of Puerto 

Rico and the Virgin Islands would 

receive a 2.4 percent decrease in 

estimated payments in CY 2013. Since 

most of the facilities in this category are 

located in Puerto Rico, the decrease is 

primarily due to the reduction in the 

wage index floor, (which only affects 

facilities in Puerto Rico in CY 2013). 

The other categories of types of facilities 

in the impact table show changes in 

estimated payments ranging from a 0.4 

percent decrease to a 1.3 percent 

increase due to the update of the wage 

index. 

Column E reflects the overall impact 

(that is, the effects of the proposed 

outlier policy changes, the proposed 

wage index, the effect of the ESRDB 

market basket increase minus 

productivity adjustment, and the effect 

of the change in the blended payment 

percentage from 50 percent of payments 

based on the composite rate system and 

50 percent based on the ESRD PPS in 

2012, to 25/75, respectively, for 2013, 

for those facilities that opted to be paid 

under the transition). We expect that 

overall, ESRD facilities will experience 

a 3.1 percent increase in estimated 

payments in 2013. ESRD facilities in 

Puerto Rico and the Virgin Islands are 

expected to receive a 0.4 percent 

increase in their estimated payments in 

CY 2013. This small increase is 

primarily due to the negative impact of 

the wage index. The other categories of 

types of facilities in the impact table 

show positive impacts ranging from an 

increase of 2.0 percent to 4.2 percent in 

their 2013 estimated payments. 

b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities 

are paid directly for the renal dialysis 

bundle and other provider types such as 

laboratories, DME suppliers, and 

pharmacies, may no longer bill 

Medicare directly for renal dialysis 

services. Rather, effective January 1, 

2011, such other providers can only 

furnish renal dialysis services under 

arrangements with ESRD facilities and 

must seek payment from ESRD facilities 

rather than Medicare. Under the ESRD 

PPS, Medicare pays ESRD facilities one 

payment for renal dialysis services, 

which may have been separately paid to 

suppliers by Medicare prior to the 

implementation of the ESRD PPS. 

Therefore, in CY 2013, the third year of 

the ESRD PPS, we estimate that the 

proposed ESRD PPS will have zero 

impact on these other providers. 

c. Effects on the Medicare Program 

We estimate that Medicare spending 

(total Medicare program payments) for 

ESRD facilities in 2013 will be 

approximately $8.7 billion. This 

estimate is based on various price 

update factors discussed in section 

VII.B.1.a in this proposed rule and takes 

into account a projected increase in feefor-service Medicare dialysis beneficiary 

enrollment of 4.6 percent in CY 2013. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are 

responsible for paying 20 percent of the 

ESRD PPS payment amount or blended 

payment amount for patients treated in 

facilities going through the ESRD PPS 

transition. As a result of the projected 

3.1 percent overall increase in the 

proposed ESRD PPS payment amounts 

in CY 2013, we estimate that there will 

be an increase in beneficiary coinsurance payments of 3.1 percent in CY 

2013, which translates to approximately 

$70 million. 

e. Alternatives Considered 

We considered eliminating the AY 

modifier use by ESRD facilities in CY 

2013, which could address program 

integrity concerns but could also require 

Medicare beneficiaries to incur 

additional injections, medical visits and 

co-insurance liabilities and accordingly, 

we did not pursue this alternative. 

Rather, we decided to monitor the use 

of the AY modifier and consider the 

elimination of the AY modifier in future 

rulemaking if we determine that it is 

being used inappropriately. 

2. End-Stage Renal Disease Quality 

Incentive Program 

a. Effects of the PY 2015 ESRD QIP 

The ESRD QIP provisions are 

intended to prevent possible reductions 

in the quality of ESRD dialysis facility 

services provided to beneficiaries as a 

result of payment changes under the 

ESRD PPS by implementing a ESRD QIP 

that reduces ESRD payments by up to 2 

percent for dialysis facilities that fail to 

meet or exceed a Total Performance 

Score with respect to performance 

standards established by the Secretary 

with respect to certain specified 

measures. The methodology that we are 

proposing to determine a facility’s Total 

Performance Score is described in 

section III.C.10 of this proposed rule. 

Any reductions in ESRD payments 

would begin on January 1, 2015 for 

services furnished on or after January 1, 

2015. 

As a result, based on the ESRD QIP 

outlined in this proposed rule, we 

estimate that, of the total amount of 

dialysis facilities (including those not 

receiving an ESRD QIP Total 

Performance Score), approximately 14 

percent or 801 of the facilities would 

likely receive a payment reduction for 

PY 2015. Facilites that do not receive a 

TPS are not eligible for a payment 

reduction. 

The ESRD QIP impact assessment 

assumes an initial count of 5,633 

dialysis facilities paid through the PPS. 

Table 12 shows the overall estimated 

distribution of payment reductions 

resulting from the PY 2015 ESRD QIP. 

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TABLE 12—ESTIMATED DISTRIBUTION OF PY 2015 ESRD QIP PAYMENT REDUCTIONS

Payment 

reduction (%) 

Number of 

facilities 

Percent of 

facilities 

0.0 ............................................................................................................................................................................ 4563 85.1 

0.5 ............................................................................................................................................................................ 470 8.8 

1.0 ............................................................................................................................................................................ 190 3.5 

1.5 ............................................................................................................................................................................ 77 1.4 

2.0 ............................................................................................................................................................................ 64 1.2 

* Note: This table excludes 268 facilities that did not receive a score because they did not have enough data to receive a Total Performance 

Score. 

To estimate whether or not a facility 

would receive a payment reduction 

under the proposed approach, we 

scored each facility on achievement and 

improvement for each of the proposed 

clinical measures using the most recent 

data available for each measure shown 

in Table 13. 

TABLE 13—DATA USED TO ESTIMATE PY 2015 ESRD QIP PAYMENT REDUCTIONS

Measure 

Period of time used to calculate 

achievement thresholds, performance standards, benchmarks, and 

improvement thresholds 

Performance period 

Hemoglobin Greater Than 12 g/dL ......................................................... Jan 2010–Dec 2010 ...................... Jan 2011–Sep 2011 

Vascular Access Type: 

% Fistula .......................................................................................... Oct 2010–Mar 2011 ....................... Apr 2011–Sep 2011. 

% Catheter ....................................................................................... Oct 2010–Mar 2011 ....................... Apr 2011–Sep 2011. 

Kt/V: 

Adult HD ........................................................................................... Jul 2010–Dec 2010 ....................... Jan 2011–Sep 2011. 

Adult PD ........................................................................................... Jul 2010–Dec 2010 ....................... Jan 2011–Sep 2011. 

Pediatric HD ..................................................................................... Jul 2010–Dec 2010 ....................... Jan 2011–Sep 2011. 

Hypercalcemia ......................................................................................... Mar 2010–Dec 2010 ...................... Apr 2011–Oct 2011. 

For the all of the measures except 

Hypercalcemia, we used claims data for 

these calculations. For the 

Hypercalcemia measure, we used 

CROWNWeb data. Clinical measures 

with less than 11 cases for a facility 

were not included in that facility’s Total 

Performance Score. Clinical measures 

with 11–25 cases for a facility received 

an adjustment as outlined in section 

III.C.1 of this proposed rule. Each 

facility’s Total Performance Score was 

compared to the estimated minimum 

Total Performance Score and the 

payment reduction table found in 

section III.C.12 of this proposed rule. 

Facilities were required to have a score 

on at least one clinical measure to 

receive a Total Performance Score. For 

these simulations, reporting measures 

were not included due to lack of data 

availability. Therefore, the simulated 

facility Total Performance Scores were 

calculated using only the clinical 

measure scores. 

To estimate the total payment 

reductions in PY 2015 for each facility 

resulting from this proposed rule, we 

multiplied the total Medicare payments 

to the facility during the one year period 

between October 2010 and September 

2011 by the facility’s estimated payment 

reduction percentage expected under 

the ESRD QIP, yielding a total payment 

reduction amount for each facility: 

(Total ESRD payment in October 2010 

through September 2011 times the 

estimated payment reduction 

percentage). For PY 2015 the total 

payment reduction for all of the 801 

facilities expected to receive a reduction 

is approximately $8.5 million 

($8,523,594). Further, we estimate that 

the total costs associated with the 

collection of information requirements 

for PY 2015 described in section V.C.2 

of this proposed rule would be 

approximately $12.4 million for all 

ESRD facilities. As a result, we estimate 

that ESRD facilities will experience an 

aggregate impact of $20.9 million 

($12,398,455 + 8,523,594 = $20,922,049) 

as a result of the PY 2015 ESRD QIP. 

Table 14 below shows the estimated 

impact of the finalized ESRD QIP 

payment reductions to all ESRD 

facilities for PY 2015. The table details 

the distribution of ESRD facilities by 

facility size (both among facilities 

considered to be small entities and by 

number of treatments per facility), 

geography (both urban/rural and by 

region), and by facility type (hospital 

based/freestanding facilities). Given that 

the time periods used for these 

calculations will differ from those we 

propose to use for the PY 2015 ESRD 

QIP, the actual impact of the PY 2015 

ESRD QIP may vary significantly from 

the values provided here. 

TABLE 14—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES FOR PY 2015 

Number of 

facilities 

Number of 

Medicare 

treatments 

2011 (in 

millions) 3

Number of 

facilities with 

QIP score 

Number of 

facilities 

expected to 

receive a payment reduction 

Payment 

reduction (percent change in 

total ESRD 

payments) 

All Facilities .......................................................................... 5,633 37.0 5,364 801 ¥0.12 

Facility Type: 

Freestanding ................................................................. 5,089 34.0 4,956 679 ¥0.10 

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TABLE 14—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES FOR PY 2015—Continued 

Number of 

facilities 

Number of 

Medicare 

treatments 

2011 (in 

millions) 3

Number of 

facilities with 

QIP score 

Number of 

facilities 

expected to 

receive a payment reduction 

Payment≤ 

reduction (percent change in 

total ESRD 

payments) 

Hospital-based .............................................................. 544 2.9 408 122 ¥0.31 

Ownership Type: 

Large Dialysis ............................................................... 3,663 24.5 3, 586 459 ¥0.09 

Regional Chain ............................................................. 915 6.3 876 119 ¥0.12 

Independent .................................................................. 617 3.9 583 125 ¥0.20 

Hospital-based (non-chain) ........................................... 429 2.2 314 96 ¥0.33 

Unknown ....................................................................... 9 0.0 5 2 ¥0.20 

Facility Size: 

Large Entities ................................................................ 4,578 30.8 4,462 578 ¥0.09 

Small Entities 1 .............................................................. 1,046 6.1 897 221 ¥0.24 

Unknown ....................................................................... 9 0.0 5 2 ¥0.20 

Urban/Rural Status: 

Rural ............................................................................. 1,249 6.1 1,186 173 ¥0.11 

Urban ............................................................................ 4,384 30.9 4,178 628 ¥0.12 

Census Region: 

Northeast ...................................................................... 784 5.7 741 117 ¥0.13 

Midwest ......................................................................... 1,320 7.5 1,223 229 ¥0.16 

South ............................................................................. 2,476 16.7 2,407 346 ¥0.11 

West .............................................................................. 991 6.7 954 96 ¥0.08 

US Territories 2 ............................................................. 62 0.3 39 13 ¥0.24 

Census Division: 

East North Central ........................................................ 916 5.5 847 175 ¥0.18 

East South Central ....................................................... 464 2.8 451 65 ¥0.12 

Middle Atlantic .............................................................. 623 4.5 582 100 ¥0.14 

Mountain ....................................................................... 332 1.7 318 37 ¥0.08 

New England ................................................................ 167 1.2 159 17 ¥0.10 

Pacific ........................................................................... 662 5.0 636 59 ¥0.08 

South Atlantic ................................................................ 1,244 8.5 1,209 188 ¥0.12 

West North Central ....................................................... 411 2.0 376 54 ¥0.11 

West South Central ...................................................... 773 5.4 747 93 ¥0.10 

US Territories 2 ............................................................. 41 0.3 39 13 ¥0.24 

Facility Size (# of total treatments): 

Less than 4,000 treatments .......................................... 1,043 2.8 899 143 ¥0.17 

4,000–9,999 treatments ................................................ 2,163 10.4 2,121 299 ¥0.10 

Over 10,000 treatments ................................................ 2,270 23.4 2,249 324 ¥0.10 

Unknown ....................................................................... 157 0.3 95 35 ¥0.47 

1Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported status. 

2 Includes Puerto Rico and Virgin Islands. 

3Based on claims data through September 2011. 

b. Alternatives Considered for the PY 

2015 ESRD QIP 

In developing the proposed PY 2015 

ESRD QIP, we selected measures that 

we believe are important indicators of 

patient outcomes and quality of care as 

discussed in sections III.C.1, III.C.2, and 

III.C.3 of this proposed rule. Poor 

management of anemia and inadequate 

dialysis, for example, can lead to 

avoidable hospitalizations, decreased 

quality of life, and death. Infections are 

also a leading cause of death and 

hospitalization among hemodialysis 

patients, but there are proven infection 

control methods that have been shown 

effective in reducing morbidity and 

mortality. We also considered proposing 

to adopt the Standardized 

Hospitalization Ratio Admissions (SHR) 

measure and the Standardized Mortality 

Ratio (SMR) measures as part of the PY 

2015 ESRD QIP. While we decided not 

to propose to adopt the SHR and SMR 

measures for the PY 2015 ESRD QIP, we 

will publicly report these measure rates/ 

ratios to the public via DFC to 

encourage facilities to improve their 

care. We believe the measures selected 

will allow us to continue focusing on 

improving the quality of care that 

Medicare beneficiaries receive from 

ESRD dialysis facilities. 

In developing the proposed scoring 

methodology for the PY 2015 ESRD QIP, 

we considered a number of alternatives 

including various improvement ranges, 

achievement thresholds, and 

benchmarks. We also considered 

whether some of the new measures 

should be scored based on only 

achievement. We also discussed scoring 

some of the clinical measures using a 

binary methodology (that is, facilities 

receive either zero or 10 points for 

missing or achieving a standard, 

respectively). We ultimately decided to 

propose to mirror the PY 2014 ESRD 

QIP scoring methodology as closely as 

possible. We aim to design a scoring 

methodology that is straightforward and 

transparent to facilities, patients, and 

other stakeholders, and we believe one 

of the ways to obtain this transparency 

is to be as consistent as possible from 

year-to-year of the program. We believe 

that this consistency will allow us to 

better assess the impacts of the ESRD 

QIP upon facilities and beneficiaries. 

Finally, we believe that all scoring 

methodologies for Medicare VBP 

programs should be aligned as 

appropriate given their specific 

statutory requirements, and the scoring 

methodology proposed for the ESRD 

QIP is similar to the Hospital Inpatient 

VBP Program. 

When deciding upon how to best 

score the Vascular Access Type and Kt/ 

V Dialysis Adequacy measure topics, we 

considered combining all of the 

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measures within the measure topic into 

one composite measure (that is, having 

one, combined numerator and one, 

combined denominator for all of the 

measures within the topic) rather than 

individually scoring each measure and 

weighting it appropriately in the 

measure topic. We believe that it is 

important to mirror the NQF 

specifications for each measure as much 

as possible; we also heeded the 

suggestion of the Measures Application 

Partnership to further test composite 

measures before implementing them. 

Therefore, we decided to propose 

measure topics where each measure 

within the measure topic is scored 

individually and then weighted 

appropriately. 

In order to receive credit for a month 

of reporting, we considered proposing to 

require facilities to report the required 

information for less than 100 percent of 

their patients for the Mineral 

Metabolism and Anemia Management 

reporting measures. Specifically, we 

considered lowering the threshold to 

reporting 98 percent of patients for a 

month in order to receive credit for that 

month. We ultimately decided that, in 

order to encourage the best care for 

patients, it is appropriate to hold 

facilities to the higher standard. Because 

the measures allow facilities to report 

values taken by other providers/ 

facilities and because we require 

reporting only for those hemodialysis 

patients that a facility sees at least twice 

in a claim month or for those peritoneal 

dialysis patients for which a facility 

submits a claim, we believe that the 

measures afford facilities enough 

flexibility while also requiring the best 

quality care. 

We also considered multiple baseline 

periods for purposes of scoring facilities 

on achievement and improvement. We 

considered periods of the same time and 

duration, periods occurring at different 

times, and periods with various 

durations. We ultimately decided that a 

baseline period of 12 months for both 

the achievement and improvement 

scores is best because it is consistent 

with the PY 2014 program. 

Additionally, a 12-month baseline 

period prevents issues related to 

seasonality. We decided to propose 

achievement and improvement baseline 

periods occurring over different periods 

of time because we believe that this 

approach mitigates data lag as much as 

possible and also allows us to score all 

of the measures on both achievement 

and improvement. Finally, we decided 

to propose an achievement baseline 

period spanning a calendar year (CY 

2011) because this approach allows us 

to publish the numerical values for the 

performance standards before the 

beginning of the performance period. 

In deciding upon the minimum 

number of cases required for a facility 

to be scored on a measure, we reviewed 

and discussed many options. We 

considered keeping the program the 

same as PY 2014 by excluding measures 

with less than 11 cases and applying no 

adjustment. We also discussed 

excluding measures with less than 26 

and less than 51 cases. Finally, we 

discussed an adjustment applicable to 

measures with 26–50 cases. We believe 

that, given the alternatives, the 

proposed methodology strikes an 

appropriate balance between 

maximizing facility inclusion in the 

program and preventing results for very 

small facilities from limiting the 

reliability of total performance scores. 

Finally, in deciding upon the 

calculation of the minimum Total 

Performance Score, we considered a 

score that includes a value for each of 

the reporting measures. We decided, 

however, to propose to adhere to the PY 

2014 methodology—calculating the 

minimum Total Performance Score as if 

the reporting measures were excluded 

from the calculation. Again, we believe 

that consistently scoring the ESRD QIP 

will allow us to better assess its impacts 

and allow facilities to plan for future 

years of the program. 

3. Reductions to Bad Debt Payments for 

All Medicare Providers 

Section 3201 of The Middle Class Tax 

Extension and Job Creation Act of 2012 

that requires reductions in bad debt 

reimbursement to all providers, supplies 

and other entities eligible to receive bad 

debt reimbursement will have a 

significant impact on the operations of 

all affected entities. However, these 

provisions are specifically prescribed by 

statute and thus, are self-implementing. 

It is estimated that the savings in the CY 

2013 would be $330 million. 

C. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4), in Table 15 below, 

we have prepared an accounting 

statement showing the classification of 

the transfers and costs associated with 

the various provisions of this proposed 

rule. 

TABLE 15—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS AND COSTS/SAVINGS ESRD PPS FOR

CY 2013 

Category Transfers 

Annualized Monetized Transfers .............................................................. $250 million. 

From Whom to Whom .............................................................................. Federal government to ESRD providers. 

Category Transfers 

Increased Beneficiary Co-insurance Payments ....................................... $70 million. 

From Whom to Whom .............................................................................. Beneficiaries to ESRD providers.

ESRD QIP for PY 2015 

Category Transfers 

Annualized Monetized Transfers .............................................................. ¥$8.5 million.* 

From Whom to Whom .............................................................................. Federal government to ESRD providers. 

Category Costs 

Annualized Monetized ESRD Provider Costs .......................................... 12.4 million.** 

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TABLE 15—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS AND COSTS/SAVINGS ESRD PPS FOR

CY 2013—Continued 

Category Transfers 

Savings from Congressionally Mandated Reductions of Bad Debt Payments in CY 2013 

Category Transfers 

Annualized Monetized Bad Debt Payments ............................................. $¥330 million. 

From Whom to Whom .............................................................................. Federal government to Medicare providers. 

* It is the reduced payment to the ESRD facilities, which fall below the quality standards as stated in section III.C.12 of this proposed rule. 

** It is the cost associated with the collection of information requirements for all ESRD facilities. 

VIII. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96–354) 

(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 organizations, and small 

governmental jurisdictions. 

Approximately 19 percent of ESRD 

dialysis facilities are considered small 

entities according to the Small Business 

Administration’s (SBA) size standards, 

which classifies small businesses as 

those dialysis facilities having total 

revenues of less than $34.5 million in 

any 1 year. Individuals and States are 

not included in the definitions of a 

small entity. For more information on 

SBA’s size standards, see the Small 

Business Administration’s Web site at 

http://sba.gov/idc/groups/public/ 

documents/sba_homepage/ 

serv_sstd_tablepdf.pdf (Kidney Dialysis 

Centers are listed as 621492 with a size 

standard of $34.5 million). 

The claims data used to estimate 

payments to ESRD facilities in this RFA 

analysis and RIA do not identify which 

dialysis facilities are part of a large 

dialysis organization (LDO), regional 

chain, or other type of ownership 

because each individual dialysis facility 

has its own provider number and bills 

Medicare using this number. Therefore, 

in previous RFA analyses and RIAs 

presented in proposed and final rules 

that updated the basic case-mix adjusted 

composite payment system, we 

considered each ESRD facility to be a 

small entity for purposes of the RFA 

analysis. However, we conducted a 

special analysis for this proposed rule 

that enabled us to identify the ESRD 

facilities that are part of an LDO or 

regional chain and therefore, were able 

to identify individual ESRD facilities 

that would be considered small entities. 

We do not believe ESRD facilities are 

operated by small government entities 

such as counties or towns with 

populations of 50,000 or less, and 

therefore, they are not enumerated or 

included in this estimated RFA analysis. 

Individuals and States are not included 

in the definition of a small entity. 

For purposes of the RFA, we estimate 

that approximately 19 percent of ESRD 

facilities are small entities as that term 

is used in the RFA (which includes 

small businesses, nonprofit 

organizations, and small governmental 

jurisdictions). This amount is based on 

the number of ESRD facilities shown in 

the ownership category in Table 11. 

Using the definitions in this ownership 

category, we consider the 617 facilities 

that are independent and the 429 

facilities that are shown as hospitalbased to be small entities. The ESRD 

facilities that are owned and operated 

by LDOs and regional chains would 

have total revenues of more than $34.5 

million in any year when the total 

revenues for all locations are combined 

for each business (individual LDO or 

regional chain), and are not, therefore, 

included as small entities. 

For the ESRD PPS updates proposed 

in this rule, a hospital-based ESRD 

facility (as defined by ownership type) 

is estimated to receive a 3.7 percent 

increase in payments for CY 2013. An 

independent facility (as defined by 

ownership type) is estimated to receive 

a 3.2 percent increase in payments for 

2013. 

Based on the proposed QIP payment 

reduction impacts to ESRD facilities for 

PY 2015, we estimate that of the 801 

ESRD facilities expected to receive a 

payment reduction, 221 ESRD small 

entity facilities would experience a 

payment reduction (ranging from 0.5 

percent up to 2.0 of total payments), as 

presented in Table 14 above. We 

anticipate the payment reductions to 

average approximately $10,462 per 

facility among the 801 facilities 

receiving a payment reduction, with an 

average of $12,509 per small entity 

facilities receiving a payment reduction. 

Using our projections of facility 

performance, we then estimated the 

impact of anticipated payment 

reductions on ESRD small entities, by 

comparing the total payment reductions 

for the 221 small entities expected to 

receive a payment reduction, with the 

aggregate ESRD payments to all small 

entities. We estimate that there are a 

total of 897 small entity facilities. For 

this entire group of 897 ESRD small 

entity facilities, a decrease of 0.24 

percent in aggregate ESRD payments is 

observed. 

Therefore, the Secretary has 

determined that this proposed rule will 

not have a significant economic impact 

on a substantial number of small 

entities. We solicit comment on the RFA 

analysis provided. 

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. Any such regulatory impact 

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 of a metropolitan 

statistical area and has fewer than 100 

beds. We do not believe this proposed 

rule will have a significant impact on 

operations of a substantial number of 

small rural hospitals because most 

dialysis facilities are freestanding. 

While there are 178 rural hospital-based 

dialysis facilities, we do not know how 

many of them are based at hospitals 

with fewer than 100 beds. However, 

overall, the 178 rural hospital-based 

dialysis facilities will experience an 

estimated 3.4 percent increase in 

payments. As a result, this proposed 

rule is estimated to not have a 

significant impact on small rural 

hospitals. Therefore, the Secretary has 

determined that this proposed rule will 

not have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

In addition, section 3201 of The 

Middle Class Tax Extension and Job 

Creation Act of 2012 that requires 

reductions in bad debt reimbursement 

to all providers, supplies and other 

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entities eligible to receive bad debt 

reimbursement will have a significant 

impact on the operations of a substantial 

number of small entities and small rural 

hospitals. However, these provisions are 

specifically prescribed by the Congress 

and thus, are self-implementing. Thus, 

we are not providing a Regulatory 

Flexibility Act Analysis to codify these 

mandated reductions in bad debt 

payments. 

IX. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

$100 million in 1995 dollars, updated 

annually for inflation. In 2012, that 

threshold is approximately $139 

million. This proposed rule does not 

include any mandates that would 

impose spending costs on State, local, or 

Tribal governments in the aggregate, or 

by the private sector, of $139 million. 

X. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) 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 

will not have substantial direct effects 

on the rights, roles, and responsibilities 

of States, local or Tribal governments. 

XI. Files Available to the Public Via the 

Internet 

This section lists the Addenda 

referred to in the preamble of this 

proposed rule. Beginning in CY 2012, 

the Addenda for the annual ESRD PPS 

proposed and final rulemakings will no 

longer appear in the Federal Register. 

Instead, the Addenda will be available 

only through the Internet. We will 

continue to post the Addenda through 

the Internet. 

Readers who experience any problems 

accessing the Addenda that are posted 

on the CMS Web site at http:// 

www.cms.gov/ESRDPayment/PAY/ 

list.asp, should contact Michelle Cruse 

at (410) 786–7540. 

List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 417 

Administrative practice and 

procedure, Grant programs—health, 

Health care, Health insurance, Health 

maintenance organizations (HMOs), 

Loan programs—health, Medicare, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED 

PAYMENT RATES FOR SKILLED 

NURSING FACILITIES 

1. The authority citation for part 413 

is revised to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 

1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883 and 1886 of the Social Security 

Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 

1395g, 1395l(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Pub. L. 106–113 (113 Stat. 1501A– 

332) and sec. 3201 of Pub. L. 112–96 (126 

Stat. 156). 

Subpart F—Specific Categories of 

Costs 

2. Section 413.89 is amended by 

revising paragraphs (h)(1) introductory 

text, (h)(1)(iv), (h)(2), (h)(3), and (i), and 

by adding paragraphs (h)(1)(v) and (h)(4) 

to read as follows: 

§ 413.89 Bad debts, charity, and courtesy 

allowances. 

* * * * * 

(h) * * * 

(1) Hospitals. In determining 

reasonable costs for hospitals, the 

amount of allowable bad debt (as 

defined in paragraph (e) of this section) 

is reduced: 

* * * * * 

(iv) For cost reporting periods 

beginning during fiscal years 2001 

through 2012, by 30 percent. 

(v) For cost reporting periods 

beginning during a subsequent fiscal 

year, by 35 percent. 

(2) Skilled nursing facilities and swing 

bed hospitals. For the purposes of this 

paragraph (h)(2), a dual eligible 

individual is defined as an individual 

that is entitled to benefits under Part A 

of Medicare and is determined eligible 

by the State for medical assistance 

under Title XIX of the Act as described 

under paragraph (2) of the definition of 

a ‘‘full-benefit dual eligible individual’’ 

at § 423.772 of this chapter. In 

determining reasonable costs for a 

skilled nursing facility and for posthospital SNF care furnished in a swing 

bed hospital, as defined in 42 CFR 

413.114(b) of this part, the amount of 

allowable bad debt (as defined in 

paragraph (e) of this section) is reduced: 

(i) For non-dual eligible individuals— 

(A) For cost reporting periods beginning 

during fiscal years 2006 through 2012, 

by 30 percent, for a patient in a skilled 

nursing facility. 

(B) For cost reporting periods 

beginning during a subsequent fiscal 

year, by 35 percent, for a patient in a 

skilled nursing facility or receiving posthospital SNF care in a swing bed 

hospital. 

(ii) For dual eligible individuals—(A) 

For cost reporting periods beginning 

during fiscal year 2013, by 12 percent, 

for a patient in a skilled nursing facility 

or receiving post-hospital SNF care in a 

swing bed hospital. 

(B) For cost reporting periods 

beginning during fiscal year 2014, by 24 

percent, for a patient in a skilled 

nursing facility or receiving posthospital SNF care in a swing bed 

hospital. 

(C) For cost reporting periods 

beginning during a subsequent fiscal 

year, by 35 percent, for a patient in a 

skilled nursing facility or receiving posthospital SNF care in a swing bed 

hospital. 

(3) End-stage renal dialysis facilities. 

In determining reasonable costs for an 

end-stage renal dialysis facility, the 

amount of allowable bad debt (as 

defined in paragraph (e) of this section) 

is: 

(i) For cost reporting periods 

beginning before October 1, 2012, 

reimbursed up to the facility’s costs. 

(ii) For cost reporting periods 

beginning during fiscal year 2013, 

reduced by 12 percent and reimbursed 

up to the facility’s costs. 

(iii) For cost reporting periods 

beginning during fiscal year 2014, 

reduced by 24 percent and reimbursed 

up to the facility’s costs. 

(iv) For cost reporting periods 

beginning during a subsequent fiscal 

year, reduced by 35 percent and 

reimbursed up to the facility’s costs. 

(4) All other providers. In determining 

reasonable costs for all other providers, 

suppliers and other entities not 

described elsewhere in paragraph (h) of 

this section that are eligible to receive 

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41000 Federal Register / Vol. 77, No. 133 / Wednesday, July 11, 2012 / Proposed Rules 

reimbursement for bad debts under this 

section, the amount of allowable bad 

debts (as defined in paragraph (e) of this 

section) is reduced: 

(i) For cost reporting periods 

beginning during fiscal year 2013, by 12 

percent. 

(ii) For cost reporting periods 

beginning during fiscal year 2014, by 24 

percent. 

(iii) For cost reporting periods 

beginning during a subsequent fiscal 

year, by 35 percent. 

(i) Exceptions applicable to Bad Debt 

Reimbursement. (1) Bad debts arising 

from covered services paid under a 

reasonable charge-based methodology or 

a fee schedule are not reimbursable 

under the program. 

(2) For end-stage renal dialysis 

services furnished on or after January 1, 

2011 and paid for under the end-stage 

renal dialysis prospective payment 

system described in § 413.215, bad debts 

arising from covered items or services 

that, prior to January 1, 2011 were paid 

under a reasonable charge-based 

methodology or a fee schedule, 

including but not limited to drugs, 

laboratory tests, and supplies are not 

reimbursable under the program. 

§ 413.178 [Removed and Reserved] 

3. Section 413.178 is removed and 

reserved. 

PART 417—HEALTH MAINTENANCE 

ORGANIZATIONS, COMPETITIVE 

MEDICAL PLANS, AND HEALTH CARE 

PREPAYMENT PLANS 

4. The authority citation for part 417 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh), secs. 1301, 1306, and 1310 of the 

Public Health Service Act (42 U.S.C. 300e, 

300e–5, and 300e–9), and 31 U.S.C. 9701. 

Subpart O—Medicare Payment: Cost 

Basis 

5. Section 417.536 is amended by 

revising paragraph (f)(1) to read as 

follows: 

§ 417.536 Cost payment principles. 

* * * * * 

(f) * * * 

(1) Bad debts attributable to Medicare 

deductible and coinsurance amounts are 

allowable only if the requirements of 

§ 413.89 of this chapter are met, subject 

to the limitations described under 

§ 413.89(h) and the exceptions for 

services described under § 413.89(i). 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: June 22, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: June 27, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–16566 Filed 7–2–12; 4:15 pm] 

BILLING CODE 4120–01–P 

mstockstill on DSK4VPTVN1PROD with PROPOSALS2