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[Federal Register Volume 78, Number 130 (Monday, July 8, 2013)]
[Proposed Rules]
[Pages 40835-40890]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16107]

[[Page 40835]]

Vol. 78

Monday,

No. 130

July 8, 2013

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 413 and 414

Medicare Program; End-Stage Renal Disease Prospective Payment System, 
Quality Incentive Program, and Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies; Proposed Rule

Federal Register / Vol. 78 , No. 130 / Monday, July 8, 2013 / 
Proposed Rules

[[Page 40836]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1526-P]
RIN 0938-AR55

Medicare Program; End-Stage Renal Disease Prospective Payment 
System, Quality Incentive Program, and Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to update and make revisions to the End-
Stage Renal Disease (ESRD) prospective payment system (PPS) for 
calendar year (CY) 2014. This rule also proposes to set forth 
requirements for the ESRD quality incentive program (QIP), including 
for payment year (PY) 2016 and beyond. In addition, this rule proposes 
to clarify the grandfathering provision related to the 3-year minimum 
lifetime requirement (MLR) for Durable Medical Equipment (DME). In 
addition, it provides clarification of the definition of routinely 
purchased DME. This rule also proposes the implementation of budget-
neutral fee schedules for splints and casts, and intraocular lenses 
(IOLs) inserted in a physician's office. Finally, this rule would make 
a few technical amendments and corrections to existing regulations 
related to payment for DMEPOS items and services.

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 30, 
2013.

ADDRESSES: In commenting, please refer to file code CMS-1526-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-1526-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-1526-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, (410) 786-7540, for issues related to the ESRD PPS.
Stephanie Frilling, (410) 786-4507, for issues related to the ESRD PPS 
wage index, home dialysis training, and the delay in payment for oral-
only drugs under the ESRD PPS.
Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market 
basket.
Anita Segar, (410) 786-4614, for issues related to the ESRD QIP.
Sandhya Gilkerson, (410) 786-4085, for issues related to the 
clarification of the grandfathering provision related to the 3-year MLR 
for DME.
Anita Greenberg (410) 786-4601, for issues related to the clarification 
of the definition of routinely purchased DME.
Christopher Molling (410) 786-6399, for issues related to DMEPOS 
technical amendments and corrections.
Hafsa Vahora, (410) 786-7899, for issues related to the implementation 
of budget neutral fee schedules for splints and casts, and IOLs 
inserted in a physician's office.

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

[[Page 40837]]

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. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
B. Summary of the Major Provisions
1. ESRD PPS
2. ESRD QIP
3. DMEPOS
C. Summary of Costs and Benefits
1. Impacts of the Proposed ESRD PPS
2. Impacts for ESRD QIP
3. Impacts for DMEPOS
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 2014 ESRD 
PPS
    1. Composite Rate Portion of the ESRD PPS Blended Payment
    2. ESRD PPS Base Rate
    a. Proposed Adjustment to the ESRD PPS Base Rate to Reflect 
Change in Utilization of ESRD-Related Drugs and Biologicals
    i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate
    ii. Determining Utilization of ESRD-Related Drugs and 
Biologicals
    iii. Pricing of ESRD-Related Drugs and Biologicals
    iv. Calculation of the Amount of the Per Treatment Reduction
    v. Comparison of ASP versus PPI
    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 2014
    c. Proposed Productivity Adjustment
    d. Calculation of the ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2014
    4. The Proposed CY 2014 Wage Index
    a. Payment Under the ESRD PPS for Facilities Located in Guam, 
American Samoa, and the Northern Mariana Islands and Proposed Wage 
Index Value for Guam
    b. Proposed Policies for Areas with No Wage Data
    c. Proposed Reduction to the ESRD Wage Index Floor
    d. Proposed Wage Index Budget-Neutrality Adjustment
    5. Application of the International Classification of Diseases 
(ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes
    a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
    b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
    c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
    6. Proposed Revisions to the Outlier Policy
    a. Impact of Proposed Changes to the Outlier Policy
    b. Outlier Policy Percentage
    C. Discussion of Self-Dialysis and Home Dialysis Training Add On 
Adjustment and Request for Public Comments
    a. Medicare Policy for Self-Dialysis Training, Home Dialysis 
Training, and Retraining
    b. Payment Methodology
    D. Delay of Payment for Oral-Only Drugs Under the ESRD PPS
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    A. Background
    B. Considerations in Updating and Expanding Quality Measures 
under the ESRD QIP for PY 2016 and Subsequent PYs
    1. Value-Based Purchasing (VBP) Overview
    2. Brief Overview of Proposed PY 2016 Measures
    3. Measures Application Partnership Review
    C. Proposed Measures for the PY 2016 ESRD QIP and Subsequent PYs 
of the ESRD QIP
    1. PY 2015 Measures Continuing in PY 2016 and Future Payment 
Years
    2. Proposal to Expand One PY 2015 Measure and Revise Two PY 2015 
Measures for PY 2016 and Subsequent Payment Years
    a. Proposed Expanded ICH CAHPS Reporting Measure
    b. Proposed Revised Mineral Metabolism Reporting Measure
    c. Proposed Revised Anemia Management Reporting Measure
    3. New Measures Proposed for PY 2016 and Subsequent Payment 
Years of the ESRD QIP
    a. Proposed Clinical Anemia Management Measure and Anemia 
Management Clinical Measure Topic
    i. Anemia Management: Hgb > 12
    ii. Anemia of Chronic Kidney Disease: Patient Informed Consent 
for Anemia Treatment
    b. Hypercalcemia
    c. Use of Iron Therapy for Pediatric Patients Reporting Measure
    d. NHSN Bloodstream Infection in Hemodialysis Outpatients 
Clinical Measure
    e. Comorbidity Reporting Measure
    4. Other Measures under Development
    5. Proposed Scoring for the PY 2016 ESRD QIP and Future Payment 
Years
    6. Proposed Performance Period for the PY 2016 ESRD QIP
    7. Proposed Performance Standards for the PY 2016 ESRD QIP and 
Future Payment Years
    a. Proposed Clinical Measure Performance Standards
    b. Estimated Performance Standards for Proposed Clinical 
Measures
    c. Proposed Performance Standards for Reporting Measures
    8. Proposed Scoring for the PY 2016 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 Facility Performance on Reporting 
Measures
    9. Proposals for Weighting the PY 2016 ESRD QIP Measures and 
Calculating the PY 2016 ESRD QIP Total Performance Score
    a. Weighting Individual Measures to Compute Measure Topic Scores 
for the Kt/V Dialysis Adequacy measure topic, the Vascular Access 
Type measure topic, and the Anemia Management Clinical measure topic
    b. Proposal for Weighting the Total Performance Score
    c. Examples of the Proposed PY 2016 ESRD QIP Scoring Methodology
    10. Proposed Minimum Data for Scoring Measures for the PY 2016 
ESRD QIP and Future Payment Years
    11. Proposed Payment Reductions for the PY 2016 ESRD QIP and 
Future Payment Years
    12. Data Validation
    13. Proposals for Scoring Facilities Whose Ownership has Changed
    14. Proposals for Public Reporting Requirements
IV. Clarification of the Definition of Routinely Purchased Durable 
Medical Equipment (DME)
    A. Background
    1. Background for DME
    2. Medicare Guidance and Rulemaking Regarding Definition of 
Routinely Purchased DME
    3. Payment for Inexpensive or Routinely Purchased Items and 
Capped Rental Items
    B. Current Issues
    C. Classification of Items under the Existing Regulations and 
Definition of Routinely Purchased Equipment
V. Clarification of the 3-year Minimum Lifetime Requirement (MLR) 
for DME
    A. Background
    B. Current Issues
    C. Scope of the 3-Year MLR
VI. Implementation of Budget-Neutral Fee Schedules for Splints, 
Casts and Intraocular Lenses (IOLs)
    A. Background
    1. Payment Under Reasonable Charges
    2. Payment Under Fee Schedules
    B. Provisions of the Proposed Regulations
VII. DMEPOS Technical Amendments and Corrections
    A. Background
    B. Proposed Technical Amendments and Corrections
VIII. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. Requirements in Regulation Text
    C. Additional Information Collection Requirements
    1. ESRD QIP
    a. Proposed Expanded ICH CAHPS Reporting Measure for PY 2016 and 
Future Payment Years of the ESRD QIP

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    b. Proposed Data Validation Requirements for the PY 2016 ESRD 
QIP
    2. Clarification of the Definition of Routinely Purchased 
Durable Medical Equipment
    3. Clarification of the 3-year Minimum Lifetime Requirement for 
DME
    4. Implementation of Budget-Neutral Fee Schedules for Splints, 
Casts and Intraocular Lenses
IX. Response to Comments
X. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2014 End-Stage Renal Disease Prospective Payment System
    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. End-Stage Renal Disease Quality Incentive Program
    a. Effects of the PY 2016 ESRD QIP
    b. Alternatives Considered for the PY 2016 ESRD QIP
    3. DMEPOS Provisions
    a. Effects of the Implementation of Fee Schedules for Splints, 
Casts and IOLs
    b. Clarification of the 3-year MLR
    c. Definition of Routinely Purchased DME
    C. Accounting Statement.
XI. Regulatory Flexibility Act Analysis
XII. Unfunded Mandates Reform Act Analysis
XIII. Federalism Analysis
XIV. Congressional Review Act
XV. Files Available to the Public via the Internet
Regulations Text

Acronyms

    Because of the many terms to which we refer by acronym in this 
final rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:

AHRQ Agency for Healthcare Research and Quality
ASP Average Sales Price
BLS Bureau of Labor Statistics
CBSA Core based statistical area
CCN CMS Certification Number
CDC Centers for Disease Control and Prevention
CKD Chronic Kidney Disease
CY Calendar Year
DFC Dialysis Facility Compare
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies
ESA Erythropoiesis stimulating agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease bundled
ESRD PPS End-Stage Renal Disease Prospective Payment System
FDA Food and Drug Administration
GEM General Equivalence Mappings
HAIs Healthcare-Acquired Infections
HCPCS Healthcare Common Procedure Coding System
HHS Department of Health and Human Services
ICD International Classification of Diseases
ICD-9-CM International Classification of Disease, 9th Revision, 
Clinical Modification
ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems
IGI IHS Global Insight
IOLs Intraocular Lenses
IPPS Inpatient Prospective Payment System
MAP Medicare Allowable Payment
MFP Multifactor Productivity
MLR Minimum Lifetime Requirement
NHSN National Health Safety Network
NQF National Quality Forum
OMB Office of Management and Budget
PFS Physician Fee Schedule
QIP Quality Incentive Program
SHR Standardized Hospitalization Ratio Admissions
SMR Standardized Mortality Ratio
TPS Total Performance Score
VBP Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted bundled prospective payment system for renal dialysis services 
furnished by ESRD facilities. Effective January 1, 2014, the transition 
to the ESRD PPS will conclude and all Medicare ESRD facilities will be 
paid 100 percent under the ESRD PPS. This rule proposes to update and 
make revisions to the End-Stage Renal Disease (ESRD) prospective 
payment system (PPS) for calendar year (CY) 2014. 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) (Public Law 110-275), and 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 (ACA) (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, section 1881(b)(14)(I) of the Act, as added by section 
632(a) of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240) requires the Secretary, by comparing per patient utilization from 
2007 with such data from 2012, to reduce the single payment amount to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals. Section 632(b) of ATRA prevents the 
Secretary from paying for oral-only ESRD-related drugs and biologicals 
under the ESRD PPS before January 1, 2016.
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 for payment year (PY) 2016. 
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. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
    This rule would clarify the definition of routinely purchased 
equipment covered under the DME benefit category and the scope of the 
3-year minimum lifetime requirement (MLR) for DME. In addition, this 
rule proposes to implement budget neutral fee schedules for splints and 
casts as well as intraocular lenses (IOLs) inserted in a physician's 
office. Finally, this rule would make a few technical amendments and 
corrections to existing regulations related to payment for DMEPOS items 
and services.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the ESRD PPS base rate for CY 2014: For CY 2014, 
we propose an ESRD PPS base rate of $216.95. This amount reflects the 
application of the proposed ESRD bundled (ESRDB) market basket reduced 
by the productivity adjustment, or 2.5 percent, the wage index budget-
neutrality adjustment factor of 1.000411, and the drug utilization 
adjustment to the CY 2013 ESRD PPS base rate of $240.36. The proposed 
CY 2014 ESRDB market basket increase factor is 2.9 percent. The current 
forecast of the proposed CY 2014 productivity adjustment is 0.4 
percent. The proposed drug utilization adjustment factor to account for 
changes in utilization as required by section 1881(b)(14)(I) is -12 
percent.
     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 2014, we are not proposing any changes to 
the application of the wage index budget-neutrality adjustment factor 
and will continue to apply the budget-neutrality

[[Page 40839]]

adjustment to the base rate for the ESRD PPS. We have been gradually 
decreasing the wage index floor by .05 in an effort to gradually phase 
out the floor. For CY 2014 and CY 2015 we are proposing to continue our 
policy for the gradual phase out of the wage index floor and to reduce 
the wage index floor values to 0.45 and 0.40, respectively.
     Update to the outlier policy: We are updating the outlier 
services fixed dollar loss amounts for adult and pediatric patients and 
Medicare Allowable Payments (MAPs) for adult patients for CY 2014 using 
2012 claims data. Based on the use of more current data, the fixed-
dollar loss amount for pediatric beneficiaries would increase from 
$47.32 to $54.23 and the MAP amount would remain $38.65 as compared to 
CY 2013 values. For adult beneficiaries, the fixed-dollar loss amount 
would decrease from $110.22 to $94.26 and the MAP amount would decrease 
from $61.38 to $52.45. The 1 percent target for outlier payments was 
not achieved in CY 2012. We believe using CY 2012 claims data to update 
the outlier MAP and fixed dollar loss amounts for CY 2014 will increase 
payments for ESRD beneficiaries requiring higher resource utilization 
in accordance with a 1 percent outlier percentage.
     Application of ICD-10-CM Diagnosis Codes to the 
comorbidity payment adjustment codes: Effective October 1, 2014, CMS 
will implement the 10th revision of the ICD coding scheme. We discuss 
and provide a crosswalk from ICD-9-CM to ICD-10-CM for codes that are 
subject to the comorbidity payment adjustment. We propose that all ICD-
10-CM codes to which ICD-9-CM codes that are eligible for the 
comorbidity payment adjustment crosswalk will be eligible for the 
comorbidity payment adjustment with two exceptions.
2. ESRD QIP
    This proposed rule proposes to implement requirements for the ESRD 
QIP. With respect to the PY 2016 ESRD QIP, we propose 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:
    [cir] Hemoglobin Greater Than 12 g/dL, a clinical measure
    [cir] Patient Informed Consent for Anemia Treatment, a clinical 
measure*
    [cir] Anemia Management, a reporting measure[dagger]
    [cir] Pediatric Iron Therapy, a reporting measure*
 To evaluate dialysis adequacy:
    [cir] A Kt/V measure for adult hemodialysis patients, a clinical 
measure
    [cir] A Kt/V measure for adult peritoneal dialysis patients, a 
clinical measure
    [cir] A Kt/V measure for pediatric hemodialysis patients, a 
clinical measure
 To determine whether patients are treated using the most 
beneficial type of vascular access:
    [cir] An arteriovenous fistula measure, a clinical measure
    [cir] A catheter measure, a clinical measure
 To address effective bone mineral metabolism management:
    [cir] Hypercalcemia, a clinical measure*
    [cir] Mineral Metabolism, a reporting measure[dagger] To address safety:
    [cir] National Healthcare Safety Network (NHSN) Bloodstream 
Infection in Hemodialysis Outpatients, a clinical measure*
 To assess patient experience:
    [cir] ICH CAHPS survey reporting measure[Dagger] To gather data regarding comorbidities:
    [cir] Comorbidity, a reporting measure*

* Denotes that this measure is new to the ESRD QIP.
[dagger] Denotes that this measure is revised in the ESRD 
QIP.
[Dagger] Denotes that this measure is expanded in the ESRD 
QIP.

    It also proposes to establish CY 2014 as the performance period for 
the PY 2016 ESRD QIP, establish performance standards for each measure, 
and adopt scoring and payment reduction methodologies that are similar 
to those finalized for the PY 2015 ESRD QIP.
3. DMEPOS
     Definition of routinely purchased DME: This rule would 
clarify the definition of routinely purchased DME set forth at section 
Sec.  414.220(a), as well as address the classification of and payment 
for expensive items of DME and accessories (over $150) as a capped 
rental items in accordance with Sec.  414.229, if the items were not 
acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987.
     Clarification of to the 3-year MLR and Related 
Grandfathering Policy: This rule would provide further clarification 
about how we would apply the 3-year minimum lifetime requirement (MLR) 
set forth at Sec.  414.202, which must be satisfied for an item or 
device to be considered durable medical equipment.
     Implementation of budget neutral fee schedules for splints 
and casts, and IOLs inserted in a physician's office: For CY 2014, we 
are proposing to implement budget neutral fee schedule amounts for 
splints, casts, and IOLs inserted in a physician's office. Section 
1842(s) of the Act authorizes CMS to implement fee schedule amounts for 
these items if they established so that they are initially budget 
neutral. In 2011, total allowed charges for splints and casts were $5.6 
million, while total allowed charges for intraocular lenses inserted in 
a physician's office were $76 thousand.

C. Summary of Costs and Benefits

    In section X.B. 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 X.B.1. of this proposed rule displays 
the estimated change in payments to ESRD facilities in CY 2014 compared 
to estimated payments in CY 2013. The overall impact of the CY 2014 
changes is projected to be a 9.4 percent decrease in payments. 
Hospital-based ESRD facilities have an estimated 9.3 percent decrease 
in payments compared with freestanding facilities with an estimated 9.4 
percent decrease.
    We estimate that the aggregate ESRD PPS expenditures would decrease 
by approximately $780 million from CY 2013 to CY 2014. This reflects a 
$210 million increase from the payment rate update, a $30 million 
increase due to the updates to the outlier threshold amounts, and a 
$1.02 billion decrease in expenditures specifically related to the -12 
percent drug utilization adjustment required by section 1881(b)(14)(I). 
The estimated 9.4 percent overall payment decrease would result in a 
$190 million savings to beneficiaries.
2. Impacts for ESRD QIP
    The overall economic impact of the proposed ESRD QIP is an 
estimated $26.4 million in PY 2016. In PY 2016, we expect the total 
payment reductions to be approximately $26.4 million, and the costs 
associated with the collection of information requirements for certain 
measures to be approximately $39.5 thousand. For PY 2017 and future 
payment years, we expect the costs associated with the collection of 
information requirements for the expanded ICH CAHPS measure in the 
proposed ESRD QIP to be approximately $9.7 million.
    The ESRD QIP will continue to incentivize facilities to provide 
higher

[[Page 40840]]

quality care to beneficiaries. The reporting measures associated with 
the collection of information requirements are critical to better 
understanding the quality of care beneficiaries receive, particularly 
patients' experience of care, and will be used to incentivize 
improvements in the quality of care provided.
3. Impacts for DMEPOS
    The overall impact of the DMEPOS proposal to implement fee 
schedules for splints and casts and IOLs inserted in a physician's 
office is insignificant. The reasonable charge amounts that we propose 
to convert to fee schedule amounts would be budget neutral the first 
year and would be updated annually thereafter based on the consumer 
price index for all consumers (CPI-U) for the 12-month period ending 
June 30 of the previous year and, reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. For 
the 3-year MLR, we believe that a vast majority of the categories of 
items that were classified as DME before January 1, 2012, did function 
for 3 or more years (76 FR 70289). The 3-year MLR is designed to 
represent a minimum threshold for determination of durability for 
equipment that is consistent with the statutory DME payment provisions 
and applies on a prospective basis, effective January 1, 2012. CMS 
recognizes that the healthcare industry and beneficiaries have come to 
rely on items that have qualified as DME on or prior to January 1, 
2012, regardless of whether those items met the 3-year MLR set forth at 
Sec.  414.202. We note that given that reliance and consistent with the 
regulation at Sec.  414.202, CMS will not reopen those prior decisions 
and reclassify the equipment in light of the new 3-year standard. We 
believe that continuing the Medicare coverage for all the items that 
qualified as DME on or prior to January 1, 2012, could avoid disrupting 
the continuity of care for the beneficiaries that received these items 
for medical treatment prior to January 1, 2012, without creating a 
significant fiscal impact on the Medicare Program.
    We expect that the overall impact of reaffirming the definition of 
routinely purchased DME and our proposal for classifying certain 
expensive items as cap rental would be a decrease in expenditures 
because payment on a 13-month capped rental basis rather than a lump 
sum purchase basis for certain, very expensive items would lower total 
payments for these items and because many beneficiaries would not rent 
the items for as long as 13 months.

II. Calendar Year (CY) 2014 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.
    On November 9, 2012, we published in the Federal Register, a final 
rule (77 FR 67450 through 67531) titled, ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Bad Debt Reductions for All Medicare Providers'' (hereinafter 
referred to as the CY 2013 ESRD PPS final rule). In that final rule, 
for the ESRD PPS, we made a number of routine updates for CY 2013, 
implemented the third year of the transition to the ESRD PPS, and made 
several policy changes and reiterations. In that rule, we finalized the 
following:
     An ESRD PPS base rate of $240.36 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 2013 ESRD bundled (ESRDB) 
market basket update of 2.9 percent minus a multifactor productivity 
adjustment of 0.6 percent, that is, a 2.3 percent increase. This amount 
also reflected the application of the wage index budget-neutrality 
adjustment of 1.000613.
     A composite base rate of $145.20 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. This amount reflected the application of the ESRDB 
market basket reduced by the multifactor productivity adjustment, or a 
2.3 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 resulted 
in a 14.0 percent drug add-on adjustment to the composite rate portion 
of the ESRD PPS blended payment.
     A 0.1 percent transition budget-neutrality adjustment 
factor.
     A 1.001141 wage index budget-neutrality adjustment factor 
for the composite portion of the ESRD PPS blended payment, which is 
applied to the wage index values.
     A 1.000613 wage index budget-neutrality adjustment factor 
for the ESRD PPS portion of the blended payment and for the ESRD PPS, 
which is applied to the ESRD PPS base rate.
     A 0.05 reduction to the wage index floor which resulted in 
a wage index floor of 0.500 under the ESRD PPS.
     A 0.501 wage index floor under the composite rate portion 
of the blended payment (1.500 x 1.001141 = 0.501).
     Revisions to the outlier policy. Specifically, for 
pediatric beneficiaries, a fixed-dollar loss amount of $47.32 and a 
Medicare Allowable Payment (MAP) amount of $41.39. For adult 
beneficiaries, a fixed-dollar loss amount of $110.22 and a MAP amount 
of $59.42.
     Eliminating the restriction on daptomycin to allow ESRD 
facilities to receive separate payment by appending the AY modifier on 
the claim for daptomycin when the diagnosis reported on the claim 
indicates the drug was used to treat a non-ESRD related condition.
     Excluding alteplase and other thrombolytics from separate 
payment for the composite rate portion of blended payments during the 
remainder of the transition.
     Use of the Average Sales Price (ASP) methodology, 
including any modifications finalized in the Physician Fee Schedule 
(PFS) final rules, to compute 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.

[[Page 40841]]

    Finally, in the CY 2013 ESRD PPS final rule, we reiterated policies 
regarding the following billing practices because we believed that ESRD 
facilities may be billing renal dialysis services for separate payment:
     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. The AY modifier should not be used for renal dialysis services 
and we have monitoring efforts in place to analyze billing trends.

B. Routine Updates and Proposed Policy Changes to the CY 2014 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. We are proposing to implement the fourth year of 
the transition for those ESRD facilities that did not elect to receive 
100 percent of the payment amount under the ESRD PPS. For CY 2014, 
under 42 CFR 413.239(a)(4), 100 percent of the payment amount will be 
determined in accordance with section 1881(b)(14). Accordingly, a 
blended rate will no longer be provided, all facilities will be paid 
100 percent under the ESRD PPS, and there will no longer be a 
transition budget neutrality adjustment factor applied to these 
payments starting on January 1, 2014. Therefore, facilities that 
participate in the transition will no longer receive a portion of their 
payments based on the basic case-mix adjusted composite rate payment 
system. Because payments will no longer be based on the basic case-mix 
adjusted composite rate, we will not update the drug add-on or wage 
index values (which included a budget neutrality adjustment factor) 
that comprised that rate. In this proposed rule we only discuss updates 
and policy changes that affect the components of the ESRD PPS.
2. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the development of the ESRD PPS per treatment base rate that 
is codified in the Medicare regulations at Sec.  413.220 and Sec.  
413.230. The CY 2011 ESRD PPS final rule also 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 budget-neutrality 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 as 
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, 
and represented the average per treatment Medicare Allowable Payment 
(MAP) for composite rate and separately billable services. In 
accordance with section 1881(b)(14)(D) of the Act and codified in 
regulations at Sec.  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 applicable outlier payments or training 
payments.
    As discussed in section II.B.3., 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 described in section 1886(b)(3)(B)(xi)(II). Accordingly, for 
this proposed rule, we applied the 2.5 percent increase to the CY 2013 
ESRD PPS base rate of $240.36, which results in a proposed CY 2014 ESRD 
PPS base rate of $246.37 ($240.36 x 1.025 = $246.37).
    In addition, as discussed in section II.B.4.d. of this proposed 
rule, for CY 2014 we are applying the wage index budget-neutrality 
adjustment factor of 1.000411 to the CY 2014 ESRD PPS base rate (that 
is, $246.37), yielding a proposed CY 2014 ESRD PPS wage-index budget-
neutrality adjusted base rate of $246.47 ($246.37 x 1.000411 = 
$246.47).
a. Proposed Adjustment to the ESRD PPS Base Rate to Reflect Change in 
Utilization of ESRD-Related Drugs and Biologicals
    Section 1881(b)(14)(I) of the Act, as added by section 632(a) of 
the American Taxpayer Relief Act of 2012 (ATRA), requires that, for 
services furnished on or after January 1, 2014, the Secretary shall 
make reductions to the single payment for renal dialysis services to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals (excluding oral-only ESRD-related 
drugs) by comparing per patient utilization data from 2007 with such 
data from 2012. Section 1881(b)(14)(I) further requires that in making 
the reductions, the Secretary take into account the most recently 
available data on Average Sales Prices (ASP) and changes in prices for 
drugs and biologicals reflected in the ESRD market basket percentage 
increase factor under section 1881(b)(14)(F). Consistent with these 
requirements, we propose to apply a payment adjustment to the CY 2014 
ESRD PPS base rate that reflects the change in utilization of ESRD-
related drugs and biologicals from CY 2007 to CY 2012.
i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate
    We are proposing an adjustment that would reduce the ESRD PPS base 
rate. Because the ESRD PPS base rate is a per treatment base rate, the 
adjustment would be calculated on a per treatment basis. We propose to 
calculate the amount of the per treatment adjustment by applying CY 
2014 prices for ESRD-related drugs and biologicals to the utilization 
data for CY 2007 and CY 2012. We note the CY 2014 ESRD PPS base rate is 
reflective of 2007 utilization because the base rate is based on CY 
2007 data. We believe using prices for drugs and biologicals inflated 
to 2014 levels allows us to appropriately measure changes that are 
attributable to utilization patterns as opposed to differences in 
pricing for drugs and biologicals in 2007 and 2012. In addition, we 
believe that because we are proposing to make the reduction in CY 2014, 
we should price the ESRD-related drugs and biologicals for the year in 
which the adjustment applies. For purposes of this analysis, we view 
utilization of drugs and biologicals as units of a drug or biological 
furnished to a patient per treatment for ESRD. We would take the 
estimated amount of the per treatment difference between the estimated 
spending of drugs and biologicals in CY 2007 and CY 2012 and reduce 
this amount by the same adjustment factors that were used to calculate 
the ESRD PPS base rate from the CY 2007 unadjusted rate per treatment, 
which are the standardization, outlier, and the 98 percent budget-
neutrality adjustments. A detailed explanation of these adjustment 
factors is provided in the CY 2011 ESRD PPS final rule (75 FR 49081 
through 49082). We propose to reduce the CY 2014 ESRD PPS base rate by 
the resulting amount.
ii. Determining Utilization of ESRD-Related Drugs and Biologicals
    Section 1881(b)(14)(I) requires the single payment amount to be 
reduced by an amount that ``reflects the Secretary's estimate of the 
change in utilization of drugs and biologicals described in clauses 
(ii), (iii), and (iv) of subparagraph (B) (other than oral-only

[[Page 40842]]

ESRD-related drugs, as such term is used in the final rule promulgated 
by the Secretary in the Federal Register on August 12, 2010 (75 FR 
49030))''. As we mentioned above, for purposes of this analysis, we 
view utilization of drugs and biologicals as units of a drug or 
biological furnished to a patient per treatment. ESRD facilities report 
this information on claims. To calculate this adjustment, we analyzed 
the utilization of erythropoiesis stimulating agents (ESAs) and any 
oral forms of such agents furnished to individuals for the treatment of 
ESRD. We also analyzed the utilization of other injectable drugs and 
biologicals (such as iron sucrose and doxercalciferol) and any oral 
equivalent form of such drug or biological furnished to individuals for 
the treatment of ESRD that were included in the expanded bundle of 
services covered by the ESRD PPS. We did not include diagnostic 
laboratory tests or other items and services in the comparison analysis 
because section 1811(b)(14)(I) only refers to estimating the change in 
utilization of drugs and biologicals.
    Section 1881(b)(14)(I) of the Act requires the Secretary to compare 
per patient utilization data from 2007 with per patient utilization 
data from 2012. For the CY 2007 utilization data for ESRD-related drugs 
and biologicals, we propose to use the data analysis prepared for the 
CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS final rule (75 FR 
49071 through 49083) we discuss in detail the development of the ESRD 
PPS base rate and as we stated above, the base rate represents the 
average MAP for composite rate and separately billable services which 
was based on 2007 claims data. We explain in the CY 2011 ESRD PPS final 
rule that in order to comply with section 1881(b)(14)(A)(ii) of the Act 
we determined that 2007 was the year with the lowest per patient 
utilization of renal dialysis services by Medicare ESRD beneficiaries 
among the years 2007, 2008, and 2009. Therefore, utilization data for 
ESAs and other drugs and biologicals including the oral-equivalent 
forms of those drugs and biologicals furnished for the treatment of 
ESRD was readily available for purposes of analyzing 2007 utilization.
    For the CY 2012 utilization data for ESRD-related drugs and 
biologicals, we propose to use the latest available claims data based 
on the CY 2012 ESRD facility claims updated through December 31, 2012 
(that is, claims with dates of service from January 1 through December 
31, 2012, that were received, processed, paid, and passed to the 
National Claims History File as of December 31, 2012). For the CY 2014 
ESRD PPS final rule, we will use the CY 2012 claims file updated 
through June 30, 2013, (that is, claims with dates of service from 
January 1 through December 31, 2012, that were received, processed, 
paid, and passed to the National Claims History File as of June 30, 
2013) to calculate 2012 utilization. We solicit comments on the 
proposed use of 2007 and 2012 claims data to capture the utilization of 
ESRD-related drugs and biologicals in those years.
    Because section 1881(b)(14)(I) requires that we compare per patient 
utilization of ESRD-related drugs and biologicals in 2007 with per 
patient utilization in 2012, we believe that this would also include 
utilization of drugs and biologicals furnished in ESRD facilities 
located in the United States Territories of Guam, American Samoa and 
the Northern Mariana Islands (the Pacific Rim), even though facilities 
in the Pacific Rim were not paid under the ESRD PPS during these years. 
Therefore, we propose to use 2007 and 2012 utilization of ESRD-related 
drugs and biologicals (including oral equivalents) for ESRD facilities 
located in these territories in our analysis of the reduction required 
by section 1881(b)(14)(I). For this proposed rule, we did not readily 
have access to the 2007 utilization data for the ESRD facilities 
located in these areas; however, we plan to include these data in our 
calculation for the final rule. Because there are very few ESRD 
facilities in this region, we do not believe that the inclusion of 
utilization of drugs and biologicals furnished in CY 2007 at these 
facilities will have a significant impact on the amount of the 
adjustment. We solicit comments on the proposal to include data on the 
utilization of drugs and biologicals furnished in ESRD facilities 
located in the Pacific Rim when comparing utilization of drugs and 
biologicals in CY 2007 with CY 2012.
iii. Pricing of ESRD-Related Drugs and Biologicals
    As we stated above, we are proposing to price ESRD-related drugs 
and biologicals to CY 2014 to allow for an accurate comparison between 
utilization of those drugs and biologicals furnished in CY 2007 with 
utilization in CY 2012. In order to price ESRD-related drugs and 
biologicals based on CY 2014 prices, we started with CY 2011 prices as 
established and published in the CY 2011 ESRD PPS final rule.
    During the development of the ESRD PPS base rate, we included the 
MAP amounts for ESRD-related drugs and biologicals that were, prior to 
January 1, 2011, separately paid under Part B. For setting the CY 2011 
ESRD PPS base rate, for Part B separately billable drugs, we used the 
first two quarters of ASP+6 and then used the Producer Price Index 
(PPI) to inflate the prices to CY 2011 (75 FR 49079). We also included 
the MAP amounts for the ESRD-related oral-equivalent drugs and 
biologicals that were, prior to January 1, 2011, separately paid under 
Part D (75 FR 49080). For setting the CY 2011 ESRD PPS base rate for 
these drugs, we used the growth rates for overall prescription drug 
prices that were used in the National Health Expenditure Projections 
(NHE) for updating prices for former Part D drugs to CY 2011 from CY 
2007.
    We propose to inflate the prices established in the CY 2011 ESRD 
PPS final rule for ESRD-related drugs and biologicals and their oral 
equivalents to CY 2014 by applying the ESRD bundled (ESRDB) market 
basket, the productivity adjustment, and the wage index budget 
neutrality adjustment factors. Because the base rate and the ESRDB 
market basket account for ESRD-related drugs and biologicals, and we 
have updated all components of the base rate annually using a market 
basket minus productivity with wage index budget neutrality adjustment 
factor, we believe that using these inflation factors are consistent 
with how these services are paid under the ESRD PPS. The drug component 
of the ESRDB market basket uses the PPI for prescription drugs as a 
proxy for the growth in drug prices. We believe using the ESRDB market 
basket to price drugs and biologicals for CY 2014 complies with the 
requirement in section 1881(b)(14)(I) that the Secretary take into 
account the changes in prices for drugs and biologicals reflected in 
the ESRDB market basket percentage increase factor. The ESRDB market 
basket minus productivity increase factors were 2.1 percent and 2.3 
percent for CY 2012 and CY 2013, respectively. The proposed CY 2014 
update is 2.5 percent. The wage index budget neutrality adjustment 
factors for the same years are 1.001520, 1.000613, and a proposed 
factor of 1.000411. Therefore, we propose to use a total growth update 
factor of 7.3 percent (1.021*1.023*1.025*1.001520* 1.000613*1.000411 = 
1.073) to inflate prices for ESRD-related drugs and biologicals from CY 
2011 levels to CY 2014 levels. We solicit comments on the use of the 
ESRDB market basket percentage increase factor to inflate prices for 
drugs and biologicals to CY 2014 levels.

[[Page 40843]]

iv. Calculation of the Amount of the per Treatment Reduction
    We applied the 2014 prices to the CY 2007 and CY 2012 drug and 
biological utilization data to calculate aggregate amounts for each 
year. For drugs and biologicals for which we have utilization data for 
CY 2012, but that were not present on CY 2007 claims, we priced these 
drugs using the ASP+6 percent price for 2012, which is an average of 
the four quarter prices, and inflated it using the CY 2013 and the CY 
2014 proposed ESRDB market basket, productivity, and wage index budget 
neutrality adjustment factors. While most of these drugs had minimal 
utilization, we note that Feraheme was the only significant exception. 
Specifically, Feraheme was not available until January 2010 and once 
the drug was available, the use of the drug rose to the top 12th drug 
furnished to ESRD beneficiaries. Next, we divided each year's estimated 
aggregate amount for drugs and biologicals by that year's count of 
treatments furnished to Medicare beneficiaries to get an average 
payment per treatment for the year. This resulted in a per treatment 
amount for drugs and biologicals of $83.76 in 2007 and a per treatment 
amount for drugs and biologicals of $51.42 in 2012. We then subtracted 
the average payment per treatment for CY 2012 from the average amount 
per treatment for CY 2007 to get a total of $32.34 ($83.76-$51.42 = 
$32.34). We then reduced this amount by the standardization, the 
outlier, and the 98 percent budget neutrality adjustments to get a 
total of $29.52 ($32.34 x .9407 x .99 x .98 = $29.52). We would apply 
these adjustments before reducing the base rate because the base rate 
was reduced by these adjustments when it was first established, and the 
reduction should be adjusted in the same way to make the two figures 
comparable. We would then reduce the CY 2014 proposed base rate of 
$246.47 by $29.52, resulting in the CY 2014 proposed base rate of 
$216.95. A reduction of $29.52 from the proposed CY 2014 ESRD PPS base 
rate results in a 12 percent reduction in Medicare payments. We solicit 
comments on the proposed methodology for the reduction to the ESRD PPS 
base rate to reflect the change in the utilization of ESRD-related 
drugs and biologicals from CY 2007 to CY 2012.
    While we propose to implement the full reduction in CY 2014, we 
note that we are also concerned that this one-time reduction to the 
ESRD PPS base rate could be a significant reduction to ESRD facilities 
for the year and potentially impact beneficiary access to care. 
Therefore, we are soliciting comments on a potential transition or 
phase-in period of the 12 percent reduction and the number of years for 
such transition or phase-in period.
v. Comparison of ASP Versus PPI
    Section 1881(b)(14)(I) requires the Secretary to ``take into 
account the most recently available data on average sales prices and 
changes in prices for drugs and biologicals reflected in the ESRDB 
market basket percentage increase factor'' in making the reduction to 
the ESRD PPS base rate to reflect the change in utilization of ESRD-
related drugs and biologicals from CY 2007 to CY 2012. While we could 
have chosen to inflate prices for drugs and biologicals to 2014 levels 
with more recently available ASP data, we believe using a growth based 
on the ESRDB market basket is more appropriate because it reflects what 
Medicare is required to pay for the drugs and biologicals through the 
ESRD PPS base rate. We performed an alternative analysis using prices 
based on the first quarter 2013 ASP+6 percent prices and the National 
Drug Code (NDC) prices published on the CMS Web site located at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Outlier_Services.html that are used for outlier calculations, and the 
PPI to project to CY 2014. The results are minimally different (a 
difference of $29.40 versus $29.52), and we believe that the ESRDB 
market basket approach is a more appropriate measure of how Medicare 
pays for these drugs under the ESRD PPS.
    We are soliciting comments on the potential use of ASP instead of 
the ESRDB market basket to inflate drug prices to 2014 levels for 
purposes of the drug utilization adjustment.
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 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 also 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.
b. Proposed Market Basket Update Increase Factor and Labor-Related 
Share for ESRD Facilities for CY 2014
    As required under section 1881(b)(14)(F)(i) 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 for ESRD treatment, 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 a 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 propose to use the same methodology and 
the CY 2008-based ESRDB market basket described in the CY 2011 ESRD PPS 
final rule (75 FR 49151 through 49162) to compute the CY 2014 ESRDB 
market basket increase factor and labor-related share based on the best 
available data. 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 2013 of the CY 2008-based ESRDB market basket (with historical data 
through the fourth quarter of 2012), and consistent with our historical 
practice of estimating market basket increases based on the best 
available data, the proposed CY 2014 ESRDB market basket increase 
factor is 2.9 percent.
    For the CY 2014 ESRD payment update, we propose to continue using a 
labor-related share of 41.737 percent for the ESRD PPS payment, which 
was finalized in the CY 2011 ESRD final rule (75 FR 49161).
c. Proposed Productivity Adjustment
    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 as equal to the 10-year moving average of changes in annual 
economy-wide private nonfarm business

[[Page 40844]]

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 were 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 2013 of the 10-year moving average of MFP, the 
proposed CY 2014 MFP factor is 0.4 percent.
d. Calculation of the ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2014
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by the productivity 
adjustment. We are proposing to use 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 ESRDB market basket percentage increase factor for CY 2014 is 
based on the 1st quarter 2013 forecast of the CY 2008-based ESRDB 
market basket, which is estimated to be 2.9 percent. This market basket 
percentage is then reduced by the MFP adjustment (the 10-year moving 
average of MFP for the period ending CY 2014) of 0.4 percent, which is 
based on IGI's 1st quarter 2013 forecast. The resulting proposed MFP-
adjusted ESRDB market basket update for CY 2014 is equal to 2.5 
percent, or 2.9 percent less 0.4 percentage point. If more recent data 
is subsequently available (for example, a more recent estimate of the 
market basket or MFP adjustment), we will use such data, if 
appropriate, to determine the CY 2014 market basket update and MFP 
adjustment in the CY 2014 ESRD PPS final rule.
4. The Proposed CY 2014 Wage Index
    Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD 
PPS may include a geographic wage index payment adjustment, 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 Office 
of Management and Budget's (OMB) Core-Based Statistical Areas (CBSAs)-
based geographic area designations to define urban and rural areas and 
their corresponding wage index values. In the CY 2012 ESRD PPS final 
rule (76 FR 70239) we finalized that, under the ESRD PPS, we will 
continue to utilize the ESRD PPS wage index methodology, first 
established under the basic case-mix adjusted composite rate 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 values; the gradual reduction of the wage 
index floor during the transition; and the policies for areas with no 
hospital data. The CBSA-based geographic area designations were 
originally described in OMB bulletin 03-04, issued June 6, 2003. This 
bulletin, as well as subsequent bulletins, is available online at 
http://www.whitehouse,gov/omb/bulletins.
    OMB publishes bulletins regarding CBSA changes, including changes 
to CBSA numbers and titles. In accordance with our established 
methodology, we have historically adopted any CBSA changes that are 
published in the OMB bulletin that corresponds with the IPPS hospital 
wage index. For FY 2014, we use the FY 2013 pre-floor, pre-reclassified 
hospital wage index to adjust the ESRD PPS payments. On February 28, 
2013, OMB issued OMB Bulletin No. 13-01, which establishes revised 
delineations of statistical areas based on OMB standards published in 
the Federal Register on June 28, 2010 and 2010 Census Bureau data. 
Because the FY 2013 pre-floor, pre-reclassified hospital wage index was 
finalized prior to the issuance of this Bulletin, the FY 2013 pre-
floor, pre-reclassified hospital wage index does not reflect OMB's new 
area delineations based on the 2010 Census and, thus, the FY 2014 ESRD 
PPS wage index will not reflect the OMB changes. As stated in the FY 
2014 IPPS/LTCH PPS proposed rule, CMS intends to propose changes to the 
hospital wage index based on this OMB Bulletin in the FY 2015 IPPS/LTCH 
PPS proposed rule (78 FR 27486 (May 10, 2013)). Therefore, we 
anticipate that the OMB Bulletin changes will be reflected in the FY 
2015 hospital wage index. Because we base the ESRD PPS wage index on 
the hospital wage index from the prior year, we anticipate that the OMB 
Bulletin changes would be reflected in the CY 2015 ESRD PPS wage index.
    For CY 2014, we will continue to use the same methodology as 
finalized in the CY 2011 ESRD PPS final rule (75 FR 49117), for 
determining the wage indices for ESRD facilities in CY 2014. 
Specifically, we propose to adjust wage indices for CY 2014 to account 
for annually updated wage levels in areas in which ESRD facilities are 
located. We propose to use the most recent, FY 2014 inpatient 
prospective payment system (IPPS) pre-floor, pre-reclassified hospital 
wage index. The ESRD PPS wage index values are calculated without 
regard to geographic reclassifications authorized under section 
1886(d)(8) and (d)(10) of the Act and utilize pre-floor hospital data 
that are unadjusted for occupational mix. The proposed CY 2014 wage 
index values for urban areas are listed in Addendum A (Wage Indices for 
Urban Areas) and the proposed CY 2014 wage index values for rural areas 
are listed in Addendum B (Wage Indices for Rural Areas). Addenda A and 
B are located on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a 
policy to use the labor-related share of 41.737 for the ESRD PPS 
portion of the payment. For the CY 2014 ESRD PPS we are not proposing 
any changes to the labor-related share of 41.737. Because all providers 
that elected to participate in the transition are entering their fourth 
year of the transition and will begin being paid 100 percent under the 
ESRD PPS, the 53.711 labor-related share that was applied to the 
composite rate portion of the blended payment is no longer applicable. 
We discuss the methodology for the ESRD PPS labor-related share in our 
CY 2011 ESRD PPS final rule (75 FR 49161), where we note that the 
labor-related share is typically the sum of Wages and Salaries, 
Benefits, Housekeeping and Operations, Professional Fees, Labor-related 
Services, and a portion of the Capital-related Building and Equipment 
expenses. For additional discussions on the labor-related share please 
refer to section II.B.3.b. of this proposed rule.

[[Page 40845]]

a. Payment under the ESRD PPS for Facilities Located in Guam, American 
Samoa, and the Northern Mariana Islands and Proposed Wage Index Value 
for Guam
    It came to our attention after the ESRD PPS was implemented that 
ESRD facilities located in the United States Territories of Guam, 
American Samoa and the Northern Mariana Islands (the Pacific Rim) have 
been paid on the basis of reasonable costs and charges, rather than 
under the ESRD PPS. Because section 1881(b)(14)(A)(i) of the Act 
requires the Secretary to implement a payment system under which a 
single payment is made to a renal dialysis facility for renal dialysis 
services in lieu of any other payment for services furnished on or 
after January 1, 2011, ESRD facilities located in the Pacific Rim must 
be paid under the ESRD PPS and will be paid under this system beginning 
for services furnished on or after January 1, 2014. In order to pay 
these facilities under the ESRD PPS, we must identify an appropriate 
wage index value for these areas as required under Sec.  413.231 of the 
regulations. We propose to use the current value calculated under the 
existing methodology, that is, the pre-floor, pre-reclassification, 
hospital wage data that is unadjusted for occupational mix for the 
island of Guam of 0.9611, which is displayed in Addendum B (Wage 
Indices for Rural Areas). In addition, the most recent proposed FY 2014 
IPPS pre-floor, pre-reclassified hospital wage data does not include 
wage data for American Samoa and the Northern Mariana Islands. 
Accordingly, we propose below to apply the wage index value for Guam to 
facilities located in American Samoa and the Northern Mariana Islands.
b. Proposed Policies for Areas with No Wage Data
    In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized the 
use of the CBSA-based geographic area designations to define urban/
rural areas and corresponding wage index values for the ESRD PPS. In 
that final rule (75 FR 49116 through 49117), 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 
is no hospital data. 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.
    In the case of American Samoa and the Northern Mariana Islands, we 
believe that Guam represents a reasonable proxy because the islands are 
located within the Pacific Rim and share a common status as United 
States Territories. In addition, the Northern Mariana Islands and 
American Samoa are rural areas with no hospital data. Therefore, we 
will use our established methodology to compute an appropriate wage 
index using the average wage index values from contiguous CBSAs, to 
represent a reasonable proxy. While we appreciate that the islands of 
the Pacific Rim are not actually contiguous, we believe that same 
principle applies here, and that Guam is a reasonable proxy for 
American Samoa and the Northern Marianas. We note that if hospital data 
becomes available for any of the islands of the Pacific Rim we will use 
that data for the appropriate CBSA's instead of the proxy. As discussed 
previously, the current wage index value using the existing methodology 
for Guam is 0.9611. Therefore, for CY 2014, we propose to apply this 
wage index value of 0.9611 to ESRD facilities located in America Samoa 
and the Northern Mariana Islands, which we are including in Addendum B.
    For CY 2014, the only urban area without wage index data is 
Hinesville-Fort Stewart, GA. As we discussed in our CY 2013 ESRD PPS 
(77 FR 67459), 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. For CY 2014 the wage index value for CBSA 
11 (Georgia) is 0.7482 and this is included in Addendum A. 
Accordingly, we propose to apply the statewide urban average wage index 
value of 0.7582 to Hinesville-Fort Stewart, GA.
c. Proposed Reduction to the ESRD Wage Index Floor
    A wage index floor value has been used in lieu of the calculated 
wage index values below the floor in making payment for renal dialysis 
services under the ESRD PPS. In the CY 2011 ESRD PPS final rule (75 FR 
49116 through 49117), we finalized that we would continue to reduce the 
wage index floor by 0.05 for each of the remaining years of the 
transition. We further specified in the CY 2012 ESRD PPS (76 FR 70241) 
that 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.
    Our intention has been to provide a wage index floor only through 
the 4-year transition to 100 percent implementation of the ERSD PPS (75 
FR 49116 through 49117; 76 FR 70240 through 70241). Most recently, in 
the CY 2013 ESRD PPS final rule (77 FR 67459 through 67461), we 
discussed the elimination of the wage index floor beginning in CY 2014, 
noting that we would propose a new methodology in CY 2014 to address 
wages in rural Puerto Rico because we would no longer be applying a 
wage index floor. The CY 2014 wage index values for both urban and 
rural Puerto Rico remain below the finalized CY 2013 ESRD PPS wage 
index floor of 0.500 (77 FR 67459), however, and we believe that both 
rural and urban facilities in Puerto Rico would benefit from continuing 
the gradual reduction of the floor. We believe that continuing the wage 
index floor for CY 2014 and CY 2015 will allow renal dialysis 
facilities located in Puerto Rico the benefit afforded to other 
geographical areas in the fifty states of a gradual and systematic 
elimination of the wage index floor. Therefore, for CY 2014 and for CY 
2015, we propose to continue to apply the wage index floor to areas 
with wage indexes below the floor. For CY 2014, Puerto Rico is the only 
area with a wage index value below the proposed floor; however, to the 
extent that other geographical areas fall below the floor in CY 2015 or 
beyond we believe they should have the benefit of a gradual reduction 
in the floor as well. We will continue to review wage index values and 
the appropriateness of a wage index floor in the future.
    For CY 2014 and CY 2015, we also propose to continue our policy of 
gradually reducing the wage index floor by 0.05 per year. Specifically, 
we propose a wage index floor value of 0.45 for CY 2014 and a wage 
index floor value of 0.40 for CY 2015. We believe that continuing our 
policy of applying a wage index floor for an additional two years would 
allow Puerto Rico to benefit from the anticipated and predictable phase 
out of the wage index floor. While we would not expect to continue this 
policy past CY 2015, we will review the appropriateness of a wage index 
floor for CY 2016 at that time.
d. Proposed Wage Index Budget-Neutrality Adjustment
    Section 1881(b)(14)(D)(iv)(II) of the Act gives us broad discretion 
to implement payment adjustments to the ESRD PPS, including an 
adjustment of the ESRD PPS by a geographic index. Section 
1881(b)(14)(D)(iv)(II) specifically refers to section 1881(b)(12)(D) as 
an example of such a geographic index, and in the CY 2011

[[Page 40846]]

ESRD PPS final rule, we finalized the use of the same wage index 
methodology that we utilized under the basic case-mix adjusted 
composite rate payment system (75 FR 49116). We had applied a wage 
index budget-neutrality adjustment factor under the basic case-mix 
adjusted composite payment system, and accordingly, in the CY 2012 ESRD 
PPS final rule, we finalized a policy for CY 2012 and future years to 
apply wage index budget-neutrality adjustment factors to the composite 
rate portion of the ESRD PPS blended payments for facilities 
participating in the transition as well as to the base rate for the 
ESRD PPS portion of the blended payment and the full ESRD PPS for those 
facilities that elected to receive 100 percent of their payment under 
that system (76 FR 70241 and 70242). We also finalized the methodology 
for computing the wage index budget-neutrality adjustment factors for 
CY 2012 and subsequent years (76 FR 70242).
    For CY 2014, we are not proposing any changes to the methodology, 
but we note that we will no longer compute a budget neutrality 
adjustment factor for the composite rate portion of the ESRD PPS 
blended payment because all facilities will be paid 100 percent under 
the ESRD PPS in CY 2014. For ease of reference, we explain the 
methodology for computing the budget-neutrality adjustment factor here. 
For the CY 2014 wage index budget-neutrality adjustment factor, we use 
the fiscal year (FY) 2014 pre-floor, pre-reclassified, non-occupational 
mix-adjusted hospital data to compute the wage index values, 2012 
outpatient claims (paid and processed as of December 31, 2012), and 
geographic location information for each facility, which may be found 
through Dialysis Facility Compare. Dialysis Facility Compare (DFC) can 
be found at the DFC Web page on the CMS Web site at http://www.medicare.gov/dialysisfacilitycompare/. The FY 2014 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.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/WIFN/list.asp. The wage index data are located in the 
section entitled, ``FY 2014 Proposed Rule Occupational Mix Adjusted and 
Unadjusted Average Hourly Wage and Pre-Reclassified Wage Index by 
CBSA''.
    We computed the proposed CY 2014 wage index budget-neutrality 
adjustment factor using treatment counts from the 2012 claims and 
facility-specific CY 2013 payment rates to estimate the total dollar 
amount that each ESRD facility would have received in CY 2013. The 
total of these payments became the target amount of expenditures for 
all ESRD facilities for CY 2014. Next, we computed the estimated dollar 
amount that would have been paid for the same ESRD facilities using the 
proposed ESRD wage index for CY 2014. The total of these payments 
becomes the new CY 2014 amount of wage-adjusted expenditures for all 
ESRD facilities. The wage index budget-neutrality factor is calculated 
as the target amount divided by the new CY 2014 amount. When we 
multiplied the wage index budget-neutrality factor by the applicable CY 
2014 estimated payments, aggregate payments to ESRD facilities would 
remain budget-neutral when compared to the target amount of 
expenditures. That is, the wage index budget-neutrality adjustment 
factor ensures that wage index adjustments do not increase or decrease 
aggregate Medicare payments with respect to changes in wage index 
updates. Therefore, we are proposing a wage index budget-neutrality 
adjustment factor of 1.000411, which would be computed in ESRD PPS base 
rate payment methodology when making payment for renal dialysis 
services in CY 2014.
5. Application of the International Classification of Diseases (ICD), 
Tenth Revision, to the Comorbidity Payment Adjustment Codes
    In the CY 2011 ESRD PPS final rule (75 FR 49094), we explained that 
section 1881(b)(14)(D)(i) of the Act, as added by section 153(b) of 
MIPPA, requires that the ESRD PPS include a payment adjustment based on 
case-mix that may take into account, among other things, patient 
comorbidities. Comorbidities are specific patient conditions that 
coexist with the patient's principal diagnosis that necessitates 
dialysis. The comorbidity payment adjustment recognizes the increased 
costs associated with comorbidities and provides additional payment for 
certain conditions that occur concurrently with the need for dialysis.
    To develop the comorbidity payment adjustment, we used a stepwise 
regression model to analyze comorbidity data and found that certain 
comorbidities are predictors of variation in payments for ESRD 
patients. Details on the development of the comorbidity categories 
eligible for the comorbidity payment adjustment, including an 
explanation of the stepwise regression model that we used to analyze 
comorbidity data, is discussed in the CY 2011 ESRD PPS final rule (75 
FR 49094 through 49108). We analyzed the comorbidity categories and 
excluded those categories from the comorbidity payment adjustment that 
met any of three exclusion criteria (75 FR 49095 through 49100): (1) 
Inability to create accurate clinical definitions; (2) potential for 
adverse incentives regarding care; and (3) potential for ESRD 
facilities to directly influence the prevalence of the co-morbidity 
either by altering dialysis care, changing diagnostic testing patterns, 
or liberalizing the diagnostic criteria.
    We finalized six comorbidity categories eligible for the 
comorbidity payment adjustment, each with associated International 
Classification of Disease, 9th Revision, Clinical Modification (ICD-9-
CM) diagnosis codes (75 FR 49100). Among these categories are three 
acute, short-term diagnostic categories (pericarditis, bacterial 
pneumonia, and gastrointestinal tract bleeding with hemorrhage) and 
three chronic diagnostic categories (hereditary hemolytic anemia with 
sickle cell anemia, myelodysplastic syndrome, and monoclonal 
gammopathy). The comorbidity categories eligible for the adjustment and 
their associated ICD-9-CM codes were published in the Appendix of the 
CY 2011 ESRD PPS final rule as Table E: ICD-9-CM Codes Recognized for a 
Comorbidity Payment Adjustment (75 FR 49211).
    In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that 
the ICD-9-CM codes eligible for the comorbidity payment adjustment are 
subject to the annual ICD-9-CM coding updates that occur in the 
hospital inpatient PPS final rule and are effective October 1st of 
every year. We explained that any updates to the ICD-9-CM codes that 
affect the categories of comorbidities and the diagnoses within the 
comorbidity categories that are eligible for the comorbidity payment 
adjustment would be communicated to ESRD facilities through sub-
regulatory guidance. Accordingly, Change Request (CR) 7476, Transmittal 
2255, entitled, ``Quarterly Update to the End-Stage Renal Disease 
Prospective Payment System, was issued on July 15, 2011 to update the 
ICD-9-CM codes eligible for the comorbidity payment adjustment in 
accordance with the annual ICD-9-CM update effective October 1, 2011. 
This CR can be found on the CMS Web site at the following link: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2255CP.pdf. There have not been updates to the ICD-9-CM codes eligible 
for the comorbidity

[[Page 40847]]

payment adjustment since October 1, 2011.
    Effective October 1, 2014, CMS will implement the 10th revision of 
the ICD coding scheme--ICD-10-CM. Because the transition to ICD-10-CM 
coding will occur during CY 2014, we discuss here the crosswalk from 
ICD-9-CM to ICD-10-CM codes for the purpose of determining eligibility 
for the comorbidity payment adjustment.
    We crosswalked the ICD-9-CM codes that are eligible for the 
comorbidity payment adjustment to ICD-10-CM codes using the General 
Equivalence Mappings (GEM) tool, which is the authoritative source for 
crosswalking developed by the National Center for Health Statistics and 
CMS. The crosswalk from ICD-9-CM to ICD-10-CM diagnosis codes resulted 
in three scenarios: One ICD-9-CM code could crosswalk to one ICD-10-CM 
code; one ICD-9-CM code crosswalked to multiple ICD-10-CM codes; or 
multiple ICD-9-CM crosswalked to one ICD-10-CM code. We applied the 
three exclusion criteria listed above to each of the ICD-10-CM codes to 
which the ICD-9-CM codes crosswalked.
    In our clinical evaluation, we found the ICD-9-CM codes generally 
crosswalked to one ICD-10-CM code that codes for the same diagnosis, 
has the same code descriptor, and does not meet any of our exclusion 
criteria. Accordingly, with the exceptions noted below, we propose that 
ICD-10-CM codes will be eligible for the comorbidity payment adjustment 
where they crosswalk from ICD-9-CM codes that are eligible for the 
comorbidity payment adjustment. There are, however, two instances where 
ICD-9-CM codes crosswalk to ICD-10-CM codes that we believe meet one or 
more of the exclusion criteria described above, and we propose to 
exclude these codes from eligibility for the comorbidity payment 
adjustment.
a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
    Table 1 lists all the instances in which one ICD-9-CM code 
crosswalks to one ICD-10-CM code. We propose that all of those ICD-10-
CM codes will be subject to the comorbidity payment adjustment with the 
exception of K52.81 Eosinophilic gastritis or gastroenteritis. 
Currently, 535.71 Eosinophilic gastritis with hemorrhage is one of 40 
ICD-9-CM diagnosis codes under the acute comorbidity category of 
Gastrointestinal (GI) Bleeding. The descriptor of K52.81, the ICD-10-CM 
code to which this ICD-9-CM code crosswalks, does not include the word 
``hemorrhage.'' In the CY 2011 ESRD PPS final rule (75 FR 49097), we 
specifically limited the GI bleeding category for the comorbidity 
payment adjustment to GI bleed with hemorrhage because we believed that 
the gastrointestinal tract bleeding category met our first exclusion 
criterion--inability to create accurate clinical definitions--because 
it was overly broad. We also believed that use of this diagnosis 
category could lead to gaming consistent with the second and third 
exclusion criteria listed above. For these reasons, we limited the 
gastrointestinal tract bleeding diagnosis category to gastrointestinal 
tract bleeding with hemorrhage, which we believe creates accurate 
clinical definitions and mitigates the potential for adverse incentives 
in ESRD care. Accordingly, we propose to exclude ICD-10-CM code K52.81 
Eosinophilic gastritis or gastroenteritis from eligibility for the 
comorbidity payment adjustment because the code descriptor does not 
indicate the diagnosis of a hemorrhage. We propose that all of the 
other ICD-10-CM codes listed in the Table 1 below will be eligible for 
the comorbidity payment adjustment.

                           Table 1--One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
----------------------------------------------------------------------------------------------------------------
            ICD-9                     Descriptor                     ICD-10                    Descriptor
----------------------------------------------------------------------------------------------------------------
                                            Gastrointestinal Bleeding
----------------------------------------------------------------------------------------------------------------
530.21.......................  Ulcer of esophagus with   K22.11.......................  Ulcer of esophagus with
                                bleeding.                                                bleeding
535.71.......................  Eosinophilic gastritis,   K52.81.......................  Eosinophilic gastritis
                                with hemorrhage.                                         or gastroenteritis
537.83.......................  Angiodysplasia of         K31.811......................  Angiodysplasia of
                                stomach and duodenum                                     stomach and duodenum
                                with hemorrhage.                                         with bleeding
569.85.......................  Angiodysplasia of         K55.21.......................  Angiodysplasia of colon
                                intestine with                                           with hemorrhage
                                hemorrhage.
----------------------------------------------------------------------------------------------------------------
                                               Bacterial Pneumonia
----------------------------------------------------------------------------------------------------------------
003.22.......................  Salmonella pneumonia....  A02.22.......................  Salmonella pneumonia
482.0........................  Pneumonia due to          J15.0........................  Pneumonia due to
                                Klebsiella pneumonia.                                    Klebsiella pneumoniae
482.1........................  Pneumonia due to          J15.1........................  Pneumonia due to
                                Pseudomonas.                                             Pseudomonas
482.2........................  Pneumonia due to          J14..........................  Pneumonia due to
                                Hemophilus influenzae                                    Hemophilus influenzae
                                [H. influenzae].
482.32.......................  Pneumonia due to          J15.3........................  Pneumonia due to
                                Streptococcus, group B.                                  streptococcus, group B
482.40.......................  Pneumonia due to          J15.20.......................  Pneumonia due to
                                Staphylococcus,                                          staphylococcus,
                                unspecified.                                             unspecified
482.41.......................  Methicillin susceptible   J15.211......................  Pneumonia due to
                                pneumonia due to                                         Methicillin susceptible
                                Staphylococcus aureus.                                   Staphylococcus aureus
482.42.......................  Methicillin resistant     J15.212......................  Pneumonia due to
                                pneumonia due to                                         Methicillin resistant
                                Staphylococcus aureus.                                   Staphylococcus aureus
482.49.......................  Other Staphylococcus      J15.29.......................  Pneumonia due to other
                                pneumonia.                                               staphylococcus
482.82.......................  Pneumonia due to          J15.5........................  Pneumonia due to
                                escherichia coli [E.                                     Escherichia coli
                                coli].
482.83.......................  Pneumonia due to other    J15.6........................  Pneumonia due to other
                                gram-negative bacteria.                                  aerobic Gram-negative
                                                                                         bacteria
482.84.......................  Pneumonia due to          A48.1........................  Legionnaires' disease
                                Legionnaires' disease.
507.0........................  Pneumonitis due to        J69.0........................  Pneumonitis due to
                                inhalation of food or                                    inhalation of food and
                                vomitus.                                                 vomit
507.8........................  Pneumonitis due to other  J69.8........................  Pneumonitis due to
                                solids and liquids.                                      inhalation of other
                                                                                         solids and liquids
510.0........................  Empyema with fistula....  J86.0........................  Pyothorax with fistula
510.9........................  Empyema without mention   J86.9........................  Pyothorax without
                                of fistula.                                              fistula
----------------------------------------------------------------------------------------------------------------

[[Page 40848]]

 
                                                  Pericarditis
----------------------------------------------------------------------------------------------------------------
420.91.......................  Acute idiopathic          I30.0........................  Acute nonspecific
                                pericarditis.                                            idiopathic pericarditis
----------------------------------------------------------------------------------------------------------------
                                   Hereditary Hemolytic and Sickle Cell Anemia
----------------------------------------------------------------------------------------------------------------
282.0........................  Hereditary spherocytosis  D58.0........................  Hereditary spherocytosis
282.1........................  Hereditary                D58.1........................  Hereditary
                                elliptocytosis.                                          elliptocytosis
282.41.......................  Sickle-cell thalassemia   D57.40.......................  Sickle-cell thalassemia
                                without crisis.                                          without crisis
282.43.......................  Alpha thalassemia.......  D56.0........................  Alpha thalassemia
282.44.......................  Beta thalassemia........  D56.1........................  Beta thalassemia
282.45.......................  Delta-beta thalassemia..  D56.2........................  Delta-beta thalassemia
282.46.......................  Thalassemia minor.......  D56.3........................  Thalassemia minor
282.47.......................  Hemoglobin E-beta         D56.5........................  Hemoglobin E-beta
                                thalassemia.                                             thalassemia
282.49.......................  Other thalassemia.......  D56.8........................  Other thalassemias
282.61.......................  Hb-SS disease without     D57.1........................  Sickle-cell disease
                                crisis.                                                  without crisis
282.63.......................  Sickle-cell/Hb-C disease  D57.20.......................  Sickle-cell/Hb-C disease
                                without crisis.                                          without crisis
282.68.......................  Other sickle-cell         D57.80.......................  Other sickle-cell
                                disease without crisis.                                  disorders without
                                                                                         crisis
----------------------------------------------------------------------------------------------------------------
                                            Myelodysplastic Syndrome
----------------------------------------------------------------------------------------------------------------
238.7........................  Essential                 D47.3........................  Essential (hemorrhagic)
                                thrombocythemia.                                         thrombocythemia
238.73.......................  High grade                D46.22.......................  Refractory anemia with
                                myelodysplastic                                          excess of blasts 2
                                syndrome lesions.
238.74.......................  Myelodysplastic syndrome  D46.C........................  Myelodysplastic syndrome
                                with 5q deletion.                                        with isolated del(5q)
                                                                                         chromosomal abnormality
238.76.......................  Myelofibrosis with        D47.1........................  Chronic
                                myeloid metaplasia.                                      myeloproliferative
                                                                                         disease
----------------------------------------------------------------------------------------------------------------

b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
    Table 2 lists all of the instances in which one ICD-9-CM code 
crosswalks to multiple ICD-10-CM codes. In those instances, we propose 
that all the crosswalked ICD-10-CM codes will be subject to the 
comorbidity payment adjustment, with the exception of D89.2 
Hypergammaglobulinemia, unspecified. ICD-9-CM code 273.1 Monoclonal 
paraproteinemia is the only ICD-9-CM code eligible for the comorbidity 
payment adjustment under the chronic comorbidity category of Monoclonal 
gammopathy. ICD-9-CM code 273.1 Monoclonal paraproteinemia crosswalks 
to two ICD-10-CM codes: D47.2 Monoclonal gammopathy and D89.2 
Hypergammaglobulinemia, unspecified. We analyzed both of these ICD-10-
CM codes and determined that D47.2 Monoclonal gammopathy should be 
eligible for the comorbidity payment adjustment because, like ICD-9-CM 
code 273.1 Monoclonal paraproteinemia, it indicates that there is an 
excessive amount of a single monoclonal gammaglobulin. When we analyzed 
the comorbidity category for the CY 2011 ESRD PPS final rule, single 
monoclonal gammaglobulin was shown to have an association with higher 
erythropoiesis stimulating agent (ESA) usage, thereby resulting in 
higher costs to dialysis facilities. After clinical evaluation of D89.2 
Hypergammaglobulinemia, unspecified, however, we determined that this 
ICD-10-CM code should not be eligible for the comorbidity payment 
adjustment because D89.2 Hypergammaglobulinemia, unspecified indicates 
only that 1 or more immunoglobulins are elevated, but does not identify 
which immunoglobulin(s) are elevated. We believe that the lack of 
specificity of this particular code results in an inability to create 
an accurate clinical definition, which is the first of the three 
exclusion criteria. Accordingly, we propose that D89.2 
Hypergammaglobulinemia, unspecified will not be eligible for the 
comorbidity payment adjustment. We propose that all of the other ICD-
10-CM codes listed in Table 2 below will be eligible for the 
comorbidity payment adjustment.

                        Table 2--One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
----------------------------------------------------------------------------------------------------------------
            ICD-9                     Descriptor                     ICD-10                    Descriptor
----------------------------------------------------------------------------------------------------------------
                                            Gastrointestinal Bleeding
----------------------------------------------------------------------------------------------------------------
562..........................  Diverticulosis of small   K57.11.......................  Diverticulosis of small
                                intestine with                                           intestine without
                                hemorrhage.                                              perforation or abscess
                                                                                         with bleeding.
                                                         K57.51.......................  Diverticulosis of both
                                                                                         small and large
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
562.03.......................  Diverticulitis of small   K57.01.......................  Diverticulitis of small
                                intestine with                                           intestine with
                                hemorrhage.                                              perforation and abscess
                                                                                         with bleeding.
                                                         K57.13.......................  Diverticulitis of small
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
                                                         K57.41.......................  Diverticulitis of both
                                                                                         small and large
                                                                                         intestine with
                                                                                         perforation and abscess
                                                                                         with bleeding.
                                                         K57.53.......................  Diverticulitis of both
                                                                                         small and large
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
562.12.......................  Diverticulosis of colon   K57.31.......................  Diverticulosis of large
                                with hemorrhage.                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.

[[Page 40849]]

 
                                                         K57.91.......................  Diverticulosis of
                                                                                         intestine, part
                                                                                         unspecified, without
                                                                                         perforation or abscess
                                                                                         with bleeding.
                                                         K57.51.......................  Diverticulosis of both
                                                                                         small and large
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
562.13.......................  Diverticulitis of colon   K57.21.......................  Diverticulitis of large
                                with hemorrhage.                                         intestine with
                                                                                         perforation and abscess
                                                                                         with bleeding.
                                                         K57.33.......................  Diverticulitis of large
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
                                                         K57.41.......................  Diverticulitis of both
                                                                                         small and large
                                                                                         intestine with
                                                                                         perforation and abscess
                                                                                         with bleeding.
                                                         K57.53.......................  Diverticulitis of both
                                                                                         small and large
                                                                                         intestine without
                                                                                         perforation or abscess
                                                                                         with bleeding.
----------------------------------------------------------------------------------------------------------------
                                               Bacterial Pneumonia
----------------------------------------------------------------------------------------------------------------
513.0........................  Abscess of lung.........  J85.0........................  Gangrene and necrosis of
                                                                                         lung.
                                                         J85.1........................  Abscess of lung with
                                                                                         pneumonia.
                                                         J85.2........................  Abscess of lung without
                                                                                         pneumonia.
----------------------------------------------------------------------------------------------------------------
                                                  Pericarditis
----------------------------------------------------------------------------------------------------------------
420.0........................  Acute pericarditis in     A18.84.......................  Tuberculosis of heart.
                                diseases classified
                                elsewhere.
                                                         I32..........................  Pericarditis in diseases
                                                                                         classified elsewhere.
                                                         M32.12.......................  Pericarditis in systemic
                                                                                         lupus erythematosus.
420.90.......................  Acute pericarditis,       I30.1........................  Infective pericarditis.
                                unspecified.
                                                         I30.9........................  Acute pericarditis,
                                                                                         unspecified.
420.99.......................  Other acute pericarditis  I30.8........................  Other forms of acute
                                                                                         pericarditis.
                                                         I30.9........................  Acute pericarditis,
                                                                                         unspecified.
----------------------------------------------------------------------------------------------------------------
                                   Hereditary Hemolytic and sickle cell anemia
----------------------------------------------------------------------------------------------------------------
282.2........................  Anemias due to disorders  D55.0........................  Anemia due to glucose-6-
                                of glutathione                                           phosphate dehydrogenase
                                metabolism.                                              [G6PD] deficiency.
                                                         D55.1........................  Anemia due to other
                                                                                         disorders of
                                                                                         glutathione metabolism.
282.3........................  Other hemolytic anemias   D55.2........................  Anemia due to disorders
                                due to enzyme                                            of glycolytic enzymes.
                                deficiency.
                                                         D55.3........................  Anemia due to disorders
                                                                                         of nucleotide
                                                                                         metabolism.
                                                         D55.8........................  Other anemias due to
                                                                                         enzyme disorders.
                                                         D55.9........................  Anemia due to enzyme
                                                                                         disorder, unspecified.
282.42.......................  Sickle-cell thalassemia   D57.411......................  Sickle-cell thalassemia
                                with crisis.                                             with acute chest
                                                                                         syndrome.
                                                         D57.412......................  Sickle-cell thalassemia
                                                                                         with splenic
                                                                                         sequestration.
                                                         D57.419......................  Sickle-cell thalassemia
                                                                                         with crisis,
                                                                                         unspecified.
282.62.......................  Hb-SS disease with        D57.00.......................  Hb-SS disease with
                                crisis.                                                  crisis, unspecified.
                                                         D57.01.......................  Hb-SS disease with acute
                                                                                         chest syndrome.
                                                         D57.02.......................  Hb-SS disease with
                                                                                         splenic sequestration.
282.64.......................  Sickle-cell/Hb-C disease  D57.211......................  Sickle-cell/Hb-C disease
                                with crisis.                                             with acute chest
                                                                                         syndrome.
                                                         D57.212......................  Sickle-cell/Hb-C disease
                                                                                         with splenic
                                                                                         sequestration.
                                                         D57.219......................  Sickle-cell/Hb-C disease
                                                                                         with crisis,
                                                                                         unspecified.
282.69.......................  Other sickle-cell         D57.811......................  Other sickle-cell
                                disease with crisis.                                     disorders with acute
                                                                                         chest syndrome.
                                                         D57.812......................  Other sickle-cell
                                                                                         disorders with splenic
                                                                                         sequestration.
                                                         D57.819......................  Other sickle-cell
                                                                                         disorders with crisis,
                                                                                         unspecified.
----------------------------------------------------------------------------------------------------------------
                                              Monoclonal Gammopathy
----------------------------------------------------------------------------------------------------------------
273.1........................  Monoclonal                D47.2........................  Monoclonal gammopathy.
                                paraproteinemia.
                                                         D89.2........................  Hypergammaglobulinemia,
                                                                                         unspecified.
----------------------------------------------------------------------------------------------------------------
                                            Myelodysplastic Syndrome
----------------------------------------------------------------------------------------------------------------
238.72.......................  Low grade                 D46.0........................  Refractory anemia
                                myelodysplastic                                          without ring
                                syndrome lesions.                                        sideroblasts, so
                                                                                         stated.
                                                         D46.1........................  Refractory anemia with
                                                                                         ring sideroblasts.
                                                         D46.20.......................  Refractory anemia with
                                                                                         excess of blasts,
                                                                                         unspecified.
                                                         D46.21.......................  Refractory anemia with
                                                                                         excess of blasts 1.
                                                         D46.4........................  Refractory anemia,
                                                                                         unspecified.
                                                         D46.A........................  Refractory cytopenia
                                                                                         with multilineage
                                                                                         dysplasia.
                                                         D46.B........................  Refractory cytopenia
                                                                                         with multilineage
                                                                                         dysplasia and ring
                                                                                         sideroblasts.
238.75.......................  Myelodysplastic           D46.9........................  Myelodysplastic
                                syndrome, unspecified.                                   syndrome, unspecified.

[[Page 40850]]

 
                                                         D46.Z........................  Other myelodysplastic
                                                                                         syndromes.
----------------------------------------------------------------------------------------------------------------

c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
    Table 3 displays the crosswalk where multiple ICD-9-CM codes 
crosswalk to one ICD-10-CM code. For the reasons explained above, we 
propose that all of the crosswalked ICD-10-CM codes listed below will 
be eligible for the comorbidity payment adjustment.

                        Table 3--Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
----------------------------------------------------------------------------------------------------------------
            ICD-9                     Descriptor                     ICD-10                    Descriptor
----------------------------------------------------------------------------------------------------------------
                                            Gastrointestinal Bleeding
----------------------------------------------------------------------------------------------------------------
533.20.......................  Acute peptic ulcer of     K27.2........................  Acute peptic ulcer, site
                                unspecified site with                                    unspecified, with both
                                hemorrhage and                                           hemorrhage and
                                perforation, without                                     perforation.
                                mention of obstruction.
533.21.......................  Acute peptic ulcer of
                                unspecified site with
                                hemorrhage and
                                perforation, with
                                obstruction.
533.40.......................  Chronic or unspecified    K27.4........................  Chronic or unspecified
                                peptic ulcer of                                          peptic ulcer, site
                                unspecified site with                                    unspecified, with
                                hemorrhage, without                                      hemorrhage.
                                mention of obstruction.
533.41.......................  Chronic or unspecified
                                peptic ulcer of
                                unspecified site with
                                hemorrhage, with
                                obstruction.
533.60.......................  Chronic or unspecified    K27.6........................  Chronic or unspecified
                                peptic ulcer of                                          peptic ulcer, site
                                unspecified site with                                    unspecified, with both
                                hemorrhage and                                           hemorrhage and
                                perforation, without                                     perforation.
                                mention of obstruction.
533.61.......................  Chronic or unspecified
                                peptic ulcer of
                                unspecified site with
                                hemorrhage and
                                perforation, with
                                obstruction.
534.00.......................  Acute gastrojejunal       K28.0........................  Acute gastrojejunal
                                ulcer with hemorrhage,                                   ulcer with hemorrhage.
                                without mention of
                                obstruction.
534.01.......................  Acute gastrojejunal
                                ulcer, with hemorrhage,
                                with obstruction.
534.20.......................  Acute gastrojejunal       K28.2........................  Acute gastrojejunal
                                ulcer with hemorrhage                                    ulcer with both
                                and perforation,                                         hemorrhage and
                                without mention of                                       perforation.
                                obstruction.
534.21.......................  Acute gastrojejunal
                                ulcer with hemorrhage
                                and perforation, with
                                obstruction.
534.40.......................  Chronic or unspecified    K28.4........................  Chronic or unspecified
                                gastrojejunal ulcer                                      gastrojejunal ulcer
                                with hemorrhage,                                         with hemorrhage.
                                without mention of
                                obstruction.
534.41.......................  Chronic or unspecified
                                gastrojejunal ulcer,
                                with hemorrhage, with
                                obstruction.
534.60.......................  Chronic or unspecified    K28.6........................  Chronic or unspecified
                                gastrojejunal ulcer                                      gastrojejunal ulcer
                                with hemorrhage and                                      with both hemorrhage
                                perforation, without                                     and perforation.
                                mention of obstruction.
534.61.......................  Chronic or unspecified
                                gastrojejunal ulcer
                                with hemorrhage and
                                perforation, with
                                obstruction.
----------------------------------------------------------------------------------------------------------------
                                               Bacterial Pneumonia
----------------------------------------------------------------------------------------------------------------
482.30.......................  Pneumonia due to          J15.4........................  Pneumonia due to other
                                Streptococcus,                                           streptococci.
                                unspecified.
482.31.......................  Pneumonia due to
                                Streptococcus, group A.
482.39.......................  Pneumonia due to other
                                Streptococcus.
482.81.......................  Pneumonia due to          J15.8........................  Pneumonia due to other
                                anaerobes.                                               specified bacteria.
482.89.......................  Pneumonia due to other
                                specified bacteria.
----------------------------------------------------------------------------------------------------------------

    In summary, based on our clinical evaluation of the ICD-10-CM codes 
to which the eligible ICD-9-CM codes crosswalk, we propose that both 
D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic 
gastritis or gastroenteritis would not be eligible for the comorbidity 
payment adjustment. We propose that all other ICD-10-CM codes to which 
eligible ICD-9-CM codes crosswalk that are listed in the Tables above 
will be eligible for the comorbidity payment adjustment effective 
October 1, 2014. We are soliciting comments on the ICD-10-CM codes that 
we propose to exclude and those we propose will be eligible for the 
comorbidity payment adjustment.
6. 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

[[Page 40851]]

Sec.  413.237(a)(1) provide that ESRD outlier services are the 
following items and services that are included in the ESRD PPS bundle: 
(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 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 (75 FR 49142), 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. The ESRD-related 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 eliminated 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. However, we 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 
can identify, through our monitoring efforts, items and services that 
are incorrectly being identified as eligible outlier services in the 
claims data. Any updates to the list of renal dialysis items and 
services that qualify as outlier services are made through 
administrative issuances, if necessary.
    Our regulations at 42 CFR Sec.  413.237(a)(2) through (a)(6), (b), 
and (c) 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 Sec.  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 are 
determined by multiplying the adjusted average outlier services MAP 
amount by the product of the patient-specific case-mix 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). Thus, for CYs 2011 and 2012, the MAP and fixed dollar loss 
amounts were computed based on pre-ESRD PPS claims data and 
utilization. For CY 2013, the outlier services MAP amounts and fixed 
dollar loss amounts were based on 2011 data (77 FR 67464). Therefore, 
the outlier thresholds for CY 2013 were based on utilization of ESRD-
related items and services furnished under the ESRD PPS. Because of the 
lower utilization of epoetin and other outlier services in CY 2011, we 
lowered the MAP amounts and fixed dollar loss amounts for both adult 
and pediatric patients for CY 2013 to allow for an increase in payments 
for ESRD beneficiaries requiring higher resources.
a. Impact of Proposed Changes to the Outlier Policy
    For CY 2014, 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 2012 claims using the December 2012 claims 
file. Accordingly, for CY 2014, the MAP and fixed dollar loss amounts 
are based on the ESRD PPS claims and utilization. The impact of this 
update is shown in Table 4, which compares the outlier services MAP 
amounts and fixed dollar loss amounts used for the outlier policy in CY 
2013 with the updated estimates for this proposed rule. The estimates 
for the proposed outlier CY 2014 outlier policy, which are included in 
Column II of Table 4, were inflation-adjusted to reflect projected 2014 
prices for outlier services.

               Table 4--Outlier Policy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                  Column I  Final outlier policy    Column II  Proposed outlier
                                                  for CY2013 (based on 2011 data    policy for CY2014 (based on
                                                    price  inflated to 2013) *      2012 data price inflated to
                                                 --------------------------------             2014) *
                                                                                 -------------------------------
                                                     Age  = 18       Age  = 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $38.65          $61.38          $38.65          $52.45
 treatment \1\..................................
Adjustments

[[Page 40852]]

 
    Standardization for outlier services \2\....          1.0927          0.9878          1.0960          0.9893
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $41.39          $59.42          $41.51          $50.85
     \3\........................................
Fixed dollar loss amount that is added to the             $47.32         $110.22          $54.23          $94.26
 predicted MAP to determine the outlier
 threshold \4\..................................
Patient months qualifying for outlier payment...            7.6%            5.1%            6.2%            5.1%
----------------------------------------------------------------------------------------------------------------
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated
  prices for outlier services (that is, 2013 prices in Column I and projected 2014 prices in Column II).
\1\ Excludes patients for whom not all data were available to calculate projected payments under an expanded
  bundle. The outlier services MAP amounts are based on 2012 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.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing
  case mix adjusters for adult and pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the
  predicted outlier services MAP for each patient.
\4\ The fixed dollar loss amounts were calculated using 2012 data to yield total outlier payments that represent
  1% of total projected payments for the ESRD PPS.

    As seen in Table 4, the estimated fixed dollar loss amount that 
determines the 2014 outlier threshold amount for adults (Column II) is 
lower than that used for the 2013 outlier policy (Column I). The 
estimated fixed dollar loss amount that determines the 2014 outlier 
threshold amount for pediatric patients (Column II) is higher than that 
used for the 2013 outlier policy (Column I). The main reason for the 
reduction for adult patients is that the lower utilization of epoetin 
and other outlier services continued to decline during the second year 
of the PPS. This can be seen by comparing the outlier service MAP 
amount per treatment for adult patients in Column I ($61.38, which is 
based on 2011 data) with that amount in Column II ($52.45, which is 
based on 2012 data).
    For pediatric patients, there was no change in the overall average 
outlier service MAP amount between 2011 and 2012 ($38.65 per treatment 
in both Columns I and II). In addition, there was a greater tendency in 
2012 for a relatively small percentage of pediatric patients to account 
for a disproportionate share of the total outlier service MAP amounts. 
The one percent target for outlier payments is therefore expected to be 
achieved based on a smaller percentage of pediatric outlier cases using 
2012 data compared to 2011 data (6.2 percent of pediatric patient 
months are expected to qualify for outlier payments rather than 7.6 
percent). These patterns led to the estimated fixed dollar loss amount 
for pediatric patients being higher for the outlier policy for CY 2014 
compared to the outlier policy for CY 2013. Generally, there is a 
relatively higher likelihood for pediatric patients that the outlier 
threshold may be adjusted to reflect changes in the distribution of 
outlier service MAP amounts. This is due to the much smaller overall 
number of pediatric patients compared to adult patients, and therefore 
to the fact that the outlier threshold for pediatric patients is 
calculated based on data for a much smaller number of pediatric 
patients compared to adult patients.
    We propose to update the fixed dollar loss amounts that are added 
to the predicted MAP amounts per treatment to determine the outlier 
thresholds for CY 2014 from $110.22 to $94.26 for adult patients and 
from $47.32 to $54.23 for pediatric patients compared with CY 2013 
amounts. We estimate that the percentage of patient months qualifying 
for outlier payments under the current policy will be 5.1 percent and 
6.2 percent for adult and pediatric patients, respectively, based on 
the 2012 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
    42 CFR 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. Based on 
the 2012 claims, outlier payments represented approximately 0.2 percent 
of total payments, again falling short of the 1 percent target due to 
the continuing decline in use of outlier services. Use of 2012 data to 
recalibrate the thresholds, which reflect lower utilization of EPO and 
other outlier services, is expected to result in aggregate outlier 
payments close to the 1 percent target in CY 2014. We believe the 
proposed update to the outlier MAP and fixed dollar loss amounts for CY 
2014 will increase payments for ESRD beneficiaries requiring higher 
resource utilization and come closer to meeting our 1 percent outlier 
policy.
    We note that recalibration of the fixed dollar loss amounts in this 
proposed rule for CY 2014 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 increases 
payments to providers for beneficiaries with renal dialysis items and 
services that are eligible for outlier payments. Therefore, beneficiary 
co-insurance obligations would also increase for renal dialysis 
services eligible for outlier payments.

C. Discussion of Self-Dialysis and Home Dialysis Training Add-on 
Adjustment and Request for Public Comments

a. Medicare Policy for Self-Dialysis Training, Home Dialysis Training, 
and Retraining
    The existing Medicare policy for furnishing self-dialysis training, 
home dialysis training, and retraining was finalized in our CY 2011 
ESRD PPS final rule (75 FR 49062 through 49064) and further discussed 
in the Medicare Benefits Policy Manual, (Publication 100-02, Chapter 
11). Self-dialysis or home dialysis can only be performed

[[Page 40853]]

after an ESRD patient has completed an appropriate course of training. 
The scope of training services that a certified ESRD facility must 
furnish to ESRD patients as a condition of coverage is described at 42 
CFR 494.100(a). For instance, 42 CFR 494.100(a)(2) states that the 
training must be conducted by a registered nurse. For additional 
information on the requirements for ESRD facilities in furnishing 
dialysis training, see 42 CFR Part 494, and additional information 
regarding home dialysis training certification, see the State 
Operations Manual, which may be viewed on the Medicare Web site at the 
following link: http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/GuidanceforLawsAndRegulations/Dialysis.html.
    42 CFR 494.70 (Condition: Patients' rights) requires that 
facilities inform patients (or their representatives) of their rights 
and responsibilities when they begin their treatment and protect and 
provide for the exercise of those rights. Our regulation at 42 CFR 
Sec.  494.70(7) requires a facility to inform patients about all 
treatment modalities' and settings, including but not limited to 
transplantation, home dialysis modalities, and in-facility 
hemodialysis. This includes the patient's right to receive resource 
materials for dialysis modalities not offered by the facility. We 
expect that all ESRD facilities comply with this regulation and furnish 
resource information on home hemodialysis, even if this modality is not 
offered by the facility. When ESRD facilities are certified for home 
dialysis training we expect the facility to provide training throughout 
the self-dialysis or home dialysis experience (42 CFR 494.100). Self-
dialysis or home dialysis training services and supplies may include 
but are not limited to personnel services; dialysis supplies, 
parenteral items used in dialysis, written training manuals and 
materials, and ESRD-related items and services.
    We discuss Medicare's training policies in Table 5 (Medicare's Self 
or Home Training by Modality) for the following dialysis modalities:
     Home Hemodialysis Training
     Intermittent Peritoneal Dialysis Training
     Continuous Ambulatory Peritoneal Dialysis Training
     Continuous Cycling Peritoneal Dialysis Training
We would expect that patients who elect self-dialysis or home dialysis 
training will be good candidates for these modalities and that they 
will be successful in completing the method of training. This includes 
compliance with patient assessments as described in 42 CFR 494.80(a)(9) 
``Evaluation of the patient's abilities, interests, preferences, and 
goals, including the desired level of participation in the dialysis 
care process; the preferred modality (hemodialysis or peritoneal 
dialysis), and setting (for example, home dialysis), and the patients 
expectations of care outcomes.''

          Table 5--Medicare's Self or Home Training by Modality
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Home Hemodialysis (HHD)        HHD training is generally furnished in 4
 Training.                      weeks. Medicare will pay the ESRD
                                facility for up to 25 HHD training
                                sessions. In some HHD programs, the
                                dialysis caregiver is trained to perform
                                the dialysis treatment in its entirety
                                and the patient plays a secondary role.
                                In other programs, the patient performs
                                most of the treatment and is only aided
                                by a helper.
Intermittent Peritoneal        IPD training is generally furnished in 4
 Dialysis (IPD) Training.       weeks. Medicare will pay the ESRD
                                facility for up to 15 PD training
                                sessions. In the IPD program, the
                                patient's caregiver is usually trained
                                to carry out the dialysis care. The
                                patient plays a minimal role, as most
                                are unable to perform self-care dialysis
                                because of other debilitating
                                conditions.
Continuous Ambulatory          CAPD training is generally furnished in 2
 Peritoneal Dialysis (CAPD)     weeks. Medicare will pay the ESRD
 Training.                      facility for up to 15 PD training
                                sessions. In CAPD programs both the
                                patient and the caregiver are trained.
Continuous Cycling Peritoneal  CCPD training is generally furnished in 2
 Dialysis (CCPD) Training.      weeks. Medicare will pay the ESRD
                                facility for up to 15 PD training
                                sessions. In CCPD programs both the
                                patient and the caregiver are trained.
------------------------------------------------------------------------

b. Payment Methodology
    In our CY 2011 ESRD PPS final rule (75 FR 49062 through 49064), we 
stated that the ESRD PPS base rate alone does not account for the 
staffing costs associated with training treatments furnished by a 
registered nurse. Thus, we finalized the training add-on payment 
adjustment, to be added on to the ESRD PPS base rate, when one-on-one 
self or home dialysis training is furnished by a nurse, working for a 
Medicare-certified training facility, to a Medicare beneficiary for 
either hemodialysis or the peritoneal dialysis training modalities 
listed above. Likewise, we noted in our CY 2012 ESRD PPS final rule (76 
FR 70252), that ``ESRD facilities receive a per-treatment payment that 
accounts for case-mix, geographic location, low-volume, and outlier 
payment regardless [of whether] the patient receives dialysis at home 
or in the facility, plus the training add-on[,]'' if applicable.
    The add-on payment adjustment is also for retraining sessions after 
a patient or caregiver has completed the initial training program and 
if the patient continues to be an appropriate candidate for self or 
home dialysis modalities. We would expect that most Medicare 
beneficiaries receive retraining sessions when they receive new 
equipment, have a change in caregiver, or modality change. The ESRD 
facility may not bill Medicare for retraining services when they 
install home dialysis equipment or furnish monitoring services. For 
example, an ESRD facility nurse may not bill for retraining sessions 
when they update a home dialysis patient's treatment record, order 
monthly supplies, or instruct the patient on the use of a new 
medication for the treatment of infection. When retraining sessions are 
furnished to a patient or caregiver, there is an expectation that the 
patient or caregiver is already knowledgeable of the elements of home 
dialysis, and if additional training is being done for a change of 
equipment or a change in modality, fewer sessions would be necessary 
because of the transferability of certain basic skills for home 
dialysis.
    We discuss our policy for retraining sessions in the Medicare 
Benefit Policy Manual, Publication 100-02, Chapter 11. If a Medicare 
beneficiary exceeds the maximum amount of training sessions based upon 
their modality, and, if they continue to be a good candidate for home 
modalities, additional training sessions or retraining sessions may be 
paid by Medicare with medical justification. In such cases, the ESRD 
facility must indicate the medical justification on the claim for the 
training or retraining session submitted for payment. Because the 
requirement of medical justification is specific to the patient's 
training needs, circumstances (such as a change in caregiver), or 
condition (change in modality), we

[[Page 40854]]

would not expect that an ESRD facility would routinely bill Medicare 
for training or retraining sessions on any patient.
    For CY 2011, we finalized the amount for the training add-on 
adjustment at $33.44 per treatment, and noted that this amount would be 
added to the ESRD PPS base rate payment when a training treatment is 
furnished by the ESRD facility. In addition, we noted that because the 
training add-on adjustment is directly related to nursing salaries and 
that nursing salaries differ greatly based on geographic location, we 
would adjust the training add-on payment by the geographic area wage 
index applicable to the ESRD facility. (For further discussions on wage 
indexes, please see section II.B.4. of this proposed rule.) When home 
dialysis training sessions are furnished to a Medicare beneficiary by a 
Medicare-certified training facility, Medicare will make the ESRD PPS 
computed base rate payment with all applicable adjustments, and then 
the separate add-on payment for self or home dialysis training.
    In our CY 2013 ESRD final rule (77 FR 67468 through 67469), we 
addressed comments on Medicare's self and home dialysis training 
policies under the ESRD PPS. In that final rule, we stated that 
commenters were concerned that the payment for home dialysis training 
is insufficient and does not reflect the true costs of training and 
that they indicated various ranges of time required for home training 
in terms of time per day and number of training sessions. At that time, 
we responded to those comments by confirming that CMS will continue to 
monitor and analyze trends in home dialysis training, but that we 
believe our payment methodology is adequate for ESRD facilities 
furnishing training services.
    In this proposed rule we are seeking comments on the costs 
associated with furnishing self or home dialysis training. We request 
comments on the elements of PD vs. HHD training sessions, specifically 
the costs of furnishing such training, the appropriate number of 
training sessions, and the duration of the training sessions. Lastly, 
we are also seeking comments on a ``holdback'' payment methodology, 
which we discussed in the CY 2011 ESRD PPS final rule (75 FR 49063). 
Under this methodology, a portion of the training payments would be 
withheld from the ESRD facility until the ESRD patient demonstrates 
that they have successfully transitioned to a home modality. 
Specifically, we are seeking comments on the length of time necessary 
for a successful transition to a home dialysis modality and the 
percentage of the payment that should be held back.

D. Delay of Payment for Oral-Only Drugs Under the ESRD PPS

    Section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of 
the Medicare Improvements for Patients and Providers Act of 2008 
(MIPPA), requires the Secretary to implement a payment system under 
which a single payment is made to a provider of services or a renal 
dialysis facility for ``renal dialysis services'' in lieu of any other 
payment. Section 1881(b)(14)(B) defines renal dialysis services, and 
subclause (iii) of that section states that these services include 
``other drugs and biologicals that are furnished to individuals for the 
treatment of ESRD and for which payment was (before the application of 
this paragraph) made separately under this title, and any oral 
equivalent form of such drug or biological[.]'' We interpreted this 
provision as including not only injectable drugs and biologicals (other 
than ESAs, which are included under clause (ii)) used for the treatment 
of ESRD, but also all non-injectable drugs furnished under Title XVIII. 
We also concluded that, to the extent ESRD-related oral-only drugs do 
not fall within clause (iii) of the statutory definition of renal 
dialysis services, such drugs would fall under clause (iv), and 
constitute other items and services used for the treatment of ESRD that 
are not described in clause (i). Accordingly, we defined ``renal 
dialysis services'' at 42 CFR 413.174 as including, among other things, 
``[o]ther items and services that are furnished to individuals for the 
treatment of ESRD and for which payment was (prior to January 1, 2011) 
made separately under title XVIII of the Act (including drugs and 
biologicals with only an oral form).'' Although oral-only drugs are 
included in the definition of renal dialysis services, in the CY 2011 
ESRD PPS final rule, we also finalized a policy to delay payment for 
these drugs under the PPS until January 1, 2014 (75 FR 49044). We 
stated that there were certain advantages to delaying the 
implementation of payment for oral-only drugs, including allowing ESRD 
facilities additional time to make operational changes and logistical 
arrangements in order to furnish oral-only ESRD-related drugs and 
biologicals to their patients. Accordingly, 42 CFR 413.174(f)(6) 
provides that payment to an ESRD facility for renal dialysis service 
drugs and biologicals with only an oral form is incorporated into the 
PPS payment rates effective January 1, 2014.
    On January 3, 2013, Congress enacted the American Taxpayer Relief 
Act of 2012 (ATRA). Section 632(b) of ATRA states that the Secretary 
``may not implement the policy under section 413.176(f)(6) of title 42, 
Code of Federal Regulations (relating to oral-only ESRD-related drugs 
in the ESRD prospective payment system), prior to January 1, 2016.'' 
Accordingly, payment for oral-only drugs will not be made under the 
ESRD PPS before January 1, 2016, instead of on January 1, 2014, which 
is the date originally finalized for payment of ESRD-related oral-only 
drugs under the ESRD PPS (75 FR 49044). We propose to pay for oral-only 
drugs consistent with section 632(b) of ATRA and implement this delay 
by revising the effective date for providing payment for oral-only 
ESRD-related drugs under the ESRD PPS at section 42 CFR 413.174(f)(6) 
from January 1, 2014 to January 1, 2016.
    Because we propose that oral-only drugs will be included in the 
ESRD PPS starting in CY 2016, we also propose to change the reference 
to January 1, 2014 in section 42 CFR 413.237(a)(1)(iv) to January 1, 
2016. In the CY 2011 ESRD PPS final rule (75 FR 49138), we defined 
outlier services as including oral-only drugs effective January 1, 
2014. In addition to modifying the date on which oral-only drugs will 
be eligible for outlier payments, we also propose to clarify our 
regulation at 413.237(a)(1)(iv) by changing the word ``excluding'' to 
``including'' to make clear that oral-only drugs are ESRD outlier 
services for purposes of the outlier policy effective January 1, 2016, 
consistent with the policy we established in the CY 2011 final rule (75 
FR 49138).

III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)

A. Background

    For more than 30 years, monitoring the quality of care provided to 
patients with end-stage renal disease (ESRD) by dialysis 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 1881(h) of the Social 
Security Act (the Act), which was added by section 153(c) of Medicare 
Improvements for Patients and Providers Act (MIPPA). CMS established 
the ESRD QIP for payment year (PY) 2012, the initial year of the 
program in which payment reductions

[[Page 40855]]

were applied, in two rules published in the Federal Register on August 
12, 2010, and January 5, 2011 (75 FR 49030 and 76 FR 628, 
respectively). Subsequently, on November 10, 2011, CMS published a rule 
in the Federal Register outlining the PY 2013 and PY 2014 ESRD QIP 
requirements (76 FR 70228). On November 9, 2012, CMS published a rule 
in the Federal Register outlining the ESRD QIP requirements for PY 2015 
and future payment years (77 FR 67450).
    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 (TPS). This proposed rule discusses each of these 
elements and our proposals for their application to PY 2016 and future 
payment years of the ESRD QIP. As of January 1, 2014, ESRD facilities 
located in Guam, American Samoa, and the Northern Mariana Islands will 
be paid under the ESRD PPS. Under section 1881(h)(1)(A) of the Act, 
these facilities will receive a reduction to their ESRD PPS payments, 
beginning with January 1, 2014 dates of service, if they do not meet 
the requirements of the ESRD QIP.

B. Considerations in Updating and Expanding Quality Measures Under the 
ESRD QIP for PY 2016 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 on particular services furnished 
to a beneficiary to a program that ties payments to providers and 
suppliers based on the quality of services they deliver. By paying for 
the quality of care rather than quantity of care, we believe we are 
strengthening the healthcare system by focusing on better care and 
lower costs through improvement, prevention and population health, 
expanded healthcare coverage, and enterprise excellence--while also 
advancing the National Strategy for Quality Improvement in Health Care 
(National Quality Strategy). CMS is currently working to update a set 
of domains and specific measures of quality for our VBP programs, and 
to link the aims of the National Quality Strategy with our payment 
policies on a national scale. We are working in partnership with 
beneficiaries, providers, advocacy groups, the National Quality Forum 
(NQF), the Measures Application Partnership, operating divisions within 
the Department of Health and Human Services (HHS), and other 
stakeholders to develop new measures where gaps exist, refine measures 
requiring adjustment, and remove measures when appropriate. We are also 
collaborating with stakeholders to ensure that the ESRD QIP serves the 
needs of our beneficiaries and also advances the goals of the National 
Quality Strategy to coordinate healthcare delivery, reduce healthcare 
costs, enhance patient satisfaction, promote healthy communities, and 
increase patient safety.\1\
---------------------------------------------------------------------------

    \1\ 2012 Annual Progress Report to Congress: National Strategy 
for Quality Improvement in Health Care, http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf.
---------------------------------------------------------------------------

    We believe that the development of an ESRD QIP that is successful 
in supporting 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 feasible and practicable, we 
have sought to adopt measures that have been endorsed by a national 
consensus organization, recommended by multi-stakeholder organizations, 
and developed with the input of providers, beneficiaries, and other 
stakeholders.
2. Brief Overview of Proposed PY 2016 Measures
    For the PY 2016 ESRD QIP and future payment years, we are proposing 
a total of 14 measures. We believe that the PY 2016 ESRD QIP proposed 
measures promote high-quality care for patients with ESRD, and also 
strengthen the goals of the National Quality Strategy. The following 
measures seek to evaluate facilities on the clinical quality of care:
 To evaluate anemia management:

    [cir] Hemoglobin Greater Than 12 g/dL, a clinical measure
    [cir] Patient Informed Consent for Anemia Treatment, a clinical 
measure*
    [cir] Pediatric Iron Therapy, a reporting measure*
    [cir] Anemia Management, a reporting measure (revised)

 To evaluate dialysis adequacy:

    [cir] A Kt/V measure for adult hemodialysis patients, a clinical 
measure
    [cir] A Kt/V measure for adult peritoneal dialysis patients, a 
clinical measure
    [cir] A Kt/V measure for pediatric hemodialysis patients, a 
clinical measure

 To determine whether patients are treated using the most 
beneficial type of vascular access:

    [cir] An arterial venous (AV) fistula measure, a clinical measure
    [cir] A catheter measure, a clinical measure

 To address effective bone mineral metabolism management:

    [cir] Hypercalcemia, a clinical measure*
    [cir] Mineral Metabolism, a reporting measure (revised)

 To address patient safety:

    [cir] National Healthcare Safety Network (NHSN) Bloodstream 
Infection in Hemodialysis Outpatients, a clinical measure*

 To address patient-centered experience:

    [cir] In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems (ICH CAHPS), a reporting measure**
 To gather data regarding comorbidities:

    [cir] Comorbidity, a reporting measure*

    ** Indicates that the measure is new to the ESRD QIP.
    *** Indicates that the measure is newly expanded or converted to 
a clinical measure in the ESRD QIP.

    At this time, we are not proposing to adopt measures that address 
care coordination, efficiency, population and community health, or cost 
of care. However, we are soliciting comments in this proposed rule on 
potential measures that would cover these areas. We welcome further 
comments on these and other potential measures for future program 
years.
3. Measures Application Partnership Review
    Section 1890A(a)(1) of the Act, as added by section 3014(b) of the

[[Page 40856]]

Affordable Care Act, requires the entity with a contract under section 
1890(a) of the Act (currently the NQF) to convene multi-stakeholder 
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 to make available to the 
public (not later than December 1 of each year) 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 
multi-stakeholder 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 2013 was transmitted to the Secretary on February 1, 
2013, and is available at (http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx). As required by 
section 1890A(a)(4) of the Act, we considered these recommendations in 
selecting quality and efficiency measures for the ESRD QIP.
    We publicly made available a number of measures in accordance with 
section 1890A(a)(2) of the Act, and these measures were reviewed by the 
Measures Application Partnership. Of these measures, a subset is 
related to a number of proposed new measures for the PY 2016 ESRD QIP 
(one each for anemia management, hypercalcemia, infection monitoring, 
comorbidity reporting, and ESA usage). The Measures Application 
Partnership supported the following:

 NQF-endorsed measure NQF 1454: Proportion of patients 
with hypercalcemia
 NQF-endorsed measure NQF 1433: Use of Iron Therapy 
for Pediatric Patients (which forms the basis for the proposed 
Pediatric Iron Therapy reporting measure)
 NQF-endorsed measure NQF 1460: National Healthcare 
Safety Network (NHSN) Bloodstream Infection Measure (which forms the 
basis for the proposed Bloodstream Infection in Hemodialysis 
Outpatients clinical measure)
 NQF-endorsed measure NQF 0369: Dialysis Facility 
Risk-adjusted Standardized Mortality Ratio (the proposed Comorbidity 
reporting measure may assist in calculating performance on this 
measure, should we propose to adopt it in the future)

The Measures Application Partnership supported the direction of the 
following measures:

 NQF-endorsed measure NQF 1463: Standardized 
Hospitalization Ratio for Admissions (the proposed Comorbidity 
reporting measure may assist in calculating performance on this 
measure, should we propose to adopt it in the future)
 Measures Application Partnership 2774: Blood 
Transfusion Appropriateness (which forms the basis for the Patient 
Informed Consent for Anemia Treatment clinical measure)

    We have taken comments from the Measures Application Partnership 
and the NQF into consideration for the PY 2016 ESRD QIP. In the 
measures section below, we further discuss these considerations, 
describe our proposals for the PY 2016 ESRD QIP, and provide rationale 
for why we believe it is appropriate to propose the measures at this 
time.

C. Proposed Measures for the PY 2016 ESRD QIP and Subsequent PYs of the 
ESRD QIP

    We previously finalized ten measures in the CY 2013 ESRD PPS final 
rule for the PY 2015 ESRD QIP and future PYs (77 FR 67471), and these 
measures are summarized in Table 6 below. We are proposing to continue 
to use nine of the ten measures for the PY 2016 ESRD QIP and future 
payment years, modifying three of the measures as follows:
     ICH CAHPS (reporting measure): Expand
     Mineral Metabolism (reporting measure): Revise
     Anemia Management (reporting measure): Revise
    For the PY 2016 ESRD QIP and future payment years, we are also 
proposing to add three new clinical measures (Patient Informed Consent 
for Anemia Treatment, Hypercalcemia, and NHSN Bloodstream Infection in 
Hemodialysis Outpatients), and two new reporting measures (Pediatric 
Iron Therapy, and Comorbidity). (See Table 7) We believe that, 
collectively, these measures will continue to promote improvement in 
dialysis care in the PY 2016 ESRD QIP and in future payment years.

  Table 6--Measures Adopted for the PY 2015 ESRD QIP and Future Payment
                                  Years
------------------------------------------------------------------------
         NQF No.                   Measure title and description
------------------------------------------------------------------------
N/A......................  Anemia Management: Hgb >12.
                           Percentage of Medicare patients with a mean
                            hemoglobin value greater than 12 g/dL.
0249.....................  Hemodialysis Adequacy: Minimum delivered
                            hemodialysis dose.
                           Percent of hemodialysis patient-months with
                            spKt/V greater than or equal to 1.2.
0318.....................  Peritoneal Dialysis Adequacy: Delivered dose
                            above minimum.
                           Percent of peritoneal dialysis patient-months
                            with spKt/V greater than or equal to 1.7
                            (dialytic + residual) during the four month
                            study period.
1423.....................  Pediatric Hemodialysis Adequacy: Minimum spKt/
                            V.
                           Percent of pediatric in-center hemodialysis
                            patient-months with spKt/V greater than or
                            equal to 1.2.
0257.....................  Vascular Access Type: Arterial Venous (AV)
                            Fistula.
                           Percentage of patient-months on hemodialysis
                            during the last hemodialysis treatment of
                            the month using an autogenous AV fistula
                            with two needles.
0256.....................  Vascular Access Type: Catheter >= 90 days.
                           Percentage of patient-months for patients on
                            hemodialysis during the last hemodialysis
                            treatment of month with a catheter
                            continuously for 90 days or longer prior to
                            the last hemodialysis session.
N/A \1\..................  National Healthcare Safety Network (NHSN)
                            Dialysis Event Reporting.
                           Number of months for which facility reports
                            NHSN Dialysis Event data to the Centers for
                            Disease Control and Prevention (CDC).
N/A \2\..................  In-Center Hemodialysis Consumer Assessment of
                            Healthcare Providers and Systems (ICH CAHPS)
                            Survey Administration \+\.
                           Attestation that facility administered survey
                            in accordance with specifications.

[[Page 40857]]

 
N/A \3\..................  Mineral Metabolism Reporting \+\.
                           Number of months for which facility reports
                            uncorrected serum calcium and phosphorus for
                            each Medicare patient.
N/A......................  Anemia Management Reporting \+\.
                           Number of months for which facility reports
                            ESA dosage (as applicable) and hemoglobin/
                            hematocrit for each Medicare patient.
------------------------------------------------------------------------
\1\ We note that an NQF-endorsed bloodstream infection measure
  (NQF1460) exists.
\2\ We note that a related measure utilizing the results of this survey
  has been NQF-endorsed (0258). 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 implement
  NQF0258.
\3\ We note that this measure is based upon a current NQF-endorsed serum
  phosphorous measure (0255), and a calcium monitoring measure
  that NQF had previously endorsed (0261).
\+\ Indicates a measure we are proposing to revise for PY 2016 and
  future years of the ESRD QIP.

   Table 7--New Measures Proposed for the PY 2016 ESRD QIP and Future
                              Payment Years
------------------------------------------------------------------------
         NQF No.                           Measure title
------------------------------------------------------------------------
N/A......................  Anemia of chronic kidney disease: Patient
                            Informed Consent for Anemia Treatment.
N/A \1\..................  Use of Iron Therapy for Pediatric Patients
                            Reporting.
1454.....................  Proportion of Patients with Hypercalcemia.
N/A \2\..................  NHSN Bloodstream Infection in Hemodialysis
                            Outpatients.
N/A \3\..................  Comorbidity Reporting.
------------------------------------------------------------------------
\1\ We note that the NQF has previously endorsed a pediatric iron
  therapy measure (1433) upon which this measure is based.
\2\ We note that the NQF has previously endorsed a National Healthcare
  Safety Network (NHSN) bloodstream infection measure (1460)
  upon which this measure is based.
\3\ We note that the NQF has previously endorsed risk-adjusted
  hospitalization and mortality measures (1463 and 0369). The proposed Comorbidity reporting measure may assist in
  calculating performance on these measures, should we propose to adopt
  them in the future.

1. PY 2015 Measures Continuing in PY 2016 and Future Payment Years
    We are continuing using six measures adopted in the CY 2013 ESRD 
PPS final rule for the PY 2016 ESRD QIP and future payment years of the 
program. We are also continuing to use two measure topics adopted. 
Proposals for scoring these measures are discussed in sections III.C.5 
through III.C.11 and III.C.13. For the reasons stated in the CY 2012 
ESRD PPS final rule (76 FR 70262, 70264 through 70265, 70269) and in 
the CY 2013 ESRD PPS final rule (77 FR 67478 through 67480, 67487 
through 67490), we will continue using:
    1. (i) The Hemoglobin Greater than 12 g/dL measure.

The Dialysis Adequacy measure topic, which is comprised of

    2. (a) Hemodialysis Adequacy Clinical Performance Measure III: 
Hemodialysis Adequacy--HD Adequacy--Minimum Delivered Hemodialysis Dose 
(NQF 0249),
    3. (b) Peritoneal Dialysis Adequacy Clinical Performance Measure 
III--Delivered Dose of Peritoneal Dialysis Above Minimum (NQF 
0318); and
    4. (c) Minimum spKt/V for Pediatric Hemodialysis Patients (NQF 
1423); and

The Vascular Access Type measure topic, which is comprised of

    5. (a) Vascular Access Type: Arterial Venous (AV) Fistula (NQF 
0257); and
    6. (b) Vascular Access Type: Catheter >= 90 days (NQF 
0256).

The technical specifications for these measures can be found at: http://www.dialysisreports.org/ESRDMeasures.aspx.
2. Proposal To Expand One PY 2015 Measure and Revise Two PY 2015 
Measures for PY 2016 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. Therefore, we are 
proposing to expand and revise the measures discussed below that we 
finalized in the CY 2013 ESRD PPS final rule. For all measures except 
for ICH CAHPS reporting measure, these proposed and revised 
requirements would apply to the measures for PY 2016 and future payment 
years. For the ICH CAHPS measure, certain proposed expanded 
requirements would apply to PY 2016, and some additional proposed 
requirements would apply to PY 2017 and future payment years.
a. Proposed Expanded ICH CAHPS Reporting Measure
    Patient-centered experience is an important measure of the quality 
of patient care. It is a component of the National Quality Strategy. 
The NQF endorses and the Measures Application Partnership supports a 
clinical measure on this topic, NQF 0285: CAHPS In-Center 
Hemodialysis Survey, which is based on how facilities perform on the 
CAHPS survey. In PY 2015, we continued to use a reporting measure 
related to the ICH CAHPS survey, requiring that facilities attest they 
had administered the survey according to the specifications set by the 
Agency for Healthcare Research and Quality (AHRQ), but not requiring 
the submission of survey data. We required that facilities attest by 
January 31, 2014 to administering the ICH CAHPS survey during the 
performance period (77 FR 67480 through 67481).
    We are taking several steps to develop the baseline data necessary 
to propose and implement NQF 0258 as a clinical measure in the 
PY 2018 ESRD QIP. We expect to be able to certify ICH CAHPS survey 
vendors beginning in early CY 2014. We are also building the capacity 
to accept survey data, developing detailed specifications for 
administering the ICH-CAHPS survey in light of questions vendors asked 
about previous procedures, and developing specifications for submitting 
data to CMS, such as file specifications, structure and instructions 
that the survey vendors will use. We have taken these steps in order to 
make it possible for facilities to contract with third party vendors to 
transfer survey data results to CMS, so that we might collect the 
baseline data necessary to propose and implement NQF 0258.
    For PY 2016, we are proposing that each facility arrange by July 
2014 for a CMS-approved vendor to conduct the

[[Page 40858]]

ICH CAHPS survey according to CMS (rather than AHRQ) specifications, 
available at the ICH CAHPS Web site (https://ichcahps.org). Facilities 
will need to register on the https://ichcahps.org Web site in order to 
authorize the CMS-approved vendor to administer the survey and submit 
data on their behalf. Each facility must then administer (via its 
vendor) the survey once during the proposed performance period and, by 
11:59 ET on January 28, 2015, report the survey data to CMS using the 
specifications on the ICH CAHPS Web site.
    For PY 2017 and subsequent payment years, we are proposing similar 
requirements except that each facility must arrange to have the survey 
administered twice during each performance period and must report the 
data (via its CMS-approved vendor) to CMS by the date specified on the 
ICH CAHPS Web site.
    Although we have required that other types of providers, including 
home health agencies and acute care hospitals, administer and submit 
CAHPS survey data on a monthly, continuous basis, we recognize that 
there are generally low rates of turnover in dialysis facility patient 
populations. For this reason, we do not see the same need to require 
facilities to administer the survey as frequently and, as proposed 
above, would require facilities to administer the survey once during 
the performance period for PY 2016 (in order to allow facilities enough 
time to select a vendor) and twice for subsequent payment years. We 
believe that this frequency of survey administration will enable us to 
gather sufficient data to adopt in future rulemaking, a clinical 
version of this measure without unduly burdening facilities. We request 
comment on this proposal. The technical specifications for this measure 
are located at http://www.dialysisreports.org/pdf/esrd/public-measures/ICHCAHPS-2016NPRM.pdf.
b. Proposed Revised Mineral Metabolism Reporting Measure
    Adequate management of bone mineral metabolism and disease in ESRD 
patients continues to be a high priority because it can cause severe 
consequences such as osteoporosis, osteomalacia, and 
hyperparathyroidism. The PY 2015 ESRD QIP has a reporting measure 
focused on mineral metabolism (77 FR 67484 through 67487). We are 
proposing two changes for PY 2016 and future payment years. First, when 
we finalized the measure in the CY 2013 ESRD PPS final rule, we 
inadvertently excluded home peritoneal patients from the measure 
specifications. For PY 2016 and future payment years, we are now 
proposing to include home peritoneal patients in the Mineral Metabolism 
reporting measure. Therefore, we are proposing that a qualifying case 
for this measure will be defined as (i) an in-center Medicare patient 
who had been treated at least seven times by the facility; and (ii) a 
home dialysis Medicare patient for whom the facility submitted a claim 
at least once per month.
    Second, if the proposed Hypercalcemia clinical measure (described 
below) is finalized based on public comment, then we believe it would 
be redundant, and unduly burdensome, for facilities to also continue 
reporting serum calcium levels as part of the mineral metabolism 
reporting measure. Accordingly, in light of our proposal to adopt the 
hypercalcemia measure, we are proposing to change the specifications 
for the mineral metabolism measure such that it no longer requires 
facilities to report serum calcium levels. We welcome comments on this 
proposal, and in particular on whether we should retain the reporting 
of serum calcium levels as part of the mineral metabolism reporting 
measure if we do not finalize the proposed hypercalcemia measure.
    As described in more detail below (Proposed Minimum Data for 
Scoring Measures), we are also proposing to eliminate the 11-case 
minimum for this measure, which was finalized in the CY 2013 ESRD PPS 
final rule at 77 FR 67486. Because of the proposed revised case 
minimum, and because there are circumstances that might make it 
challenging for a facility to draw a sample from certain patients, such 
as those who are admitted to hospital during the month, we are 
proposing that, in order to receive full points on this measure, 
facilities that treat 11 or more qualifying cases over the entire 
performance period will have to report at the lesser of the 50th 
percentile of facilities in CY 2013 or 97 percent per month, on a 
monthly basis, for each month of the performance period. We are further 
proposing that facilities that treat fewer than 11 qualifying cases 
during the performance period will have to report on a monthly basis 
the specified levels for all but one qualifying case. If a facility 
only has one qualifying case during the entire performance period, a 
facility will have to attest to that fact in CROWNWeb by January 31 of 
the year following the performance period in order to avoid being 
scored on the measure. We make this proposal because we seek to ensure 
the highest quality of care regardless of facility size, and because we 
seek to mitigate cherry-picking by ensuring that one patient does not 
skew a facility's score (77 FR 67474).
    We welcome comments on this proposal. Technical specifications for 
this proposed measure can be found at: http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Hypercalcemia-2016NPRM.pdf.
c. Proposed Revised 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.'' In the CY 2013 ESRD PPS final rule, we 
finalized an Anemia Management reporting measure for the reasons stated 
in that final rule (77 FR 67491 through 67495). However, we 
inadvertently excluded home peritoneal patients from the measure 
specifications. For PY 2016 and future payment years, we are now 
proposing to include home peritoneal patients in the Anemia Management 
reporting measure. Therefore, we are proposing that a qualifying case 
for this measure will be defined as (i) an in-center Medicare patient 
who had been treated at least seven times by the facility; and (ii) a 
home dialysis Medicare patient for whom the facility submitted a claim 
at least once per month.
    We believe that there are circumstances that might make it 
challenging to draw a sample from certain patients, and therefore, we 
are proposing that, in order to receive full points on this measure, 
facilities that treat 11 or more qualifying cases over the entire 
performance period must report at the lesser of the 50th percentile of 
facilities in CY 2013 or 99 percent per month, on a monthly basis for 
each month of the performance period. In addition, we are proposing 
that, in order to receive full points on this measure, facilities that 
treat fewer than 11 qualifying cases during the performance period must 
report on a monthly basis the specified levels for all but one 
qualifying case. If a facility only has one qualifying case during the 
entire performance period, a facility will have to attest to that fact 
in CROWNWeb by January 31 of the year following the performance period 
in order to avoid being scored on the measure. We make this proposal 
because we seek to ensure the highest quality of care regardless of 
facility size, and because we seek to mitigate cherry-picking by 
ensuring that one patient does not skew a facility's score (77 FR 
67474).
    Technical specifications for this proposed measure can be found at: 
http://www.dialysisreports.org/pdf/esrd/

[[Page 40859]]

public-measures/AnemiaManagement-Reporting-2016NPRM.pdf. We request 
comment on this proposal to revise the Anemia Management reporting 
measure.
3. New Measures Proposed for PY 2016 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 2016 ESRD QIP and future payment years, we are proposing to 
adopt five new measures. The proposed new measures include two measures 
on anemia management, one measure on mineral metabolism, one measure on 
bloodstream infection monitoring, and one measure on comorbidities.
a. Proposed Anemia Management Clinical Measure Topic and Measures
    Section 1881(h)(2)(A)(i) of the Act states that the measures 
specified for the ESRD QIP are required to include measures on ``anemia 
management that reflect the labeling approved by the Food and Drug 
Administration for such management.'' For PY 2016 and future payment 
years, we are proposing to create a new anemia management clinical 
measure topic, which consists of one measure initially finalized in the 
PY 2012 ESRD QIP final rule and most recently finalized for PY 2015 and 
future PYs in the CY 2013 ESRD PPS final rule, and one new proposed 
measure, described below. We note that, like other measure topics, we 
are proposing that the Anemia Management clinical measure topic consist 
only of clinical and not reporting measures.
i. Anemia Management: Hgb>12
    For the PY 2016 ESRD QIP and future payment years of the program, 
we are proposing to include the current Hgb>12 measure in a new Anemia 
Management Clinical Measure Topic. In the event that the Patient 
Informed Consent for Anemia Treatment measure described below is not 
finalized, we would retain the Hgb>12 measure as an independent 
measure. We welcome comments on this proposal.
ii. Anemia of Chronic Kidney Disease: Patient Informed Consent for 
Anemia Treatment
    This is a measure of the proportion of dialysis patients for whom a 
facility attests that risks, potential benefits, and alternative 
treatment options for anemia were evaluated, and that the patient 
participated in the decision-making regarding an anemia treatment 
strategy. We believe that this measure is consistent with recent 
changes to the FDA-approved labeling \2\ for ESAs and Kidney Disease: 
Improving Global Outcomes (KDIGO) Anemia Management Guidelines \3\ that 
highlight the evolving understanding of risks associated with ESA 
therapy, as required in section 1881(h)(2)(A)(i) of the Act. We believe 
it is appropriate for facilities and physicians to ensure that steps 
are taken to make patients aware of those potential risks within the 
context of treatment for anemia. For these reasons, we are proposing to 
adopt this measure (Anemia of Chronic Kidney Disease: Patient Informed 
Consent for Anemia Treatment) for the ESRD QIP in PY 2016 and future 
payment years of the program. In order to meet the requirements of this 
proposed measure, facilities must attest in CROWNWeb for each 
qualifying patient, on an annual basis, that informed consent was 
obtained from that patient, or that patient's legally authorized 
representative, during the performance period. We propose that 
qualifying cases for this measure would be defined as patients who 
received dialysis in the facility for 30 days or more. The proposed 
deadline for reporting these attestations for the PY 2016 ESRD QIP will 
be January 31, 2015 or, if that is not a regular business day, the 
first business day thereafter. Missing attestation data for a patient 
will be interpreted as failure to obtain informed consent from that 
patient.
---------------------------------------------------------------------------

    \2\ http://www.fda.gov/Drugs/DrugSafety/ucm259639.htm.
    \3\ Kidney Disease: Improving Global Outcomes (KDIGO) Anemia 
Work Group. KDIGO Clinical Practice Guideline for Anemia in Chronic 
Kidney Disease. Kidney inter., Suppl. 2012 (2): 279-335.
---------------------------------------------------------------------------

    We welcome comments on this proposed measure. Technical 
specifications for this proposed measure can be found at: http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-InformedConsent-2016NPRM.pdf.
b. Hypercalcemia
    Section 1881(h)(2)(A)(iii)(II) 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). Many 
studies have associated disorders of mineral metabolism with mortality, 
fractures, cardiovascular disease, and other morbidities. Therefore, we 
believe it is critical to adopt a clinical measure that encourages 
adequate management of bone mineral metabolism and disease in ESRD 
patients.
    Elevated serum calcium level (or hypercalcemia) has been shown to 
be significantly associated with increased all-cause mortality in 
patients with advanced Chronic Kidney Disease (CKD). Both KDIGO 
Clinical Practice Guideline for the Diagnosis, Evaluation, Prevention, 
and Treatment of Chronic Kidney Disease--Mineral and Bone Disorder 
(CKD--MBD) and the National Kidney Foundation's Kidney Disease Outcomes 
Quality Initiative (KDOQI) support maintaining serum calcium levels 
within reference ranges. Hypercalcemia is also a proxy for vascular 
and/or valvular calcification 4 5 and subsequent risk for 
cardiovascular deaths. We previously proposed a hypercalcemia clinical 
measure for the PY 2015 ESRD QIP (77 FR 40973 through 40974), but 
decided not to finalize the measure because we lacked baseline data 
that could be used to calculate performance standards, achievement 
thresholds, and benchmarks (77 FR 67490 through 67491). We now possess 
enough baseline data to calculate these values. Therefore, we are 
proposing to adopt the NQF-endorsed measure NQF 1454: 
Proportion of Patients with Hypercalcemia, for PY 2016 and future 
payment years of the ESRD QIP.
---------------------------------------------------------------------------

    \4\ Wang A, Woo J, Law C, et al. Cardiac Valve Calcification as 
an Important Predictor for All-Cause Mortality and Cardiovascular 
Mortality in Long-Term Peritoneal Dialysis Patients: A Prospective 
Study. J Am. S. Nephrology 2011 (14/1): 159-168.
    \5\ Wang A, Ho S, Wang M, et al. Cardiac Valvular Calcification 
as a Marker of Atherosclerosis and Arterial Calcification in End-
stage Renal Disease. JAMA 2005 (165/3): 327-332.
---------------------------------------------------------------------------

    The proposed Hypercalcemia 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.) In order to enable us to calculate this measure, each 
facility will be required to enter in CROWNWeb, on a monthly basis, an 
uncorrected calcium level for each in-center and home dialysis patient 
over the age of eighteen.
    Performance on this measure is expressed as a proportion of 
patient-months for which the 3-month rolling average exceeds 10.2 mg/
dL. The numerator is the total number of eligible patient-months where 
the 3-month rolling average is greater than 10.2 mg/dL and the 
demoninator is the total number of eligible patient-months. We are 
proposing that facilities would begin to submit data on this measure 
based on January 2014 uncorrected serum

[[Page 40860]]

calcium levels but that we would calculate the first 3-month rolling 
average for each eligible patient in March 2014 using January, 
February, and March 2014 data. We would then calculate a new 3-month 
rolling average each successive eligible patient-month (April through 
December measure calculations) by dropping the oldest month's data and 
using instead the newest month's data in the 3-month period. The 
facility's performance will be determined by calculating the proportion 
of the 3-month averages calculated monthly (March through December, 
each time using the latest three months of data) for all eligible 
patients that was greater than 10.2 mg/dL.
    Because we are proposing to adopt this measure not only for PY 
2016, but also subsequent payment years, we also propose that, 
beginning with the PY 2017 program, we would measure hypercalcemia 
beginning in January of the applicable 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/MineralMetabolism-Hypercalcemia-2016NPRM.pdf. We welcome comments on this proposal.
c. Use of Iron Therapy for Pediatric Patients Reporting Measure
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must include 
measures on ``anemia management that reflect the labeling approved by 
the Food and Drug Administration for such management.'' Appropriate 
anemia management requires the presence of sufficient stores of 
iron.\6\ Iron deficiency is a leading cause of non-response to ESA 
therapy, and several studies suggest that providing oral or IV iron is 
effective in correcting iron deficiency in the pediatric 
population.7 8 Pediatric patients have previously been 
excluded from all anemia management measures, limiting the 
participation of dialysis facilities with substantial numbers of 
pediatric patients in the ESRD QIP. In an effort to address this issue, 
and account for the quality of care dialysis facilities provide to 
pediatric patients, we are proposing to adopt a pediatric iron therapy 
measure for the ESRD QIP in PY 2016 and future payment years of the 
program.
---------------------------------------------------------------------------

    \6\ Seeherunvong W, Rubio L, Abitbol CL, et al. Identification 
of poor responders to erythropoietin among children undergoing 
hemodialysis. J Pediatr 2001 (138/5):710-714.
    \7\ Warady BA, Zobrist RH, Wu J, Finan E. Sodium ferric 
gluconate complex therapy in anemic children on hemodialysis. 
Pediatr Nephrol 20: 1320-7, 2005.
    \8\ Frankenfield DL, Neu AM, Warady BA, et al. Anemia in 
pediatric hemodialysis patients: Results from the 2001 Clinical 
Performance Measures Project. Kidney International 64:1120-4, 2003.
---------------------------------------------------------------------------

    We considered proposing an NQF-endorsed clinical measure on the use 
of iron therapy for pediatric patients as part of the proposed Anemia 
Management clinical measure topic (NQF 1433: Use of Iron 
Therapy for Pediatric Patients). This measure is an assessment of the 
percentage of all pediatric hemodialysis and peritoneal dialysis 
patients who received IV iron or were prescribed oral iron within three 
months of attaining the following conditions: (i) Patient had 
hemoglobin less than 11.0 g/dL; (ii) patient had simultaneous values of 
serum ferritin concentration less than 11.0; and (iii) patient's 
transferrin saturation (TSAT) was less than 20 percent. Upon 
investigation, we discovered that there were not enough patients who 
would qualify for this measure to establish reliable baseline data that 
would allow us to propose to adopt this measure as a clinical measure 
for PY 2016. We also note that the clinical measure currently presents 
other issues related to the minimum number of cases that would need to 
be reported for scoring, and we are considering the use of an adjuster 
that could be applied where the sample size is small. While we continue 
to consider these and other issues related to the adoption of a 
pediatric iron therapy clinical measure, we are proposing a related 
reporting measure for PY 2016 and future payment years in order to 
acquire a sufficient amount of baseline data for the development of a 
clinical measure in the future.
    For PY 2016 and future payment years, we are proposing that 
facilities must enter in CROWNWeb on a quarterly basis, for each 
qualifying case (defined in the next sentence): (i) Patient admit/
discharge date; (ii) hemoglobin levels; (iii) serum ferritin levels; 
(iv) TSAT percentages; (v) the dates that the lab measurements were 
taken for items (ii)-(iv); (vi) intravenous IV iron received or oral 
iron prescribed (if applicable); and (vii) the date that the IV iron 
was received or oral iron was prescribed (if applicable). We are 
proposing that qualifying cases for this measure would be defined as 
in-center and home dialysis patients under the age of eighteen.
    As described in more detail below, we are proposing that each 
facility must report data on the Use of Iron Therapy for Pediatric 
Patients measure if it treats one or more qualifying cases during the 
performance period. Because this reporting measure requires that a 
facility enter data in CROWNWeb only once per quarter for each patient, 
we believe that the burden is appropriate and will not unduly impact 
small facilities, since it is proportionate to the number of patients 
that facilities treat. However, for the same reasons stated in the 
final description of the PY 2014 ESRD QIP Mineral Metabolism measure 
(which had a one patient minimum) (77 FR 67472 through 67474), we are 
proposing that, in order to receive full points on this measure, 
facilities that treat 11 or more qualifying cases over the performance 
period will have to report at the lesser of the 50th percentile of 
facilities in CY 2013 or 97 percent per quarter, for each quarter of 
the performance period. We are proposing that facilities that treat 
fewer than 11 qualifying cases during the performance period will have 
to report on a quarterly basis the specified data elements for all but 
one qualifying case. If a facility only has one qualifying case during 
the entire performance period, a facility will have to attest to that 
fact in CROWNWeb by January 31 of the year following the performance 
period in order to avoid being scored on the measure.
    The technical specifications for this measure can be found at: 
http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-PediatricIronTherapyReporting-2016NPRM.pdf. We welcome 
comment on this proposal.
d. NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical 
Measure
    Healthcare-acquired infections (HAI) are a leading cause of 
preventable mortality and morbidity across different settings in the 
healthcare sector, including dialysis facilities. Bloodstream 
infections are a pressing concern in a population where individuals are 
frequently immuno-compromised and depend on regular vascular access to 
facilitate dialysis therapy. In a national effort to reduce infection 
rates, CMS has partnered with the CDC to encourage facilities to report 
to the NHSN as a way to track and facilitate action intended to reduce 
HAIs. The NHSN is a secure, internet-based surveillance system that is 
managed by the Division of Healthcare

[[Page 40861]]

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 
continue to believe that accurately reporting dialysis events to the 
NHSN by these facilities supports national goals for patient safety, 
particularly goals for the reduction of HAIs. In addition, we believe 
that undertaking other activities designed to reduce the number of HAIs 
supports national goals for patient safety. For further information 
regarding the NHSN's dialysis event reporting protocols, please see 
http://www.cdc.gov/nhsn/dialysis/index.html.
    We have worked over the past two years to help dialysis facilities 
become familiar with the NHSN system through the adoption of an NHSN 
Dialysis Event reporting measure. We now believe that facilities are 
sufficiently versed in reporting this measure to the NHSN. In light of 
the importance of monitoring and preventing infections in the ESRD 
population, and because a clinical measure would have a greater impact 
on clinical practice by holding facilities accountable for their actual 
performance, we are proposing to replace the NHSN Dialysis Event 
reporting measure that we adopted in the CY 2013 ESRD PPS final rule 
(77 FR 67481 through 67484) with a new clinical measure for PY 2016 and 
future payment years. This proposed measure, NHSN Bloodstream Infection 
in Hemodialysis Outpatients, is based closely NQF 1460, in 
that it evaluates the number of hemodialysis outpatients with positive 
blood cultures per 100 hemodialysis patient-months.
    We are proposing that facilities must submit 12 months of 
accurately reported dialysis event data (defined in the next sentence) 
to NHSN on a quarterly basis. In order to ensure that a facility 
submits data that can be used to identify the source of bloodstream 
infections, to preserve the internal validity of bloodstream infection 
data, and to help prevent future bloodstream infections, we propose to 
define accurately reported dialysis event data as data reported by 
facilities that follow the NHSN enrollment and training guidelines 
specified by the CDC (available at: http://www.cdc.gov/nhsn/dialysis/enroll.html and http://www.cdc.gov/nhsn/Training/dialysis/index.html), 
according to the reporting requirements specified within the NHSN 
Dialysis Event Protocol. (This protocol, which facilities are already 
using to meet the requirements of the NHSN Dialysis Event reporting 
measure, includes information about IV antimicrobial starts and 
evidence of vascular access site infection, as well as information 
about the presence of a bloodstream infection.)
    Additionally, we are proposing that each quarter's data would be 
due 3 months after the end of that quarter. For example, data from 
January 1 through March 31, 2014 would need to be entered by June 30, 
2014; data from April 1 through June 30, 2014 would need to be 
submitted by September 30, 2014; data from July 1 through September 30, 
2014 would need to be submitted by December 31, 2014; data from October 
1 through December 31, 2014 would need to be submitted by March 31, 
2015. If facilities do not report 12 months of these data according to 
the requirements and the deadlines specified above, we propose that 
they would receive a score of zero on the measure. We also propose that 
facilities with a CCN open date after January 1, 2014 will be excluded 
from the measure. We note that in previous payment years we have 
awarded partial credit to facilities that submitted less than twelve 
months of data to encourage them to enroll in and report data in the 
NHSN system. However, we are proposing to require 12 months of data on 
this clinical measure because infection rates vary through different 
seasons of the year.
    We note that this proposed measure only applies to facilities 
treating in-center hemodialysis patients (both adult and pediatric). We 
will determine whether a facility treats in-center patients by 
referencing the facility's information in the Standard Information 
Management System and CROWNWeb.
    We recognize that the CDC has published Core Interventions for BSI 
Prevention in Dialysis, which are listed at http://www.cdc.gov/dialysis/prevention-tools/core-interventions.html. We encourage 
facilities to adopt the nine listed interventions in order to help 
prevent infections, but are not proposing to require facilities to 
adopt any of these interventions at this time.
    We request comment on this proposal, and in particular on the issue 
of whether it is appropriate at this time to convert the current NHSN 
Dialysis Event Reporting measure into a clinical measure. The technical 
specifications for this measure are located at http://www.dialysisreports.org/ESRDMeasures.aspx.
e. Comorbidity Reporting Measure
    The NQF endorsed a clinical measure for Dialysis Facility Risk-
Adjusted Standardized Mortality Ratio (0369) in 2008, and a 
clinical measure for Standardized Hospitalization Ratio for Admissions 
(1463) in 2011. We have long been interested in adding a 
Standardized Mortality Ratio (SMR) measure and a Standardized 
Hospitalization Ratio (SHR) measure to the ESRD QIP. As articulated in 
the CY 2013 ESRD PPS final rule, ``We believe that dialysis facilities 
own partial responsibility for the rate at which their patients are 
hospitalized, in particular when that rate is substantially higher than 
at other peer facilities and may not be explained by variation in the 
illness of patients'' (77 FR 67496). Similarly, we continue to believe 
that the ``SMR may help distinguish the quality of care offered by 
dialysis facilities as determined by mortality, a key health care 
outcome used to assess quality of care in other settings, such as 
hospitals'' (77 FR 67497).
    Although we believe that SHR and SMR capture important indicators 
of morbidity and mortality, we are considering whether, and how, we 
might be able to adopt them through future rulemaking in a way that 
properly takes into account the effect that comorbidities have on 
hospitalization and mortality rates for the ESRD population. We also 
acknowledge concerns raised by commenters in the past that the NQF-
endorsed SMR and SHR measures are not adequately risk adjusted (77 FR 
67496). Currently, information about patient comorbidities is collected 
by CMS via the Medical Evidence Reporting Form 2728, which is typically 
only submitted by facilities to CMS when a new patient first begins to 
receive dialysis treatment. We also use Form 2728 to capture the date 
of first dialysis in order to help determine patient exclusions for all 
of the clinical measures finalized in the PY 2013 ESRD PPS final rule. 
However, facilities are not required to update this form, which makes 
it difficult to capture information about comorbidities that develop 
after the initiation of dialysis treatment. We acknowledge the concerns 
of commenters who stated that ``there is currently no mechanism either 
for correcting or updating patient comorbidity data on CMS' Medical 
Evidence Reporting Form 2728, and these comorbidities affect the 
calculation of the measure'' (76 FR 70267).
    We are proposing to adopt a Comorbidity reporting measure for the 
PY 2016 ESRD QIP and future payment years of the ESRD QIP. The purpose 
of this measure is two-fold. First, the proposed reporting measure 
offers a

[[Page 40862]]

mechanism for collecting annual information about patient 
comorbidities, thereby providing a reliable source of data that we can 
use to develop a risk-adjustment methodology for the SHR and SMR 
clinical measures, should we propose to adopt such measures in the 
future. Second, the reporting measure will make it possible to improve 
our understanding of the risk factors that contribute to morbidity and 
mortality in the ESRD patient population. The data we gather will 
enable us to develop risk-adjustment methodologies for possible use in 
calculating the SHR and SMR measures, should we propose to adopt those 
measures in the future, and therefore more reliably calculate expected 
hospitalization and mortality rates in future payment years of the ESRD 
QIP. When we examine updated data on comorbidities, we will determine 
the appropriateness of including that data as additional risk-
adjustment factors for the SMR and SHR measures by considering the 
extent to which each comorbidity may be influenced by the quality of 
dialysis facility care, as opposed to factors outside of a facility's 
control.
    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 section 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.
    NQF has not endorsed a measure for updating comorbidity information 
for patients with ESRD. We have given due consideration to endorsed 
measures, as well as those adopted by a consensus organization, and we 
are proposing this measure under the authority of 1881(h)(2)(B)(ii) of 
the Act. We believe that the proposed measure's potential to improve 
clinical understanding and practice outweighs the minimal burden it 
would impose upon facilities. Additionally, we believe that this 
measure will provide data that is currently unavailable through Form 
2728 because the measure accounts for the most recent information about 
patient risk factors, which may change over time as a patient continues 
receiving dialysis.
    For this proposed reporting measure, we are proposing each facility 
will annually update in CROWNWeb up to 24 comorbidities, or indicate 
``none of the above,'' for each qualifying case. For the purposes of 
this measure, we are proposing to define a ``qualifying case'' as a 
hemodialysis or peritoneal dialysis patient being treated at the 
facility as of December 31 of the performance period, according to 
admit and discharge dates entered into CROWNWeb. In fulfilling this 
reporting requirement, facilities would select one or more of the 
following for each qualifying case:

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
 Congestive heart failure.     Diabetes, on oral             Drug dependence.
                                       medications.
 Atherosclerotic heart         Diabetes, without             Inability to ambulate.
 disease (ASHD).                       medications.
 Other cardiac disease.        Diabetic retinopathy.         Inability to transfer.
 Cerebrovascular disease       Chronic obstructive           Needs assistance with daily
 (CVA, TIA).                           pulmonary disease.                    activities.
 Peripheral vascular           Tobacco use (current          Institutionalization--
 disease.                              smoker).                              Assisted Living.
 History of hypertension.      Malignant neoplasm, Cancer.   Institutionalization--
                                                                             Nursing Home.
 Amputation.                   Toxic nephropathy.            Institutionalization--Other
                                                                             Institution.
 Diabetes, currently on        Alcohol dependence.           Non-renal congenital
 insulin.                                                                    abnormality.
 None of the above.           ....................................  ....................................
----------------------------------------------------------------------------------------------------------------

    Therefore, to receive full points on this measure, we are proposing 
that facilities would be required to provide the updates in CROWNWeb by 
January 31, 2015 or, if that is not a regular business day, the first 
business day thereafter. While we are proposing to require facilities 
to report a single annual update per patient, we encourage facilities 
to update this information more frequently, in order to more closely 
monitor their patients' risk factors, and to improve the quality of the 
data.
    Technical specifications for this proposed measure can be found at 
http://www.dialysisreports.org/pdf/esrd/public-measures/ComorbidityReporting-2016NPRM.pdf. We welcome comments on these 
proposals.
4. Other Measures Under Development
    As part of our effort to continuously improve the ESRD QIP, we 
continue to work on developing additional robust measures that provide 
valid assessments of the quality of care furnished by facilities to 
patients with ESRD. We are considering the feasibility of developing 
quality measures in other topic areas (for example, blood transfusions, 
kidney transplantation, quality of life, and health information 
technology) for quality improvement at the point of care as well as for 
the electronic exchange of information in support of care coordination 
across providers and settings. Additional areas of potential interest 
include residual renal function, complications associated with ESRD, 
and frequently comorbid conditions (for example, diabetes and heart 
disease). We request comment on these potential areas of future 
measurement, and welcome suggestions on other topics for measure 
development.
5. Proposed Scoring for the PY 2016 ESRD QIP and Future Payment Years
    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. We believe that the 
methodology set forth in the CY 2013 ESRD PPS final rule incentivizes 
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 are proposing to adopt a scoring methodology for the 
PY 2016 ESRD QIP and future payment years that is nearly identical to 
the one finalized in the CY 2013 ESRD PPS final rule. To the extent 
that the scoring methodology differs, those differences are proposed 
below.
6. Proposed Performance Period for the PY 2016 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a year, and that the 
performance period occur prior to the beginning of such year. In the CY 
2013 ESRD PPS final rule, we finalized a performance period of CY 2013. 
We stated our belief that, for most measures, a 12-month performance

[[Page 40863]]

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. For 
the reasons outlined in the CY 2013 ESRD PPS final rule (77 FR 67500), 
we have determined for PY 2016 that CY 2014 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 renal dialysis services 
furnished on January 1, 2016. Therefore, for the PY 2016 ESRD QIP, we 
are proposing to establish CY 2014 as the performance period for all of 
the measures. We welcome comments on this proposal.
7. Proposed Performance Standards for the PY 2016 ESRD QIP and Future 
Payment Years
    We are proposing to adopt performance standards for the PY 2016 
ESRD QIP measures that are similar to what we finalized in the CY 2013 
ESRD PPS final rule. Section 1881(h)(4)(A) 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 Medicare payment reduction.
a. Proposed Clinical Measure Performance Standards
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we are proposing for PY 2016 to set the 
performance standards (both achievement and improvement) based on the 
national performance rate (that is, the 50th percentile) of facility 
performance in CY 2012, except as specified below.
    With respect to the proposed NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure, we are proposing to begin 
data collection beginning with CY 2014 events. We do not have data 
prior to CY 2014 for purposes of setting a performance standard based 
on the national performance rate of facility performance in CY 2012. 
For that reason, we are proposing that the performance standard for the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical measure 
for PY 2016 be the 50th percentile of the national performance rate on 
the measure during CY 2014. Because we lack the baseline data needed to 
calculate an improvement score, we are also proposing that, for PY 
2016, facilities be scored only on achievement for this measure, and 
not on the basis of improvement. Although we recognize that with other 
measures that lacked baseline data we instituted a reporting measure to 
ensure that both an achievement and improvement score could be 
assessed, we believe that it is appropriate, in this case, to adopt a 
clinical measure without the baseline data necessary for an improvement 
score. Hospital Acquired Infections (HAIs) are a leading cause of 
preventable mortality and morbidity across different settings in the 
healthcare sector, including dialysis facilities, costing patient lives 
and billions of dollars. CMS has recognized that reducing HAIs is 
critically important to the Agency's three main goals of improving 
healthcare, improving health, and reducing healthcare costs. Because of 
the abnormally great impact HAIs have upon patients and the healthcare 
industry, we believe it is important to begin assessing facilities on 
the number of these events as soon as possible, rather than on merely 
whether they report these events. Additionally, the NHSN measure has 
been a reporting measure since PY 2014, which will give facilities two 
years to report data before they are scored on the data results. Thus, 
although we do not yet have complete baseline data to give improvement 
scores in PY 2016, we believe it is appropriate to implement this 
measure using only achievement scores because of the urgency in 
reducing these events and the time facilities have had to prepare 
themselves for such a measure. Finally, we are proposing that 
facilities would receive a score of zero on the NHSN clinical measure 
if they do not submit 12 months of data, as defined in Section 
III.C.3.d above, and by the deadlines specified in Section III.C.3.d 
above.
    For the proposed Patient Informed Consent for Anemia Treatment, we 
believe that facilities should meet the standard 100 percent of the 
time. However, we recognize that unexpected events might make a 100 
percent standard difficult to meet, so we are proposing that facilities 
should be allowed to meet the standard for less than 100 percent of 
their patients. Because prior data are unavailable for the 
establishment of a performance standard, benchmark, and achievement 
threshold, we developed a methodology to determine appropriate 
achievement standards. As described in Section III.C.10, we are 
proposing that a small facility adjuster will be applied to facilities 
with between 11 and 25 qualifying patients. Since facilities with 
between 11 and 25 patients would be subject to the favorable scoring 
modifications applied by the small facility adjuster, these facilities 
would have an easier time achieving the proposed achievement standards. 
Therefore, the minimum number of cases a facility may have and not 
benefit from a small facility adjuster is 26. We calculated that if a 
facility with 26 cases failed to obtain consent for two qualifying 
cases, it would have obtained consent 92 percent of the time (rounded). 
If the facility failed to obtain consent for one case, it would have 
obtained consent 96 percent of the time (rounded). We believe that 
these values (92 and 96 percent) encourage a high consistency of care 
for patients with ESRD that is reasonably attainable by all facilities, 
while accounting for the possibility that facilities would be unable to 
obtain informed consent for reasons beyond their control. Therefore, we 
are proposing that the achievement threshold be defined as obtaining 
informed consent for 92 percent of qualifying cases during the 
performance period, and that the benchmark be defined as obtaining 
informed consent for 96 percent of such cases. Furthermore, we propose 
to calculate the proposed performance standard using the average of the 
benchmark and achievement threshold, which is 94 percent. We seek 
comments on this performance standard.
    Because we lack the baseline data needed to calculate improvement 
scores for the Patient Informed Consent for Anemia Treatment measure, 
we are also proposing that for PY 2016, facilities be scored only on 
achievement for this measure, and not on the basis of improvement. We 
recognize that with other measures that lacked baseline data we adopted 
a reporting measure to ensure that both an achievement and improvement 
score could be assessed. However, we believe that it is appropriate, in 
this case, to adopt a clinical measure without the baseline data 
necessary for an improvement score. Anemia management is a topic 
highlighted in the ESRD QIP authorizing statute, requiring measures 
that reflect labeling approved by the Food and Drug Administration. 
(See section 1881(h)(2)(A) of the Act.) The inclusion of the topic in 
statue highlights its importance to CMS and to dialysis patients. ESA 
labeling has changed over time as additional safety information

[[Page 40864]]

has become available, and the informed consent process is designed to 
ensure that the most current safety information is communicated to 
patients before ESAs are administered. In addition, obtaining informed 
consent for anemia treatment is a standard of practice that should 
aready be in place at dialysis facilities, so facilities should already 
have procedures in place to support the measure. Thus, although we do 
not yet have complete baseline data to give improvement scores in PY 
2016, we believe it is appropriate to implement this measure using only 
achievement scores because of the importance of providing patients with 
current information about the risks and benefits of anemia therapy, and 
because this is already a standard clinical practice.
    For the proposed Hypercalcemia measure, the first month that we can 
use to establish the baseline is May 2012. This is because the 
hypercalcemia measure relies on CROWNWeb as its data source, CROWNWeb 
was first rolled out nationally in May 2012, and data submitted to 
CROWNWeb before that time is considered test or pilot data. For that 
reason, we are proposing to set the performance standard as the 50th 
percentile of national performance from May 2012 through November 2012. 
We seek comment on this proposal.
b. Estimated Performance Standards for Proposed Clinical Measures
    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 2012 or the first 
portion of CY 2013. However, we are able to estimate these numerical 
values based on the most recent data available. For all of the proposed 
clinical measures except Hypercalcemia, this data comes from the period 
of January through November 2012. For the Hypercalcemia clinical 
measure, the most recent data available comes from the period May 
through November 2012. In Table 8, we have provided the estimated 
performance standards for all of the measures except for the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure, 
which will be based on data from CY 2014. We will publish updated 
values for all measures except the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure in the CY 2014 ESRD PPS final 
rule.

  Table 8--Estimated Numerical Values for the Performance Standards for
the PY 2016 ESRD QIP Clinical Measures Using the Most Recently Available
                                  Data
------------------------------------------------------------------------
                  Measure                       Performance  standard
------------------------------------------------------------------------
Vascular Access Type:
  %Fistula................................  62.4%.
  %Catheter...............................  10.5%.
Kt/V:
  Adult Hemodialysis......................  93.6%.
  Adult, Peritoneal Dialysis..............  85.4%.
  Pediatric Hemodialysis..................  92.5%.
Anemia Management:
  Hemoglobin > 12 g/dL....................  0%.
  Patient Informed Consent for Anemia       94%.
   Treatment \1\.
Hypercalcemia.............................  2.3%.
NHSN Bloodstream Infection in Hemodialysis  50th percentile of eligible
 Outpatients.                                facilities' performance
                                             during the performance
                                             period.
------------------------------------------------------------------------
\1\ As noted above, the performance standard for the Patient Informed
  Consent for Anemia Treatment is based on clinical standards, not data
  collected through the ESRD QIP.

    We believe that the ESRD QIP should not have lower standards than 
in previous years. In accordance with our statements in the CY 2012 
ESRD PPS final rule (76 FR 70273), if the final numerical values for 
the PY 2016 performance standards are worse than PY 2015 for a measure, 
then we are proposing to substitute the PY 2015 performance standard 
for that measure. We request comments on this proposal.
c. Proposed Performance Standards for Reporting Measures
    For the proposed ICH CAHPS reporting measure, we are proposing to 
set the performance standard for PY 2016 as the facility's successful 
submission, by January 28, 2015, of ICH CAHPS survey data collected 
during the performance period in accordance with the measure 
specifications to CMS as specified at https://ichcahps.org. For PY 2017 
and future payment years, we are proposing that the PY 2016 performance 
standard continue, except that in each performance period, facilities 
are required to submit data from the two surveys conducted during the 
performance period, rather than one, and that the survey data must be 
submitted by the dates specified by CMS at https://ichcahps.org.
    For the proposed Mineral Metabolism reporting measure, we are 
proposing to set the performance standard as successfully reporting the 
measure for the number of qualifying cases specified in Section 
III.C.2.b for each month of the 12-month duration of the performance 
period.
    For the proposed Anemia Management reporting measure, we are 
proposing to set the performance standard as successfully reporting the 
measure for the number of qualifying cases specified in Section 
III.C.2.c for each month of the 12-month duration of the performance 
period.
    For the proposed Anemia Management: Pediatric Iron Therapy 
reporting measure, we are proposing to set the performance standard as 
successfully reporting for each qualifying case each quarter the 
following: (i) Patient admit/discharge date; (ii) hemoglobin levels; 
(iii) serum ferritin levels; (iv) TSAT percentages; (v) the dates that 
the lab measurements were taken for items (ii)-(iv); (vi) intravenous 
IV iron prescribed or oral iron prescribed (if applicable); and (vii) 
the date that the IV iron or oral iron was prescribed (if applicable).
    For the proposed Comorbidity reporting measure, we are proposing to 
set the performance standard as successfully updating in CROWNWeb at 
least once during the performance period for each qualifying case, the 
patient's comorbidities. We are further proposing that the update be 
entered into CROWNWeb by the January 31 following the conclusion of the 
performance period or, if that is not a regular business day, the first 
business day thereafter.
8. Proposed Scoring for the PY 2016 ESRD QIP Proposed Measures
    In order to assess whether a facility has met the performance 
standards, we finalized a methodology for the PY 2014 ESRD QIP 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 
(76 FR 70272 through 70273). We are proposing to use a similar 
methodology for purposes of scoring facility performance on each of the 
clinical measures for the PY 2016 ESRD QIP and future payment years, 
except that we are proposing that there will only be an achievement 
score for the NHSN Bloodstream Infection in Hemodialysis Outpatients 
and Patient Informed Consent for Anemia Treatment clinical measures, 
because data are not available to calculate an improvement score.
    In determining a facility's achievement score for the PY 2016

[[Page 40865]]

program and future payment years, we are proposing to continue using 
the current methodology described above, under which facilities would 
receive points along an achievement range based on their performance 
during the proposed performance period for each measure, which we 
define as a scale between the achievement threshold and the benchmark 
explained below. We are proposing to define the achievement threshold 
for each of the proposed clinical measures as the 15th percentile of 
the national performance rate during CY 2012, except as otherwise 
specified below for the NHSN Bloodstream Infection in Hemodialysis 
Outpatients clinical measure, the Patient Informed Consent for Anemia 
Treatment clinical measure, and Hypercalcemia clinical measure. We 
believe that this achievement threshold will provide an incentive for 
facilities to continuously improve their performance, while not 
reducing incentives to facilities that score at or above the national 
performance rate for the clinical measures (77 FR 67503). We are 
proposing to define the benchmark as the 90th percentile of the 
national performance rate during CY 2012, except as proposed below for 
the NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure and the Patient Informed Consent for Anemia Treatment clinical 
measure, because it represents a demonstrably high but achievable 
standard of quality that the high performing facilities reached.
    For the proposed NHSN Bloodstream Infection in Hemodialysis 
Outpatients clinical measure, we are proposing that the achievement 
threshold and benchmark be the 15th and 90th percentiles, respectively, 
of national performance during CY 2014.
    For the proposed Patient Informed Consent for Anemia Treatment 
clinical measure, and for the reasons described in Section III.C.7.a, 
we are proposing that the achievement threshold be defined as obtaining 
informed consent for 92 percent of qualifying cases during the 
performance period, and that the benchmark be defined as obtaining 
informed consent for 96 percent of such cases.
    For the reasons described above, the first month that we can use to 
establish the baseline for the proposed Hypercalcemia measure is May 
2012. Therefore, we are proposing to set the achievement threshold as 
the 15th percentile of national performance and the benchmark as the 
90th percentile of national performance from May 2012 through November 
2012. We request comment on these proposals.
    With the exception of the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent Anemia Treatment clinical measure, we are proposing that 
facilities receive points along an improvement range, defined as a 
scale running between the improvement threshold and the benchmark. We 
are proposing to define the improvement threshold as the facility's 
performance on the measure during CY 2013. The facility's improvement 
score would be calculated by comparing its performance on the measure 
during CY 2014 (the proposed performance period) to its performance 
rate on the measure during CY 2013. Because we lack the baseline data 
needed to calculate improvement scores for the NHSN Bloodstream 
Infection in Hemodialysis Outpatients clinical measure and the Patient 
Informed Consent for Anemia Treatment clinical measure, we are 
proposing that facilities will not receive improvement scores for these 
measures for PY 2016.
    Like the performance standards, we do not have the necessary data 
at this time to assign final numerical values to the proposed 
achievement thresholds and benchmarks for the clinical measures. 
However, we are able to estimate them based on the most recent data 
available. For all of the clinical measures except Hypercalcemia and 
NHSN Bloodstream Infection in Hemodialysis Outpatients, this data comes 
from the period between January 2012 and November 2012. For the 
Hypercalcemia clinical measure, the data comes from the period between 
May 2012 and November 2012. In Table 9, we have provided the estimated 
achievement thresholds and benchmarks for each of the measures except 
for NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure (which would be based on data from January 1, 2014 through 
December 31, 2104) and Patient Informed Consent for Anemia Treatment 
(for which the achievement threshold and benchmark are proposed to be 
92 percent and 96 percent, respectively).

  Table 9--Estimated Proposed Achievement Thresholds and Benchmarks for
 the Proposed PY 2016 ESRD QIP Clinical Measures Using the Most Recently
                             Available Data
------------------------------------------------------------------------
                                      Achievement
             Measure                   threshold           Benchmark
------------------------------------------------------------------------
%Fistula........................  49.8%.............  77.1%.
%Catheter.......................  19.6%.............  3.0%.
Kt/V:
    Adult Hemodialysis..........  85.9%.............  97.5%.
    Adult, Peritoneal Dialysis..  66.7%.............  94.8%.
    Pediatric Hemodialysis......  83.3%.............  98.8%.
Anemia Management:
Hemoglobin > 12 g/dL............  1.2%..............  0%.
    Patient Informed Consent for  92%...............  96%.
     Anemia Treatment \1\.
Hypercalcemia...................  6.1%..............  0.2%.
NHSN Dialysis Event Reporting     15th percentile of  90th percentile of
 and Clinical Bloodstream          eligible            eligible
 Infection.                        facilities'         facilities'
                                   performance         performance
                                   during the          during the
                                   performance         performance
                                   period.             period.
------------------------------------------------------------------------
\1\ As discussed above, the proposed achievement threshold and benchmark
  for the Patient Informed Consent for Anemia Treatment clinical measure
  are based on clinical standards, not baseline data.

    We believe that the ESRD QIP should not have lower standards than 
previous years. In accordance with our statements in the CY 2012 ESRD 
PPS final rule (76 FR 70273), if the final PY 2016 numerical values for 
the achievement thresholds and benchmarks are worse than PY 2015 for a 
given measure, we are proposing to substitute the PY 2015 achievement 
thresholds and benchmarks for that measure. We request comments on 
these proposals.

[[Page 40866]]

a. Proposals for Scoring Facility Performance on Clinical Measures 
Based on Achievement
    Using the same methodology we finalized in the CY 2013 ESRD PPS 
final rule, we are proposing to award between 0 and 10 points for each 
of the proposed clinical measures (77 FR 67504). As noted, we are 
proposing that the score for each of these clinical measures will be 
based upon the higher of an achievement or improvement score on each of 
the clinical measures, except for NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent for Anemia Treatment clinical measure, which we are proposing 
to score on achievement alone. For purposes of calculating achievement 
scores for the clinical measures, we are proposing to base the score on 
where a facility's performance rate falls relative to the achievement 
threshold and the benchmark for that measure. (Performance standards do 
not enter into the calculation of improvement or achievement scores.) 
Identical to what we finalized in the CY 2013 ESRD PPS final rule, we 
are proposing that if a facility's performance rate during the 
performance period is:
     Equal to or greater than the benchmark, then the facility 
would receive 10 points for achievement;
     Less than the achievement threshold, then the facility 
would receive 0 points for achievement; or
     Equal to or greater than the achievement threshold, but 
below the benchmark, then 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 
for a clinical measure based on a linear scale distributing all points 
proportionately between the achievement threshold and the benchmark, so 
that the interval in the performance between the score for 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
    Using the same methodology we have previously finalized for the 
ESRD QIP, we are proposing that facilities would earn between 0 and 9 
points for each of the clinical measures that will have an improvement 
score (that is, all clinical measures except NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure and Patient Informed 
Consent for Anemia Treatment), based on how much their performance on 
the measure during CY 2014 improved from their performance on the 
measure during CY 2013 (77 FR 67504). A specific improvement range for 
each measure would be established for each facility. We are proposing 
that if a facility's performance rate on a measure during the 
performance period is:
     Less than the improvement threshold, then the facility 
would receive 0 points for improvement; or
     Equal to or greater than the improvement threshold, but 
below the benchmark, then 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, then it would receive 10 points on the measure based on the 
achievement score methodology discussed above. We request comments on 
this proposal.
c. Proposals for Calculating Facility Performance on Reporting Measures
    As noted above, reporting measures differ from clinical measures in 
that they are not scored based on clinical values; rather, they 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 are 
discussed below.
    With respect to the proposed Anemia Management reporting measure 
and the proposed Mineral Metabolism reporting measure, we are proposing 
to award points to facilities using the same formula that we finalized 
in the CY 2013 ESRD PPS final rule for Mineral Metabolism and Anemia 
Management (77 FR 67506):
[GRAPHIC] [TIFF OMITTED] TP08JY13.000

    With respect to the proposed Use of Iron Therapy for Pediatric 
Patients reporting measure, using the following formula:
[GRAPHIC] [TIFF OMITTED] TP08JY13.001

We are proposing to score the Pediatric Iron Therapy measure 
differently than the proposed Anemia Management reporting measure and 
the proposed Mineral Metabolism reporting measure because it requires 
quarterly rather than monthly reporting, and therefore scoring based on 
monthly reporting rates is not feasible.
    With respect to the proposed ICH CAHPS reporting measure and 
Comorbidity reporting measure, we are proposing that a facility receive 
a score of 10 points if it satisfies the performance standard for the 
measure, and 0 points if it does not. We are proposing to score these 
reporting measures differently than the other reporting measures 
because these require annual or biannual reporting, and therefore 
scoring based on monthly or quarterly reporting rates is not feasible.
    We request comment on the proposed methodology for scoring the PY 
2016 ESRD QIP reporting measures.

[[Page 40867]]

9. Proposals for Weighting the PY 2016 ESRD QIP Measures and 
Calculating the PY 2016 ESRD QIP Total Performance Score
    Section 1881(h)(3)(A)(iii) of the Act provides that the methodology 
for calculating the facility TPS shall include a process to weight the 
performance scores with respect to individual measures to reflect 
priorities for quality improvement, such as weighting 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 2016 ESRD QIP measures for purposes of calculating the 
TPS, we considered two criteria: (1) The number of measures we are 
proposing to include in the PY 2016 ESRD QIP; and (2) the National 
Quality Strategy priorities.
a. Weighting Individual Measures To Compute Measure Topic Scores for 
the Kt/V Dialysis Adequacy Measure Topic, the Vascular Access Type 
Measure Topic, and the Anemia Management Clinical Measure Topic
    In the CY 2013 ESRD PPS final rule, we established a methodology 
for deriving the overall scores for measure topics (77 FR 67507). For 
the reasons described in the CY 2013 ESRD PPS final rule, we are 
proposing to use the same methodology in PY 2016 and future payment 
years to calculate the scores for the three measure topics. After 
calculating the individual measure scores within a measure topic, we 
are proposing to calculate a measure topic score using the following 
steps: (i) Dividing the number of patients in the denominator of each 
measure by the sum of the number of patients in each denominator for 
all of the applicable measures in the measure topic; (ii) multiplying 
that figure by the facility's score on the measure; (iii) summing the 
results achieved for each measure; and (iv) 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 (as discussed below), then that measure would not be 
included in the measure topic score for that facility. Only one measure 
within the measure topic needs to have enough cases to be scored in 
order for the measure topic to be scored and included in the 
calculation of the TPS. We are also proposing that the measure topic 
score would be equal to one clinical measure in the calculation of the 
TPS. For an additional explanation, see the examples provided at 77 FR 
67507.
    We request comment on the proposed method of weighting individual 
measure scores to derive a measure topic score.
b. Proposal for Weighting the Total Performance Score
    We continue to believe that weighting the clinical measures/measure 
topics equally will incentivize facilities to improve and achieve high 
levels of performance across all of these measures, resulting in 
overall improvement in the quality of care provided to patients with 
ESRD. We also continue to believe that, while the reporting measures 
are valuable, the clinical measures evaluate actual patient outcomes 
and therefore justify a higher combined weight (77 FR 67506 through 
67508). For the reasons outlined in the CY 2013 ESRD PPS final rule, we 
are proposing to continue weighting clinical measures as 75 percent and 
reporting measures as 25 percent of the TPS. We request comment on this 
proposed methodology for weighting the clinical and reporting measures.
    We have also considered the issue of awarding a TPS to facilities 
that do not report data on the proposed minimum number of cases with 
respect to one or more of the measures or measure topics. For the 
reasons stated in the CY 2013 ESRD PPS final rule, for PY 2016 and 
future payment years, we are proposing to continue to require a 
facility to have at least one clinical and one reporting measure score 
to receive a TPS (77 FR 67508). We request comment on our proposals to 
require a facility to be eligible for a score on at least one reporting 
and one clinical measure in order to receive a TPS.
    Finally, we are proposing that the TPSs be rounded to the nearest 
integer, with half of an integer being rounded up. We request comment 
on this proposal. For further examples regarding measure and TPS 
calculations, we refer readers to the figures below.
c. Examples of the Proposed PY 2016 ESRD QIP Scoring Methodology
    In this section, we provide examples to illustrate the proposed 
scoring methodology for PY 2016. 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 has performed very well. The example benchmark (the 90th 
percentile of performance nationally in CY 2012) calculated for this 
clinical measure is 77 percent, and the example achievement threshold 
(which is the 15th percentile of performance nationally in CY 2012) is 
46 percent. Therefore, facility A's performance of 86 percent on the 
clinical measure during the performance period exceeds the benchmark of 
77 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.)

[[Page 40868]]

[GRAPHIC] [TIFF OMITTED] TP08JY13.002

    Figure 2 shows an example of scoring for another facility, Facility 
B. As illustrated below, the facility's performance on the example 
clinical measure improved from 26 percent in CY 2013 to 54 percent 
during the performance period. The achievement threshold is 50 percent 
and the achievement benchmark is 77 percent. Because the facility's 
performance during the performance period is within the achievement 
range and the improvement range, we must calculate the improvement and 
achievement scores to determine the example clinical measure score.
    To calculate the achievement score, we would apply the formula 
discussed above. The result of this formula for this example is [9 * 
((54-50)/(77-50))] + .5, which equals 1.83, and we round to the nearest 
integer, which is 2.
    Likewise, to calculate the improvement score, we apply the 
improvement formula discussed above. The result of this formula for 
this is example is [10 * ((54-26)/(77-26))]-.5, which equals 4.99 and 
we round to the nearest integer, which is 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 for this clinical measure. 
Thus, Facility B's score on this example measure is 5.

[[Page 40869]]

[GRAPHIC] [TIFF OMITTED] TP08JY13.003

BILLING CODE 4120-01-P
    In Figure 3, Facility C's performance on the example clinical 
measure drops from 26 percent in CY 2013 to 23 percent during the 
performance period, a decline of 3 percent. Because Facility C's 
performance during the performance period falls below the achievement 
threshold of 26 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 2013. 
Therefore, in this example, Facility C would receive 0 points for the 
example clinical measure.

[[Page 40870]]

[GRAPHIC] [TIFF OMITTED] TP08JY13.004

    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 discussed earlier.
    After calculating the scores for each measure, we would calculate 
the TPS. As an example, by applying the weighting criteria to a 
facility that receives a score on all finalized measures, we would 
calculate the facility's TPS using the following formula:

Total Performance Score = [(.150 * Vascular Access Type Measure Topic) 
+ (.150 * Kt/V Dialysis Adequacy Measure Topic) + (.150 * Anemia 
Management Clinical Measure Topic) + (.150 * Hypercalcemia Measure) + 
(.150 * NHSN Bloodstream Infection in Hemodialysis Outpatients) + (.05 
* ICH CAHPS Survey Reporting Measure) + (.05 * Mineral Metabolism 
Reporting Measure) + (.05 * Anemia Management Reporting Measure) + (.05 
* Pediatric Iron Therapy Reporting Measure) + (.05 * Comorbidity 
Reporting Measure) ] * 10.

The TPS 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 (that 
is, did not have enough qualifying cases) on the proposed Hypercalcemia 
measure, then the facility's TPS would be calculated as follows:

Total Performance Score = [(.188 * Vascular Access Type Measure Topic) 
+ (.188 * Kt/V Dialysis Adequacy Measure Topic) + (.188 * Anemia 
Management Clinical Measure Topic) + (.188 * NHSN Bloodstream Infection 
in Hemodialysis Outpatients) + (.05 * ICH CAHPS Survey Reporting 
Measure) + (.05 * Mineral Metabolism Reporting Measure) + (.05 * Anemia 
Management Reporting Measure) + (.05 * Pediatric Iron Therapy Reporting 
Measure) + (.05 * Comorbidity Reporting Measure) ] * 10.

Again, the TPS would be rounded to the nearest integer (and any 
individual measure values ending in .5 would be rounded to the next 
higher integer).
    Finally, for example, if a facility is eligible for only two of the 
reporting measures, then the facility's TPS would be calculated as 
follows:

Total Performance Score = [(.150 * Vascular Access Type Measure Topic) 
+ (.150 * Kt/V Dialysis Adequacy Measure Topic) + (.150 * Anemia 
Management Cinical Measure Topic) + (.150 * Hypercalcemia Measure) + 
(.150 * NHSN Bloodstream Infection in Hemodialysis Outpatients) + (.125 
* Anemia Management Reporting Measure) + (.125 * Comorbidity Reporting 
Measure)] * 10.

Again, the TPS would be rounded to the nearest integer (and any 
individual measure values ending in .5 would be rounded to the next 
higher integer).
10. Proposed Minimum Data for Scoring Measures for the PY 2016 ESRD QIP 
and Future Payment Years
    For the same reasons described in the CY 2013 ESRD PPS final rule 
(77 FR 67510 through 67512), for PY 2016 and future payment years, we 
are proposing to only score facilities on clinical and reporting 
measures for which they have a minimum number of qualifying cases 
during the performance period. For PY 2016 and future payment years, we 
are proposing that a facility must have a threshold of at least 11 
qualifying cases for the entire performance period in order to be 
scored on a clinical measure. We are proposing that reporting measures 
other than ICH CAHPS will have a threshold of one qualifying case 
during the performance period. The 11-qualifying case minimum was 
intended to reduce burden on facilities with limited qualifying cases 
for earlier

[[Page 40871]]

reporting measures (77 FR 67480, 67483, 67486 and 67493). We are 
proposing to set the reporting measure case minimums at one because we 
plan to use data to permit future implementation of clinical measures. 
If patients in small facilities are systematically excluded, then we 
will not be able to gather the robust data we need to support the 
performance standard, benchmark, and achievement threshold calculations 
in future payment years. For example, if we excluded facilities with 10 
or fewer patients from the Pediatric Iron Therapy reporting measure, 
then very few, if any, facilities would be able to report the measure, 
and we would be unable to collect meaningful data for future measure 
development. Similarly, if we excluded facilities with 10 or fewer 
patients from the comorbidity reporting measure, then we would be 
unable to use updated comorbidities for patients in these facilities in 
a risk-adjusment calculation should we propose to adopt an SHR and/or 
SMR clinical measure in the future. For those reasons, we are proposing 
that the case minimum for all reporting measures except for ICH CAHPS 
be one.
    For the proposed expanded ICH CAHPS reporting measure, we are 
proposing that facilities with fewer than 30 qualifying cases during 
the performance period not be scored on the measure. In the CY 2013 
ESRD PPS final rule, we excluded facilities with 10 or fewer adult in-
center hemodialysis patients from the ICH CAHPS measure because we 
recognized that, for many small dialysis facilities, hiring a third-
party administrator to fulfill the ICH CAHPS survey requirements would 
have been impractical or prohibitively costly (77 FR 67480). As we move 
toward developing a clinical measure, we have determined that the 
survey results are more reliable if there are at least 30 surveys 
submitted per facility. Therefore, we are proposing that for PY 2016 
and future payment years, facilities that treat fewer than 30 
qualifying cases (defined as adult in-center hemodialysis patients) 
during the performance period will be excluded from this measure. We 
further are proposing that we will consider a facility to have met the 
30-patient threshold unless it affirmatively attests in CROWNWeb by 
January 31 of the year prior to the year in which payment reductions 
will be made (for example, January 31, 2015, for the PY 2016 ESRD QIP) 
that it treated 29 or fewer adult in-center hemodialysis patients 
during the performance period.
    For the same reasons described in the CY 2013 ESRD PPS final rule 
(77 FR 67510 through 67512), for PY 2016 and future payment years, we 
are proposing to apply to each clinical measure score for which a 
facility has between 11 and 25 qualifying cases the same adjustment 
factor we finalized in the CY 2013 ESRD PPS final rule (77 FR 67511). 
We seek public comment on these proposals.
    For the PY 2016 ESRD QIP and future payment years, we are also 
proposing to continue to begin counting the number of months or 
quarters, as applicable, for which a facility is open on the first day 
of the month after the facility's CCN open date. With the exception of 
the ICH CAHPS expanded reporting measure, we are proposing that only 
facilities with a CCN open date before July 1, 2014, be scored on the 
proposed reporting measures. Under the specifications for the proposed 
ICH CAHPS reporting measure, facilities would need to administer the 
survey (via a CMS-approved, third-party vendor) during the performance 
period. Because arranging such an agreement takes time, we are 
proposing that only facilities with a CCN open date before January 1 of 
the performance period to be scored on this measure. Additionally, we 
are proposing that facilities with CCN open dates after January 1, 2014 
will not be scored on the NHSN. We note that in previous payment years 
we have awarded partial credit to facilities that submitted less than 
12 months of data to encourage them to enroll in and report data in the 
NHSN system. However, we are proposing to collect 12 months of data on 
this clinical measure because infection rates vary through different 
seasons of the year.
    As discussed above, we are proposing that a facility will not 
receive a TPS unless it receives a score on at least one clinical and 
one reporting measure. We note that finalizing this proposal would 
result in facilities not being eligible for a payment reduction for the 
PY 2016 ESRD QIP and future payment years if they have a CCN open date 
on or after July 1 of the performance period (CY 2014 for the PY 2016 
ESRD QIP). We request comment regarding these proposals.
11. Proposed Payment Reductions for the PY 2016 ESRD QIP and Future 
Payment Years
    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 TPSs receive the largest payment 
reductions. For PY 2016, we are proposing that a facility would not 
receive a payment reduction if it achieves a minimum TPS that is equal 
to or greater than the total of the points it would have received if: 
(i) It performed at the performance standard for each clinical measure; 
(ii) it received zero points for each clinical measure that did not 
have a numerical value for the performance standard published with the 
PY 2016 final rule; and (iii) it received five points for each 
reporting measure. We request comments on these proposals.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. For 
PY 2016 and future payment years, we are proposing that the payment 
reduction scale be the same as the PY 2015 ESRD QIP (77 FR 67514 
through 67516). We are proposing that, for each 10 points a facility 
falls below the minimum TPS, the facility would receive an additional 
0.5 percent reduction on its ESRD PPS payments for PY 2016 and future 
payment years, 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 incentivize facilities to meet the performance standards 
established and continue to improve their performance; even if a 
facility fails to achieve the minimum TPS, such a facility will still 
be incentivized to strive for and attain better performance rates in 
order to reduce the percentage 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 TPS at this time. Based on the estimated performance 
standards listed above using the most recent data available, we 
estimate for PY 2016 that a facility must meet or exceed a minimum TPS 
of 46. For all of the clinical measures except Hypercalcemia, this data 
comes from the period between January 2012 and November 2012. For the 
Hypercalcemia clinical measure, the data comes from the period between 
May 2012 and November 2012. We are proposing that facilities failing to 
meet the minimum TPS (as will be published in the Medicare Program; 
End-Stage Renal Disease Prospective Payment System, Quality Incentive 
Program, and Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies final rule in November) will receive payment reductions based 
on the estimated total performance score ranges indicated in Table 10 
below.

[[Page 40872]]

  Table 10--Estimated Payment Reduction Scale for PY 2016 based on the
                      Most Recently Available Data
------------------------------------------------------------------------
                                                             Reduction
                 Total performance score                     (Percent)
------------------------------------------------------------------------
100-46 *................................................               0
45-36...................................................             0.5
35-26...................................................             1.0
25-16...................................................             1.5
15-0....................................................             2.0
------------------------------------------------------------------------

12. Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. We began a pilot data-validation program in CY 2013 for the 
ESRD QIP, and we are now in the process of procuring the services of a 
data-validation contractor, who will be tasked with validating a 
national sample of facilities' records as they report CY 2013 data to 
CROWNWeb. The first priority will be to develop a methodology for 
validating data submitted to CROWNWeb under the pilot data-validation 
program; once this methodology has been developed, CMS will publicize 
it through a CROWN Memo and solicit public comment. As part of the CY 
2013 ESRD QIP PPS final rule (77 FR 67522 through 67523), we finalized 
a requirement to sample approximately 10 records from 750 randomly 
selected facilities; these facilities will have 60 days to comply once 
they receive requests for records. We are proposing to extend this 
pilot data-validation program to include analysis of data submitted to 
CROWNWeb during CY 2014. For the PY 2016 ESRD QIP, sampled facilities 
will be reimbursed by our validation contractor for the costs 
associated with copying and mailing the requested records. 
Additionally, we are proposing to reduce the annual random sample size 
from 750 to 300. We believe that this smaller sample size will still 
yield a sufficiently precise estimate of QIP reliability while imposing 
a smaller burden on ESRD QIP-eligible facilities and CMS alike. We are 
also proposing to extend our policy that no facility will receive a 
payment reduction resulting from the validation process for CY 2014 
during PY 2016. Once we have gathered additional information based on 
these initial validation efforts, we will propose further procedures 
for validating data submitted in future years of the ESRD QIP. These 
procedures may include a method for scoring facilities based on the 
accuracy of the data they submit to CROWNWeb, and a method to assign 
penalties for submitting inaccurate data. We solicit comments on these 
proposals.
    We are also considering a feasibility study for validating data 
reported to CDC's NHSN Dialysis Event Module, which may mirror the 
process used by the Hospital Inpatient Quality Reporting Program (77 FR 
53539 through 53553). Although this is still in the early stages of 
development, we anticipate that this study may mirror the validation 
sample by targeting ``candidate HAI events,'' much like the methodology 
used by CMS's Hospital Inpatient Quality Reporting Program. The 
feasibility study will likely: (i) Estimate the burden and associated 
costs to ESRD QIP-eligible facilities for participating in an NHSN 
validation program; (ii) assess the costs to CMS to implement an NHSN 
validation program on a statistically relevant scale; and (iii) develop 
and test a protocol to validate NHSN data in nine ESRD QIP-eligible 
facilities. Facilities would be selected on a voluntary basis. Based on 
the results of this study, we intend to propose more detailed 
requirements for validating NHSN data used in the ESRD QIP in the 
future.
13. Proposals for Scoring Facilities Whose Ownership Has Changed
    During PY 2012 (our first implementation year for the ESRD QIP), 
facilities requested guidance regarding how a change in ownership 
affects any applicable ESRD QIP payment reductions. Starting with the 
implementation of the PY 2015 ESRD QIP (which is CY 2013), the 
application of an ESRD QIP payment reduction depended on whether the 
facility retained its CCN after the ownership transfer. If the 
facility's CCN remained the same after the facility was transferred, 
then we considered the facility to be the same facility (despite the 
change in ownership) for the purposes of the ESRD QIP, and we applied 
any ESRD QIP payment reductions that would have applied to the 
transferor to the transferee. Likewise, as long as the facility 
retained the same CCN, we calculated 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 
received a new CCN as a result of a change in ownership, then we 
treated the facility as a new facility for purposes of the ESRD QIP 
based on the new facility's CCN open date. We believe that these 
proposals are the most operationally efficient and will allow 
facilities the greatest amount of certainty when they change ownership. 
We are proposing to continue applying these rules during the PY 2016 
ESRD QIP and future years of the program, and we request public comment 
on this proposal.
14. Proposals for Public Reporting Requirements
    Section 1881(h)(6)(A) of the Act requires the Secretary to 
establish procedures for making information available to the public 
about facility performance under the ESRD QIP, including information on 
the TPS (as along with appropriate comparisons of facilities to the 
national average with respect to such scores) and 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 
publication. In addition, section 1881(h)(6)(C) of the Act requires the 
Secretary to provide each facility with a certificate containing its 
TPS 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 a 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, 
thereby establishing procedures for facilities to review the 
information to be made public and for informing the public through 
facility-posted certificates. We are proposing to maintain the public 
reporting requirements as finalized in the CY 2013 ESRD PPS final rule, 
except regarding the timing of when facilities must post their 
certificates.
    For PYs prior to PY 2014, we required facilities to post 
certificates within 5 business days of us making these certificates 
available for download from dialysisreports.org in accordance with 
section 1881(h)(6)(C) of the Act. (77 FR 67516 and 76 FR 637) In the CY 
2013 ESRD PPS final rule, we noted that many individuals responsible 
for posting the certificates were away on holiday during the December 
time period when certificates typically become available, and finalized 
that, beginning in PY 2014, a facility must post copies of its 
certificates by the first business day after January 1 of the payment 
year. (77 FR 67517) We also noted that certificates are typically 
available for download on or around December 15 of each year, and 
stated that we believe that this two week time is enough to allow 
facilites to post them.
    Since the CY 2013 ESRD PPS final rule was finalized, we have noted 
that a posting deadline of the first business day after January 1 could 
create

[[Page 40873]]

difficulties for facilities if it were ever the case that certificates 
were not available for download in the typical timeframe. We want to 
ensure that facilities have adequate time to post certificates as 
required in this circumstance, and that the required timing 
accommodates the December holidays. Therefore, we propose that, 
beginning in PY 2014, facilities must post certificates within fifteen 
business days of us making these certificates available for download 
from dialysisreports.org in accordance with section 1881(h)(6)(C) of 
the Act. We request comments on this proposal.

IV. Clarification of the Definition of Routinely Purchased Durable 
Medical Equipment (DME)

A. Background

1. Background for DME
    Title XVIII of the Social Security Act (the Act) governs the 
administration of the Medicare program. The statute provides coverage 
for broad categories of benefits, including, but not limited to, 
inpatient and outpatient hospital care, skilled nursing facility care, 
home health care, physician services, and DME. ``Medical and other 
health services,'' which is defined under section 1861(s)(6) of the Act 
to include DME, is a separate Medicare Part B benefit for which payment 
is authorized by section 1832 of the Act. In accordance with section 
1861(n) of the Act, the term ``durable medical equipment'' includes 
iron lungs, oxygen tents, hospital beds, and wheelchairs used in the 
beneficiary's home, including an institution used as his or her home 
other than an institution that meets the requirements of section 
1861(e)(1) or section 1819(a)(1) of the Act.
    Section 1834(a) of the Act, as added by section 4062 of the Omnibus 
Budget Reconciliation Act of 1987 (OBRA 87), Public Law 100-203, sets 
forth the payment rules for DME furnished on or after January 1, 1989. 
The Medicare payment amount for a DME item is generally equal to 80 
percent of the lesser of the actual charge or the fee schedule amount 
for the item, less any unmet Part B deductible. The beneficiary's 
coinsurance for such items is generally equal to 20 percent of the 
lesser of the actual charge or the fee schedule amount for the item 
once the deductible is met. The fee schedule amounts are generally 
calculated using average allowed charges from a base period and then 
increased by annual update factors. Sections 1834(a)(2) through (a)(7) 
of the Act set forth separate classes of DME and separate payment rules 
for each class. The six classes of items are: inexpensive and other 
routinely purchased DME; items requiring frequent and substantial 
servicing; customized items; oxygen and oxygen equipment; other covered 
items (other than DME); and other items of DME, also referred to as 
capped rental items. The class for inexpensive and other routinely 
purchased DME also includes accessories used in conjunction with 
nebulizers, aspirators, continuous positive airway pressure devices and 
respiratory assist devices. Items of DME fall under the class for other 
items of DME (capped rental items) if they do not meet the definitions 
established in the statute and regulations for the other classes of 
DME.
2. Medicare Guidance and Rulemaking Regarding Definition of Routinely 
Purchased DME
    On July 14, 1988, CMS central office issued a program memorandum to 
the CMS regional offices containing guidance for carriers to follow in 
developing a data base that would be used in identifying other 
routinely purchased DME for the purpose of implementing section 
1834(a)(2)(a)(ii) of the Act. For the purpose of identifying routinely 
purchased items, the carriers were instructed via the program 
memorandum to ``compute the unduplicated count of beneficiaries who 
purchased the item, by HCPCS code, and a count of those who only rented 
the item during the 7/1/86-6/30/87 period.'' The carriers were 
instructed to include purchase of new and used items and beneficiaries 
who purchased an item that was initially rented in the count of 
beneficiaries who purchased the item. The carriers made determinations 
regarding whether DME furnished during this period would be rented 
(non-capped) or purchased based on which payment method was more 
economical.
    In November 1988, CMS revised Part 3 (Claims Process) of the 
Medicare Carriers Manual (HCFA Pub. 14-3) via transmittal number 1279, 
by adding section 5102 and detailed instructions for implementation of 
the fee schedules and payment classes for DME mandated by section 4062 
of OBRA 87. The new implementing instructions were effective for 
services furnished on or after January 1, 1989. Section 5102.1 
indicated that carriers would be provided with a listing of the HCPCS 
(Health Care Financing Administration Common Procedure Coding System 
prior to 2003 and Healthcare Common Procedure Coding System beginning 
in 2003) codes for the equipment in the routinely purchased DME 
category. The initial classifications were implemented on January 1, 
1989, in accordance with the program instructions, and included a 
listing of HCPCS codes for base equipment such as canes and walkers, as 
well as HCPCS codes for replacement accessories such as cane tips, 
walker leg extensions, and power wheelchair batteries for use with 
medically necessary, patient-owned base equipment (canes, walkers, and 
power wheelchairs). In the case of expensive accessories that were not 
routinely purchased during July 1986 through June 1987, such as a 
wheelchair attachment to convert any wheelchair to one arm drive, these 
items fell under the listing of HCPCS codes for capped rental items. 
Medicare payment for DME extends to payment for replacement of 
essential accessories used with patient-owned equipment or accessories, 
attachments, or options that modify base equipment, such as the 
addition of elevating leg rests to a manual wheelchair.
    The Medicare definition of routinely purchased equipment is under 
42 CFR Sec.  414.220(a)(2) and specifies that routinely purchased 
equipment means equipment that was acquired by purchase on a national 
basis at least 75 percent of the time during the period July 1986 
through June 1987.'' This definition was promulgated via an interim 
final rule (IFC) on December 7, 1992 (57 FR 57698), remaining 
consistent with Medicare program guidance in effect beginning in 1988 
and discussed above, and finalized on July 10, 1995 (60 FR 35492). In 
the preamble of the 1992 IFC (57 FR 57679), we discussed how items were 
classified as routinely purchased DME based on data from July 1986 
through June 1987, ``in the absence of a statutory directive that 
defines the period for determining which items are routinely 
purchased.'' CMS indicated that it ``selected the period July 1, 1986 
through June 30, 1987, because it is the same 12-month period required 
by section 1834(a)(2)(B)(i) of the Act for calculating the base fee 
schedule amount for routinely purchased equipment.'' This period was 
therefore established as the period from which data was used for 
identifying the items that had been acquired on a purchase basis 75 
percent of the time or more under the Medicare rent/purchase program.
3. Payment for Inexpensive or Routinely Purchased Items and Capped 
Rental Items
    Pursuant to 42 CFR Sec.  414.220(b) payment for inexpensive or 
routinely purchased DME is made on a purchase

[[Page 40874]]

or rental basis, with total payments being limited to the purchase fee 
schedule amount for the item. If an item is initially rented and then 
purchased, the allowed purchase charge is based on the lower of the 
actual charge or fee schedule amount for purchase of the item minus the 
cumulative allowed charge for previously paid rental claims. Pursuant 
to 42 CFR Sec.  414.229(f), payment for capped rental items is made on 
a monthly rental basis for up to 13 months of continuous use. The 
supplier must transfer title to the equipment to the beneficiary on the 
first day following the 13th month of continuous use.

B. Current Issues

    Concerns have been raised about the application of the definition 
of and payment for routinely purchased DME, as it applies to expensive 
DME accessories. For example, recently one manufacturer of a new, 
expensive wheelchair accessory, included under a HCPCS code that would 
result in a corresponding Medicare fee schedule amount of approximately 
$3,000, if purchased, questioned why the HCPCS code describing their 
product was classified as capped rental DME. They pointed out that 
codes added to the HCPCS in recent years for other similar and more 
expensive wheelchair accessories costing $4,000 to $10,000 were 
classified as routinely purchased DME even though the items were not 
purchased under Medicare during the period specified in Sec.  
414.220(b). As a result, we began a review of expensive items that have 
been classified as routinely purchased equipment since 1989, that is, 
new codes added to the HCPCS after 1989 for items costing more than 
$150, to address this apparent inconsistency.
    As a result of this review, we found some codes that are not 
classified consistent with the regulatory definition of routinely 
purchased equipment at section Sec.  414.220(a)(2). We found that HCPCS 
codes added after 1989 for expensive, durable accessories used with 
base equipment, such as wheelchairs, have been classified as routinely 
purchased equipment. While section 1834(a)(2)(A)(iii) of the Act and 42 
CFR Sec.  414.220(a)(3) of the regulations allow payment for the 
purchase of accessories used in conjunction with nebulizers, 
aspirators, continuous positive airway pressure devices (CPAP), other 
items covered under the DME benefit including DME other than 
nebulizers, aspirators, CPAP devices, respiratory assist devices and 
accessories used in conjunction with those items, are paid for in 
accordance with the rules at section 1834(a) of the Act and are 
classified under sections 1834(a)(3) thru (7) of the Act as inexpensive 
and other routinely purchased DME, items requiring frequent and 
substantial servicing, certain customized items, oxygen and oxygen 
equipment, other covered items other than DME, or other covered items 
of DME.
    Additionally, we found that in some cases, expensive items of DME 
were classified as routinely purchased based on information suggesting 
that payers other than Medicare were routinely making payment for the 
items on a purchase basis. We believe that classifying an item as 
routinely purchased equipment based on data and information from other 
payers for the purposes of implementing Sec.  414.220(b) is 
inappropriate because other payers do not operate under the same 
payment rules as Medicare. Other payers may decide to purchase 
expensive items for reasons other than a achieving a more economical 
alternative to rental, the basis Medicare contractors used in deciding 
whether to purchase items during July 1986 through June 1987. In other 
cases, expensive items of DME were classified as routinely purchased 
equipment based on requests from manufacturers of equipment primarily 
used by Medicaid beneficiaries. We do not believe we should classify an 
item as routinely purchased equipment for the purposes of implementing 
Sec.  414.220(b) of the Medicare regulations based on how this might 
affect other payers such as Medicaid state agencies because such 
classifications are not consistent with the regulations, which for 
Medicare purposes generally require payment on a capped rental basis 
for any item with a purchase cost of greater than 150 dollars. After 
reviewing this issue, we do not think the regulation supports the 
classification of expensive DME as routinely purchased equipment based 
solely on whether other payers routinely pay for the item on a purchase 
basis or how manufacturers would prefer that other payers pay for the 
item. The classification of HCPCS codes for expensive equipment added 
after 1989 as routinely purchased equipment based on this kind of 
information does not comply with the Medicare definition of routinely 
purchased equipment and defeats a fundamental purpose of the capped 
rental payment methodology to avoid paying the full purchase price of 
costly equipment used only a short time.
    DME and accessories used in conjunction with DME are paid for under 
the DME benefit and in accordance with the rules at section 1834(a) of 
the Act. We are clarifying the existing definition of routinely 
purchased equipment at Sec.  414.220(a)(2) and providing notice that 
certain HCPCS codes for DME and DME accessories added to the HCPCS 
after 1989 that are currently classified as routinely purchased 
equipment should be reclassified as capped rental items (see Table 11 
below). This applies to all expensive items for which Medicare claims 
data July 1986 through June 1987 does not exist or does not indicate 
that the item was acquired by purchase on a national basis at least 75 
percent of the time. In the case of expensive accessories that are 
furnished for use with complex rehabilitative power wheelchairs, the 
purchase option for complex rehabilitative power wheelchairs at section 
1834(a)(7)(A)(iii) of the Act would also apply to these accessories. 
For any wheelchair accessory classified as a capped rental item and 
furnished for use with a complex rehabilitiave power wheelchair (that 
is, furnished to be used as part of the complex rehabilitative power 
wheelchair), the supplier must give the beneficiary the option of 
purchasing these accessories at the time they are furnished. These 
items would be considered as part of the complex rehabilitative power 
wheelchair and associated purchase option set forth at Sec.  
414.229(a)(5).
    We are soliciting comments on the effective date(s) for 
reclassifying items previously classified as routinely purchased 
equipment to the capped rental payment class in order to be in 
compliance with current regulations. Given that some items (HCPCS 
codes) may be included in the Round 2 and/or Round 1 Recompete phases 
of the competitive bidding program, we do not believe we can change the 
classification for items furnished under these programs until the 
contracts awarded based on these competitions expire on July 1, 2016, 
and January 1, 2017, respectively, regardless of whether the item is 
provided in an area subject to competitive bidding or not. We propose 
that the reclassification of items previously classified as routinely 
purchased equipment to the capped rental payment class be effective 
January 1, 2014, for all items that are not included in either a Round 
2 or Round 1 Recompete competitive bidding program (CBP) established in 
accordance with Sec.  414.400. For any item currently under a Round 2 
CBP, instead of a January 1, 2014, effective date we propose July 1, 
2016, for these reclassifications, which would apply to all items 
furnished in all areas of the

[[Page 40875]]

country, with the exception of items furnished in a Round 1 Recompete 
CBP. For items furnished in a Round 1 Recompete CBP, we propose an 
effective date of January 1, 2017, which would only apply to items 
furnished in the nine Round 1 Recompete areas. Therefore, we propose to 
generally base the effect dates on when the competitive bidding 
programs end. To summarize, the proposed effective dates for the 
reclassifications of these items from the routinely purchased DME class 
to the capped rental DME class would be:
     January 1, 2014, for items furnished in all areas of the 
country if the item is not included in Round 2 or Round 1 Recompete 
CBP;
     July 1, 2016, for items furnished in all areas of the 
country if the item is included in a Round 2 CBP and not a Round 1 
Recompete CBP and for items included in a Round 1 Recompete CBP but 
furnished in an area other than one of the 9 Round 1 Recompete areas; 
and
     January 1, 2017, for items included in a Round 1 Recompete 
CBP and furnished in one of the nine Round 1 Recompete areas.
    With the exception of the items described in the fourth bullet, 
this implementation strategy would allow the item to be moved to the 
payment class for capped rental items at the same time in all areas of 
the country without disrupting CBPs currently underway. For Round 1 
Recompete items furnished in nine areas of the country for the six-
month period from July 1, 2016, thru December 31, 2016, Medicare 
payment would be on a capped rental basis in all parts of the country 
other than these nine areas.
    Alternatively, the effective date for the reclassifications could 
be January 1, 2014, for all items paid under the fee schedule. In other 
words, the reclassification would not affect payments for items 
furnished under the Round 2 or Round 1 Recompete CBPs in the respective 
CBAs until the contract entered into under these programs expire on 
July 1, 2016, and January 1, 2017, respectively. However, this 
alternative would result in an extensive two and a half year period 
from Janary 2014 through June 2016, where Medicare payment would be on 
a capped rental basis for the items in half of the country (non-
competitive bidding areas) and on a purchase basis in the other half of 
the country (109 Round 2 and/or Round 1 Recompete competitive bidding 
areas). We believe that this bifurcation in payment classifications 
would create confusion and would be difficult to implement, and we are 
soliciting comments on this alternative implementation strategy.
    We have identified approximately 80 HCPCS codes requiring 
reclassification from the inexpensive or routinely purchased DME 
payment class to the capped rental DME payment class. The codes are 
shown in Table 11 below. The impacts of our changes are included in the 
discussion of impacts in section X of this rule.
    As shown in Table 11, Column A of the table shows the type of DME. 
Columns B and C indicate the HCPCS level II codes and the short 
descriptor. The long descriptor for each code is available at http://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.html.
    As shown in Column A, the majority of codes relate to manual 
wheelchairs and wheelchair accessories. In the case of accessories that 
are only used with complex rehabilitative power wheelchairs classified 
as capped rental items, the purchase option for complex rehabilitative 
power wheelchairs applies to these accessories because they are part of 
the capped rental wheelchair that the supplier is required to offer to 
the beneficiary on a lump sum purchase basis. We have displayed in 
Column B the items that would be associated with the purchase option 
set forth at section Sec.  414.229(a)(5). Wheelchair accessories that 
are also used with manual wheelchairs or standard power wheelchairs 
would also be subject to the purchase option if they are furnished for 
use with a complex rehabilitative power wheelchair.

    Table 11--Routinely Purchased Items Reclassified to Capped Rental
------------------------------------------------------------------------
        Group category                   HCPCS             Descriptor
------------------------------------------------------------------------
Automatic External              K0607.................  Repl battery for
 Defibrillator.                                          AED.
Canes/Crutches................  E0117.................  Underarm spring
                                                         assist crutch.
Glucose Monitor...............  E0620.................  Capillary blood
                                                         skin piercing
                                                         device laser.
High Frequency Chest Wall       A7025.................  Replace chest
 Oscillation Device (HFCWO).                             compress vest.
Hospital Beds/Accessories.....  E0300.................  Enclosed ped
                                                         crib hosp
                                                         grade.
Misc. DMEPOS..................  A4639.................  Infrared ht sys
                                                         replacement
                                                         pad.
                                E0762.................  Trans elec jt
                                                         stim dev sys.
                                E1700.................  Jaw motion rehab
                                                         system.
Nebulizers & Related Drugs....  K0730.................  Ctrl dose inh
                                                         drug deliv
                                                         system.
Osteogenesis Stimulator.......  E0760.................  Osteogenesis
                                                         ultrasound
                                                         stimulator.
Other Neuromuscular             E0740.................  Incontinence
 Stimulators.                                            treatment
                                                         system.
                                E0764.................  Functional
                                                         neuromuscular
                                                         stimulation.
Pneumatic Compression Device..  E0656.................  Segmental
                                                         pneumatic
                                                         trunk.
                                E0657.................  Segmental
                                                         pneumatic
                                                         chest.
Power Operated Vehicles (POV).  E0984.................  Add pwr tiller.
Respiratory Equipment.........  E0457.................  Chest shell.
Speech Generating Devices.....  E2500.................  SGD digitized
                                                         pre-rec 8min 20min 
                                                         40 min.
                                E2508.................  SGD spelling
                                                         phys contact.
                                E2510.................  SGD w multi
                                                         methods messg/
                                                         access.
Support Surfaces..............  E0197 *...............  Air pressure pad
                                                         for mattress.
                                E0198.................  Water pressure
                                                         pad for
                                                         mattress.
Traction Equipment............  E0849.................  Cervical pneum
                                                         traction equip.
                                E0855.................  Cervical
                                                         traction
                                                         equipment.
                                E0856.................  Cervical collar
                                                         w air bladder.
Walkers.......................  E0140 *...............  Walker w trunk
                                                         support.
                                E0144.................  Enclosed walker
                                                         w rear seat.
                                E0149 *...............  Heavy duty
                                                         wheeled walker.
Wheelchairs Manual............  E1161.................  Manual adult wc
                                                         w tiltinspac.

[[Page 40876]]

 
                                E1232.................  Folding ped wc
                                                         tilt-in-space.
                                E1233.................  Rig ped wc
                                                         tltnspc w/o
                                                         seat.
                                E1234.................  Fld ped wc
                                                         tltnspc w/o
                                                         seat.
                                E1235.................  Rigid ped wc
                                                         adjustable.
                                E1236.................  Folding ped wc
                                                         adjustable.
                                E1237.................  Rgd ped wc
                                                         adjstabl w/o
                                                         seat.
                                E1238.................  Fld ped wc
                                                         adjstabl w/o
                                                         seat.
Wheelchairs Options/            E0985 *...............  W/c seat lift
 Accessories.                                            mechanism.
                                E0986.................  Man w/c push-rim
                                                         pow assist.
                                E1002 [supcaret]......  Pwr seat tilt.
                                E1003 [supcaret]......  Pwr seat
                                                         recline.
                                E1004 [supcaret]......  Pwr seat recline
                                                         mech.
                                E1005 [supcaret]......  Pwr seat recline
                                                         pwr.
                                E1006 [supcaret]......  Pwr seat combo w/
                                                         o shear.
                                E1007 [supcaret]......  Pwr seat combo w/
                                                         shear.
                                E1008 [supcaret]......  Pwr seat combo
                                                         pwr shear.
                                E1010 [supcaret]......  Add pwr leg
                                                         elevation.
                                E1014.................  Reclining back
                                                         add ped w/c.
                                E1020 *...............  Residual limb
                                                         support system.
                                E1028 *...............  W/c manual
                                                         swingaway.
                                E1029.................  W/c vent tray
                                                         fixed.
                                E1030 [supcaret]......  W/c vent tray
                                                         gimbaled.
                                E2227.................  Gear reduction
                                                         drive wheel.
                                E2228 *...............  Mwc acc,
                                                         wheelchair
                                                         brake.
                                E2310 [supcaret]......  Electro connect
                                                         btw control.
                                E2311 [supcaret]......  Electro connect
                                                         btw 2 sys.
                                E2312 [supcaret]......  Mini-prop remote
                                                         joystick.
                                E2313 [supcaret]......  PWC harness,
                                                         expand control.
                                E2321 [supcaret]......  Hand interface
                                                         joystick.
                                E2322 [supcaret]......  Mult mech
                                                         switches.
                                E2325 [supcaret]......  Sip and puff
                                                         interface.
                                E2326 [supcaret]......  Breath tube kit.
                                E2327 [supcaret]......  Head control
                                                         interface mech.
                                E2328 [supcaret]......  Head/extremity
                                                         control
                                                         interface.
                                E2329 [supcaret]......  Head control
                                                         interface
                                                         nonproportional
                                                         .
                                E2330 [supcaret]......  Head control
                                                         proximity
                                                         switch.
                                E2351 [supcaret]......  Electronic SGD
                                                         interface.
                                E2368 *...............  Pwr wc
                                                         drivewheel
                                                         motor replace.
                                E2369 *...............  Pwr wc
                                                         drivewheel gear
                                                         box replace.
                                E2370 *...............  Pwr wc dr wh
                                                         motor/gear
                                                         comb.
                                E2373.................  Hand/chin ctrl
                                                         spec joystick.
                                E2374 [supcaret]......  Hand/chin ctrl
                                                         std joystick.
                                E2375 *...............  Non-expandable
                                                         controller.
                                E2376 [supcaret]......  Expandable
                                                         controller,
                                                         replace.
                                E2377 [supcaret]......  Expandable
                                                         controller,
                                                         initial.
                                E2378.................  Pw actuator
                                                         replacement.
                                K0015 *...............  Detach non-adjus
                                                         hght armrst.
                                K0070 *...............  Rear whl
                                                         complete pneum
                                                         tire.
Wheelchairs Seating...........  E0955 *...............  Cushioned
                                                         headrest.
------------------------------------------------------------------------
* Effective July 1, 2016. If the item is furnished in CBAs in accordance
  with contracts entered into as part of the Round 1 Recompete of DMEPOS
  CBP, then effective January 1, 2017.
[supcaret] Item billable with Complex Rehabilitative Power Wheelchair
  codes K0835-K0864.

    In summary, we are providing notice of certain HCPCS codes that 
would be reclassified as capped rental items (see Table 11 of codes). 
We invite comments on this section.

V. Clarification of the 3-Year Minimum Lifetime Requirement (MLR) for 
DME

    DME is covered by Medicare based, in part, upon section 1832(a) of 
the Act, which describes the scope of benefits under the supplementary 
medical insurance program (Medicare Part B), to include ``medical and 
other health services,'' which is further defined undersection 
1861(s)(6) of the Act to include DME. In addition, section 1861(m)(5) 
of the Act specifically includes DME in the definition of the term 
``home health services.'' In accordance with section 1861(n) of the 
Act, the term ``durable medical equipment'' includes iron lungs, oxygen 
tents, hospital beds, and wheelchairs used in the patient's home 
whether furnished on a rental basis or purchased. The patient's home 
includes an institution used as his or her home other than an 
institution that meets the requirements of section 1861(e)(1) or 
section 1819(a)(1) of the Act. Besides being subject to this provision, 
the coverage of DME must meet the requirements of section 1862(a)(1)(A) 
of the Act, which in general excludes from payment any items or 
services that are not reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of a 
malformed body member, and section 1862(a)(6) of the Act, which (except 
for certain specified exceptions) precludes payment for personal 
comfort items.
    Section 414.202 defines DME as equipment furnished by a supplier or 
a

[[Page 40877]]

home health agency that meets the following conditions: (1) Can 
withstand repeated use; (2) effective with respect to items classified 
as DME after January 1, 2012, has an expected life of at least 3 years; 
(3) is primarily and customarily used to serve a medical purpose; (4) 
generally is not useful to an individual in the absence of an illness 
or injury; and is appropriate for use in the home. Prior to 2012, the 
definition for DME did not contain a 3-year minimum lifetime 
requirement (MLR) although Section 110.1 of chapter 15 of the Medicare 
Benefit Policy Manual (CMS-Pub. 100-02) provided further guidance with 
regard to the definition of DME and durability of an item that is when 
an item is considered durable.

B. Current Issues

    On November 10, 2011, CMS issued a final rule in which it revised 
the definition of DME at Sec.  414.200 by adding a 3-year MLR effective 
January 1, 2012, that must be met by an item or device in order to be 
considered durable for the purpose of classifying the item under the 
Medicare benefit category for DME (76 FR 70228 (November 10, 2011)). 
Specifically, an additional condition under Sec.  414.200 is that DME 
must be equipment furnished by a supplier or a home health agency that, 
effective with respect to items classified as DME after January 1, 
2012, has an expected life of at least 3 years. The change to the 
regulation was designed to further clarify the meaning of the term 
``durable'' and provide an interpretation of the statute generally 
consistent with the DME payment and coverage provisions, including, 
Medicare program guidance at section 280.1 of chapter 1, part 4 of the 
Medicare National Coverage Determinations Manual (Pub. 100-03) which 
specifies that an item can withstand repeated use means that the item 
could normally be rented and used by successive patients. The 3-year 
MLR is intended to specify that durable equipment is equipment that can 
withstand repeated use over an extended period of time. Since the vast 
majority of items covered under the DME benefit over the years last for 
3 or more years, the MLR is intended to clarify the scope of the DME 
benefit primarily for new items coming on the market or in the process 
of being developed. The standard set forth in regulations gives 
manufacturers and the public a clear understanding of how long an item 
would need to withstand repeated use in order the meet the durability 
requirement for DME. The rule also provides clear guidance to CMS and 
other stakeholders for making consistent informal benefit category 
determinations and national coverage determinations for DME.
    The 3-year MLR is designed to represent a minimum threshold for a 
determination of durability for a piece of equipment. The 3-year MLR is 
not an indication of the typical or average lifespan of DME, which in 
many cases is far longer than 3 years. The 3-year MLR does not apply to 
disposable supplies or accessories covered for use with DME such as 
masks, tubing, and blood glucose test strips. The 3-year MLR is 
prospective only and does not apply to equipment classified as DME 
before the regulation was effective, that is, January 1, 2012.
    We also determined that the 3-year MLR should not apply to 
equipment classified as DME before the effective date to allow for 
continued coverage of such equipment that healthcare industry and 
beneficiaries have come to rely on, regardless of whether those items 
met the 3-year MLR set forth at 42 CFR 414.202 (76 FR 70288). Given 
that reliance, we did not intend to reopen those prior decisions and 
reclassify the equipment in light of the 3-year standard. We believe 
that continuing Medicare coverage for items that qualified as DME prior 
to the effective date, helps avoid disrupting the continuity of care 
for the beneficiaries that received these items for medical treatment 
prior to January 1, 2012.
    Beneficiaries have been relying on these items for their treatment 
to the extent that the items have been covered as DME under Medicare 
and applying the 3-year MLR to these items could impact the continuity 
of care for these beneficiaries. Furthermore, we believed that a vast 
majority of the categories of items that were classified as DME before 
January 1, 2012, did function for 3 or more years. We also noted that 
the 3-year durability rule would only apply to new products, and, to 
the extent that a modified product is not a new product, the 3-year MLR 
would not be applicable.
    In response to the public comments that requested further 
clarification on the application of the grandfathering provision for 
the 3-year MLR, we noted that we would consider issuing additional 
guidance to provide further clarification, if necessary (76 FR 70290). 
For purposes of providing additional guidance on the scope of the 
grandfathered items under the provision, we invite public comments on 
this issue.

C. Scope of the 3-Year MLR for DME

    Under Sec.  414.202, effective with respect to items classified as 
DME after January 1, 2012, an item is not considered durable unless it 
has an expected life of at least 3 years. Therefore, the 3-year MLR 
applies to new items after January 1, 2012, and does not apply to items 
covered under the DME benefit on or prior to January 1, 2012. Items 
classified as DME on or before January 1, 2012, are considered 
``grandfathered items'' for the purpose of this requirement, regardless 
of whether they meet the 3-year rule.
    For the purpose of providing further guidance on the scope of the 
3-year MLR, we are providing clarification about how we would regard 
grandfathered items covered as DME prior to the effective date and we 
request comments on that clarification. If the product is modified 
(upgraded, refined, reengineered, etc.) after January 1, 2012, the item 
would still be classified as DME as a grandfathered item unless the 
modified product now has an expected life that is shorter than the 
expected lifetime for the item covered as DME prior to January 1, 2012, 
In this case, we consider the item, as modified, to be a new item that 
is subject to the 3-year MLR. For example, equipment covered prior to 
January 1, 2012, and described by code X has a life of at least 2 
years. If, after January 1, 2012, that item is modified such that it no 
longer lasts 2 years, such modification would render the item ``new'' 
and it would be subject to the 3-year MLR. Therefore, since the new 
(modified) product does not last 3 years, it would not meet the 
definition of DME under the regulation and could not be covered or be 
billed using the code that described the item before it was modified.
    We seek comments on this proposed clarification.

VI. Implementation of Budget-Neutral Fee Schedules for Splints, Casts 
and Intraocular Lenses (IOLs)

A. Background

1. Payment Under Reasonable Charges
    Payment for most items and services furnished under Part B of the 
Medicare program is made through contractors known as Medicare 
Administrative Contractors (MACs). These contractors were previously 
referred to as carriers. Prior to 1988, in accordance with section 
1842(b) of the Act, payment for most of these items and services was 
made on a reasonable charge basis by these contractors, with the 
criteria for determining reasonable charges set forth at 42 CFR part 
405, subpart E of our regulations.
    Under this general methodology, several factors or ``charge 
screens'' were developed for determining the

[[Page 40878]]

reasonable charge for an item or service. In accordance with Sec.  
405.503, each supplier's ``customary charge'' for an item or service, 
or the 50th percentile of charges for an item or service over a 12-
month period, was one factor used in determining the reasonable charge. 
In accordance with Sec.  405.504, the ``prevailing charge'' in a local 
area, or the 75th percentile of suppliers' customary charges for the 
item in the locality, was also used in determining the reasonable 
charge. For the purpose of calculating prevailing charges, a 
``locality'' is defined at Sec.  405.505 of our regulations and ``may 
be a State (including the District of Columbia, a territory, or a 
Commonwealth), a political or economic subdivision of a State, or a 
group of States.'' The regulation further specifies that the locality 
``should include a cross section of the population with respect to 
economic and other characteristics.'' In accordance with Sec.  405.506, 
for certain items, such as parenteral and enteral nutrients, supplies, 
and equipment, an additional factor referred to as the ``lowest charge 
level'' was used in determining the reasonable charge for an item or 
service. In accordance with section 5025 of the Medicare Carriers 
Manual (HCFA Pub. 14-3) and Sec.  405.509 of our regulations, effective 
for items furnished on or after October 1, 1985, an additional factor, 
the ``inflation-indexed charge (IIC),'' was added to the factors taken 
into consideration in determining the reasonable charge for certain 
items and services. The IIC is defined in Sec.  405.509(a) as the 
lowest of the fee screens used to determine reasonable charges for 
items and services, including supplies, and equipment reimbursed on a 
reasonable charge basis (excluding physicians' services) that is in 
effect on December 31 of the previous fee screen year, updated by the 
inflation adjustment factor. The inflation adjustment factor is based 
on the current percentage change in the consumer price index for all 
urban consumers (United States city average) (CPI-U) for the 12-month 
period ending June 30. The reasonable charge is generally set based on 
the lowest of the actual charge for the item or service or the factors 
described above.
2. Payment Under Fee Schedules
    Specific provisions have been added to the Act mandating 
replacement of the reasonable charge payment methodology with fee 
schedules for most items and services furnished under Part B of the 
Medicare program. The phase in of fee schedules to replace reasonable 
charges for Medicare payment purposes began with the fee schedule for 
clinical diagnostic laboratory tests in 1988. As of 1997, very few 
items and services were still paid on a reasonable charge basis, which 
is a very time consuming and laborious process. Contractors must 
collect new charge data each year, perform the various calculations, 
and maintain pricing files and claims processing edits for the various 
charge screens. For each item that is paid on a reasonable charge 
basis, administrative funding must be provided to contractors for the 
purpose of performing these calculations and maintaining these pricing 
files. Therefore, replacing reasonable charge payments with fee 
schedules eliminates the need to fund these efforts and saves money 
that can be used to implement other parts of the program. Section 4315 
of the Balanced Budget Act of 1997 (BBA) amended the Act at section 
1842 by adding a new subsection (s). Section 1842(s) of the Act 
provides authority for implementing statewide or other area wide fee 
schedules to be used for payment of the following services that were 
previously on a reasonable charge basis:
     Medical supplies.
     Home dialysis supplies and equipment (as defined in 
section 1881(b)(8) of the Act).
     Therapeutic shoes.
     Parenteral and enteral nutrients, equipment, and supplies 
(PEN).
     Electromyogram devices.
     Salivation devices.
     Blood products.
     Transfusion medicine.
    For Medicare payment purposes, we interpret the category ``medical 
supplies'' under section 1842(s) of the Act to include all other items 
paid on a reasonable charge basis as of 1997 that do not fall under any 
of the other categories listed in section 1842(s) of the Act. We 
believe that section 1842(s) of the Act is intended to provide 
authority for establishing fee schedules for all of the remaining, and 
relatively small number of items and services still paid for on a 
reasonable charge basis at the time of enactment in 1997. In light of 
this provision, we generally consider ``intraocular lenses'' to be paid 
as ``medical supplies.'' Therefore, in addition to including splints 
and casts under this category, we also propose to include intraocular 
lenses inserted in a physician's office for the purpose of implementing 
this specific section. Although we recognize the terms ``intraocular 
lenses'' and ``medical supplies'' are separately identified under Sec.  
414.202, we note that such terms are listed for purposes of defining 
what constitutes orthotic and prosthetic devices (that is, these terms 
are excluded from such definition), and not intended to suggest these 
are mutually exclusive things. Accordingly, we do not believe we are 
precluded from establishing fee schedules for IOLs under the category 
of medical supplies under section 1842(s) of the Act. Nevertheless, we 
are specifically requesting comments on this issue.
    Section 1842(s)(1) of the Act provides that the fee schedules for 
the services listed above are to be updated on an annual basis by the 
percentage increase in the CPI-U (United States city average) for the 
12-month period ending with June of the preceding year, reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. Total payments for the initial year of the fee schedules must 
be budget-neutral, or approximately equal to the estimated total 
payments that would have been made under the reasonable charge payment 
methodology. As explained below, we used this authority to establish 
fee schedules for parental and enteral nutrition (PEN) items and 
services for use in paying claims with dates of service on or after 
January 1, 2002.
    On July 27, 1999, we published a notice of proposed rulemaking (64 
FR 40534) to establish fee schedules for PEN items and services, 
splints and casts, intraocular lenses (IOLs) inserted in a physician's 
office, and various other items and services for which section 1842(s) 
of the Act provided authority for replacing the reasonable charge 
payment methodology with fee schedules. After reviewing public comments 
on the proposed rule, we decided to move ahead with a final rule 
establishing fee schedules for the Parenteral and Enteral Nutrition 
(PEN) items and services, but not the other items and services, 
primarily related to concerns regarding data used for calculating fee 
schedule amounts for items and service that are no longer paid on a 
reasonable charge basis. The final rule for implementing the fee 
schedules for PEN items and services was published on August 28, 2001 
(66 FR 45173). For splints and casts, national reasonable charge 
amounts, updated on an annual basis by the IIC, have been used to pay 
for the splint and cast materials. Converting these amounts to national 
fee schedule amounts that are updated by the same index factor used in 
updating the reasonable charge amounts would result in no change in 
payment, or 100 percent budget-neutrality. Currently, very few IOLs are 
inserted in a physician's office nationally. In 2011, total allowed 
charges for 437 IOLs furnished to 287

[[Page 40879]]

beneficiaries equaled $75,914. Since IOLs are considerably low volume 
items furnished by very few suppliers nationally, there are some states 
where none of these items are furnished; therefore, charge data for use 
in calculating prevailing charges, even at the state level, are not 
available and budget-neutrality is not an issue. If the national 
average allowed amount for these items is used as the fee schedule 
amount for the few IOLs that are still inserted in a physician's 
office, we do not believe that total allowed charges in the first year 
of the fee schedule would be significantly different than what would 
otherwise be paid nationally under the current reasonable charge 
payment methodology. For 2011, the national average allowed charge for 
covered claims for the 287 beneficiaries receiving IOLs inserted in a 
physician's office was $174 ($75,914 / 437). In some cases, the allowed 
charge for specific claims in 2011 was less than $174 and in other 
cases the allowed charge was more than $174. However, given the low 
volume of items furnished nationally, the budget impact of paying all 
of the approximately 437 claims based on the national average allowed 
amount would be negligible. We believe establishing budget-neutral fee 
schedule amounts for splints and casts, and IOLs inserted in a 
physician's office will save government resources in calculating the 
reasonable charge payment for the low volume items. We are proposing to 
establish fee schedules for these items effective for paying claims 
with dates of service on or after January 1, 2014.

B. Provisions of the Proposed Regulations

    For the reasons we articulated above, we propose, under section 
1842(s) of the Act, to implement fee schedules for splints and casts, 
and IOLs inserted in a physician's office falling under the category of 
medical supplies. In addendum C of this proposed rule, we have inserted 
the current 2013 reasonable charge amounts for splints, casts and IOLs 
inserted in a physician's office. The splints and casts are payment 
amount limits updated by the CPI-U factor ending with June of the 
preceding year, in this case June 2012. The IOLs inserted in 
physician's office estimates the 2012 average allowed charge. We would 
not have the entire calendar year estimates for 2013 average allowed 
charge for IOLs inserted in a physician's office in order to implement 
the fee schedule amounts for these items effective for paying claims 
with dates of service on or after January 1, 2014; therefore, we are 
using the estimate of the 2012 average allowed charge. The final fee 
schedule amount will be specified in the final rule. We currently do 
not have the percentage change in the CPI-U for the 12-month period 
ending with June of 2013 to update the fee-schedule amounts for splints 
and casts. Specifically, we are proposing to amend 42 CFR Sec.  414.106 
and Sec.  414.100 to include the general rule for updating the fee 
schedules for splints, casts and IOLs inserted in a physician's office. 
We are also proposing to add Sec.  414.106 and Sec.  414.108 to set 
forth the fee schedule methodology and updates as explained above for 
splints, casts, and IOLs inserted in a physician's office. Subject to 
coinsurance and deductible rules, Medicare payment for these services 
is to be equal to the lower of the actual charge for the item or the 
amount determined under the applicable fee schedule payment 
methodology.
    For splints and casts, we propose national fee schedule amounts for 
items furnished from January 1, 2014, thru December 31, 2014, based on 
2013 reasonable charges updated by the percentage increase in the 
consumer price index for all urban consumers (United States city 
average) for the 12-month period ending with June 2013. For subsequent 
years, the fee schedule amounts would be updated by the percentage 
increase in the consumer price index for all urban consumers (United 
States city average) for the 12-month period ending with June of the 
preceding year, reduced by the productivity adjustment as described in 
section 1886(b)(3)(B)(xi)(II) of the Act.
    For IOLs inserted in a physician's office, we propose national fee 
schedule amounts for items furnished from January 1, 2014, thru 
December 31, 2014, based on the national average allowed charge for the 
item from January 1, 2012 through December 31, 2012, updated by the 
percentage increase in the consumer price index for all urban consumers 
(United States city average) for the 24-month period ending with June 
2013. For subsequent years, the fee schedule amounts would be updated 
by the percentage increase in the consumer price index for all urban 
consumers (United States city average) for the 12-month period ending 
with June of the preceding year, reduced by the productivity adjustment 
as described in section 1886(b)(3)(B)(xi)(II) of the Act.

VII. DMEPOS Technical Amendments and Corrections

A. Background

    Medicare pays for various DMEPOS items and services based on 
payment rules that are set forth in section 1834 of the Act and 42 CFR 
Part 414, Subpart D. We propose to make three minor, conforming 
technical amendments to the existing DMEPOS payment regulations (the 
title of Subpart D and 42 CFR Sec.  414.200 and Sec.  414.226).

B. Proposed Technical Amendments and Corrections

    Below are the proposed technical amendments.
     We propose to modify the title of ``Subpart D--Payment for 
Durable Medical Equipment, Prosthetic and Orthotic Devices'' to read 
``Subpart D--Payment for Durable Medical Equipment, Prosthetic and 
Orthotic Devices, and Surgical Dressings'' to reflect that payment for 
surgical dressings is addressed under this subpart at Sec.  414.220(g).
     In subpart Sec.  414.200, we propose to modify the phrase 
``This subpart implements sections 1834 (a) and (h) of the Act by 
specifying how payments are made for the purchase or rental of new and 
used durable medical equipment and prosthetic and orthotic devices for 
Medicare beneficiaries.'' as follows: ``This subpart implements 
sections 1834 (a),(h), and (i) of the Act by specifying how payments 
are made for the purchase or rental of new and used durable medical 
equipment, prosthetic and orthotic devices, and surgical dressings for 
Medicare beneficiaries.'' The Omnibus Budget Reconciliation Act of 1993 
amended section 1834 of the Act by adding subsection (i), mandating 
payment on a fee schedule basis for surgical dressings. Although Sec.  
414.220(g) addresses this requirement, the regulation at Sec.  414.200 
was not updated to indicate that this subpart implements section 
1834(i) in addition to sections 1834(a) and (h) of the Act.
     Section 1834(a)(9)(D) of the Act provides authority for 
creating separate classes of oxygen and oxygen equipment. Section 
1834(a)(9)(D)(ii) of the Act prohibits CMS from creating separate 
classes of oxygen and oxygen equipment that result in expenditures for 
any year that are more or less than expenditures which would have been 
made if the separate classes had not been created. In other words, the 
new classes and payment amounts for oxygen and oxygen equipment must be 
established so that creating the new classes is annually budget-
neutral. In November 2006, we published a final rule establishing 
separate classes for oxygen and oxygen equipment and included a 
methodology for meeting the requirements of section 1834(a)(9)(D)(ii) 
of the Act by applying annual reductions to the monthly fee schedule 
amounts for the stationary oxygen

[[Page 40880]]

equipment class at Sec.  414.226(c)(1)(i) in order to establish budget 
neutrality for total oxygen and oxygen expenditures for all oxygen 
classes. Increases in expenditures for oxygen and oxygen equipment that 
are attributed to higher payment amounts established for new classes of 
oxygen and oxygen equipment are off set by reducing the monthly payment 
amount for stationary oxygen equipment. Due to a drafting error in the 
regulation text portion of the November 2006 final rule, CMS-1304-F (71 
FR 65933), 42 CFR Sec.  414.226(c)(6) needs to be corrected. The 
regulation text at Sec.  414.226(c)(6) mistakenly states that budget 
neutrality should be achieved by adjusting all oxygen class rates. 
Section 414.226(c)(6) should read that only the stationary oxygen 
equipment rate should be adjusted to achieve budget neutrality. 
Therefore, we propose that Sec.  414.226(c)(6) be revised to read as 
follows: ``Beginning in 2008, CMS makes an annual adjustment to the 
national limited monthly payment rate for items described in paragraph 
(c)(1)(i) of this section to ensure that such payment rates do not 
result in expenditures for any year that are more or less than the 
expenditures that would have been made if such classes had not been 
established.''
     We are also making a technical correction to existing 42 
CFR Sec.  414.102(c) to conform the regulation governing parenteral and 
enteral (PEN) nutrients, equipment and supplies covered item fee 
schedule update with the statute. Although section 1842(s)(1)(B)(ii) of 
the Act is self-implementing, the PEN nutrients, equipment and supplies 
payment regulations at 42 CFR 414 Subpart C were not updated to reflect 
the application of the multifactor productivity adjustment to the CPI-U 
update factor for 2011 and subsequent calendar years. Therefore, we are 
revising Sec.  414.102(c) of our regulations to specify that for years 
2003 through 2010, the PEN items and services fee schedule amounts of 
the preceding year are updated by the percentage increase in the CPI-U 
for the 12-month period ending with June of the preceding year. For 
each year subsequent to 2010, the PEN items and services fee schedule 
amounts of the preceding year are updated by the percentage increase in 
the CPI-U for the 12-month period ending with June of the preceding 
year, reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act.

VIII. 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 requirement 
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 section II.D. of this proposed rule, we are proposing changes to 
regulatory text for the ESRD PPS in CY 2014. However, the changes that 
are being proposed do not impose any new information collection 
requirements.

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. Proposed Expanded ICH CAHPS Reporting Measure for PY 2016 and Future 
Payment Years of the ESRD QIP
    As stated above in section III.C.2.a of this proposed rule, we 
proposed to include in the PY 2016 ESRD QIP an expanded ICH CAHPS 
reporting measure, which assesses facility usage of the ICH CAHPS 
survey. Unlike the ICH CAHPS reporting measure finalized in the CY 2013 
ESRD PPS final rule (77 FR 67480 through 67481), the proposed expanded 
ICH CAHPS reporting measure would require facilities to report (via a 
CMS-approved vendor) survey data to CMS once for PY 2016, and, for PY 
2017 and beyond, to administer (via a CMS-approved vendor) a second ICH 
CAHPS survey and report the second set of survey data to CMS. 
Therefore, for PY 2016, we estimate the burden associated with this 
requirement to be the time and effort necessary for facilities to 
submit (via a CMS-approved vendor) survey results to CMS. For PY 2017 
and future payment years, we estimate the burden associated with this 
requirement is the time and effort necessary for facilities to 
administer (via a CMS-approved vendor) a second ICH CAHPS survey and 
submit (via a CMS-approved vendor) the survey results to CMS.
    We estimate that approximately 5,506 facilities will treat adult, 
in-center hemodialysis patients in PY 2016 and, therefore, will be 
eligible to receive a score on this measure. We further estimate that 
all 5,506 facilities will report (via a CMS-approved vendor) survey 
results to CMS, and that it will take each vendor approximately 5 
minutes to do so. Therefore, the estimated total annual burden 
associated with meeting the measure requirements in PY 2016 is 459 
hours [(5/60) hours x 5,506 facilities). According to the Bureau of 
Labor Statistics, the mean hourly wage of a registered nurse is $32.66/
hour. Since we anticipate nurses (or administrative staff who would be 
paid at a lower hourly wage) will submit this data to CMS, we estimate 
that the aggregate cost of this requirement for PY 2016 will be $14,991 
(459 hours x $32.66/hour).
    We estimate that approximately 5,693 facilities will treat adult, 
in-center hemodialysis patients in PY 2017 and, therefore, will be 
eligible to receive a score on this measure. We estimate that all 5,693 
facilities will administer the ICH CAHPS survey through a third-party 
vendor and arrange for the vendor to submit the data to CMS. We 
estimate that it would take each patient 30 minutes to complete the 
survey (to account for variability in education levels) and that 
approximately 103 surveys per year would be taken per facility. 
Interviewers from each vendor would therefore spend a total of 
approximately 52 hours per year with patients completing these surveys 
(0.5 hours * 103 surveys) or $1,698 (52 hours x $32.66) for an 
estimated annual burden of $9,666,714 ($1,698 per facility x 5,693 
facilities).\9\ We previously estimated that the aggregate cost of 
submitting survey data to CMS is $14,991. Therefore, we estimate that 
the

[[Page 40881]]

total annual burden for ESRD facilities to comply with the collection 
of information requirements associated with the proposed expanded ICH 
CAHPS measure for PY 2017 and future payment years would be 
approximately $9,681,705 ($9,666,714 + $14,991) across all ESRD 
facilities.
---------------------------------------------------------------------------

    \9\ We note that this total represents an underestimate of the 
overall burden because it does not include time costs for patients.
---------------------------------------------------------------------------

b. Proposed Data Validation Requirements for the PY 2016 ESRD QIP
    Section III.C.13 of the proposed rule outlines our data validation 
proposals. We proposed to randomly sample records from 300 facilities; 
each sampled facility would be required to produce up to 10 records; 
and the sampled facilities will be reimbursed by our validation 
contractor for the costs associated with copying and mailing the 
requested 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 300 
facilities are tasked with providing the required documentation, the 
estimated annual burden for these facilities across all facilities 
would be 750 hours (300 facilities x 2.5 hours) at a total of $24,495 
(750 hours x $32.66/hour) or $81.65 ($24,495/300 facilities) per 
facility in the sample.
    2. The discussion on clarifying the definition of routinely 
purchased DME does not contain any new information collection 
requirements.
    3. The clarification of the the 3-year Minimum Lifetime Requirement 
for DME does not contain any new information collection requirements.
    4. The proposed implementation of Budget-Neutral Fee Schedules for 
Splints, Casts and Intraocular Lenses does not contain any new 
information collection requirements.
    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-1526-P], Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

IX. 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.

X. 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 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 2014, proposes to implement the fourth year of the ESRD 
PPS transition, and proposes to make several policy changes to the ESRD 
PPS. These include proposed updates and changes to the ESRD PPS base 
rate, wage index values, the wage index budget-neutrality adjustment 
factor, and the outlier payment policy. This rule will also implement 
section 1881(b)(14)(I), which requires the Secretary, by comparing per 
patient utilization from 2007 with such data from 2012, to reduce the 
single payment amount to reflect the Secretary's estimate of the change 
in the utilization of ESRD-related drugs and biologicals. Failure to 
publish this proposed rule would result in ESRD facilities not 
receiving appropriate payments in CY 2014.
    This rule proposes to implement the ESRD QIP for PY 2016 and beyond 
by proposing to adopt measures, scoring, and payment reductions to 
incentivize improvements in dialysis care as directed by section 
1881(h) of the Act. Failure to propose requirements for the PY 2016 
ESRD QIP would prevent continuation of the ESRD QIP beyond PY 2015.
3. Overall Impact
    We estimate that the proposed revisions to the ESRD PPS will result 
in a decrease of approximately $970 million in payments to ESRD 
facilities in CY 2014, which includes the amount associated with the 
increase in the ESRDB market basket reduced by the productivity 
adjustment, updates to outlier threshold amounts, the inclusion of the 
Pacific Rim ESRD facilities, updates to the wage index, and the drug 
utilization adjustment required by section 1881(b)(14)(I), as added by 
section 632(a) of ATRA.
    For PY 2016, we estimate that the proposed requirements related to 
the ESRD QIP will cost approximately $39.5 thousand and the predicted 
payment reductions will equal about $26.4 million to result in a total 
impact from the proposed ESRD QIP requirements of $26.4 million. For PY 
2017 and future payment years, we expect the costs associated with the 
collection of information requirements for the expanded ICH CAHPS 
measure in the proposed ESRD QIP to be approximately $9.7 million.
    We estimate that the proposed changes for implementing the fee 
schedule amounts from reasonable charge payments will be budget neutral 
and will have no impact to DMEPOS providers of splints, casts and 
intraocular lenses inserted in a physician's office.
    We estimate that our proposed clarification of the definition of 
routinely purchased DME and re-classification of certain items as cap 
rental items would impact certain DMEPOS providers. We estimate that 
the clarification of the 3-year minimum lifetime requirement for DME 
would have no impact on DMEPOS suppliers.

[[Page 40882]]

B. Detailed Economic Analysis

1. CY 2014 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 in CY 2013 to estimated payments in CY 2014. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2013 and CY 2014 
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 2012 update of CY 2012 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2012 claims 
to 2013 and 2014 using various updates. The updates to the ESRD PPS 
base rate are described in section II.B of this proposed rule. Table 12 
shows the impact of the estimated CY 2014 ESRD payments compared to 
estimated payments to ESRD facilities in CY 2013.

                              Table 12--Impact of Proposed Changes in Payments to ESRD Facilities for CY 2014 Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             Effect of 2014
                                                                                                               changes in    Effect of 2014
                                                                 Number of   Effect of 2014  Effect of 2014  market  basket    changes in     Effect of
                  Facility type                     Number of    treatments    changes in      changes in         minus       base rate due   total 2014
                                                    facilities      (in      outlier policy   wage indexes    productivity       to drug     changes \5\
                                                                 millions)   \4\  (percent)     (percent)        update        utilization     (percent)
                                                                                                                (percent)       (percent)
                                                             A            B               C               D               E               F            G
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities...................................        5,771         38.1             0.4             0.0             2.5           -12.0         -9.4
Type:
    Freestanding.................................        5,270         35.4             0.4             0.0             2.5           -12.0         -9.4
    Hospital based...............................          501          2.7             0.3             0.1             2.5           -11.9         -9.3
Ownership Type:
    Large dialysis organization..................        3,769         25.9             0.4             0.0             2.5           -12.0         -9.4
    Regional chain...............................          885          6.1             0.4             0.0             2.5           -12.0         -9.4
    Independent..................................          614          3.9             0.2             0.1             2.5           -12.0         -9.5
    Hospital based \1\...........................          400          2.1             0.2             0.1             2.5           -11.9         -9.4
    Unknown......................................          103          0.2             0.3            -0.2             2.5           -12.0         -9.6
Geographic Location:
    Rural........................................        1,257          6.3             0.4            -0.1             2.5           -12.0         -9.5
    Urban........................................        4,514         31.8             0.4             0.0             2.5           -12.0         -9.4
Census Region:
    East North Central...........................          946          5.7             0.4            -0.2             2.5           -11.9         -9.5
    East South Central...........................          477          2.9             0.5            -0.2             2.5           -11.9         -9.5
    Middle Atlantic..............................          634          4.6             0.4             0.5             2.5           -12.0         -9.0
    Mountain.....................................          340          1.8             0.3             0.1             2.5           -12.0         -9.4
    New England..................................          170          1.3             0.4             0.2             2.5           -12.0         -9.2
    Pacific \2\..................................          684          5.3             0.1             0.4             2.5           -12.0         -9.3
    Puerto Rico and Virgin Islands...............           41          0.3             0.4            -2.3             2.5           -11.9        -11.5
    South Atlantic...............................        1,288          8.8             0.5            -0.3             2.5           -12.0         -9.6
    West North Central...........................          416          2.0             0.4            -0.1             2.5           -12.0         -9.5
    West South Central...........................          775          5.5             0.5            -0.1             2.5           -11.9         -9.5
Facility Size:
    Less than 4,000 treatments \3\...............        1,044          2.6             0.4             0.0             2.5           -12.0         -9.4
    4,000 to 9,999 treatments....................        2,157         10.4             0.4            -0.1             2.5           -12.0         -9.5
    10,000 or more treatments....................        2,400         24.7             0.4             0.0             2.5           -12.0         -9.4
    Unknown......................................          170          0.4             0.4            -0.1             2.5           -12.0         -9.5
Percentage of Pediatric Patients:
    Less than 2%.................................        5,662         37.7             0.4             0.0             2.5           -12.0         -9.4
    Between 2% and 19%...........................           44          0.3             0.3             0.0             2.5           -11.9         -9.5
    Between 20% and 49%..........................            6          0.0             0.1            -0.3             2.5           -12.0         -9.9
    More than 50%................................           59          0.1             0.0             0.1             2.5           -12.0         -9.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
\2\ Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.
\3\ Of the 1,044 ESRD facilities with less than 4,000 treatments, only 375 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 9.5 percent decrease in payments.
\4\ Includes the effect of including the Pacific Rim ESRD facilities of Guam, American Samoa, and the Northern Mariana Islands into the PPS.
\5\ Includes the effect of Market Basket minus productivity increase of 2.5 percent to the ESRD PPS base rate and the effect of the $29.52 decrease in
  the base rate due to the drop in drug utilization.
Note:Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

    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.6. of this proposed rule is shown in column C. For CY 2014, the

[[Page 40883]]

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 0.0 percent to a 0.5 percent increase. Nearly all ESRD 
facilities are anticipated to experience a positive effect in their 
estimated CY 2014 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 2014 wage index values for the ESRD PPS payments. 
Facilities located in the census region of Puerto Rico and the Virgin 
Islands would receive a 2.3 percent decrease in estimated payments in 
CY 2014. 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 2014). 
The other categories of types of facilities in the impact table show 
changes in estimated payments ranging from a 0.3 percent decrease to a 
0.5 percent increase due to the update of the wage index.
    Column E shows the effect of the ESRDB market basket increase minus 
productivity adjustment. The impact on all facilities would be a 2.5 
percent increase.
    Column F shows the effect of the drug utilization adjustment 
required by section 1881(b)(14)(I). For CY 2014, the impact on all 
facilities as a result of the $29.52 decrease to the base rate, as 
described in section II.B.2.a., would be a 12 percent decrease in 
estimated payments. The estimated impact ranges from 11.9 percent to 12 
percent decrease.
    Column G 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 drug utilization adjustment required by section 
1881(b)(14)(I). We expect that overall, ESRD facilities will experience 
a 9.4 percent decrease in estimated payments in 2014. ESRD facilities 
in Puerto Rico and the Virgin Islands are expected to receive an 11.5 
percent decrease in their estimated payments in CY 2014. This larger 
decrease is primarily due to the negative impact of the wage index. The 
other categories of types of facilities in the impact table show 
negative impacts ranging from a decrease of 9.9 percent to 9.0 percent 
in their 2014 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 2014, the fourth 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 CY 2014 will be approximately $8 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 3.8 percent in 
CY 2014.
d. Effects on Medicare Beneficiaries
    Under the ESRD PPS, beneficiaries are responsible for paying 20 
percent of the ESRD PPS payment amount. As a result of the projected 
9.4 percent overall decrease in the proposed ESRD PPS payment amounts 
in CY 2014, we estimate that there will be a decrease in beneficiary 
co-insurance payments of 9.4 percent in CY 2014, which translates to 
approximately $190 million.
e. Alternatives Considered
    For this proposed rule, we proposed to implement the full reduction 
required by section 1881(b)(14)(I) in CY 2014. In particular, we 
proposed a one-time reduction of $29.52 to the ESRD PPS base rate. We 
considered proposing to implement the reduction using a transition. For 
example, we considered transitioning the reduction over a 2 or 3-year 
period. We chose to implement the full reduction by reducing the ESRD 
PPS base rate by an adjustment to reflect change in the utilization of 
ESRD-related drugs and biologicals by comparing utilization data from 
2007 with such data from 2012.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2016 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 PPS payments by up to 2 
percent for dialysis facilities that fail to meet or exceed a TPS 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 TPS is described in section 
III.C.11 of this proposed rule. Any reductions in ESRD PPS payments as 
a result of a facility's performance under the PY 2016 ESRD QIP would 
begin with services furnished on January 1, 2016.
    As a result, based on the ESRD QIP outlined in this proposed rule, 
we estimate that, of the total number of dialysis facilities (including 
those not receiving an ESRD QIP TPS), approximately 36 percent or 2,069 
of the facilities would likely receive a payment reduction in PY 2016. 
Facilities that do not receive a TPS are not eligible for a payment 
reduction.
    The ESRD QIP impact assessment assumes an initial count of 5,771 
dialysis facilities paid through the PPS. Table 13 shows the overall 
estimated distribution of payment reductions resulting from the PY 2016 
ESRD QIP.

 Table 13--Estimated Distribution of PY 2016 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                 Number of    Percent of
          Payment  reduction  percent            facilities   facilities
------------------------------------------------------------------------
0.0...........................................        3,417         62.3
0.5...........................................          994         18.1
1.0...........................................          583         10.6
1.5...........................................          280          5.1
2.0...........................................          212          3.9
------------------------------------------------------------------------
Note:This table excludes 285 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 on several measures we have previously 
finalized and for which there were available data from CROWNWeb and 
Medicare claims. Measures used for the simulation are shown in Table 
14.

[[Page 40884]]

   Table 14--Data Used To Estimate PY 2016 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                               Period of time
                                  used to
                                 calculate
                                achievement
                                thresholds,
           Measure              performance        Performance period
                                 standards,
                              benchmarks, and
                                improvement
                                 thresholds
------------------------------------------------------------------------
Hemoglobin Greater Than 12 g/ Jan 2012-Jun     July 2012-Dec 2012.
 dL.                           2012.
Vascular Access Type:
    % Fistula...............  Jan 2011-Dec     Jan 2012-Dec 2012.
                               2011.
    % Catheter..............  Jan 2011-Dec     Jan 2012-Dec 2012.
                               2011.
Kt/V:
    Adult HD................  Jan 2011-Dec     Jan 2012-Dec 2012.
                               2011.
    Adult PD................  Jan 2011-Dec     Jan 2012-Dec 2012.
                               2011.
    Pediatric HD............  Jan 2011-Dec     Jan 2012-Dec 2012.
                               2011.
Hypercalcemia...............  Jan 2011-Dec     May 2012-Dec 2012.
                               2011.
------------------------------------------------------------------------

    Clinical measures with less than 11 cases for a facility were not 
included in that facility's Total Performance Score. 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.11 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, the NHSN Bloodstream Infection in 
Hemodialysis Outpatients and Patient Informed Consent for Anemia 
Treatment clinical measures, as well as the reporting measures were not 
included due to lack of data availability. Therefore, the simulated 
facility Total Performance Scores were calculated using only some of 
the clinical measure scores.
    To estimate the total payment reductions in PY 2016 for each 
facility resulting from this proposed rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
January 2012 and December 2012 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 
January 2012 through December 2012 times the estimated payment 
reduction percentage). For PY 2016 the total payment reduction for all 
of the 2,069 facilities expected to receive a reduction is 
approximately $26.4 million ($26,355,878). Further, we estimate that 
the total costs associated with the collection of information 
requirements for PY 2016 described in section VII.B.2 of this proposed 
rule would be approximately $15 thousand for all ESRD facilities. As a 
result, we estimate that ESRD facilities will experience an aggregate 
impact of $26.4 million ($39,486 + $26,355,878= $26,395,364) in PY 
2016, as a result of the PY 2016 ESRD QIP.
    Table 15 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2016. 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 2016 ESRD QIP, the actual impact of 
the PY 2016 ESRD QIP may vary significantly from the values provided 
here.

              Table 15--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2016 q
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of       Medicare        Number of      expected to      (percent
                                    facilities      treatments      facilities       receive a      change  in
                                                     2012  (in    with QIP score      payment       total ESRD
                                                   millions) \3\                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,771            38.1           5,486           2,069           -0.35
Facility Type:
    Freestanding................           5,270            35.4           5,116           1,854           -0.32
    Hospital-based..............             501             2.7             370             215           -0.67
Ownership Type:
    Large Dialysis..............           3,769            25.9           3,710           1,228           -0.29
    Regional Chain..............             885             6.1             849             355           -0.36
    Independent.................             614             3.9             572             292           -0.52
    Hospital-based (non-chain)..             400             2.1             289             169           -0.66
    Unknown.....................             103             0.2              66              25           -0.47
Facility Size:
    Large Entities..............           4,654            32.0           4,559           1,583           -0.30
    Small Entities \1\..........           1,014             5.9             861             461           -0.57
    Unknown.....................             103             0.2              66              25           -0.47
Urban/Rural Status:
    Rural.......................           1,257             6.3           1,191             416           -0.31
    Urban.......................           4,514            31.8           4,295           1,653           -0.35
Census Region:
    Northeast...................             786             5.8             741             309           -0.40
    Midwest.....................           1,325             7.7           1,233             478           -0.37
    South.......................           2,501            17.1           2,440             923           -0.34
    West........................             998             7.0             966             302           -0.27

[[Page 40885]]

 
    US Territories \2\..........             161             0.5             106              57           -0.66
Census Division:
    Pacific Rim.................               7             0.1               7               5           -0.92
    East North Central..........             946             5.7             868             354           -0.38
    East South Central..........             477             2.9             465             147           -0.27
    Middle Atlantic.............             634             4.6             595             254           -0.42
    Mountain....................             340             1.8             325              82           -0.21
    New England.................             170             1.3             154              58           -0.28
    Pacific.....................             677             5.2             652             224           -0.30
    South Atlantic..............           1,288             8.8           1,245             490           -0.37
    West North Central..........             416             2.0             383             129           -0.34
    West South Central..........             775             5.5             754             298           -0.34
    US Territories \2\..........              41             0.3              38              28           -0.86
Facility Size ( of
 total treatments):
    Less than 4,000 treatments..           1,044             2.6             853             273           -0.36
    4,000-9,999 treatments......           2,157            10.4           2,136             730           -0.30
    Over 10,000 treatments......           2,400            24.7           2,384           1,027           -0.38
    Unknown.....................             170             0.4             113              39           -0.41
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-
  reported status.
\2\ Includes Puerto Rico and Virgin Islands.
\3\ Based on claims data through December 2012.

b. Alternatives Considered for the PY 2016 ESRD QIP
    In the proposed PY 2016 ESRD QIP, we selected measures that we 
believe are important indicators of patient outcomes and quality of 
care as discussed in section III.C of this proposed rule. Poor 
management of anemia, for example, can lead to avoidable 
hospitalizations, decreased quality of life, and death. In order to 
provide strong incentives to improve patient outcomes in this 
clinically important area, we considered proposing a clinical measure 
for Pediatric Iron Therapy. However, upon further review we recognized 
that we lacked the necessary baseline data to establish achievement 
thresholds, performance standards, and benchmarks. We, therefore, 
proposed a reporting measure in order to gather the data we will need 
to introduce a clinical measure in the future. In the case of the NHSN 
Bloodstream Event in Hemodialysis Outpatient measure, we considered 
proposing a reporting measure instead of a clinical measure, because we 
lacked the necessary baseline data to establish achievement thresholds, 
performance standards, and benchmarks. However, we decided not to do 
so. Due to the great impact hospital acquired infections have upon 
patients and the industry, we believe it is important to begin 
assessing facilities on the number of these events rather than on 
merely whether they report these events as soon as possible. Similarly, 
in the case of the Patient Informed Consent for Anemia Treatment 
measure, we considered proposing a reporting measure instead of a 
clinical measure, because we lacked the necessary baseline data to 
establish achievement thresholds, performance standards, and 
benchmarks. We decided not to do because we believe that providing 
counseling on the risks and benefits of anemia treatment, and seeking 
informed consent for such treatment, is already a standard of clinical 
care in the ESRD provider community. We also considered proposing the 
Standardized Hospitalization Ratio Admissions (SHR) measure and the 
Standardized Mortality Ratio (SMR) measure as reporting measures for 
the PY 2016 ESRD QIP. We decided not to do so due to outstanding 
concerns about the measures' validity and reliability. As an 
alternative, we proposed the Comorbidity reporting measure to provide a 
reliable source of data that we can use to properly risk-adjust SHR and 
SMR clinical measures (should we propose to adopt such measures in the 
future), and to improve our understanding of the risk factors that 
contribute to morbidity and mortality in the ESRD patient population.
    In developing the proposed scoring methodology for the PY 2016 ESRD 
QIP, we considered several alternatives. For example, we considered 
weighting the clinical measures at 80 percent and the reporting 
measures at 20 percent of the Total Performance Score. We ultimately 
decided to propose the weighting methodology used in the PY 2015 ESRD 
QIP because the ratio of clinical to reporting measures did not change 
significantly, and also because we wanted to retain a strong incentive 
for facilities to meet the requirements for the reporting measures. We 
also considered a number of ways to establish achievement thresholds 
and benchmarks for the NHSN clinical measure. For example, we 
considered using baseline data from CYs 2012 through 2013 to set 
achievement thresholds and benchmarks. However, we ultimately decided 
to propose to use data from CY 2014 when establishing baseline data for 
scoring purposes, because facilities were not required to submit twelve 
full months of NHSN data during CY 2012-2013, and rates of healthcare-
acquired infections are susceptible to seasonal variability. In light 
of the importance of monitoring and preventing infections in the ESRD 
population, we decided that it would be preferable to propose a 
clinical measure with equivalent baseline and performance periods, 
rather than a reporting measure that would have less of a direct impact 
on clinical practice. We also considered a number of ways to score the 
Patient Informed Consent for Anemia Treatment clinical measure. In this 
case, we lacked baseline data that could be used to establish 
achievement thresholds and benchmarks, so we considered proposing a 
reporting

[[Page 40886]]

measure in place of the clinical measure. In light of the importance of 
the measure, however, we ultimately decided to propose a clinical 
measure in order to provide a stronger incentive for facilities to 
obtain informed consent from patients receiving anemia treatment. In 
considering possible scoring methodologies for the measure, we 
specifically considered setting the achievement threshold at 100 
percent because we believe that facilities should always obtain 
informed consent from patients receiving ESA. However, we recognized 
that unexpected events in the clinical setting might preclude the 
possibility of obtaining informed consent in every instance, so we 
ultimately decided to propose to set the achievement threshold for the 
measure at 92 percent. We selected 92 percent because this would allow 
facilities with 26 patients to meet the achievement threshold if they 
failed to obtain informed consent from 2 patients (see section III.C.8 
for more details).
3. DMEPOS Provisions
a. Effects of the Implementation of Fee Schedules for Splints, Casts 
and IOLs
    The implementation of fee schedules for use in paying claims for 
splints, casts, and IOLs inserted in a physician's office would result 
in administrative savings associated with determining and implementing 
the Medicare allowed payment amounts for these items. As a result, the 
agency would save approximately $94,000 in annual administrative 
expenses for calculating reasonable charge payment amounts and 
maintaining multiple pricing files necessary for making payment on a 
reasonable charge basis.
b. Clarification of the 3-Year MLR for DME
    We expect no significant impact regarding application of the 3-year 
MLR for DME. As we noted in the final regulation for the 3-year MLR, we 
believe that a vast majority of the categories of items that were 
classified as DME before January 1, 2012, did function for 3 or more 
years (76 FR 70289). The 3-year MLR is designed to represent a minimum 
threshold for determination of durability for equipment that is 
consistent with the statutory DME payment provisions and applies on a 
prospective basis, effective January 1, 2012. CMS recognizes that the 
healthcare industry and beneficiaries have come to rely on items that 
have qualified as DME prior to January 1, 2012, regardless of whether 
those items met the 3-year MLR set forth at Sec.  414.202. We note that 
given that reliance and consistent with the regulation at Sec.  
414.202, CMS will not reopen those prior decisions and reclassify the 
equipment in light of the new 3-year standard. We believe that 
continuing the Medicare coverage for all the items that qualified as 
DME on or prior to January 1, 2012, would avoid disrupting the 
continuity of care for the beneficiaries that received these items for 
medical treatment prior to January 1, 2012. As noted in the final rule 
(76 FR 70301, 70311) it is difficult to predict how many different 
types of new devices will be introduced in the market in the future 
that may or may not meet the 3-year MLR. However, even absent the 3-
year MLR, it is likely that new products which do not meet the 3-year 
MLR will not qualify as DME based upon our current interpretation of 
the criteria for DME. It is possible that with the clarification of the 
3-year MLR, we will limit what can be covered as DME compared to what 
we would have covered as DME absent this regulatory clarification. 
Additionally, to the extent the regulatory change is binding to some 
new products, there may be reduced program cost. The final rule does 
apply to items that were classified as DME on or before January 1, 2012 
which tends to lessen the overall impact to the program. In general, we 
expect that the final rule (76 FR 70311) and clarification we are now 
proposing of the 3-year MLR would have a minimal, if any, savings 
impact on the expenditures under program. This is because the vast 
majority if items classified as DME in the past have had lifetimes of 3 
years or more and so there would be very few instances, if any, where 
this clarification will have any impact on classification of items as 
DME.
c. Definition of Routinely Purchased DME
    As discussed in section IV of this rule, this rule would clarify 
the definition of routinely purchased equipment set forth at section 
Sec.  414.220(a) and would classify an expensive item of DME or 
accessory (over $150) as a capped rental item if it was not acquired by 
purchase on a national basis at least 75 percent of the time during the 
period July 1986 through June 1987. Because concerns were brought to 
our attention on the application of the definition of routinely 
purchased DME, we performed a review of the approximately 250 HCPCS 
codes assigned to the routinely purchased category of DME in excess of 
$150. Based on our review, and given the definition of routinely 
purchased equipment set forth at section Sec.  414.220, we would 
classify such items in the capped rental category if the items were not 
acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987.
    As shown in Table 11 of section IV of the preamble, our review 
identified 80 current HCPCS codes requiring reclassification from 
routinely purchased DME to capped rental DME. The majority of codes 
relate to manual wheelchairs and wheelchair accessories. We have 
displayed in Column B accessories of complex rehabilitative power 
wheelchairs that would be classified as capped rental items and for 
which suppliers must also offer to the beneficiary on a lump sum 
purchase basis in accordance with Sec.  414.229(h)(3) of the 
regulations. In addition, we have displayed in Table 16 below and 
Column B of Table 11 of section IV of the preamble approximately 14 
codes which would be reclassified in two stages effective July 1, 2016, 
rather than January 1, 2014, for all items included in competitive 
bidding programs other than those furnished in the Round 1 Recompete 
programs and areas; and on January 1, 2017, for those items furnished 
as part of the Round I Recompete competitive bidding programs.

  Table 16--Items Reclassified to Capped Rental DME Category Effective
                             July 1, 2016 *
------------------------------------------------------------------------
             HCPCS category                           HCPCS
------------------------------------------------------------------------
Support Surfaces.......................  E0197
Walkers................................  E0140 E0149
Wheelchairs Options/Accessories........  E0985 E1020 E1028 E2228 E2368
                                          E2369 E2370 E2375 K0015 K0070
Wheelchair Seating.....................  E0955
------------------------------------------------------------------------
* Items furnished in accordance with Round 1 Recompete contracts would
  be reclassified effective January 1, 2017.

[[Page 40887]]

    In Table 17 below, we show estimated savings associated with making 
payment on a capped rental basis rather than a lump sum purchase basis 
for items that would be reclassified.

  Table 17--Impact of Items Reclassified to Capped Rental DME Category
------------------------------------------------------------------------
                                                  Impact to the federal
                       FY                            government (in $
                                                        millions)
------------------------------------------------------------------------
2014...........................................                      -20
2015...........................................                      -20
2016...........................................                      -20
2017...........................................                      -30
2018...........................................                      -40
------------------------------------------------------------------------

    The decrease in expenditures is expected because the changes would 
eliminate the lump sum purchase method for the certain items, and 
instead payment would be made under the monthly rental method resulting 
in lower aggregate payments because many beneficiaries do not rent 
items for as long as 13 months. In order to prepare our impact on the 
Medicare program, we reviewed claims data and utilization for all items 
currently classified as capped rental items from 2009 through 2011 and 
determined that the weighted average number of allowed monthly rental 
services for beneficiaries receiving capped rental items during that 
period was 8 months. We therefore used 8 months as the estimated number 
of months beneficiaries would rent items in Table 11 of section IV of 
the preamble that would not have a purchase option. All anticipated 
savings include the price growth for the covered item fee schedule 
update factors for DME mandated by section 1834(a)(14) of the Act. In 
addition, our estimate takes into account projected changes in DME 
beneficiary enrollment. Furthermore, we reflected the savings for these 
items that are currently included under any existing competitive 
bidding program and which will be reclassified from routinely purchased 
to capped rental effective July 1, 2016.
    From table 11 of section IV of the preamble above, entitled 
Routinely Purchased Items Reclassified to Capped Rental, for items that 
would be paid on a capped rental basis with no purchase option, the 
highest volume items in terms of 2012 allowed charges are:

             Table 18--Three Highest Volume Routinely Purchased Items Reclassified to Capped Rental
----------------------------------------------------------------------------------------------------------------
                                                                                      Allowed
               HCPCS                             Item              Purchase fee       charges       Code added
----------------------------------------------------------------------------------------------------------------
E0760..............................  Ultrasonic Bone Growth               $3,514     $21,370,310            1997
                                      Stimulator.
E2510..............................  Speech Generating Device...           7,356      20,170,162            2001
E1161..............................  Tilt In Space Manual                  2,571      18,666,674            2003
                                      Wheelchair.
----------------------------------------------------------------------------------------------------------------

    The allowed charges in 2012 for these three items combined were 
approximately $60 million, which makes up almost half of approximately 
$130 million in allowed charges for items that would no longer be 
eligible for purchase. Under the capped rental payment rules, these 
items would be rented for up to 13-continuous months, following which 
title to the equipment would transfer from the supplier to the 
beneficiary.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars--a004--a-4), in Table 19 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 19--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                Category                             Transfers
------------------------------------------------------------------------
                          ESRD PPS for CY 2014
------------------------------------------------------------------------
Annualized Monetized Transfers..........  $-780 million.
From Whom to Whom.......................  Federal government to ESRD
                                           providers.
Increased Beneficiary Co-insurance        $-190 million.
 Payments.
From Whom to Whom.......................  Beneficiaries to ESRD
                                           providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2016
------------------------------------------------------------------------
Annualized Monetized Transfers..........  -$26.4 million *
From Whom to Whom.......................  Federal government to ESRD
                                           providers.
------------------------------------------------------------------------
                Category                               Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider Costs  $39.5 thousand **
------------------------------------------------------------------------

                                    DME Definition of Routinely Purchased DME
----------------------------------------------------------------------------------------------------------------
           Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfer   -$25.3 million............              2013                7%         2014-2018
 Payments.                      -$25.7 million............              2013                3%         2014-2018
                               ---------------------------------------------------------------------------------
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.11 of this proposed rule.
** It is the cost associated with the collection of information requirements for all ESRD facilities.

[[Page 40888]]

XI. 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 18 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 $35.5 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://www.sba.gov/content/small-business-size-standards (Kidney 
Dialysis Centers are listed as 621492 with a size standard of $35.5 
million).
    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 18 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 12. Using the 
definitions in this ownership category, we consider the 614 facilities 
that are independent and the 400 facilities that are shown as hospital-
based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more 
than $35.5 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 
9.4 percent decrease in payments for CY 2014. An independent facility 
(as defined by ownership type) is estimated to receive a 9.5 percent 
decrease in payments for CY 2014.
    Based on the proposed QIP payment reduction impacts to ESRD 
facilities for PY 2016, we estimate that of the 2,069 ESRD facilities 
expected to receive a payment reduction, 461 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 13 
(``Estimated Distribution of PY 2016 ESRD QIP Payment Reductions'') and 
Table 15 (``Impact of Proposed QIP Payment Reductions to ESRD 
Facilities for PY 2016'') above. We anticipate the payment reductions 
to average approximately $12,738 per facility among the 2,069 
facilities receiving a payment reduction, with an average of $13,810 
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 461 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 1,014 small entity 
facilities. For this entire group of 1,014 ESRD small entity 
facilities, a decrease of 0.57 percent in aggregate ESRD payments is 
observed.
    Splints, casts and intraocular lenses (IOLs) affected by this rule 
are generally furnished by physicians. Approximately 95 percent of 
physicians are considered to be small entities for the purposes of the 
RFA. Individuals and states are not included in the definition of a 
small entity. The reasonable charge payment amounts for splints and 
casts are based on national reasonable charge amounts increased each 
year by the 12-month percentage change in the CPI-U ending June of the 
previous year. These national inflation-indexed charges can easily be 
converted to fee schedule amounts with no impact on the national 
Medicare payment amounts for these items. Therefore, the fee schedule 
amounts that would take effect on January 1, 2014, for splints and 
casts would be the same as the reasonable charge amounts that would 
take effect on January 1, 2014, for these items. This rule would have 
no impact on small businesses that furnish these items. Given that 
Medicare pays for very few intraocular lenses inserted in a physician's 
office, these entities do not rely on Medicare payment for these items 
to support their businesses. Because the fee schedule amounts that 
would take effect on January 1, 2014, for intraocular lenses inserted 
in a physician's office would be based on the national average allowed 
charge for the item, the payment amounts these entities would receive 
under the fee schedule will be, on average, the same amounts they are 
currently paid for these items when considering the small national 
volume of claims as a whole. For example, in 2011, the average allowed 
charge for an IOL inserted in a physician's office was $174 for just 
287 cases nationwide. If a particular physician office is a small 
business that charges less than $174 per IOL, a national fee schedule 
amount of $174 could increase payment for this small business for this 
item. Alternatively, if a particular physician office is a small 
business that charges more than $174 per IOL, a national fee schedule 
amount of $174 could decrease payment for this small business for this 
item. However, with only 287 cases nationwide, implementing a national 
fee of $174 would not have a significant impact on any physician office 
that is a small business because the volume of claims indicates that 
the small businesses are not relying on payment for these items to fund 
their businesses (physician practices) as a whole. Therefore, we expect 
that the overall impact of this rule on small businesses that are 
physician offices that insert IOLs covered by Medicare would be 
minimal. Approximately 85 percent of suppliers of DMEPOS in general are 
considered to be small entities for the purposes of the RFA. We expect 
that the impact of moving certain expensive DME items from the 
routinely purchased payment class to the capped rental payment class on 
small business will be minimal since the suppliers would still receive 
105 percent of the purchase fee for items that are rented for the full 
13-month capped rental period. In addition, the supplier would retain 
ownership of equipment that is not used for 13 months and can furnish 
the equipment to another beneficiary, beginning a new, separate 13-
month capped rental period for the same item.
    Therefore, the Secretary has determined that this proposed rule 
will 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

[[Page 40889]]

operations of a substantial number of small rural hospitals because 
most dialysis facilities are freestanding. While there are 159 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 159 
rural hospital-based dialysis facilities will experience an estimated 
10.1 percent decrease in payments. As a result, this proposed rule is 
estimated to have a significant impact on small rural hospitals. 
Therefore, the Secretary has determined that this proposed rule will 
have a significant impact on the operations of a substantial number of 
small rural hospitals.

XII. 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 2013, that threshold is approximately $141 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 $141 million.

XIII. 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.

XIV. Congressional Review Act

    This proposed rule is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.
    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

XV. 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 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, and 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

0
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), sec. 3201 of Pub. L. 112-96 (126 
Stat. 156), and sec. 632 of Pub. L. 112-240 (126 Stat. 2354).

Sec.  413.174  [Amended]

0
2. Section 413.174 (f)(6) is amended by removing ``January 1, 2014'' 
and by adding in its place ``January 1, 2016.

Sec.  413.237  [Amended]

0
3. Section 413.237(a)(1)(iv) is amended by removing ``excluding'' and 
by adding in its place ``including''; and by removing ``January 1, 
2014'' and adding in its place ``January 1, 2016''.

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

0
4. The authority citation for part 414 continues to read as follows:

    Authority: Secs. 1102, 1871, and 1881(b)(1) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)).

0
5. The heading for subpart C is revised to read as follows:

Subpart C--Fee Schedules for Parenteral and Enteral Nutrition (PEN) 
Nutrients, Equipment and Supplies, Splints, Casts, and Certain 
Intraocular Lenses (IOLs)

0
6. Section 414.100 is revised to read as follows:

Sec.  414.100  Purpose.

    This subpart implements fee schedules for PEN items and services, 
splints and casts, and IOLs inserted in a physician's office as 
authorized by section 1842(s) of the Act.
0
7. Section 414.102 is amended by revising paragraphs (a) introductory 
text, (a)(2), (b)(1), and (c) to read as follows:

Sec.  414.102  General payment rules.

    (a) General rule. For PEN items and services furnished on or after 
January 1, 2002, and for splints and casts and IOLs inserted in a 
physician's office on or after January 1, 2014, Medicare pays for the 
items and services as described in paragraph (b) of this section on the 
basis of 80 percent of the lesser of--
* * * * *
    (2) The fee schedule amount for the item or service, as determined 
in accordance with Sec. Sec.  414.104 thru 414.108.
    (b) * * *
    (1) CMS or the carrier determines fee schedules for parenteral and 
enteral nutrition (PEN) nutrients, equipment, and supplies, splints and 
casts, and IOLs inserted in a physician's office, as specified in 
Sec. Sec.  414.104 thru 414.108.
* * * * *
    (c) Updating the fee schedule amounts. For the years 2003 through 
2010 for PEN items and services, the fee schedule amounts of the 
preceding year are updated by the percentage increase in the CPI-U for 
the 12-month period ending with June of the preceding year. For each 
year subsequent to 2010 for PEN items and services and for each year 
subsequent to 2014 for splints and casts, and IOLs inserted in a 
physician's office, the fee schedule amounts of the preceding year are 
updated by the percentage increase in the CPI-U for the 12-month period 
ending with June of

[[Page 40890]]

the preceding year, reduced by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act.
0
8. Section 414.106 is added to read as follows:

Sec.  414.106  Splints and casts.

    (a) Payment rules. Payment is made in a lump sum for splints and 
casts.
    (b) Fee schedule amount. The fee schedule amount for payment for an 
item or service furnished in 2014 is the reasonable charge amount for 
2013, updated by the percentage increase in the CPI-U for the 12-month 
period ending with June of 2013.
0
9. Section 414.108 is added to read as follows:

Sec.  414.108  IOLs inserted in a physician's office.

    (a) Payment rules. Payment is made in a lump sum for IOLs inserted 
in a physician's office.
    (b) Fee schedule amount. The fee schedule amount for payment for an 
IOL furnished in 2014 is the national average allowed charge for the 
IOL furnished from in calendar year 2012, updated by the percentage 
increase in the CPI-U for the 24-month period ending with June of 2013.
0
10. Revise the heading to Subpart D to read as follows:

Subpart D--Payment for Durable Medical Equipment, Prosthetic and 
Orthotic Devices, and Surgical Dressings

* * * * *
0
11. Section Sec.  414.200 is revised to read as follows:

Sec.  414.200  Purpose.

    This subpart implements sections 1834(a), (h) and (i) of the Act by 
specifying how payments are made for the purchase or rental of new and 
used durable medical equipment, prosthetic and orthotic devices, and 
surgical dressings for Medicare beneficiaries.
0
12. Section 414.226 is amended by revising paragraph (c)(6) to read as 
follows:

Sec.  414.226  Oxygen and oxygen equipment.

* * * * *
    (c) * * *
    (6) Beginning in 2008, CMS makes an annual adjustment to the 
national limited monthly payment rate for items described in paragraph 
(c)(1)(i) of this section to ensure that such payment rates do not 
result in expenditures for any year that are more or less than the 
expenditures that would have been made if such classes had not been 
established.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 19, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 26, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-16107 Filed 7-1-13; 4:15 pm]
BILLING CODE 4120-01-P
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