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. 

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. 
CMS-1526-P 2 

 

 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-- 
CMS-1526-P 3 

 

 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 stampin 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. 
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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 
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schedule an appointment to view public comments, phone 1-800-743-3951. 

Electronic Access 

 This Federal Register document is also available from the Federal Register online 

database through Federal Digital System (FDsys), a service of the U.S. Government Printing 

Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/. 

Addenda Are Only Available Through the Internet on the CMS Web Site 

 In the past, a majority of the Addenda referred to throughout the preamble of our 

proposed and final rules were available in the Federal Register. However, the Addenda of the 

annual proposed and final rules will no longer be available in the Federal Register. Instead, 

these Addenda to the annual proposed and final rules will be available only through the Internet 

on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective 

Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. 

Readers who experience any problems accessing any of the Addenda to the proposed and final 

rules of the ESRD PPS that are posted on the CMS Web site identified above should contact 

Michelle Cruse at 410-786-7540. 

Table of Contents 

 To assist readers in referencing sections contained in this preamble, we are providing a 

Table of Contents. Some of the issues discussed in this preamble affect the payment policies, but 

do not require changes to the regulations in the Code of Federal Regulations (CFR). 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) 

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

3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) 
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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 ESRDRelated 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 
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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 
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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 
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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 
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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 
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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 

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 
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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 
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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 
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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) (Public 

Law 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 
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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 ESRDrelated 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 
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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 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 fixeddollar 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 fixeddollar 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. 
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• 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 ICD10-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: 

o Hemoglobin Greater Than 12 g/dL, a clinical measure 

o Patient Informed Consent for Anemia Treatment, a clinical measure* 

o Anemia Management, a reporting measure†

o Pediatric Iron Therapy, a reporting measure* 

• To evaluate dialysis adequacy: 

o A Kt/V measure for adult hemodialysis patients, a clinical measure 

o A Kt/V measure for adult peritoneal dialysis patients, a clinical measure 

o 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: 
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o An arteriovenous fistula measure, a clinical measure 

o A catheter measure, a clinical measure 

• To address effective bone mineral metabolism management: 

o Hypercalcemia, a clinical measure * 

o Mineral Metabolism, a reporting measure†

• To address safety: 

o National Healthcare Safety Network (NHSN) Bloodstream Infection in 

Hemodialysis Outpatients, a clinical measure* 

• To assess patient experience: 

o ICH CAHPS survey reporting measure‡

• To gather data regarding comorbidities: 

o Comorbidity, a reporting measure* 

* Denotes that this measure is new to the ESRD QIP. 

†

 Denotes that this measure is revised in the ESRD QIP. 

‡

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 §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 §414.229, if the items were not acquired by 
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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 applythe 3-year minimum lifetime 

requirement (MLR) set forth at § 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 
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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 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-
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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 § 414.202. We note that given that reliance and consistent 

with the regulation at § 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)
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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 
CMS-1526-P 23 

 

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). 
CMS-1526-P 24 

 

• 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. 

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
CMS-1526-P 25 

 

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 §413.220 and §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 
CMS-1526-P 26 

 

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 §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 budgetneutrality 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 ESRDRelated 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 
CMS-1526-P 27 

 

(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 
CMS-1526-P 28 

 

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 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 
CMS-1526-P 29 

 

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 ESRDrelated 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 
CMS-1526-P 30 

 

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 
CMS-1526-P 31 

 

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 
CMS-1526-P 32 

 

of the ESRDB market basket percentage increase factor to inflate prices for drugs and biologicals 

to CY 2014 levels. 

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 
CMS-1526-P 33 

 

$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 website located at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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 
CMS-1526-P 34 

 

$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. 
CMS-1526-P 35 

 

 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 

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 
CMS-1526-P 36 

 

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 
CMS-1526-P 37 

 

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 
CMS-1526-P 38 

 

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 prefloor, 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 
CMS-1526-P 39 

 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/EndStage-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. 

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 
CMS-1526-P 40 

 

to pay these facilities under the ESRD PPS, we must identify an appropriate wage index value 

for these areas as required under §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 CBSAbased 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 
CMS-1526-P 41 

 

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. 
CMS-1526-P 42 

 

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 
CMS-1526-P 43 

 

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 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 budgetneutrality 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 mixadjusted hospital data to compute the wage index values, 2012 outpatient claims (paid and 
CMS-1526-P 44 

 

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 Website 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 Website at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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 budgetneutral when compared to the target amount of expenditures. That is, the wage index budgetneutrality 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 
CMS-1526-P 45 

 

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. 
CMS-1526-P 46 

 

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, shortterm 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 subregulatory 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 website at the following link: http://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/Downloads/R2255CP.pdf. There have not been updates to the 

ICD-9-CM codes eligible for the comorbidity payment adjustment since October 1, 2011. 
CMS-1526-P 47 

 

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 
CMS-1526-P 48 

 

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. 
CMS-1526-P 49 

 

Table 1: One ICD-9-CM Code Crosswalks to One ICD-10-CM Code 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

530.21 Ulcer of esophagus with bleeding K22.11 Ulcer of esophagus with bleeding 

535.71 Eosinophilic gastritis, with hemorrhage K52.81 Eosinophilic gastritis or gastroenteritis 

537.83 Angiodysplasia of stomach and duodenum with hemorrhage K31.811 Angiodysplasia of stomach and duodenum with bleeding 

569.85 Angiodysplasia of intestine with hemorrhage K55.21 Angiodysplasia of colon with hemorrhage 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

003.22 Salmonella pneumonia A02.22 Salmonella pneumonia 

482.0 Pneumonia due to Klebsiella pneumonia J15.0 Pneumonia due to Klebsiella pneumoniae 

482.1 Pneumonia due to Pseudomonas J15.1 Pneumonia due to Pseudomonas 

482.2 Pneumonia due to Hemophilus influenzae [H. influenzae] J14 Pneumonia due to Hemophilus influenzae 

482.32 Pneumonia due to Streptococcus, group B J15.3 Pneumonia due to streptococcus, group B 

482.40 Pneumonia due to Staphylococcus, unspecified J15.20 Pneumonia due to staphylococcus, unspecified 

482.41 Methicillin susceptible pneumonia due to Staphylococcus 

aureus 

J15.211 Pneumonia due to Methicillin susceptible Staphylococcus 

aureus 

482.42 Methicillin resistant pneumonia due to Staphylococcus 

aureus 

J15.212 Pneumonia due to Methicillin resistant Staphylococcus 

aureus 

482.49 Other Staphylococcus pneumonia J15.29 Pneumonia due to other staphylococcus 

482.82 Pneumonia due to escherichia coli [E. coli] J15.5 Pneumonia due to Escherichia coli 

482.83 Pneumonia due to other gram-negative bacteria J15.6 Pneumonia due to other aerobic Gram-negative bacteria 

482.84 Pneumonia due to Legionnaires' disease A48.1 Legionnaires' disease 

507.0 Pneumonitis due to inhalation of food or vomitus J69.0 Pneumonitis due to inhalation of food and vomit 

507.8 Pneumonitis due to other solids and liquids J69.8 Pneumonitis due to inhalation of other solids and liquids 

510.0 Empyema with fistula J86.0 Pyothorax with fistula 

510.9 Empyema without mention of fistula J86.9 Pyothorax without fistula 

Pericarditis 

ICD-9 Descriptor ICD-10 Descriptor 

420.91 Acute idiopathic pericarditis I30.0 Acute nonspecific idiopathic pericarditis 

Hereditary Hemolytic and Sickle Cell Anemia 

ICD-9 Descriptor ICD-10 Descriptor 

282.0 Hereditary spherocytosis D58.0 Hereditary spherocytosis 

282.1 Hereditary elliptocytosis D58.1 Hereditary elliptocytosis 

282.41 Sickle-cell thalassemia without crisis D57.40 Sickle-cell thalassemia 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 thalassemia D56.5 Hemoglobin E-beta thalassemia 

282.49 Other thalassemia D56.8 Other thalassemias 

282.61 Hb-SS disease without crisis D57.1 Sickle-cell disease without crisis 

282.63 Sickle-cell/Hb-C disease without crisis D57.20 Sickle-cell/Hb-C disease without crisis 

282.68 Other sickle-cell disease without crisis D57.80 Other sickle-cell disorders without crisis 

Myelodysplastic Syndrome 

ICD-9 Descriptor ICD-10 Descriptor 

238.7 Essential thrombocythemia D47.3 Essential (hemorrhagic) thrombocythemia 

238.73 High grade myelodysplastic syndrome lesions D46.22 Refractory anemia with excess of blasts 2 
CMS-1526-P 50 

 

238.74 Myelodysplastic syndrome with 5q deletion D46.C Myelodysplastic syndrome with isolated del(5q) 

chromosomal abnormality 

238.76 Myelofibrosis with myeloid metaplasia D47.1 Chronic 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 
CMS-1526-P 51 

 

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 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

K57.11 Diverticulosis of small intestine without perforation or abscess 

with bleeding 

562 Diverticulosis of small intestine with hemorrhage 

K57.51 Diverticulosis of both small and large intestine without 

perforation or abscess with bleeding 

K57.01 Diverticulitis of small intestine with 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 

562.03 Diverticulitis of small intestine with hemorrhage 

K57.53 Diverticulitis of both small and large intestine without 

perforation or abscess with bleeding 

K57.31 Diverticulosis of large intestine without perforation or abscess 

with bleeding 

K57.91 Diverticulosis of intestine, part unspecified, without 

perforation or abscess with bleeding 

562.12 Diverticulosis of colon with hemorrhage 

K57.51 Diverticulosis of both small and large intestine without 

perforation or abscess with bleeding 

K57.21 Diverticulitis of large 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 

562.13 Diverticulitis of colon with hemorrhage 

K57.53 Diverticulitis of both small and large intestine without 

perforation or abscess with bleeding 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

J85.0 Gangrene and necrosis of lung 

J85.1 Abscess of lung with pneumonia 

513.0 Abscess of lung 

J85.2 Abscess of lung without pneumonia 

Pericarditis 

ICD-9 Descriptor ICD-10 Descriptor 

A18.84 Tuberculosis of heart 

I32 Pericarditis in diseases classified elsewhere 

420.0 Acute pericarditis in diseases classified elsewhere 

M32.12 Pericarditis in systemic lupus erythematosus 

420.90 Acute pericarditis, unspecified I30.1 Infective pericarditis 

I30.9 Acute pericarditis, unspecified 

420.99 Other acute pericarditis I30.8 Other forms of acute pericarditis 

I30.9 Acute pericarditis, unspecified 
CMS-1526-P 52 

 

Hereditary Hemolytic and sickle cell anemia 

ICD-9 Descriptor ICD-10 Descriptor 

D55.0 Anemia due to glucose-6-phosphate dehydrogenase [G6PD] 

deficiency 

282.2 Anemias due to disorders of glutathione metabolism 

D55.1 Anemia due to other disorders of glutathione metabolism 

D55.2 Anemia due to disorders of glycolytic enzymes 

D55.3 Anemia due to disorders of nucleotide metabolism 

D55.8 Other anemias due to enzyme disorders 

282.3 Other hemolytic anemias due to enzyme deficiency 

D55.9 Anemia due to enzyme disorder, unspecified 

D57.411 Sickle-cell thalassemia with acute chest syndrome 

D57.412 Sickle-cell thalassemia with splenic sequestration 

282.42 Sickle-cell thalassemia with crisis 

D57.419 Sickle-cell thalassemia with crisis, unspecified 

D57.00 Hb-SS disease with crisis, unspecified 

D57.01 Hb-SS disease with acute chest syndrome 

282.62 Hb-SS disease with crisis 

D57.02 Hb-SS disease with splenic sequestration 

D57.211 Sickle-cell/Hb-C disease with acute chest syndrome 

D57.212 Sickle-cell/Hb-C disease with splenic sequestration 

282.64 Sickle-cell/Hb-C disease with crisis 

D57.219 Sickle-cell/Hb-C disease with crisis, unspecified 

D57.811 Other sickle-cell disorders with acute chest syndrome 

D57.812 Other sickle-cell disorders with splenic sequestration 

282.69 Other sickle-cell disease with crisis 

D57.819 Other sickle-cell disorders with crisis, unspecified 

Monoclonal Gammopathy 

ICD-9 Descriptor ICD-10 Descriptor 

273.1 Monoclonal paraproteinemia D47.2 Monoclonal gammopathy 

D89.2 Hypergammaglobulinemia, unspecified 

Myelodysplastic Syndrome 

ICD-9 Descriptor ICD-10 Descriptor 

D46.0 Refractory anemia without ring 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 

238.72 Low grade myelodysplastic syndrome lesions 

D46.B Refractory cytopenia with multilineage dysplasia and ring 

sideroblasts 

238.75 Myelodysplastic syndrome, unspecified D46.9 Myelodysplastic syndrome, unspecified 

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 ICD10-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 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 
CMS-1526-P 53 

 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

533.20 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, without mention of obstruction 

533.21 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, with obstruction 

K27.2 Acute peptic ulcer, site unspecified, with both hemorrhage 

and perforation 

533.40 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, without mention of obstruction 

533.41 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, with obstruction 

K27.4 Chronic or unspecified peptic ulcer, site unspecified, with 

hemorrhage 

533.60 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, without mention of obstruction 

533.61 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, with obstruction 

K27.6 Chronic or unspecified peptic ulcer, site unspecified, with 

both hemorrhage and perforation 

534.00 Acute gastrojejunal ulcer with hemorrhage, without mention of 

obstruction 

534.01 Acute gastrojejunal ulcer, with hemorrhage, with obstruction 

K28.0 Acute gastrojejunal ulcer with hemorrhage 

534.20 Acute gastrojejunal ulcer with hemorrhage and perforation, 

without mention of obstruction 

534.21 Acute gastrojejunal ulcer with hemorrhage and perforation, 

with obstruction 

K28.2 Acute gastrojejunal ulcer with both hemorrhage and 

perforation 

534.40 Chronic or unspecified gastrojejunal ulcer with hemorrhage, 

without mention of obstruction 

534.41 Chronic or unspecified gastrojejunal ulcer, with hemorrhage, 

with obstruction 

K28.4 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

534.60 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, without mention of obstruction 

534.61 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, with obstruction 

K28.6 Chronic or unspecified gastrojejunal ulcer with both 

hemorrhage and perforation 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

482.30 Pneumonia due to Streptococcus, unspecified 

482.31 Pneumonia due to Streptococcus, group A 

482.39 Pneumonia due to other Streptococcus 

J15.4 Pneumonia due to other streptococci 

482.81 Pneumonia due to anaerobes 

482.89 Pneumonia due to other specified bacteria 

J15.8 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 
CMS-1526-P 54 

 

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 §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 
CMS-1526-P 55 

 

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 §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 §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. 
CMS-1526-P 56 

 

 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 
CMS-1526-P 57 

 

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 for 

CY2013 (based on 2011 data 

price inflated to 

2013)* 

Column II

Proposed outlier policy for 

CY2014 (based on 2012 data 

price inflated to 

2014)* 

Age 

< 18 

Age 

>= 18 

Age 

< 18 

Age 

>= 18 

Average outlier services MAP 

amount per treatment1 $38.65 $61.38 $38.65 $52.45 

Adjustments 

Standardization for 

outlier services2 1.0927 0.9878 1.0960 0.9893 

 MIPPA reduction 0.98 0.98 0.98 0.98 

Adjusted average 

outlier services 

MAP amount3 

$41.39 $59.42 $41.51 $50.85 

Fixed dollar loss amount that 

is added to the predicted MAP 

to determine the outlier 

threshold4 

$47.32 $110.22 $54.23 $94.26 

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 (t

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 servic

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 pla

ESA claims monitoring policy were applied. 
CMS-1526-P 58 

 

2

Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing case mix adjusters for adult

patient groups. 

3

This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the predicted outlier services MAP

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 
CMS-1526-P 59 

 

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 
CMS-1526-P 60 

 

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 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 website at 

the following link: http://www.cms.gov/Medicare/Provider-Enrollment-andCertification/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 §494.70(7) 

requires a facility to inform patients about all treatment modalities’ and settings, including but 
CMS-1526-P 61 

 

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.” 
CMS-1526-P 62 

 

Table 5: Medicare’s Self or Home Training by Modality 

Home 

Hemodialysis 

(HHD) 

Training 

HHD training is generally furnished in 4 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 

Dialysis (IPD) 

Training 

IPD training is generally furnished in 4 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 

Peritoneal 

Dialysis 

(CAPD) 

Training 

CAPD training is generally furnished in 2 weeks. Medicare will pay the ESRD facility 

for up to 15 PD training sessions. In CAPD programs both the patient and the caregiver 

are trained.

Continuous 

Cycling 

Peritoneal 

Dialysis 

(CCPD) 

Training 

CCPD training is generally furnished in 2 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 
CMS-1526-P 63 

 

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 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 
CMS-1526-P 64 

 

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 (77FR 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 
CMS-1526-P 65 

 

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 
CMS-1526-P 66 

 

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 oralonly 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 ESRDrelated 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 

drugsconsistent 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 
CMS-1526-P 67 

 

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 endstage 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 

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 
CMS-1526-P 68 

 

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 Marina 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, 
CMS-1526-P 69 

 

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

 

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: 

 

1

 2012 Annual Progress Report to Congress: National Strategy for Quality Improvement in Health Care, 

http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf. 
CMS-1526-P 70 

 

• To evaluate anemia management: 

o Hemoglobin Greater Than 12 g/dL, a clinical measure 

o Patient Informed Consent for Anemia Treatment, a clinical measure* 

o Pediatric Iron Therapy, a reporting measure* 

o Anemia Management, a reporting measure (revised) 

• To evaluate dialysis adequacy: 

o A Kt/V measure for adult hemodialysis patients, a clinical measure 

o A Kt/V measure for adult peritoneal dialysis patients, a clinical measure 

o 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: 

o An arterial venous (AV) fistula measure, a clinical measure 

o A catheter measure, a clinical measure 

• To address effective bone mineral metabolism management: 

o Hypercalcemia, a clinical measure* 

o Mineral Metabolism, a reporting measure (revised) 

• To address patient safety: 

o National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis 

Outpatients, a clinical measure* 

• To address patient-centered experience: 

o In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems 

(ICH CAHPS), a reporting measure**

• To gather data regarding comorbidities:
CMS-1526-P 71 

 

o 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 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 
CMS-1526-P 72 

 

(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) 
CMS-1526-P 73 

 

• 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 # Measure Title and Description 

N/A Anemia Management: Hgb >12 

Percentage of Medicare patients with a mean hemoglobin value greater than 12 g/dL. 
CMS-1526-P 74 

 

NQF # Measure Title and Description 

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/A1 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/A2 In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) 

Survey Administration+

Attestation that facility administered survey in accordance with specifications. 

N/A3 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 (NQF#1460) 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 NQF#0258. 

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# Measure Title 

N/A Anemia of chronic kidney disease: Patient Informed Consent for Anemia Treatment 

N/A1 Use of Iron Therapy for Pediatric Patients Reporting 

1454 Proportion of Patients with Hypercalcemia 

N/A2 NHSN Bloodstream Infection in Hemodialysis Outpatients 

N/A3 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 
CMS-1526-P 75 

 

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 
CMS-1526-P 76 

 

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 ICHCAHPS 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 
CMS-1526-P 77 

 

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 CMSapproved vendor to conduct the ICH CAHPS survey according to CMS (rather than AHRQ) 

specifications, available at the ICH CAHPS website (https://ichcahps.org). Facilities will need to 

register on the https://ichcahps.org website 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 website. 

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 website. 

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 
CMS-1526-P 78 

 

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. 
CMS-1526-P 79 

 

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/publicmeasures/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 
CMS-1526-P 80 

 

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/public-measures/AnemiaManagement-Reporting2016NPRM.pdf. We request comment on this proposal to revise the Anemia Management 
CMS-1526-P 81 

 

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. 
CMS-1526-P 82 

 

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 labeling2

 for ESAs and 

Kidney Disease: Improving Global Outcomes (KDIGO) Anemia Management Guidelines3

 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. 
CMS-1526-P 83 

 

We welcome comments on this proposed measure. Technical specifications for this 

proposed measure can be found at: http://www.dialysisreports.org/pdf/esrd/publicmeasures/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 calcification4,5 and subsequent risk for cardiovascular deaths. We 

previously proposed a hypercalcemia clinical measure for the PY 2015 ESRD QIP (77 FR 40973 

 

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. 
CMS-1526-P 84 

 

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. 

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 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 
CMS-1526-P 85 

 

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-Hypercalcemia2016NPRM.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 

 

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. 
CMS-1526-P 86 

 

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. 

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 
CMS-1526-P 87 

 

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/AnemiaManagementPediatricIronTherapyReporting-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 
CMS-1526-P 88 

 

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 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 
CMS-1526-P 89 

 

#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 
CMS-1526-P 90 

 

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 incenter 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/coreinterventions.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 
CMS-1526-P 91 

 

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 
CMS-1526-P 92 

 

proposed reporting measure offers a mechanism for collecting annual information about patient 

comorbidities, thereby providing a reliable source of data that we can use to develop a riskadjustment 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 riskadjustment 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 
CMS-1526-P 93 

 

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 

medications 

• Drug dependence 

• Atherosclerotic heart disease 

(ASHD) 

• Diabetes, without 

medications 

• Inability to ambulate 

• Other cardiac disease • Diabetic retinopathy • Inability to transfer 

• Cerebrovascular disease 

(CVA, TIA) 

• Chronic obstructive 

pulmonary disease 

• Needs assistance with daily 

activities 

• Peripheral vascular disease • Tobacco use (current 

smoker) 

• Institutionalization – 

Assisted Living 

• History of hypertension • Malignant neoplasm, Cancer • Institutionalization – Nursing 

Home 

• Amputation • Toxic nephropathy • Institutionalization – Other 
CMS-1526-P 94 

 

Institution 

• Diabetes, currently on insulin • Alcohol dependence • Non-renal congenital 

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 
CMS-1526-P 95 

 

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 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 
CMS-1526-P 96 

 

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 
CMS-1526-P 97 

 

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. 
CMS-1526-P 98 

 

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 
CMS-1526-P 99 

 

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 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 
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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 Treatment1 

94% 

Hypercalcemia 2.3% 

NHSN Bloodstream Infection in 

Hemodialysis Outpatients

50th percentile of eligible 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. 
CMS-1526-P 101 

 

 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 
CMS-1526-P 102 

 

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 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 
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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 
CMS-1526-P 104 

 

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 
CMS-1526-P 105 

 

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 

Measure Achievement 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 Anemia Treatment1 

92% 96%

Hypercalcemia 6.1% 0.2%

NHSN Dialysis Event 

Reporting and Clinical 

Bloodstream Infection 

15th percentile of eligible 

facilities’ performance during the 

performance period

90th percentile of eligible 

facilities’ performance 

during the performance 

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. 

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 
CMS-1526-P 106 

 

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 
CMS-1526-P 107 

 

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 
CMS-1526-P 108 

 

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): 

With respect to the proposed Use of Iron Therapy for Pediatric Patients reporting 

measure, using the following formula: 

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 
CMS-1526-P 109 

 

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. 

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 
CMS-1526-P 110 

 

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. 
CMS-1526-P 111 

 

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.) 
CMS-1526-P 112 

 

Figure 1 

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, 
CMS-1526-P 113 

 

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. 

Figure 2 
CMS-1526-P 114 

 

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. 

Figure 3 
CMS-1526-P 115 

 

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. 
CMS-1526-P 116 

 

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 
CMS-1526-P 117 

 

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 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. 
CMS-1526-P 118 

 

 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 incenter 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 
CMS-1526-P 119 

 

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 
CMS-1526-P 120 

 

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 
CMS-1526-P 121 

 

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. 

Table 10 – Estimated Payment Reduction Scale for PY 2016 based on the Most Recently 

Available Data 

Total Performance Score Reduction 

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, 
CMS-1526-P 122 

 

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 QIPeligible 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. 
CMS-1526-P 123 

 

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 
CMS-1526-P 124 

 

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 difficulties for facilities if it were 
CMS-1526-P 125 

 

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 
CMS-1526-P 126 

 

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 
CMS-1526-P 127 

 

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 

§414.220(a)(2) and specifies that routinely purchased equipment means equipment that was 
CMS-1526-P 128 

 

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 §414.220(b) payment for inexpensive or routinely purchased DME is 

made on a purchase 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 §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 
CMS-1526-P 129 

 

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 §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 §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 §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. 
CMS-1526-P 130 

 

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 §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 §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. 
CMS-1526-P 131 

 

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 §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 powere 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 §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 Janaury 1, 2017, 

respectively, regardless of whether the item is provided in an area subject to competitive bidding 
CMS-1526-P 132 

 

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 §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 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 
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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-NumericHCPCS.html. 
CMS-1526-P 134 

 

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 §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 Defibrillator K0607 Repl battery for AED 

Canes/Crutches E0117 Underarm spring assist crutch 

Glucose Monitor E0620 Capillary blood skin piercing device laser 

High Frequency Chest Wall 

Oscillation Device (HFCWO) A7025 Replace chest 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 Stimulators 

 

E0740 Incontinence 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 

E2500 SGD digitized pre-rec <=8min 

E2502 SGD prerec msg >8min <=20min 

E2504 SGD prerec msg>20min <=40min 

E2506 SGD prerec msg > 40 min 

E2508 SGD spelling phys contact 

Speech Generating Devices 

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 
CMS-1526-P 135 

 

Group Category HCPCS Descriptor 

 E0856 Cervical collar w air bladder 

E0140 * Walker w trunk support 

E0144 Enclosed walker w rear seat 

Walkers 

E0149 * Heavy duty wheeled walker 

E1161 Manual adult wc w tiltinspac 

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 

Wheelchairs Manual 

E1237 Rgd ped wc adjstabl w/o seat 

 E1238 Fld ped wc adjstabl w/o seat 

 

E0985 * W/c seat lift mechanism 

E0986 Man w/c push-rim pow assist 

E1002 ^ Pwr seat tilt 

E1003 ^ Pwr seat recline 

E1004 ^ Pwr seat recline mech 

E1005 ^ Pwr seat recline pwr 

E1006 ^ Pwr seat combo w/o shear 

E1007 ^ Pwr seat combo w/shear 

E1008 ^ Pwr seat combo pwr shear 

E1010 ^ 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 ^ W/c vent tray gimbaled 

E2227 Gear reduction drive wheel 

E2228 * Mwc acc, wheelchair brake 

E2310 ^ Electro connect btw control 

E2311 ^ Electro connect btw 2 sys 

E2312 ^ Mini-prop remote joystick 

E2313 ^ PWC harness, expand control 

E2321 ^ Hand interface joystick 

E2322 ^ Mult mech switches 

E2325 ^ Sip and puff interface 

E2326 ^ Breath tube kit 

E2327 ^ Head control interface mech 

E2328 ^ Head/extremity control interface 

E2329 ^ Head control interface nonproportional 

E2330 ^ Head control proximity switch 

E2351 ^ 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 ^ Hand/chin ctrl std joystick 

E2375 * Non-expandable controller 

E2376 ^ Expandable controller, replace 

E2377 ^ Expandable controller, initial 

Wheelchairs Options/Accessories 

E2378 Pw actuator replacement 
CMS-1526-P 136 

 

Group Category HCPCS Descriptor 

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 

^ 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 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; 
CMS-1526-P 137 

 

(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 §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 §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 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 
CMS-1526-P 138 

 

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 FR70288). 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 
CMS-1526-P 139 

 

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 §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 
CMS-1526-P 140 

 

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 reasonable charge for an item or service. In accordance with §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 §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 
CMS-1526-P 141 

 

“locality” is defined at §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 

§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 §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 §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 
CMS-1526-P 142 

 

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 performaing 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 
CMS-1526-P 143 

 

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 §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 
CMS-1526-P 144 

 

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 

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 physicaian’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 
CMS-1526-P 145 

 

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 physican’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 § 414.106 and § 414.100 to include the general rule for updating the fee 

schedules for splints, casts and IOLs inserted in a physican’s office. We are also proposing to 

add §414.106 and §414.108 to set forth the fee schedule methodology and updates as explained 

above for splints, casts, and IOLs inserted in a physican’s office. Subject to coinsurance and 
CMS-1526-P 146 

 

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
CMS-1526-P 147 

 

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 §414.200 and §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 § 414.220(g). 

• In subpart §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 §414.220(g) addresses this requirement, the 

regulation at §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 
CMS-1526-P 148 

 

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 equipment class at § 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 §414.226(c)(6) needs to be corrected. The regulation text at §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 

§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.” 
CMS-1526-P 149 

 

• We are also making a technical correction to existing 42 CFR §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 §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 describe 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: 
CMS-1526-P 150 

 

● 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-1526-P 151 

 

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 
CMS-1526-P 152 

 

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 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. 

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. 

 

9

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

patients. 
CMS-1526-P 153 

 

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 
CMS-1526-P 154 

 

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 
CMS-1526-P 155 

 

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 
CMS-1526-P 156 

 

providers. We estimate that the clarification of the 3-year minimum lifetime requirement for 

DME would have no impact on DMEPOS suppliers. 

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 

Facility Type 

Number 

of 

Facilities 

A 

Number of 

Treatments 

(in millions) 

B 

Effect of 

2014 

Changes in 

Outlier 

Policy4 

C 

Effect of 

2014 

Changes in 

Wage 

Indexes 

D 

Effect of 2014 

Changes in 

Market Basket 

minus 

productivity 

update 

E 

Effect of 2014 

Changes in 

Base Rate due 

to Drug 

Utilization 

F 

Effect of Total 

2014 changes5 

G 

All Facilities 5,771 38.1 0.4% 0.0% 2.5% -12.0% -9.4% 

Type 
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 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 based1 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% 

 Pacific2 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 treatments3 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% and19% 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 
CMS-1526-P 158 

 

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 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. 
CMS-1526-P 159 

 

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 
CMS-1526-P 160 

 

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 
CMS-1526-P 161 

 

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. 

Payment Reduction 

Number of 

Facilities 

Percent of 

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. 

Table 14 – Data used to Estimate PY 2016 ESRD QIP Payment Reductions. 
CMS-1526-P 162 

 

Measure Period of Time Used to Calculate 

Achievement Thresholds, 

Performance Standards, 

Benchmarks, and Improvement 

Thresholds 

Performance Period 

Hemoglobin Greater Than 

12 g/dL Jan 2012 – Jun 2012 July 2012 – Dec 2012 

Vascular Access Type 

 % Fistula Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

 % Catheter Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

Kt/V 

 Adult HD Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

 Adult PD Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

 Pediatric HD Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

Hypercalcemia Jan 2011 – Dec 2011 May 2012 – Dec 2012 

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 
CMS-1526-P 163 

 

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 

Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2012 (in 

millions)3

Number 

of 

Facilities 

with QIP 

Score 

Number of 

Facilities 

Expected 

to Receive 

a Payment 

Reduction 

Payment 

Reduction 

(percent 

change in 

total ESRD 

payments) 

All Facilities 5,771 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%
CMS-1526-P 164 

 

Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2012 (in 

millions)3

Number 

of 

Facilities 

with QIP 

Score 

Number of 

Facilities 

Expected 

to Receive 

a Payment 

Reduction 

Payment 

Reduction 

(percent 

change in 

total ESRD 

payments) 

Hospital-based (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 Entities1 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%

US Territories2 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%
CMS-1526-P 165 

 

Number 

of 

Facilities

Number of 

Medicare 

Treatments 

2012 (in 

millions)3

Number 

of 

Facilities 

with QIP 

Score 

Number of 

Facilities 

Expected 

to Receive 

a Payment 

Reduction 

Payment 

Reduction 

(percent 

change in 

total ESRD 

payments) 

US Territories2 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 
CMS-1526-P 166 

 

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 
CMS-1526-P 167 

 

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 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 
CMS-1526-P 168 

 

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 § 

414.202. We note that given that reliance and consistent with the regulation at § 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-
CMS-1526-P 169 

 

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 IVof this rule, this rule would clarify the definition of routinely 

purchased equipment set forth at section §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 §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. 
CMS-1526-P 170 

 

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 §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 

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

FY 

Impact to the federal 

government) 

(in $ millions) 

2014 

-20 
CMS-1526-P 171 

 

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 
CMS-1526-P 172 

 

HCPCS Item Purchase Fee Allowed Charges Code Added 

E0760 Ultrasonic Bone Growth Stimulator $3,514 $21,370,310 1997 

E2510 Speech Generating Device $7,356 $20,170,162 2001 

E1161 Tilt In Space Manual Wheelchair $2,571 $18,666,674 2003 

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. 
CMS-1526-P 173 

 

Table 19 Accounting Statement: Classification of Estimated 

Transfers and Costs/Savings 

ESRD PPS for CY 2014 

Category Transfers 

Annualized Monetized Transfers $ -780 million 

From Whom to Whom Federal government to ESRD providers 

Category Transfers

Increased Beneficiary Co-insurance Payments $ -190 million 

From Whom to Whom Beneficiaries to ESRD providers 

ESRD QIP for PY 2016 

Category Transfers

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 -$25.3 million 2013 7% 2014 - 2018 

Transfer 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. 

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 
CMS-1526-P 174 

 

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 
CMS-1526-P 175 

 

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 
CMS-1526-P 176 

 

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. 
CMS-1526-P 177 

 

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 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. 
CMS-1526-P 178 

 

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 website at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Michelle 

Cruse at (410) 786-7540. 
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CMS-1526-P 180 

 

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 
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For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services 

proposes to amend 42 CFR chapter IV as follows: 

PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT 

FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 

 1. The authority citation for part 413 is revised to read as follows: 

 Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883 and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 

1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Pub.L. 

106-113 (113 Stat. 1501A-332), sec. 3201 of Pub.L. 112-96 (126 Stat. 156), and sec. 632 of Pub. 

L. 112-240 (126 Stat. 2354) 

§ 413.174 [Amended] 

 2. Section 413.174 (f)(6) is amended by removing “January 1, 2014” and by adding in its 

place “January 1, 2016 

§ 413.237 [Amended] 

 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 

 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)).

2. The heading for subpart C is revised to read as follows: 
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Subpart C--Fee Schedules for Parenteral and Enteral Nutrition (PEN) Nutrients, 

Equipment and Supplies, Splints, Casts, and Certain Intraocular Lenses (IOLs) 

5. Section 414.100 is revised to read as follows: 

§ 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. 

6. Section 414.102 is amended by revising paragraphs (a) introductory text, (a)(2), 

(b)(1), and (c) to read as follows: 

§ 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 §§ 

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 §§ 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 
CMS-1526-P 183 

 

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 the preceding year, reduced by the productivity adjustment described in 

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

5. Section 414.106 is added to read as follows: 

§ 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. 

 7. Section 414.108 is added to read as follows: 

§ 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. 

8. Revise the heading to Subpart D to read as follows: 

Subpart D – Payment for Durable Medical Equipment, Prosthetic and Orthotic Devices, 

and Surgical Dressings 
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*****

9. Section §414.200 is revised to read as follows: 

§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. 

10. Section 414.226 is amended by revising paragraph (c)(6) to read as follows: 

§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. 

BILLING CODE 4120-01-P
CMS-1526-P 

. 

[FR Doc. 2013-16107 Filed 07/01/2013 at 4:15 pm; Publication Date: 07/08/2013]