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 Diseas e Prospective Payment System, Quality Incentive Program, and Durable Medical Equipm ent, Prosthetics, Orthotics, and Supplies
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
SUMMARY: This rule proposes to update and make re visions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for cal endar 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 clar ify the grandfathering provision related to the 3-year minimum lifetime requirement (MLR) for Durable Medical Equipment (DME). In addition, it provides clarification of the de finition of routinely purchased DME. This rule also proposes the implementa tion of budget-neutral fee schedules for splints and casts, and intraocular lenses (IOLs ) inserted in a physician’s offi ce. 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 mu st 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 ca nnot 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 delive r (by hand or courier) your written comments ONLY to the following addre sses 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 Hube rt 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 reta in a proof of filing by st amping 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 addres ses indicated as appr opriate for hand or courier delivery may be delayed a nd received after the comment period. For information on viewing public co mments, see the beginning of the
"SUPPLEMENTARY INFORMATION" section.
FOR FURTHER INFORMATION CONTACT: Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS.CMS-1526-P 4

Stephanie Frilling, (410) 786-4507, for issues re lated to the ESRD PPS wage index, home dialysis training, and the de lay in payment for oral-onl y drugs under the ESRD PPS. Heidi Oumarou, (410) 786-7942, for issues related to the ESRD market basket. Anita Segar, (410) 786-4614, for issu es 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 clarifi cation of the definition of routinely purchased DME. Christopher Molling (410) 786-6399, for issues rela ted to DMEPOS technical amendments and corrections. Hafsa Vahora, (410) 786-7899, for issues relate d to the implementation of budget neutral fee schedules for splints and casts, and IO Ls 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, includi ng any personally identif iable 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 si te as soon as possible after they have been received: http://www.regulations.go v. Follow the search instructions on that Web site to view public comments. Comments received timely will also be av ailable for public inspection as they are received, generally beginning approximately 3 w eeks 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. ToCMS-1526-P 5

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 wi ll no longer be available in the Federal Register . Instead, these Addenda to the annual propos ed and final rules will be avai lable 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/ESRD Payment/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 referenc ing 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, Prosthet ics, Orthotics, and Supplies (DMEPOS)CMS-1526-P 6

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 Ra te 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 Fact or and Labor-related Shar e for ESRD FacilitiesCMS-1526-P 7

for CY 2014 c. Proposed Productivity Adjustment d. Calculation of the ESRDB Market Basket Upda te, 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 Prop osed 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 Classificat ion of Diseases (ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes a. One ICD-9-CM Code Crossw alks 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 Cr osswalk 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 Traini ng, Home Dialysis Training, and Retraining b. Payment Methodology D. Delay of Payment for Oral-Only Drugs Under the ESRD PPSCMS-1526-P 8

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 Applicatio n 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 an d Revise Two PY 2015 Measures for PY 2016 and Subsequent Payment Years a. Proposed Expanded IC H 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 S ubsequent Payment Years of the ESRD QIP a. Proposed Clinical Anemia Management Meas ure and Anemia Management Clinical Measure Topic i. Anemia Management: Hgb>12 ii. Anemia of Chronic Kidney Disease: Patie nt Informed Consent for Anemia Treatment b. Hypercalcemia c. Use of Iron Therapy for Pe diatric Patients Reporting Measure d. NHSN Bloodstream Infection in Hemodi alysis Outpatients Clinical Measure e. Comorbidity Reporting MeasureCMS-1526-P 9

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 Standa rds for Reporting Measures 8. Proposed Scoring for the PY 2016 ESRD QIP Proposed Measures a. Proposals for Scoring Facility Performan ce 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 QI P Measures and Calculating the PY 2016 ESRD QIP Total Performance Score a. Weighting Individual Measur es to Compute Measure Topic Scores for the Kt/V Dialysis Adequacy measure topic, the Vascular Access Ty pe 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 Meas ures 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 ChangedCMS-1526-P 10

14. Proposals for Public Reporting Requirements IV. Clarification of the Defi nition of Routinely Purchased Du rable 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 Re gulations and Definition of Routinely Purchased Equipment V. Clarification of the 3-year Mini mum Lifetime Requirement (MLR) for DME A. Background
B. Current Issues C. Scope of the 3-Year MLR VI. Implementation of Budget-Neutral Fee Sc hedules 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 CommentsCMS-1526-P 11

B. Requirements in Regulation Text C. Additional Information Collection Requirements 1. ESRD QIP a. Proposed Expanded ICH CAHP S Reporting Measure for PY 2016 and Future Payment Years of the ESRD QIP b. Proposed Data Validation Requi rements for the PY 2016 ESRD QIP 2. Clarification of the Definition of Rou tinely Purchased Durable Medical Equipment 3. Clarification of the 3-year Mi nimum 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 Diseas e 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 QIPCMS-1526-P 12

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 EquipmentCMS-1526-P 13

DMEPOS Durable Medical Equipment, Pr osthetics, 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 Cl assification of Disease, 9 th Revision, Clinical Modification ICH CAHPS In-Center Hemodialysis Consum er 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 BudgetCMS-1526-P 14

PFS Physician Fee Schedule QIP Quality Incentive Program SHR Standardized Hospita lization 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 se rvices furnished by ESRD facilities. Effective January 1, 2014, the transition to the ESRD PPS will conclude and all Me dicare ESRD facilities will be paid 100 percent under the ES RD PPS. This rule proposes to update and make revisions to the End-Stage Renal Disease (ESRD) prospe ctive 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 comparingCMS-1526-P 15

per patient utilization from 2007 with such da ta from 2012, to reduce the single payment amount to reflect the Secretary’s estim ate of the change in the utili zation of ESRD-related drugs and biologicals. Section 632(b) of ATRA prevents the Secretary from paying for oral-only ESRDrelated drugs and biologi cals 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 require ments for the ESRD Quality Incentive Program (QIP), including for payment year (PY) 2016. Th e program is authorized under section 153(c) of MIPPA, which added section 1881(h) to the Social S ecurity 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 st andards established by CMS. 3. Durable Medical Equipment, Prosthet ics, 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 impl ement budget neutral fee sc hedules 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 redu ced by the productivity adjustment, or 2.5 percent, the wage index budget-neutrality adjustment factor of 1.000411, and the drugCMS-1526-P 16

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 budge t-neutrality adjustment factor and will continue to apply the budget-neutrality adjustment to the base rate fo r the ESRD PPS. We have been gradually decreasing the wage index floor by .05 in an effo rt 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 fl oor 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 Me dicare Allowable Payments (MAPs) for adult patients for CY 2014 using 2012 claims data. Base d 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 ou tlier payments was not achieved in CY 2012. We believe using CY 2012 claims data to upda te the outlier MAP and fixed dollar loss amounts for CY 2014 will increase payments for ESRD bene ficiaries requiring higher resource utilization in accordance with a 1 per cent outlier percentage.CMS-1526-P 17

• 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 re quirements 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 hemodialys is patients, a clinical measure

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

o A Kt/V measure for pediatric hemodial ysis patients, a clinical measure

• To determine whether patients are treate d using the most beneficial type of vascular access:CMS-1526-P 18

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 se ction §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 byCMS-1526-P 19

purchase on a national basis at least 75 per cent of the time during the period July 1986 through June 1987.

• Clarification of to the 3-year ML R 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 mu st be satisfied for an item or device to be considered durab le medical equipment.

• Implementation of budget neutral fee schedules fo r 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 IO Ls inserted in a physician’s office. Section 1842(s) of the Act authorizes CMS to implem ent 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 to tal 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 propo sed rule, we set forth a detailed analysis of the impacts that the proposed changes would have on affected en tities and beneficiaries. The impacts include the following:
1. Impacts of th e Proposed ESRD PPS The impact chart in section X.B.1. of this pr oposed rule displays th e estimated change in payments to ESRD facilities in CY 2014 compar ed to estimated payments in CY 2013. The overall impact of the CY 2014 changes is projected to be a 9.4 percent decr ease in payments. Hospital-based ESRD facilities have an estima ted 9.3 percent decrease in payments comparedCMS-1526-P 20

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 increas e 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 pa yment reductions to be approximately $26.4 million, and the costs associated with the coll ection of information re quirements 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 incentiv ize 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 am ounts would be budget neutra l the first year and would be updated annually thereafter based on the consumer price index for all consumers (CPI-CMS-1526-P 21

U) for the 12-month period ending June 30 of the previous year and, reduced by the productivity adjustment described in secti on 1886(b)(3)(B)(x i)(II) of the Act. Fo r 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 a pplies on a prospective basis, effective January 1, 2012. CMS recognizes that the healthcare industr y 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 reope n those prior decisions and reclassify the equipment in light of the new 3-year standar d. We believe that continuing the Medicare coverage for all the items that qualified as DME on or prior to Ja nuary 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 im pact on the Medicare Program. We expect that the overall impact of rea ffirming the definition of routinely purchased DME and our proposal for classifying certain expens ive items as cap rental would be a decrease in expenditures because payment on a 13-month ca pped 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 Rena l Disease (ESRD) Prospective Payment System (PPS) A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)CMS-1526-P 22

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 ru le. 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 se ction 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 Me dical 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, im plemented 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 fo r CY 2013, implemented the third year of the transition to the ESRD PPS, and made several polic y 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 por tion of the blended payments during theCMS-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 percen t increase. This amount also reflected the application of the wage index budge t-neutrality adjustment of 1.000613.

• A composite base rate of $145.20 pe r 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 multif actor productivity adjustment, or a 2.3 percent increase.

• A zero update to the drug add-on adjustme nt and maintaining the $20.33 per treatment drug add-on amount for the composite rate por tion 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-neut rality 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 adjustme nt factor for the ESRD PPS portion of the blended payment and for the ESRD PPS, wh ich is applied to the ESRD PPS base rate.

• A 0.05 reduction to the wage index floor whic h 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 Allo wable Payment (MAP) amount of $41.39. For adult beneficiaries, a fixed-dolla r 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 cl aim for daptomycin when the diagnosis reported on the claim indicates the drug was us ed to treat a non-ES RD related condition.

• Excluding alteplase and other thrombolytics from separate payment for the composite rate portion of blended payments dur ing 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 separa tely paid absent the ESRD PPS and for the composite rate portion of the blende d payment during the transition. Finally, in the CY 2013 ESRD PPS final rule, we reiterated po licies regarding the following billing practices because we believed that ESRD f acilities may be billing renal dialysis services for separate payment:

• Any item or service included in the compos ite rate should not be identified on ESRD claims.

• An AY modifier can be appende d to claims for drugs and la boratory 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 monitori ng efforts in place to analyze billing trends. B. Routine Updates and Proposed Policy Changes to the CY 2014 ESRD PPSCMS-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 tran sition 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 paym ent amount under the ESRD PPS. For CY 2014, under 42 CFR 413.239(a)(4), 100 percent of the pa yment 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 per cent under the ESRD PPS, and ther e 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 codifi ed in the Medicare regulations at §413.220 and §413.230. The CY 2011 ES RD 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 wi th sections 1881(b )(14)(D)(ii) and 1881(b )(14)(A)(ii) of the Act, respectively. Specifically, the ESRD PPS base rate was develope d from CY 2007 claims (that is, the lowest per patient utilization year as required by section 1881(b)(14)(A)(i i) of theCMS-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 regu lations at §413.230, the ESRD PPS base rate is adjusted for the patient-specific case-mix adju stments, applicable facility adjustments, geographic differences in area wage levels using an area wage inde x, 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 ar e required to be annually increased by the rate of increase in the ESRD market basket, re duced by the productivity adjustment described in section 1886(b)(3)(B)(x i)(II). Accordingly, for this propos ed 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-ne utrality 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 Ra te 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 serv ices furnished on or after January 1, 2014, the Secretary shall make reductions to the single payment for renal di alysis services to reflect the Secretary’s estimate of the change in the ut ilization of ESRD-related drugs and biologicalsCMS-1526-P 27

(excluding oral-only ESRD-relate d drugs) by comparing per patie nt utilization data from 2007 with such data from 2012. Sec tion 1881(b)(14)(I) further requires that in making the reductions, the Secretary take into account the most recentl y available data on Average Sales Prices (ASP) and changes in prices for drugs and biologicals reflected in the ES RD market basket percentage increase factor under section 1881(b)(14)(F). Cons istent 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-relate d 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 woul d reduce the ESRD PPS base rate. Because the ESRD PPS base rate is a per tr eatment base rate, the adjustme nt 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 biologi cals to the utilizati on 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 be lieve using prices for drugs and biologicals inflated to 2014 levels allows us to appropria tely 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 biol ogicals for the year in which the adjustment applies. For purposes of this analysis, we view utilization of drugs and bi ologicals 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 th e estimated spending of drugs and biologicals in CY 2007 and CY 2012 and reduce this amount by th e same adjustment factors that were used to calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per treatment, which areCMS-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 ra te by the resulting

amount. ii. Determining Utilization of ESRD-Relat ed Drugs and Biologicals Section 1881(b)(14)(I) require s 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) (o ther than oral-only ESRD-related drugs, as such term is used in the final rule pr omulgated by the Secretary in the Federal Register on August 12, 2010 (75 FR 49030)))”. As we mentione d above, for purposes of this analysis, we view utilization of drugs and biol ogicals as units of a drug or biological furnished to a patient per treatment. ESRD facilities report this informa tion on claims. To calculate this adjustment, we analyzed the utilization of eryt hropoiesis stimulating agents (ESA s) and any oral forms of such agents furnished to individuals for the treatment of ESRD. We also anal yzed the utilization of other injectable drugs and biologicals (such as iron sucrose and doxercalciferol) and any oral equivalent form of such drug or biological furn ished to individuals for the treatment of ESRD that were included in the e xpanded bundle of services covere d 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) on ly refers to estimating the change in utilization of drugs and biologicals. Section 1881(b)(14)(I) of the Act requir es 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 biol ogicals, 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 FRCMS-1526-P 29

49071 through 49083) we discuss in detail the deve lopment 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 util ization 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 fo r purposes of analyzing 2007 utilization. For the CY 2012 utilization data for ESRD-re lated drugs and biologi cals, 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 passe d 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, processe d, 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 captu re 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 utilizati on in 2012, we believe that this would also include utilization of drugs and biolog icals furnished in ESRD facilities located in the United States Territories of Guam, American Samoa and the Northern Mariana Islands (theCMS-1526-P 30

Pacific Rim), even though facili ties 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 uti lization data for the ESRD fac ilities 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 th ese facilities will have a significant impact on the amount of the adjustment. We solicit comme nts 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 pri ce 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 starte d 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 biological s that were, prior to January 1, 2011, separately paid under Part B. For setting the CY 2011 ESRD PPS base ra te, for Part B separately billable drugs, we used the first two quarters of ASP+6 and then us ed the Producer Price Inde x (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 biologi cals that were, prior to Janu ary 1, 2011, separately paid underCMS-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 pric es 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 establishe d in the CY 2011 ESRD PPS final rule for ESRD-related drugs and biological s and their oral equivalents to CY 2014 by applying the ESRD bundled (ESRDB) market basket, the productiv ity adjustment, and the wage index budget neutrality adjustment factors. Because the ba se rate and the ESRDB ma rket basket account for ESRD-related drugs and biologicals , and we ha ve 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 fact ors 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 dr ug prices. We believe using the ESRDB market basket to price drugs and biol ogicals 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 f actors 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 year s are 1.001520, 1.000613, and a proposed factor of 1.000411. Therefore, we propose to use a tota l 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 useCMS-1526-P 32

of the ESRDB market basket percentage increase f actor 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 a nd CY 2012 drug and biol ogical 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 onl y 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 12 th 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 trea tment for CY 2007 to get a total of $32.34 ($83.76 - $51.42 = $32.34). We then reduce d this amount by the standardiz ation, 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 re ducing the base rate because the base rate was reduced by these adjustments when it was fi rst established, and the reduction should be adjusted in the same way to make the two figur es comparable. We would then reduce the CY 2014 proposed base rate of $246.47 by $29.52, resulti ng in the CY 2014 proposed base rate ofCMS-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 util ization of ESRD-related drugs and biologicals from CY 2007 to CY 2012. While we propose to implement the full reduc tion in CY 2014, we note that we are also concerned that this one-time reduction to the ESRD PPS base rate c ould be a significant reduction to ESRD facilities for the year and potentially impact beneficiary access to care. Therefore, we are soliciting comments on a pot ential transition or phase-in period of the 12 percent reduction and the num ber of years for such tran sition 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 fa ctor” in making the redu ction to the ESRD PPS base rate to reflect the change in utilization of ESRD-relate d 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 th rough 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 athttp://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 mini mally different (a difference of $29.40 versusCMS-1526-P 34

$29.52), and we believe that the ESRDB market bask et 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 th e 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 A ffordable Care Act, beginning in 2012, the ESRD payment amounts are required to be annua lly increased by an ESRD market basket increase factor that is reduced by the pr oductivity 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 be ing 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 fu rnish renal dialysis services. b. Proposed Market Basket Update Increase Fact or 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 fo r ESRD treatment, this term is also commonly used to denote the input price i ndex (that is, cost categories, thei r respective weights, and price proxies combined) derived from a market bask et. Accordingly, the term “ESRDB market basket,” as used in this document, re fers 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 descri bed in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to compute the CY 2014 ESRDB market basket increase factor an d labor-related share based on the best available data. Consistent w ith 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 co mponents of the market baskets. Using this methodology and the IGI forecast fo r the first quarter of 2013 of the CY 2008- based ESRDB market basket (w ith historical data through th e fourth quarter of 2012), and consistent with our historical practice of estim ating market basket incr eases 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 pr opose 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 amende d by section 3401(h) of the Affordable Care Act, for CY 2012 and each s ubsequent year, the ESRD market basket percentage increase factor shall be reduced by the productivity ad justment described in section 1886(b)(3)(B)(xi)(II) of the Act. The statute defines the pr oductivity adjustment as equal to the 10-year moving average of changes in a nnual economy-wide private nonfarm business multifactor productivity (MFP) (as projected by th e Secretary for the 10-year period ending with the applicable fiscal year, year, cost repor ting period, or other annua l period) (the “MFP adjustment”). The Bureau of Labor Statistics (B LS) is the agency that publishes the officialCMS-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 fina l methodology for calcula ting 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 produ ced 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 thr ough 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 Up date, 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 percen tage increase factor reduced by the productivity adjustment. We are proposing to use the same methodology for calculating the ESRDB market basket updates adju sted for MFP that was finalized in the CY 2012 ESRD PPS final rule (76 FR 70234). Thus, in accordance with section 1881(b)(1 4)(F)(i) of the Act, the proposed ESRDB market basket percentage increase factor for CY 2014 is based on the 1 st 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 1 st quarter 2013 forecast. The resulting proposed MFP-adjusted ESRDB mark et basket update for CY 2014 is equal to 2.5CMS-1526-P 37

percent, or 2.9 percent less 0.4 percentage point. If more rece nt 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 ma rket 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 pr ovides that the ESRD PPS may include a geographic wage index payment adjustment, su ch as the index refe rred 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 u tilize 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 va lues; the gradual reduction of the wage index floor during the transition; and th e 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 su bsequent bulletins, is available online at http://www.whitehouse,gov/omb/bulletins

. OMB publishes bulletins regarding CBSA change s, including changes to CBSA numbers and titles. In accordance with our establishe d methodology, we have historically adopted any CBSA changes that are published in the OMB bu lletin that corresponds with the IPPS hospital wage index. For FY 2014, we use the FY 2013 pre-fl oor, pre-reclassified hospital wage index toCMS-1526-P 38

adjust the ESRD PPS payments. On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which establishes revised delineations of statis tical 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 fina lized 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 I PPS/LTCH PPS proposed rule, CMS intends to propose changes to th e 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 reflecte d in the FY 2015 hospital wage index. Because we base the ESRD PPS wage inde x on the hospital wage index from the prior year, we anticipate that the OMB Bulletin changes would be refl ected 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 determini ng 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 fac ilities are located. We propose to use the most recent, FY 2014 inpatient prospective payment syst em (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 Ac t and utilize pre-floor hospital data that are unadjusted for occupa tional 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 ar eas are listed in Addendum B (Wage Indices for Rural Areas). Addenda A and B are located on the CMS Web site atCMS-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 por tion of the payment. For the CY 2014 ESRD PPS we are not proposing any changes to th e labor-related share of 41.737. Because all providers that elected to participate in the transi tion are entering their fourthyear 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 th e blended payment is no longer applicable. We discuss the methodology for the ESRD PPS labor-re lated 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 Propos ed Wage Index Value for Guam It came to our attention after the ESRD PPS was implem ented that ESRD facilities located in the United States Territories of Gu am, American Samoa and the Northern Mariana Islands (the Pacific Rim) have b een 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 pa yment 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 Ri m 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 orderCMS-1526-P 40

to pay these facilities under the ESRD PPS, we mu st 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 exis ting methodology, that is, the pre- floor, pre-reclassification, hospital wage data that is una djusted 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 Marian a Islands. Accordingly, we propose below to apply the wage index value for Guam to faciliti es 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 FR49117), we finalized the use of the CBSAbased geographic area designations to define urban/rural area s and corresponding wage index values for the ESRD PPS. In that final ru le (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 ru ral areas with no hosp ital data, we compute the wage index using the average wage index values from all conti guous CBSAs to represent a reasonable proxy for that rural area. In the case of American Samoa and the Nort hern 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 establishedCMS-1526-P 41

methodology to compute an appropriate wage inde x 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 conti guous, we believe that same pr inciple 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 th e average of all urban areas w ithin 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 P PS (76 FR 70241) that we finalized the 0.05 reduction to the wage index floor for CYs 2012 and 2013, resul ting in a wage index floor of 0.550 and 0.500, respectively.CMS-1526-P 42

Our intention has been to provide a wage i ndex 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 geographica l areas in the fifty st ates of a gradual and systematic elimination of the wage index fl oor. 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 be low the proposed floor; however, to the extent that other geographica l 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 va lues and the appropriate ness 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. Specificall y, we propose a wage index floor value of 0.45 for CY 2014 and a wage index fl oor value of 0.40 for CY 2015. We believe that continuing our policy of applying a wage index floor for an ad ditional 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 wageCMS-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, incl uding an adjustment of the ESRD PPS by a geographic index. Section 1881(b)( 14)(D)(iv)(II) specifically refe rs to section 1881(b)(12)(D) as an example of such a geographic index, and in the CY 2011 ESRD PPS fina l 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 adju sted composite payment system, and accordingly, in the CY 2012 ESRD PPS final rule, we finaliz ed a policy for CY 2012 and future years to apply wage index budget-neutrality adjustment fact ors to the composite ra te 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 a nd 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 cha nges 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 faciliti es will be paid 100 percent under the ESRD PPS in CY 2014. For ease of reference, we e xplain 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 pr e-floor, pre-reclassifi ed, non-occupational mixadjusted hospital data to com pute the wage index values, 2012 outpatient claims (paid andCMS-1526-P 44

processed as of December 31, 2012), and geogr aphic location information for each facility, which may be found through Dialysis Facility Co mpare. 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 athttp://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 en titled, “FY 2014 Proposed Rule Occupational Mix Adjusted and Unadjusted Average Hourly Wage and Pre-Reclassified Wa ge Index by CBSA”. We computed the proposed CY 2014 wage i ndex budget-neutrality adjustment factor using treatment counts from the 2012 claims a nd facility-specific CY 2013 payment rates to estimate the total dollar amount th at 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 th e proposed ESRD wage index for CY 2014. The total of these payments becomes the new CY 2014 amount of wage-adjus ted 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 inde x budget-neutrality factor by the applicableCY 2014 estimated payments, aggregate payments to ESRD facilities would remain budgetneutral when compared to the target amount ofexpenditures. That is, the wage index budgetneutrality adjustment factor en sures that wage index adjustme nts do not increase or decrease aggregate Medicare payments with respect to cha nges in wage index updates. Therefore, we are proposing a wage index budget-neutrality adju stment factor of 1.000411, which would beCMS-1526-P 45

computed in ESRD PPS base rate paymen t methodology when making payment for renal dialysis services in CY 2014. 5. Application of the International Classificat ion 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 sectio n 153(b) of MIPPA, require s that the ESRD PPS include a payment adjustment based on case-mix th at may take into account, among other things, patient comorbidities. Comorbidities are speci fic patient conditions that coexist with the patient’s principal diagnosis that necessitates dialysis. The comorbidity payment adjustment recognizes the increased costs as sociated with comorbidities a nd provides additional payment for certain conditions that occur concurren tly 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 predic tors of variation in payments for ESRD patients. Details on the deve lopment of the comorbidity categories eligible for the comorbidity payment adjustment, includi ng an explanation of the stepwise regression model that we used to analyze comorbidity da ta, is discussed in th e 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) potentia l for ESRD facilities to directly influence the prevalence of the co-morbidity either by altering dialysis ca re, 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 Internationa l Classification of Disease, 9 th Revision, Clinical Modification (ICD–9–CM) diagnosis codes (75 FR 49100). Am ong these categories ar e three acute, shortterm diagnostic categories (pericarditis, bacteria l pneumonia, and gastroin testinal tract bleeding with hemorrhage) and three chr onic diagnostic categories (hered itary 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 ES RD 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 ad justment are subject to the annual ICD-9-CM coding updates that occur in the hospital inpatient PPS final rule and are effective October 1 st of every year. We explained that any updates to the ICD-9-CM code s that affect the categories of comorbidities and the diagnoses within the como rbidity categories that are eligible for the comorbidity payment adjustment would be co mmunicated to ESRD facilities through subregulatory guidance. Accordingly, Change Request (CR) 7476, Transmittal 2255, entitled, “Quarterly Update to the End-Stage Renal Dise ase Prospective Payment System, was issued on July 15, 2011 to update the ICD-9-CM codes eligib le for the comorbidity payment adjustment in accordance with the annual ICD-9-CM update ef fective 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 comorbid ity payment adjustment since October 1, 2011.CMS-1526-P 47

Effective October 1, 2014, CMS will implement the 10 th 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 co morbidity payment adjustment. We crosswalked the ICD-9-CM codes that are eligible for the comorbidity payment adjustment to ICD-10-CM codes using the Gene ral Equivalence Mappings (GEM) tool, which is the authoritative source for crosswalking develope d 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 crosswal k 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 crite ria 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 IC D-9-CM codes generally crosswalked to one ICD-10-CM code that codes for the same diagnos is, has the same code descriptor, and does not meet any of our exclusion criter ia. Accordingly, with the exce ptions noted below, we propose that ICD-10-CM codes will be eligible for th e comorbidity payment adjustment where they crosswalk from ICD-9-CM codes that are eligib le 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 exclus ion criteria described above, and we propose to exclude these codes from eligibility for the comorbidity payment adjustment. a. One ICD-9-CM Code Crossw alks 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 comorbidityCMS-1526-P 48

payment adjustment with the exception of K52.8 1 Eosinophilic gastritis or gastroenteritis. Currently, 535.71 Eosinophilic gastritis with he morrhage is one of 40 ICD-9-CM diagnosis codes under the acute comorbidity category of Gast rointestinal (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 P PS final rule (75 FR 49097), we specifically limited the GI bleeding category for the comorbid ity payment adjustment to GI bleed with hemorrhage because we believed that the gastroin testinal 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 diagnos is 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 cate gory to gastrointestinal tract bleeding with hemorrhage, which we believe creates accurate clinical definitions and mitigates the potential for adverse incentives in ESRD car e. Accordingly, we propose to exclude ICD-10-CM code K52.81 Eosinophilic gastritis or gastroenteritis from eligibility fo r 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 Tabl e 1 below will be eligible for the comorbidity payment adjustment.CMS-1526-P 49

Table 1: One ICD-9-CM Code Cr osswalks 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 K 52.81 Eosinophilic gastritis or gastroenteritis 537.83 Angiodysplasia of stomach and duodenum with hemorrhage K31.811 Angiodysplasi a 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 J 15.0 Pneumonia due to Klebsiella pneumoniae 482.1 Pneumonia due to Pseudomonas J 15.1 Pneumonia due to Pseudomonas 482.2 Pneumonia due to Hemophilus influenzae [H. infl uenzae] 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 pne umonia due to Staphylococcus aureus J15.211 Pneumonia due to Methic illin 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. co li] 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 Pn eumonitis due to inhalation of other solids and liquids 510.0 Empyema with fistula J86.0 Pyothorax with fistula 510.9 Empyema without mention of fist ula J86.9 Pyothorax without fistula Pericarditis ICD-9 Descriptor ICD-10 Descriptor 420.91 Acute idiopathic peri carditis I30.0 Acute nonspecifi c idiopathic pericarditis Hereditary Hemolytic and Sickle Cell Anemia ICD-9 Descriptor ICD-10 Descriptor 282.0 Hereditary spherocytosis D 58.0 Hereditary spherocytosis 282.1 Hereditary elliptocytosis D 58.1 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 di sease without crisis 282.68 Other sickle-cell disease without crisis D 57.80 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 D 46.22 Refractory anemia with excess of blasts 2CMS-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 pr opose that all the crosswalked ICD-10-CM codes will be subject to the comorbidity paymen t 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 como rbidity payment adjust ment under the chronic comorbidity category of Monoclonal gamm opathy. 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 gammopat hy 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 m onoclonal gammaglobulin. When we analyzed the comorbidity category for the CY 2011 ESRD PPS final rule, single monoclonal gammaglobulin was shown to have an associatio n with higher erythropoiesis stimulating agent (ESA) usage, thereby resulting in higher costs to di alysis facilities. After clinical evaluation of D89.2 Hypergammaglobulinemia, unspecified, howe ver, we determined that this ICD-10-CM code should not be eligible for the comorbidity payment adjustment because D89.2 Hypergammaglobulinemia, unspecified indicate s 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 cr eate an accurate clinical definition, which is the first of the three exclusion cr iteria. Accordingly, we propose that D89.2CMS-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 Crossw alks to Multiple ICD-10-CM Codes

Gastrointestinal Bleeding ICD-9 Descriptor ICD-10 Descriptor K57.11 Diverticulosis of small intes tine without perforation or abscess with bleeding 562 Diverticulosis of small intestine with hemorrhage

K57.51 Diverticulosis of both sm all and large intestine without perforation or abscess with bleeding K57.01 Diverticulitis of small intes tine with perforation and abscess with bleeding K57.13 Diverticulitis of small intes tine without perforation or abscess with bleeding K57.41 Diverticulitis of both small a nd large intestine with perforation and abscess with bleeding 562.03 Diverticulitis of sma ll intestine with hemorrhage

K57.53 Diverticulitis of both sma ll and large intestine without perforation or abscess with bleeding K57.31 Diverticulosis of large intes tine without perforation or abscess with bleeding K57.91 Diverticulosis of intes tine, part unspecified, without perforation or abscess with bleeding 562.12 Diverticulosis of colon with hemorrhage

K57.51 Diverticulosis of both sm all and large intestine without perforation or abscess with bleeding K57.21 Diverticulitis of large intes tine with perforation and abscess with bleeding K57.33 Diverticulitis of large intes tine without perforation or abscess with bleeding K57.41 Diverticulitis of both small a nd large intestine with perforation and abscess with bleeding 562.13 Diverticulitis of colon with hemorrhage

K57.53 Diverticulitis of both sma ll 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 I30.1 Infective pericarditis 420.90 Acute pericarditis, unspecified I30.9 Acute pericarditis, unspecified I30.8 Other forms of acute pericarditis 420.99 Other acute pericarditis I30.9 Acute pericarditis, unspecifiedCMS-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 diso rders 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 thalassemi a with acute chest syndrome D57.412 Sickle-cell thalassemi a 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 diseas e with acute chest syndrome D57.212 Sickle-cell/Hb-C diseas e with splenic sequestration 282.64 Sickle-cell/Hb-C disease with crisis

D57.219 Sickle-cell/Hb-C diseas e with crisis, unspecified D57.811 Other sickle-cell disord ers with acute chest syndrome D57.812 Other sickle-cell disord ers 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 D47.2 Monoclonal gammopathy 273.1 Monoclonal paraproteinemia 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 D46.9 Myelodysplastic syndrome, unspecified 238.75 Myelodysplastic syndrome, unspecified D46.Z Other myelodysplastic syndromes
c. Multiple ICD-9-CM Codes Cr osswalk to One ICD-10-CM Code Table 3 displays the crosswalk where multip le 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 Code s Crosswalk to One ICD-10-CM Code

Gastrointestinal Bleeding ICD-9 Descriptor ICD-10 DescriptorCMS-1526-P 53

Gastrointestinal Bleeding ICD-9 Descriptor ICD-10 Descriptor 533.20 Acute peptic ulcer of unsp ecified site with hemorrhage and perforation, without mention of obstruction 533.21 Acute peptic ulcer of unsp ecified site with hemorrhage and perforation, with obstruction K27.2 Acute peptic ulcer, site uns pecified, 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 pep tic ulcer, site unspecified, with hemorrhage

533.60 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, w ithout mention of obstruction
533.61 Chronic or unspecified peptic ulcer of unspecified site with hemorrhage and perforation, with obstruction K27.6 Chronic or unspecified pep tic ulcer, site unspecified, with both hemorrhage and perforation

534.00 Acute gastrojejunal ulcer with hemorrhage, without mention of obstruction 534.01 Acute gastrojejunal ulcer, w ith hemorrhage, with obstruction K28.0 Acute gastrojejunal ulcer with hemorrhage

534.20 Acute gastrojejunal ulcer wi th hemorrhage and perforation, without mention of obstruction 534.21 Acute gastrojejunal ulcer wi th hemorrhage and perforation, with obstruction K28.2 Acute gastrojejunal ul cer 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 evalua tion of the ICD-10-CM codes to which the eligible ICD-9-CM codes cro sswalk, we propose that both D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic ga stritis or gastroenteritis w ould not be eligible for the comorbidity payment adjustment. We propose that all other ICD-10-CM c odes to which eligible ICD-9-CM codes crosswalk that are listed in the Tables above will be eligible for theCMS-1526-P 54

comorbidity payment adjustment effective Octo ber 1, 2014. We are soliciting comments on the ICD-10-CM codes that we propose to exclude an d 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 th e ESRD PPS include a payment adjustment for high cost outliers due to unusual variations in th e type or amount of medically necessary care, including variabil ity in the amount of erythropoies is stimulating agents (ESAs) necessary for anemia management. Our re gulations 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, separa tely billable under Medi care Part B; (iii) medical/surgical supplies, includi ng syringes, used to administer ESRD-related drugs, that were or would have been, prior to January 1, 2011, separa tely billable under Medica re Part B; and (iv) renal dialysis service drugs th at 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 fac ility 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 specifie d 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 identifiedCMS-1526-P 55

additional drugs and laboratory tests that may be eligible for ESRD outlier payment. Transmittal 2094 was rescinded and replaced by Transmitta l 2134, dated January 14, 2011, which was issued to correct the subject on th e 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 whic h were or would have been separately billable under Medicare Part B prior to January 1, 2011. Ho wever, 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 orde r to provide unit prices for calcul ating imputed outlier services. We also can identify, through our monitoring effo rts, items and services that are incorrectly being identified as eligible outlier services in the claims data. Any upda tes 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) thr ough (a)(6), (b), a nd (c) specify the methodology used to calculate outlier payments. An ESRD facility is eligible for an outlier payment if its actual or imput ed 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 wo uld have been considered separately billable services prior to January 1, 2011. The threshold is equal to the ESRD f acility’s predicted ESRD outlier services MAP amount per treatment (which is case-mix ad justed) plus the fixed dollar loss amount. In accordance with §413.237(c) of the re gulations, facilities are paid 80 percent of the per treatment amount by which the imputed MA P amount for outlier services (that is, the actual incurred amount) exceeds this threshold. ESRD facilities ar e eligible to receive outlier payments for treating both adult a nd pediatric dialysis patients.CMS-1526-P 56

In the CY 2011 ESRD PPS final rule, usi ng 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 th e predicted outlier serv ices MAP amounts. The outlier services MAP amounts and fixed dollar loss amounts are diffe rent for adult and pediatric patients due to differences in th e utilization of separately bi llable 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 mu ltipliers developed from the regression analysis to compute the payment adjustments. The aver age outlier services MAP amount per treatment for CY 2011 was based on payment amounts report ed 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 da ta 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 out lier thresholds for CY 2013 were based on utilization of ESRD-related item s 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 benefi ciaries requiring higher resources. a. Impact of Proposed Changes to the Outlier Policy For CY 2014, we are not proposing any change s to the methodology used to compute theCMS-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, wh ich compares the outlier services MAP amounts and fixed dollar loss amounts used for the outli er 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 inflatio n-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 treatment 1 $38.65 $61.38 $38.65 $52.45 Adjustments

Standardization for outlier services 2 1.0927 0.9878 1.0960 0.9893 MIPPA reduction 0.98 0.98 0.98 0.98

Adjusted average outlier services MAP amount 3 $41.39 $59.42 $41.51 $50.85

Fixed dollar loss amount that is added to the predicted MAP to determine the outlier threshold 4 $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 we re 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 calc ulate projected payments under an expanded bundle. The outlier s ervic amounts are based on 2012 data. The medi cally unbelievable edits of 400,000 units for EPO and 1,200 mcg for Aranesp that are i n pl a ESA claims monitoring polic y were applied.CMS-1526-P 58

2 Applied to the average outlier MAP per tr eatment. Standardization for outlier services is based on existing case mix adjusters for adul t patient groups. 3 This is the amount to which the separately billable (SB) paym ent multipliers are applied to calc ulate the predicted outlier ser vices MA P patient. 4 The fixed dollar loss amounts were calculated usi ng 2012 data to yield tota l outlier payments that represent 1% of total projec ted 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 amou nt that determines the 2014 outlier threshold amount for pediatric patients (Column II) is high er than that used for the 2013 outlier policy (Column I). The main reason for the reduction for a dult patients is that the lower utilization of epoetin and other outlier services continued to d ecline during the second y ear of the PPS. This can be seen by comparing the outlier service MAP amount per tr eatment 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 relati vely small percentage of pediatric patients to account for a disproportionate shar e of the total outlier service MAP amounts. The one percent target for outlier payments is th erefore 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 paymen ts rather than 7.6 percen t). These patterns led to the estimated fixed dollar loss amount for pedi atric 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 ad justed to reflect changes in the distribution of outlier service MAP amounts. This is due to the much smaller overall numberCMS-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 am ounts that are added to the predicted MAP amounts per treatment to determine the outli er 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 pediat ric 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 th at the per treatment base ra te 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, ou tlier payments represented approximately 0.2 percent of total payments, again fa lling short of the 1 pe rcent 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 resu lt in aggregate ou tlier payments close to the 1 percent target in CY 2014. We believe the pro posed 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 cl oser 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 paym ents to ESRD facilities for beneficiaries withCMS-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-ins urance 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 Traini ng, 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 perf ormed after an ESRD patient has completed an appropriate course of training. Th e scope of training services that a certified ESRD facility must furnish to ESRD patients as a condition of c overage is described at 42 CFR 494.100(a). For instance, 42 CFR 494.100(a)(2) states that the training must be c onducted by a registered nurse. For additional information on the requirements for ESRD facilities in furnishing dialysis training, see 42 CFR Part 494, and additional in formation regarding home dialysis training certification, see the State Operations Manual, wh ich 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) requ ires that facilities inform patients (or their representatives) of their rights and res ponsibilities when they be gin their treatment and protect and provide for the ex ercise of those rights. Ou r regulation at 42 CFR §494.70(7) requires a facility to inform pa tients about all treatment modali ties’ and settings, including butCMS-1526-P 61

not limited to transplantation, home dialysis moda lities, and in-facility hemodialysis. This includes the patient’s right to receive resource ma terials for dialysis modalities not offered by the facility. We expect that all ES RD 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 tr aining 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 servi ces and supplies may include bu t are not limited to personnel services; dialysis supplies, parenteral items us ed 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 followi ng dialysis modalities:

• Home Hemodialysis Training

• Intermittent Peritoneal Dialysis Training

• Continuous Ambulatory Perito neal Dialysis Training

• Continuous Cycling Periton eal 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 wi ll be successful in completing the method of training. This includes compliance with pa tient assessments as described in 42 CFR 494.80(a)(9) “Evaluation of the patie nt’s abilities, intere sts, preferences, a nd goals, including the desired level of participation in the dialysis care process; the pref erred modality (hemodialysis or peritoneal dialysis), and setting (for example, home dialysis), a nd 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 week s. 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 entir ety 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 w eeks. Medicare will pay the ESRD facility for up to 15 PD training sessions. In the IPD pr ogram, 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 b ecause 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 doe s not account for the staffing co sts associated with training treatments furnished by a registered nurse. T hus, 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 Medi care-certified training f acility, to a Medicare beneficiary for either hemodialysis or the perito neal dialysis training mo dalities listed above. Likewise, we noted in our CY 2012 ESRD PPS fi nal 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 retr aining sessions after a patient or caregiverCMS-1526-P 63

has completed the initial training program and if the patient continues to be an appropriate candidate for self or home dialysis modaliti es. We would expect that most Medicare beneficiaries receive retraining sessions when th ey 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 retrai ning sessions when they update a home dialysis patient’s treatment record, order monthly supplies , or instruct the pati ent on the use of a new medication for the treatment of in fection. When retraining sessions are furnished to a patient or caregiver, there is an expectation that the patien t or caregiver is alrea dy knowledgeable of the elements of home dialysis, and if additional trai ning 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 retr aining sessions in the Medica re 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 th e training or retraining session submitted for payment. Because the requirement of medical justification is specific to the patient’s traini ng needs, circumstances (such as a change in caregiver), or condition (change in modality), we would not expect that an ESRD facility would rou tinely bill Medicare for training or retraining sessions on any patient. For CY 2011, we finalized the amount for th e training add-on adjustment at $33.44 per treatment, and noted that this amount would be added to the ESRD PPS ba se rate payment whenCMS-1526-P 64

a training treatment is furnished by the ESRD f acility. 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 ES RD facility. (For further discussions on wage indexes, please see section II.B.4. of this propose d 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 w ith all applicable adju stments, 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 dial ysis 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 th e 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 c onfirming that CMS will c ontinue to monitor and analyze trends in home dialysis training, but that we believe our payment methodology is adequate for ESRD facilities fu rnishing training services. In this proposed rule we are seeking comment s on the costs associated with furnishing self or home dialysis training. We request co mments 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 discusse d 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 toCMS-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 serv ices” 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 in jectable drugs and biologicals (other than ESAs, which are included under clause (ii)) used for the treatmen t of ESRD, but also a ll 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 rena l 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). Acco rdingly, we defined “renal dialysis services” at 42 CFR 413.174 as including, among ot her 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 (incl uding drugs and biologicals with only an oral form).” Although oral-only drugs are included in th e definition of renal dial ysis services, in the CY 2011 ESRD PPS final rule, we al so finalized a policy to delay payment for these drugs underCMS-1526-P 66

the PPS until January 1, 2014 (75 FR 49044). We stat ed that there were ce rtain advantages to delaying the implementation of payment for oral -only drugs, including allowing ESRD facilities additional time to make operational changes and l ogistical arrangements in order to furnish oralonly ESRD-related drugs and biol ogicals to their patients. Accordingly, 42 CFR 413.174(f)(6) provides that payment to an ESRD facility for re nal 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 4 2, Code of Federal Regulations (relating to oral-only ESRDrelated drugs in the ESRD prospective payment sy stem), 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 or iginally 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 an d implement this delay by revising the effective date for providing payment for oral-only ESRD-re lated 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 ES RD PPS starting in CY 2016, we also propose to change the re ference 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 theCMS-1526-P 67

outlier policy effective January 1, 2016, consistent with the polic y 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 quali ty of care provided to patients with endstage renal disease (ESRD) by di alysis facilities has been an important component of the Medicare ESRD payment system. The ESRD qualit y incentive program (QIP ) is the most recent step in fostering improved patient outcomes by es tablishing 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 Se curity 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 S ecretary to establish an ESRD QIP by (i) selecting measures; (ii) establ ishing 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 pe rformance period; and (v) applying an appropriateCMS-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 sect ion 1881(h)(1)(A) of the Act, these facilities will receive a reduction to their ESRD PPS paymen ts, 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 be en transitioning from a program that pays for healthcare based on particular services furn ished to a beneficiary to a program that ties payments to providers and suppliers based on the qua lity 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 heal thcare coverage, and enterpri se excellence – while also advancing the National Strategy for Quality Impr ovement 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 Stra tegy 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 bene ficiaries and also adva nces the goals of the National Quality Strategy to coordinate health care delivery, reduce hea lthcare costs, enhance patient satisfaction, promote healthy co mmunities, and increase patient safety. 1 We believe that the development of an ESRD QIP that is succe ssful in supporting the delivery of high-quality healthcare serv ices 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 activitie s for the ESRD QIP take into account national pr iorities such as those established by the Na tional Priorities Partnership ( http://www.nationalprioritiespartnership.org/ ), HHS Strategic Plan ( http://www.hhs.gov/secretary/abou t/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/in itiatives/h ai/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 paymen t 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 fac ilities 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/workingforqu ality/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 hemodialys is patients, a clinical measure

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

o A Kt/V measure for pediatric hemodial ysis patients, a clinical measure

• To determine whether patients are treated using th e most beneficial type of vascular access:

o An arterial venous (AV) fistul a 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 Assessmen t 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 ne wly expanded or converted to a c linical 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 m easures that would cover these areas. We welcome further comments on these and other po tential measures for future program years. 3. Measures Applicatio n Partnership Review Section 1890A(a)(1) of the Act, as added by s ection 3014(b) of the Affordable Care Act, requires the entity with a cont ract under section 1 890(a) of the Act (cu rrently the NQF) to convene multi-stakeholder groups to provide input to th e Secretary on the se lection of quality and efficiency measures for use in certain prog rams. 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 us e in certain programs. Section 1890A(a)(3) of the Act requires the entity with a c ontract 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. Secti on 1890A(a)(4) of the Act requires the Secretary to take into consideration the input of the multi-stakeholde r groups in selecting quality and efficiency measures. The Measures Application Partnership is the public/private pa rtnership comprised of multi-stakeholder groups convened by NQF fo r 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 atCMS-1526-P 72

( http://www.qualityforum.org/ Setting_Priorities/Partners hip/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 we re reviewed by the Measures Application Partnership. Of these measures, a subset is related to a numbe r of proposed new measures for the PY 2016 ESRD QIP (one each for anem ia management, hypercalcemia, infection monitoring, comorbidity reporting, and ESA usage) . The Measures App lication Partnership supported the following:

• NQF-endorsed measure NQF #1454: Proporti on of patients with hypercalcemia

• NQF-endorsed measure NQF #1433: Use of Iron Therapy for Pediatric Patients (which forms the basis for the proposed Pedi atric Iron Therapy reporting measure)

• NQF-endorsed measure NQF #1460: National He althcare Safety Network (NHSN) Bloodstream Infection Measure (which form s the basis for the proposed Bloodstream Infection in Hemodialysis Ou tpatients clinical measure)

• NQF-endorsed measure NQF #0369: Dialysis Fa cility Risk-adjus ted Standardized Mortality Ratio (the proposed Comorbidity reporting measur e may assist in calculating performance on this measure, should we propose to adopt it in the future) The Measures Application Partnership supporte d the direction of the following measures:

• NQF-endorsed measure NQF #1463: Standardized Hospitalization Ratio for Admissions (the proposed Comorbidity reporting measur e 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 Partners hip and the NQF into consideration for the PY 2016 ESRD QIP. In th e 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 a ppropriate 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 ni ne 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 C onsent for Anemia Treatment, Hypercalcemia, and NHSN Bloodstream Infection in He modialysis Outpatients), a nd two new reporting measures (Pediatric Iron Therapy, and Comorb idity). (See Table 7) We be lieve 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 me an 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 pat ient-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-mo nths with spKt/V greater than or equal to 1.2. 0257 Vascular Access Type: Arterial Venous (AV) Fistula Percentage of patient-mont hs on hemodialysis during the last hem odialysis treatment of the month using an autogenous AV fistula with two needles.
0256 Vascular Access Type: Catheter >= 90 days Percentage of patient-months for pat ients on hemodialysis during the last hemodialysis treatment of month with a catheter continuously for 90 days or longer prior to the last hemodialysis session. N/A 1 National Healthcare Safety Network (NHSN) Dialysis Event Reporting Number of months for which facility reports NHS N Dialysis Event data to the Centers for Disease Control and Prevention (CDC). N/A 2 In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) Survey Administration + Attestation that facility administered surv ey in accordance with specifications. N/A 3 Mineral Metabolism Reporting + Number of months for which facility reports un corrected 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 measur e (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 st ep in reaching our goal to implement NQF#0258. 3 We note that this measure is based upon a current NQF-endorsed seru m phosphorous measure (# 0255), and a calcium monitoring measure that NQF ha d 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: Pa tient Informed Consent for Anemia Treatment N/A 1 Use of Iron Therapy for Pediatric Patients Reporting 1454 Proportion of Patients with Hypercalcemia N/A 2 NHSN Bloodstream Infection in Hemodialysis Outpatients N/A 3 Comorbidity Reporting 1 We note that the NQF has previously e ndorsed a pediatric iron therapy measure (#1433) upon which this measure is based. 2 We note that the NQF has previously e ndorsed a National Healthcare Safety Networ k (NHSN) bloodstream infection measure (#1460) upon which this measure is based. 3 We note that the NQF has previously e ndorsed risk-adjusted hospitalization and mo rtality measures (#1463 and #0369). The proposed Comorbidity reporting measure may as sist in calculating performance on thes e measures, should we propose to adopt them in the future.
1. PY 2015 Measures Continuing in PY 2016 and Future Payment YearsCMS-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 scor ing 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 He modialysis 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.dialysisreport s.org/ESRDMeasures.aspx 2. Proposal to Expand One PY 2015 Measure an d 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 paymentCMS-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 m easures 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 IC H 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 faci lities perform on the CAHPS survey. In PY 2015, we continued to use a report ing measure related to the ICH CAHPS survey, requiring that facilities attest they had administered the surv ey 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 th e baseline data necessa ry 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 ve ndors beginning in early CY 2014. We are also building the capacity to accept survey data, developing deta iled specifications for administering the ICHCAHPS survey in light of ques tions vendors asked about previ ous procedures, and developing specifications for submitting data to CMS, such as file specifications, structure and instructionsCMS-1526-P 77

that the survey vendors will use. We have take n these steps in order to make it possible for facilities to contract with third party vendors to transfer survey da ta results to CMS, so that we might collect the baseline data necessa ry 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 su rvey 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 author ize the CMS-approved vendor to administer the survey and submit data on their behalf . Each facility must th en 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 subm it CAHPS survey data on a monthly, continuous basis, we recognize that there ar e 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, woul d 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 paymen t 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 onCMS-1526-P 78

this proposal. The technical specifica tions for this measure are located at http://www.dialysisreports.org/pdf/e srd/public-measures/I CHCAHPS-2016NPRM.pdf

. b. Proposed Revised Mineral Metabolism Reporting Measure Adequate management of bone mineral me tabolism and disease in ESRD patients continues to be a high priority because it can cause severe consequences such as osteoporosis, osteomalacia, and hyperparathyroidism. Th e 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 exclude d 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 re porting measure. Therefore, we are proposing that a qualifying case for this measure will be de fined as (i) an in-cente r Medicare patient who had been treated at least seven ti mes 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 calci um levels as part of the mineral metabolism reporting measure. Accordingly, in light of our proposal to a dopt the hypercalcemia measure, we are proposing to change the specifications fo r the mineral metabolism measure such that it no longer requires facilities to re port serum calcium levels. We welcome comments on this proposal, and in particular on whether we should re tain the reporting of se rum 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 Sc oring Measures), we are also proposing to eliminate the 11-case minimu m for this measure, which was finalized in the CY 2013 ESRD PPS final rule at 77 FR 67486. Becau se 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 rece ive full points on this measure, f acilities 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 propo sing 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 ha ve to attest to that fact in CROWNWeb by January 31 of the year following the performance period in order to avoi d 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.dialysisrepo rts.org/pdf/esrd/publicmeasures/MineralMetabolism-Hypercalcemia-2016NPRM.pdf

. c. Proposed Revised Anemia Ma nagement Reporting Measure Section 1881(h)(2)(A)(i) re quires “measures on anemia management that reflect the labeling approved by the Food and Drug Administra tion (FDA) for such management.” In the CY 2013 ESRD PPS final rule, we finalized an Anemia Management reporting measure for theCMS-1526-P 80

reasons stated in that final rule (77 FR 67491 through 67495). However, we inadvertently excluded home peritoneal patients from the m easure 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 qua lifying case for this measure will be defined as (i) an in-center Medica re patient who had been treated at least seven times by the facility; and (ii) a home dialysis Me dicare 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 therefor e, we are proposing that, in orde r to receive full points on this measure, facilities that treat 11 or more qualify ing 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, faci lities that treat fewer than 11 qualifying cases during the performance period must report on a monthly basis the sp ecified levels for all but one qualifying case. If a facility only has one quali fying 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 scor ed 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-m easures/AnemiaManagement-Reporting2016NPRM.pdf . We request comment on this proposal to revise the Anemia ManagementCMS-1526-P 81

reporting measure. 3. New Measures Proposed for PY 2016 and S ubsequent Payment Years of the ESRD QIP As the program evolves, we believe it is im portant to continue to evaluate and expand the measures selected for the ESRD QIP. Ther efore, 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 meas ures 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 mana gement.” 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 th e 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 th at, like other measure topics, we are proposing that the Anemia Management clinical measure to pic consist only of c linical and not reporting

measures. i. Anemia Management: Hgb>12 For the PY 2016 ESRD QIP and future paymen t 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: Patie nt 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 treatmen t options for anemia were evaluated, and that the patient participated in the decision-making regard ing an anemia treatment strategy. We believe that this measure is consistent with recent changes to the FDA-approved labeling 2 for ESAs and Kidney Disease: Improving Global Outcomes (KDIGO) Anemia Management Guidelines 3 that highlight the evolving understandi ng 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 th ose potential risks within the context of treatment for anemia. For these reasons, we are proposi ng to adopt this measur e (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 fo r each qualifying patient, on an annual basis, that informed consent was obtained from that pa tient, or that patient’s legally authorized representative, during the performance period. We propos e 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 atte stations for the PY 2016 ESRD QIP will be January 31, 2015 or, if that is not a regular bus iness day, the first busin ess day thereafter. Missing attestation data for a patie nt will be interpreted as fail ure 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 meas ure. 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 Secret ary specifies, including, to the extent feasible, measures of bone mineral metabolism. A bnormalities of bone mineral metabolism are exceedingly common, and contribute significantly to morbidity and mortality in patients with advanced Chronic Kidney Disease (CKD). Many st udies have associated disorders of mineral metabolism with mortality, fractures, cardiovascular disease, and other morb idities. Therefore, we believe it is critical to adopt a clinical measure that en courages adequate management of bone mineral metabolism and disease in ESRD patients. Elevated serum calcium level (or hypercalcem ia) has been shown to be significantly associated with increased all-cause mortality in patients with advanced Chronic Kidney Disease (CKD). Both KDIGO Clinical Practice Guidelin e for the Diagnosis, Evaluation, Prevention, and Treatment of Chronic Kidney Disease–Minera l and Bone Disorder (CKD–MBD) and the National Kidney Foundation’s Kidney Disease Ou tcomes Quality Initiative (KDOQI) support maintaining serum calcium levels within refere nce ranges. Hypercalcemia is also a proxy for vascular and/or va lvular calcification 4,5 and subsequent risk for cardiovascular deaths. We previously proposed a hypercalcemia clinical measure for the PY 2015 ESRD QIP (77 FR 40973

4 Wang A, Woo J, Law C, et al. Card iac 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 Ca lcification 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 meas ure because we lacked baseline data that could be used to calculate performance standard s, achievement thresholds, and benchmarks (77 FR 67490 through 67491). We now possess enough base line 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-m onth rolling average. (“Uncorrected” means not corrected for serum albumin con centration.) 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 dial ysis 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 pati ent-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 averag e for each eligible patient in March 2014 using January, Februar y, and March 2014 data. We w ould 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 insteadthe 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 calcu lated monthly (March through December, each time using the latest three months of data) for all eligible patients that was great er than 10.2 mg/dL. Because we are proposing to adopt this measure not only for PY 2016, but alsoCMS-1526-P 85

subsequent payment years, we also propose that, beginning with the PY 2017 program, we would measure hypercalcemia beginni ng 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 fo r January would be calc ulated 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 th e 3-month rolling average, and so on. Technical specifications for th is measure can be found at http://www.dialysisreports.or g/pdf/esrd/public-meas ures/MineralMetabo lism-Hypercalcemia2016NPRM.pdf . We welcome comments on this proposal.

c. Use of Iron Therapy for Pediatri c Patients Reporting Measure
Section 1881(h)(2)(A)(i) states that the ESRD QIP must include measures on “anemia management that reflect the labeling approve d 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 lead ing cause of non-response to ES A therapy, and several studies suggest that providing oral or IV iron is effective in correct ing iron deficiency in the pediatric population. 7,8 Pediatric patients have previously be en excluded from all anemia management measures, limiting the participati on of dialysis facilities with substantial numbers of pediatric patients in the ESRD QIP. In an effort to a ddress this issue, and acc ount 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 pe diatric patients, we ar e proposing to adopt a pe diatric iron therapy measure for the ESRD QIP in PY 2016 and future payment years of the program. We considered proposing an NQF-endorsed clin ical 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 perit oneal dialysis patients who received IV iron or were prescribed oral iron with in three months of attaining the following conditions: (i) Patient had hemoglobin less than 11.0 g/dL; (ii) patien t had simultaneous values of serum ferritin concentration less than 11.0; a nd (iii) patient’s transferrin sa turation (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 base line data that would allow us to propose to adopt this measure as a clinical measure for PY 2016. We al so note that the clinical measure currently presents other issues related to the mi nimum number of cases th at would need to be reported for scoring, and we are c onsidering the use of an adjuster that could be applied where the sample size is small. While we continue to consider these and othe r issues related to the adoption of a pediatric iron th erapy 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 ar e proposing that facilities must enter in CROWNWeb on a quarterly basis, for each qualifyi ng case (defined in the next sentence): (i) patient admit/discharge date; (ii) hemoglobin le vels; (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 IVCMS-1526-P 87

iron was received or oral iron was prescribed (i f applicable). We are proposing that qualifying cases for this measure would be defined as in-cen ter and home dialysis pa tients under the age of eighteen. As described in more detail below, we are prop osing that each facility must report data on the Use of Iron Therapy for Pediatric Patients meas ure if it treats one or more qualifying cases during the performance period. Because this reporti ng measure requires that a facility enter data in CROWNWeb only once per quarter for each patient, we believe th at the burden is appropriate and will not unduly impact small facilit ies, 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 pe rformance period will have to report at the lesser of the 50th percent ile of facilities in CY 2013 or 97 per cent per quarter, fo r each quarter of the performance period. We are proposing that f acilities that treat fewer than 11 qualifying cases during the performance period will have to report on a quarterly basis the sp ecified 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 atte st to that fact in CROWNWeb by January 31 of the year following the performance period in orde r to avoid being scored on the measure. The technical specifications fo r this measure can be found at: http://www.dialysisreports.org/pdf/e srd/public-measures/A nemiaManagementPediatricIronTherapyR eporting-2016NPRM.pdf . We welcome comment on this proposal. d. NHSN Bloodstream Infection in Hemodial ysis Outpatients Clinical Measure Healthcare-acquired infections (HAI) are a leading cause of preventable mortality andCMS-1526-P 88

morbidity across different settings in the hea lthcare sector, including dialysis facilities. Bloodstream infections are a pre ssing concern in a population wh ere individuals are frequently immuno-compromised and depend on re gular vascular access to facilit ate dialysis therapy. In a national effort to reduce infecti on 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, psychi atric hospitals, rehabilitation hospitals, outpatient dialysis cen ters, 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, partic ularly goals for the reduction of HAIs. In addition, we believe that undertaking other ac tivities designed to re duce the number of HAIs supports national goals for patient safety. For fu rther 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 he lp 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 a nd preventing infections in th e ESRD population, and because a clinical measure would have a greater imp act on clinical practic e by holding facilities accountable for their actual perfor mance, we are proposing to re place 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 a nd future payment years. This proposed measure, NHSN Bloodstream Infection in Hemodi alysis Outpatients, is based closely NQFCMS-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 subm it 12 months of accuratel y 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 identif y the source of bloodstream infections, to preserve the internal validity of bloodstr eam 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 a nd training guidelines specified by the CDC (available at: http://www.cdc.gov/nhsn/ dialysis/enroll.html and http://www.cdc.gov/nhsn/Trai ning/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 evid ence of vascular access s ite infection, as well as information about the presence of a bloodstream infection.) Additionally, we are proposing that each quart er’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 th rough September 30, 2014 would need to be submitted by December 31, 2014; data from Oct ober 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 not e that in previous payment years we haveCMS-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 ar e 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 info rmation in the Standard Information Management System and CROWNWeb. We recognize that the CDC has published Co re 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 ni ne listed interventions in order to help prevent infections, but are not pr oposing 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 c onvert the current NHSN Dialysis Event Reporting measure into a clinical measure. The technical specifi cations for this measure are located at http://www.dialysisreport s.org/ESRDMeasures.aspx

. e. Comorbidity Reporting Measure The NQF endorsed a clinical measure for Dial ysis Facility Risk-A djusted Standardized Mortality Ratio (#0369) in 2008, an d a clinical measure for Sta ndardized Hospitalization Ratio for Admissions (#1463) in 2011. We have long been interested in adding a Standardized Mortality Ratio (SMR) measure and a Standardi zed Hospitalization Ratio (SHR) measure to the ESRD QIP. As articulated in the CY 2013 ES RD PPS final rule, “We believe that dialysisCMS-1526-P 91

facilities own partial responsibil ity for the rate at which thei r patients are hospitalized, in particular when that rate is substantially higher than at othe r 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 qu ality 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 ES RD population. We also acknowledge concerns raised by commenters in the past that th e NQF-endorsed SMR and SH R measures are not adequately risk adjusted (77 FR 67496). Curren tly, information about patient comorbidities is collected by CMS via the Medical Evidence Re porting Form 2728, which is typically only submitted by facilities to CMS when a new patient firs t 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 clin ical measures finalized in the PY 2013 ESRD PPS final rule. However, facilities are not re quired to update this form, which makes it difficult to capture information about comorbidities that develop afte r the initiation of dial ysis treatment. We acknowledge the concerns of commenters who stat ed that “there is currently no mechanism either for correcting or updati ng patient comorbidity data on CM S’ Medical Evidence Reporting Form 2728, and these comorbiditie s 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, theCMS-1526-P 92

proposed reporting measure offers a mechanism fo r 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 clin ical measures, should we propose to adopt such measures in the future. Second, the repo rting 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-adjus tment methodologies for possible use in calculating the SHR and SMR me asures, should we propose to adopt those measures in the future, and therefore more re liably calculate expect ed hospitalization and mortality rates in future payment years of th e ESRD QIP. When we examine updated data oncomorbidities, we will determine the appropriateness of including that data as additional riskadjustment factors for the SMR and SHR measur es by considering the extent to which each comorbidity may be influenced by the quality of dialys is facility care, as opposed to factors outside of a fac ility’s control. Section 1881(h)(2)(B)(i) of the Act requires that, unless th e exception set forth in section 1881(h)(2)(B)(ii) of the Act appl ies, the measures specified for the ESRD QIP under section 1881(h)(2)(A)(iii) of the Act must have been endors ed 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 consider ation is given to measures that have been endorsed or adopted by a consensus orga nization identified by the Secretary. NQF has not endorsed a measure for updating co morbidity information for patients withCMS-1526-P 93

ESRD. We have given due cons ideration to endorsed measures, as well as those adopted by a consensus organization, and we are proposi ng 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 pr actice 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 tim e 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 ar e proposing to define a “qualifying case” as a hemodialysis or peritoneal dialys is patient being treated at the f acility as of December 31 of the performance period, according to admit and di scharge 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 – OtherCMS-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 measur e, we are proposing that facilities would be required to provide the update s in CROWNWeb by January 31, 2015 or , if that is not a regular business day, the first business da y thereafter. While we are propos ing to require facilities to report a single annual upda te per patient, we encourage facilitie s to update this information more frequently, in order to more closely monitor th eir patients’ risk factors, and to improve the quality of the data. Technical specifications for this proposed measure can be found at http://www.dialysisreports.or g/pdf/esrd/public-meas ures/ComorbidityRe porting-2016NPRM.pdf

. We welcome comments on these proposals. 4. Other Measures under Development As part of our effort to continuously impr ove the ESRD QIP, we continue to work on developing additional robust measures that provi de valid assessments of the quality of care furnished by facilities to patients with ESRD. We are considering the fe asibility of developing quality measures in other topic areas (for exam ple, 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 info rmation in support of care coordination across providers and settings. Additi onal areas of potential interest include residual renal function, complications associated with ESRD, and frequen tly comorbid conditions (f or example, diabetes and heart disease). We request comment on thes e potential areas of future measurement, andCMS-1526-P 95

welcome suggestions on other t opics 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 Secretar y to develop a methodology for assessing the total performance of each facility based on the pe rformance 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 fina l rule incentivizes facilities to meet the goals of the ESRD QIP; therefor e, with the exception of the pr oposed changes further discussed in the applicable section belo w, we are proposing to adopt a scoring methodology for the PY 2016 ESRD QIP and future payment years that is n early 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 measur es, 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 benefici aries. 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 fu ll 12 months of data and still implement the payment reductions beginning with renal dialys is services furnished on January 1, 2016. Therefore, for the PY 2016 ESRD QIP, we are proposing to establish CY 2014 as theCMS-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 st andards 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 perform ance standards with respect to measures selected . . . for a performance period wi th respect to a year.” Section 1881(h)(4)(B) of the Act further provides that the “performance sta ndards . . . shall include levels of achievement and improvement, as determined appropriate by the Secretary.” We use the performance standards to establish the minimum score a facil ity 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 Bloodstrea m Infection in Hemodialysis Outpatients clinical measure, we are proposing to begin da ta 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 f acility performance in CY 2012. Fo r that reason, we are proposing that the performance standard for the NHSN Bloods tream Infection in Hemodialysis Outpatients clinical measure for PY 2016 be the 50th percen tile of the national pe rformance 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 onCMS-1526-P 97

achievement for this measure, and not on the basis of improvement. A lthough 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 withou t the baseline data necessary for an improvement score. Hospital Acquired Infec tions (HAIs) are a leading cause of preventable mortality and morbidity across different settings in the healthca re sector, including dialys is 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 asse ssing facilities on the number of these events as soon as possibl e, rather than on merely whet her they report these events. Additionally, the NHSN measure has been a repo rting measure since PY 2014, which will give facilities two years to re port 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 th emselves for such a measure. Finally, we are proposing that f acilities would receive a scor e of zero on the NHSN clinical measure if they do not submit 12 months of da ta, 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 Consen t for Anemia Treatment, we believe that facilities should meet the standard 100 percen t of the time. However, we recognize that unexpected events might make a 100 percent standa rd difficult to meet, so we are proposing that facilities should be allowed to meet the standa rd for less than 100 percen t of their patients.CMS-1526-P 98

Because prior data are unavailable for the esta blishment of a performance standard, benchmark, and achievement threshold, we developed a me thodology 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 qua lifying patients. Since fa cilities with between 11 and 25 patients would be subject to the favorab le 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 cas es a facility may have and not benefit from a small facility adjuster is 26. We calculated that if a f acility with 26 cases failed to obtain consent for two qualifying cases, it would have obtained cons ent 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 (9 2 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 pr oposing that the achievement thre shold be defined as obtaining informed consent for 92 percent of qualifying cases during the pe rformance period, and that the benchmark be defined as obtaining informed consen t 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 percen t. 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 meas ure, 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 lack ed baseline data we adopted a reporting measureCMS-1526-P 99

to ensure that both an achievement and improve ment 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 ma nagement is a topic highlighted in the ESRD QIP authorizing statute, requiri ng measures that reflect labe ling approved by the Food and Drug Administration. (See section 1881(h)(2 )(A) of the Act.) The inclus ion of the topic in statue highlights its importance to CMS and to dialysis patients. ESA labeli ng has changed over time as additional safety information has become av ailable, and the informed consent process is designed to ensure that the most current safety information is communicated to patients before ESAs are administered. In a ddition, obtaining informed consen t for anemia treatment is a standard of practice that should aready be in place at dialysis facilities, so facilities should already have procedures in pl ace to support the measure. Th us, although we do not yet have complete baseline data to give improvement scor es 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 a nd benefits of anemia th erapy, 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 hype rcalcemia 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 cons idered test or pilot data. For that reason, we are proposing to set the performance standard as the 50th percentile of na tional 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 numer ical values to theCMS-1526-P 100

proposed performance standards for the clinical m easures, because we do not yet have all of the data from CY 2012 or the first portion of CY 201 3. 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 come s 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 Sta ndards for the PY 2016 ESRD QIP Clinical Measures Using th e 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 Treatment 1 94% Hypercalcemia 2.3% NHSN Bloodstream Infection in Hemodialysis Outpatients 50th percentile of el igible 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 perfor mance 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 Standa rds for Reporting Measures For the proposed ICH CAHPS reporting measure, we are proposing to set the performance standard for PY 2016 as the facil ity’s successful submission, by January 28, 2015, of ICH CAHPS survey data collected during th e 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 c ontinue, except that in each performance period, facilitie s 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 repor ting 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 report ing 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: Pediat ric Iron Therapy reporting measure, we are proposing to set the performance standard as suc cessfully reporting for each qualifying case eachCMS-1526-P 102

quarter the following: (i) patient admit/discharge date; (ii) hemoglobin leve ls; (iii) serum ferritin levels; (iv) TSAT percentages; (v) the dates that the lab measurements were taken for items (ii)– (iv); (vi) intravenous IV iron pres cribed or oral iron prescribed (i f applicable); and (vii) the date that the IV iron or oral iron wa s prescribed (if applicable). For the proposed Comorbidity reporting measure, we are proposing to set the performance standard as successfully upda ting in CROWNWeb at least once during the performance period for each qualifying case, th e 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 base d on an achievement and improvement scoring methodology for purposes of assessing their perfor mance on the clinical measures (76 FR 70272 through 70273). We are proposing to use a simila r 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 Outpatie nts 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 al ong an achievement range based on theirCMS-1526-P 103

performance during the proposed performance peri od 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 dur ing 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 f acilities that score at or above the national performance rate for th e clinical measures (77 FR 67503). We are proposing to define the benchmark as the 90th per centile of the national performance rate during CY 2012, except as proposed below for the NHS N Bloodstream Infection in Hemodialysis Outpatients clinical measure and the Patient In formed 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 achievemen t threshold and benchmark be the 15th and 90th percentiles, respectivel y, 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 ac hievement threshold be defined as obtaining informed consent for 92 pe rcent of qualifying cases during the performance period, and that the benchmark be defined as obt aining informed consent for 96 percent of such

cases. For the reasons described above, the first mont h that we can use to establish the baselineCMS-1526-P 104

for the proposed Hypercalcemia measure is Ma y 2012. Therefore, we ar e proposing to set the achievement threshold as the 15th percentile of national performance and the benchmark as the 90th percentile of national performance fr om 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 be nchmark. We are proposing to define the improvement threshold as the facility’s pe rformance on the measure during CY 2013. The facility’s improvement score w ould be calculated by comparing its performance on the measure during CY 2014 (the proposed performance peri od) to its performance rate on the measure during CY 2013. Because we lack th e 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 Hype rcalcemia and NHSN Bloodstream Infection in Hemodialysis Outpatients, this data comes fr om 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 pr ovided the estimated achievement thresholds and benchmarks for each of the measures except for NHSN Bloods tream Infection inCMS-1526-P 105

Hemodialysis Outpatients clinical measure (whi ch 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 pr oposed to be 92 per cent and 96 percent, respectively). Table 9 – Estimated Proposed Achievement Th resholds 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 Treatment 1 92% 96% Hypercalcemia 6.1% 0.2% NHSN Dialysis Event Reporting and Clinical Bloodstream Infection 15th percentile of eligible facilities’ perfor mance during the performance period 90th percentile of eligible facilities’ performance during the performance period

1 As discussed above, the proposed achieveme nt threshold and benchmark for the Patient Informed Consent for Anemia Treatment cl inical 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 ES RD PPS final rule (76 FR 70273), if the final PY 2016 numerical values for the achievement th resholds 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 Performan ce on Clinical Measures Based on Achievement Using the same methodology we finalized in the CY 2013 ESRD PPS final rule, we areCMS-1526-P 106

proposing to award between 0 and 10 points for e ach of the proposed clinical measures (77 FR 67504). As noted, we are proposing that the score for each of these clinic al measures will be based upon the higher of an achievement or improv ement score on each of the clinical measures, except for NHSN Bloodstream Infection in Hemodi alysis 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 cal culating achievement scores for the clinical measures, we are proposing to base the score on wh ere a facility’s performa nce 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 scor es rounded to the n earest 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 distri buting all points proportionate ly between the achievement threshold and the benchmark, so that the inte rval in the performance between the scoreCMS-1526-P 107

for a given number of achievement points a nd 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 previous ly finalized for the ESRD QIP, we are proposing that facilities would ear n between 0 and 9 points for each of the clinical measures that will have an improvement score (that is, a ll clinical measures except NHSN Bloodstream Infection in Hemodialysis Outpatients clinic al 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 es tablished for each facility. We are proposing that if a facility’s perfor mance 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 improveme nt 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 achieveme nt score methodology discussed above. We request comments on this proposal. c. Proposals for Calculating Facility Performance on Reporting MeasuresCMS-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 f acilities 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 Mana gement reporting measure and the proposed Mineral Metabolism reporting measure, we are propos ing to award points to facilities using the same formula that we finalized in the CY 2013 ESRD PPS final rule fo r Mineral Metabolism and Anemia Management (77 FR 67506):

With respect to the proposed Use of Ir on Therapy for Pediatric Patients reporting measure, using the following formula:

We are proposing to score the Pediatric Iron Th erapy measure differently than the proposed Anemia Management reporting measure and the proposed Mineral Metabolism reporting measure because it requires quarterly rather th an 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 recei ve a score of 10 point s if it satisfies the performance standard for the measure, and 0 points if it does not. We are proposing to scoreCMS-1526-P 109

these reporting measures differently than the other reporting measures because these require annual or biannual reporting, and therefore scorin g based on monthly or qua rterly reporting rates is not feasible. We request comment on the proposed met hodology 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)(ii i) of the Act provides that the methodology for calculating the facility TPS shall include a process to weight th e performance scores with respect to individual measures to reflect priorities for quality improveme nt, such as weighting scores to ensure that facilities have strong incentives to meet or ex ceed anemia management and dialysis adequacy performance standards, as determined appropria te 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 meas ures we are proposing to include in the PY 2016 ESRD QIP; and 2) the National Quality Strategy priorities. a. Weighting Individual Measur es to Compute Measure Topic Scores for the Kt/V Dialysis Adequacy measure topic, the Vascular Access Ty pe 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 us e 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 topicCMS-1526-P 110

score using the following steps: (i) Dividing the number of patient s in the denominator of each measure by the sum of the number of patients in each denominator for a ll of the applicable measures in the measure topic; (ii) multiplying th at figure by the facility’s score on the measure; (iii) summing the results achieved for each meas ure; 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 to pic to be scored and included in the calculation of the TPS. We are also proposing that the m easure 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 me thod of weighting individual measure scores to derive a m easure 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 th e quality of care provid ed to patients with ESRD. We also continue to believe that, while the reporting measures are valuable, the clinical measures evaluate actual patient outcomes and th erefore justify a higher combined weight (77 FR 67506 through 67508). For the reasons outline d in the CY 2013 ESRD PPS final rule, we are proposing to continue weigh ting clinical measures as 75 pe rcent and reporting measures as 25 percent of the TPS. We request comment on this proposed methodol ogy for weighting the clinical and reporting measures.CMS-1526-P 111

We have also considered the issue of awardi ng a TPS to facilities th at do not report data on the proposed minimum number of cases with re spect to one or more of the measures or measure topics. For the reasons stated in th e 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 measur e score to receive a TPS (77 FR 67508). We request comment on our proposals to require a fac ility to be eligible for a scor e on at least one reporting and one clinical measure in order to receive a TPS. Finally, we are proposing that th e TPSs be rounded to the neares t integer, with half of an integer being rounded up. We request commen t on this proposal. For further examples regarding measure and TPS cal culations, 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 clin ical measure is 77 per cent, and the example achievement threshold (which is the 15th percent ile 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 be nchmark of 77 percent, so F acility A would earn 10 points (the maximum) for achievement for this measure. (Because, in this ex ample, Facility A has earned the maximum number of points possible fo r 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 exampl e 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 exam ple clinical measure

score. To calculate the achievement score, we w ould 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 sc ore, 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 th e nearest integer, which is 5.

Therefore, for this example cl inical measure, Facility B’s achievement score is 3, and its improvement score is 5. We award Facility B th e higher of the two scor es for this clinical measure. Thus, Facility B’s score on this example measure is 5.

Figure 2CMS-1526-P 114

In Figure 3, Facility C’s performance on th e example clinical measure drops from 26 percent in CY 2013 to 23 percent during the performance period, a de cline of 3 percent. Because Facility C’s performance during the performance period falls belo w the achievement threshold of 26 percent, it receives 0 points for achievem ent. 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 ex ample, Facility C would receive 0 points for the example clinical measure.

Figure 3CMS-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 repor ting measures are calc ulated 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 r eceives 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 Measur e Topic) + (.150 * Anemia Management Clinical Measure Topic) + (.150 * H ypercalcemia Measure) + (.150 * NHSN Bloodstream Infection in Hemodialysis Ou tpatients) + (.05 * ICH CAHPS Survey Reporting Measure) + (.05 * Mineral Me tabolism Reporting Measure) + (.05 * Anemia Management Reporting Measure) + (.05 * Pediat ric Iron Therapy Reporting Measure) + (.05 * Comorb idity 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 m easure, then the facility’s TPS would be calculated as follows: Total Performance Score = [(.188 * Vascular Access Type Measure Topic) + (.188 * Kt/V Dialysis Adequacy Measur e 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 Th erapy Reporting Measure) + (.05 * Comorbidity Reporting Measure) ] * 10. Again, the TPS would be rounded to the near est 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 tw o 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 Measur e Topic) + (.150 * Anemia Management Cinical Measure Topic) + (.150 * Hypercalcemia Measure) + (.150 * NHSN Bloodstream Infection in Hemodialys is Outpatients) + (.125 * Anemia Management Reporting Measure) + (.125 * Comorbidity Reporting Measure)] *
10. Again, the TPS would be rounded to the near est integer (and any individual measureCMS-1526-P 117

values ending in .5 would be rounded to the next higher integer). 10. Proposed Minimum Data for Scoring Meas ures for the PY 2016 ESRD QIP and Future Payment Years For the same reasons described in th e CY 2013 ESRD PPS final rule (77 FR 67510 through 67512), for PY 2016 and future payment year s, we are proposing to only score facilities on clinical and reporting measur es for which they have a minimum number of qualifying cases during the performance period. For PY 2016 and futu re 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 reportin g measures other than ICH CAHPS will have a threshold of one qualif ying case during the performance period. The 11-qualifying case minimum was intended to re duce burden on facilities with limited qualifying cases for earlier re porting 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 fr om the Pediatric Iron Th erapy reporting measure, then very few, if any, facilities would be able to report the measure, a nd we would be unable to collect meaningful data for future measure deve lopment. 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 faci lities 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 repor ting measures except for ICH CAHPS be one.CMS-1526-P 118

For the proposed expanded ICH CAHPS re porting measure, we are proposing that facilities with fewer than 30 qualifying cases dur ing 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-part y administrator to fulfill the ICH CAHPS survey requirements would have been impractical or prohi bitively 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, facili ties that treat fewer than 30 qualifying cases (defined as adult in-center hem odialysis patients) during the pe rformance 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 affirm atively attests in CROWNWeb by Ja nuary 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 he modialysis patients during the performance period. For the same reasons described in th e CY 2013 ESRD PPS final rule (77 FR 67510 through 67512), for PY 2016 and future payment y ears, 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 mo nths 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 ICHCMS-1526-P 119

CAHPS expanded reporting measure, we are proposi ng that only facilities with a CCN open date before July 1, 2014, be scored on the proposed repor ting measures. Under the specifications for the proposed ICH CAHPS reporting measure, facilities would need to admini ster the survey (via a CMS-approved, third-party vendo r) during the performance peri od. Because arranging such an agreement takes time, we are proposing that only f acilities 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 clin ical measure because infection rates vary through di fferent seasons of the year. As discussed above, we are proposing that a facility will not r eceive 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 facili ties not being eligible for a payment reduction for the PY 2016 ESRD QIP and future payment y ears if they have a CCN open da te 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 result s in an appropriate distributi on of payment reductions across facilities, such that facilities achieving the lowe st 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 eq ual to or greater than the tota l of the points it would haveCMS-1526-P 120

received if: (i) it performed at the performance sta ndard 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 receive d five points for each reporting measure. We request comments on these proposals. Section 1881(h)(3)(A)(ii ) of the Act requires that facili ties achieving the lowest TPSs receive the largest payment re ductions. 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 poi nts a facility falls below the minimum TPS, the facility would receive an additional 0.5 percent reduc tion on its ESRD PPS payments for PY 2016 and future payment years, with a ma ximum 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 perfor mance 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 usin g 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 co mes 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 propos ing that facilities failing to meet theCMS-1526-P 121

minimum TPS (as will be published in the Me dicare 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 scor e ranges indicated in Table 10 below. Table 10 – Estimated Payment Reduction Scal e 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 validati ng a national sample of facilities’ records as they report CY 2013 data to CROWNWe b. 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 deve loped, 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; thes e 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 valida tion contractor for the costs associated with copying and mailing the requested records. Addi tionally, we are proposing to reduce the annual random sample size from 750 to 300. We believe that this smaller sample si ze will still yield a sufficiently precise estimate of QIP reliabi lity 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 resu lting from the validation pro cess for CY 2014 during PY 2016. Once we have gathered additional information ba sed on these initial validation efforts, we will propose further procedures for validating data subm itted in future years of the ESRD QIP. These procedures may include a method for scoring fac ilities based on the accuracy of the data they submit to CROWNWeb, and a method to assign pe nalties for submitting inaccurate data. We solicit comments on these proposals. We are also considering a f easibility study for validating da ta reported to CDC’s NHSN Dialysis Event Module, which may mirror the pro cess used by the Hospital Inpatient Quality Reporting Program (77 FR 53539 through 53553). Although this is stil l in the early stages of development, we anticipate that this study may mirror the validation sample by targeting “candidate HAI events,” much like the methodol ogy 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 participa ting in an NHSN validation program; (ii) assess the costs to CMS to implement an NHSN validation pr ogram 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 re sults 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 ownershi p 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 pa yment reduction depended on whethe r 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 QI P, and we applied any ESRD QIP payment reductions that would have applied to the transfer or 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, rega rdless of whether the ownershi p 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 proposal s 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 rule s 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 Ac t requires the Secretary to establish procedures for making information available to the public abou t 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 i ndividual measures achieved by each facility. Section 1881(h)(6 )(B) of the Act further requires that a facility have anCMS-1526-P 124

opportunity to review the information to be made public with respect to th at 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 pos t 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 adopt ed uniform requirements based on sections 1881(h)(6)(A) through 1881(h)(6 )(D) of the Act, thereby establis hing procedures for facilities to review the information to be made public a nd for informing the public through facility-posted certificates. We are proposing to maintain the public reporting requirement s as finalized in the CY 2013 ESRD PPS final rule, except regarding th e timing of when facilities must post their certificates. For PYs prior to PY 2014, we required faciliti es to post certificates within 5 business days of us making these certi ficates 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 ma ny individuals respons ible for posting the certificates were away on holiday during the De cember 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 paym ent year. (77 FR 67517) We also noted that certificates are typically available for downl oad on or around December 15 of each year, and stated that we be lieve that this two w eek 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 wereCMS-1526-P 125

ever the case that certifi cates 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 Decem ber holidays. Therefore, we propose that, beginning in PY 2014, facilities mu st post certificates within fift een business days of us making these certificates available fo r download from dialysisreports.or g in accordance with section 1881(h)(6)(C) of the Act. We request comments on this proposal.
IV. Clarification of the De finition of Routinely Purchased Durable Medical Equipment (DME) A. Background 1. Background for DME Title XVIII of the Social Security Act (t he Act) governs the administration of the Medicare program. The statute pr ovides coverage for broad cate gories of benefits, including, but not limited to, inpatient and outpatient hospital ca re, skilled nursing facil ity care, home health care, physician services, and DME. "Medical and other health services," which is defined under section 1861(s)(6) of the Ac t 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” in cludes iron lungs, oxygen tents, hospital beds, and wheelchairs used in the beneficiary’s home, incl uding an institution used as his or her home other than an institution that meets the requi rements of section 1861 (e )(1) or section 1819 (a)(1) of the Act. Section 1834(a) of the Act, as a dded 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 isCMS-1526-P 126

generally equal to 80 per cent 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 per cent of the lesser of the actual charge or the fee schedule amount for the item once the deductible is met. The fee sc hedule amounts are generally calculated using average allowed charges from a base period a nd then increased by annual update factors. Sections 1834(a)(2) thr ough (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 su bstantial 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 a nd other routinely purchased DME also includes accessories used in conjunction wi th 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 guidan ce for carriers to follow in deve loping a data base that would be used in identifying other r outinely purchased DME for the purpose of implementing section 1834(a)(2)(a)(ii) of the Act. Fo r the purpose of identifying ro utinely purchased items, the carriers were instructed via the program memo randum to “compute the unduplicated count of beneficiaries who purchased the item, by HCPCS c ode, and a count of those who only rented the item during the 7/1/86 – 6/30/87 period.” The carrier s were instructed to include purchase of new and used items and beneficiaries who purchased an item that was initially rented in theCMS-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 num ber 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 implementi ng instructions were e ffective for services furnished on or after January 1, 1989. Section 5102.1 indicated that carr iers would be provided with a listing of the HCPCS (Health Care Fi nancing Administration Common Procedure Coding System prior to 2003 and Healthcare Common Procedure Coding System beginning in 2003) codes for the equipment in the routinely purchas ed 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 su ch as canes and walkers, as well as HCPCS codes for replacement accessories such as can e 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 th at 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 unde r the listing of HCPCS c odes for capped rental items. Medicare payment for DME extends to paym ent for replacement of essential accessories used with patient-owned equipment or accessories , attachments, or options that modify base equipment, such as the addition of elev ating leg rests to a manual wheelchair. The Medicare definition of routinel y purchased equipment is under 42 CFR §414.220(a)(2) and specifies that routinely purchased equipment means equipment that wasCMS-1526-P 128

acquired by purchase on a national ba sis 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 consis tent with Medicare program guidance in effect beginning in 1988 and discussed above, an d 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 de termining which items are routinely purchased.” CMS indicated that it “selected the period Ju ly 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 calc ulating the base fee schedule amount for routinely purc hased equipment.” This period was therefore established as the period from which data was used for identif ying the items that had been acquired on a purchase basis 75 percent of the time or more unde r the Medicare rent/purch ase program. 3. Payment for Inexpensive or Routinely Purchased Items and Capped Rental Items Pursuant to 42 CFR §414.220(b) payment for in expensive or routinely purchased DME is made on a purchase or rental basis, with to tal payments being limited to the purchase fee schedule amount for the item. If an item is in itially rented and then purchased, the allowed purchase charge is based on the lower of the ac tual 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 13 th month of continuous use.
B. Current Issues Concerns have been raised about the applic ation of the definition of and payment forCMS-1526-P 129

routinely purchased DME, as it applies to expensive DME accessories. For example, recently one manufacturer of a new, expensive wheelchai r accessory, included under a HCPCS code that would result in a corresponding Medicare f ee schedule amount of approximately $3,000, if purchased, questioned why the HCPCS code desc ribing their product was classified as capped rental DME. They pointed out that codes adde d 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 und er 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 equipm ent 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 code s that are not classified consistent with the regulatory definition of routinely purchased equi pment at section §414.220(a )(2). We found that HCPCS codes added after 1989 for expensive, dura ble 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 w ith nebulizers, aspirators, continuous positive airway pressure devices (CPAP), other item s covered under the DME benefit including DME other than nebulizers, aspirators, CPAP devices, respiratory assist devices and accessories used in conjunction with those items, ar e paid for in accordance with the rules at sec tion 1834(a) of the Act and are classified under se ctions 1834(a)(3) thru (7) of th e 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, ex pensive items of DME were classified as routinely purchased based on info rmation suggesting that payers other than Medicare were routinely making payment for the items on a purchase basis. We believe th at 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. Ot her 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 whethe r 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 manufactur ers 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 r outinely pay for the item on a purchase basis or how manufacturers would pr efer that other payers pay for the item. The classification of HCPCS codes for expensive equipment a dded after 1989 as routinely purch ased equipment based on this kind of information does not comply with th e 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 co stly 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 purcha sed equipment at §414.220(a)(2) a nd providing notice that certain HCPCS codes for DME and DME accessories added to the HCPCS after 1989 that are currently classified as routinely purchase d 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 indi cate 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 rehabilitati ve power wheelchairs, the purchase option for complex rehabilitative power wheelchairs at se ction 1834(a)(7)(A)(iii) of the Act would also apply to these accessories. For any wheelchair a ccessory classified as a capped rental item and furnished for use with a complex rehabilitiave power wheelchair (tha t is, furnished to be used as part of the complex rehabilitative powere wheelch air), 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 rehabil itative 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 (HCP CS 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 pr ovided in an area subject to competitive biddingCMS-1526-P 132

or not. We propose that the reclas sification of items previously cl assified 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 a ny item currently under a Round 2 CBP , instead of a January 1, 2014, effective da te 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 ite ms furnished in a Round 1 Recompete CBP, we propose an effective date of January 1, 2017, whic h 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 rout inely 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 ot her 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 th e payment class for capped rental items at theCMS-1526-P 133

same time in all areas of the country without disrupting CBPs currently underway. For Round 1 Recompete items furnished in nine areas of th e 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 recl assifications could be January 1, 2014, for all items paid under the fee schedule. In other words, the reclassification woul d 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 progr ams expire on July 1, 2016, and January 1, 2017, respectively. However, this al ternative would result in an exte nsive 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 ar e soliciting comments on this alternative implementation strategy. We have identified approximately 80 HCPCS codes requiring reclassification from the inexpensive or routinely purchased DME paym ent 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/C oding/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 rent al items, the purchase option for complex rehabilitative power wheelchairs applies to thes e accessories because they are part of the capped rental wheelchair that the supplie r is required to offer to the be neficiary 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). Wheelchai r accessories that are also used with manual wheelchairs or standard power wh eelchairs 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 Defibrillat or K0607 Repl battery for AED Canes/Crutches E0117 Underarm spring assist crutch Glucose Monitor E0620 Capillary bl ood 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 Ct rl dose inh drug deliv system Osteogenesis Stimulator E0760 Oste ogenesis ultrasound stimulator Other Neuromuscular Stimulators E0740 Incontinence treatment system E0764 Functional neuromuscular stimulation E0656 Segmental pneumatic trunk Pneumatic Compression Device 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 E0197 * Air pressure pad for mattress Support Surfaces E0198 Water pressure pad for mattress E0849 Cervical pneum traction equip Traction Equipment E0855 Cervical traction equipmentCMS-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 replacementCMS-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 C BAs 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 certa in HCPCS codes that would be reclassified as capped rental items (see Table 11 of code s). We invite comments on this section. V. Clarification of the 3-year Mini mum 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 supp lementary medical insura nce program (Medicare Part B), to include “medical a nd other health services,” whic h 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 h ealth 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 institu tion used as his or he r home other than an institution that meets the requirements of secti on 1861(e)(1) or section 18 19(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 dia gnosis or treatment of illness or injury or to improve the functioning of a malformed body memb er, and section 1862(a)(6) of the Act, which (except for certain specified exceptions) pr ecludes payment for pe rsonal comfort items. Section 414.202 defines DME as equipment furnished by a supplier or a home health agency that meets the following conditions: (1) ca n withstand repeated use; (2) effective with respect to items classified as DME after January 1, 2012, has an exp ected life of at least 3 years;CMS-1526-P 137

(3) is primarily and customarily used to serve a me dical 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 effectiv e January 1, 2012, that must be met by an item or device in order to be considered durable for the purpose of cla ssifying 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 respec t to items classified as DME after January 1, 2012, has an expected life of at least 3 years. Th e 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 paymen t and coverage provisions, including, Medicare program guidance at section 280.1 of chapter 1, part 4 of the Medica re National Coverage Determinations Manual (Pub. 100-03) which specifie s that an item can w ithstand 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 ma jority of items covered under the DME benefit over the years last for 3 or more years, the ML R is intended to clarif y the scope of the DME benefit primarily for new items coming on the market or in the process of being developed. TheCMS-1526-P 138

standard set forth in regulations gives manufacturers and the pub lic a clear unders tanding of how long an item would need to withstand repeated use in order the meet th e durability requirement for DME. The rule also provides clear guida nce to CMS and other stakeholders for making consistent informal benefit category determinatio ns 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 ML R is prospective only a nd does not apply to equipment classified as DME before the regula tion 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 conti nued coverage of such e quipment 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). Gi ven that reliance, we did not intend to reopen those prior decisions and reclassify the eq uipment 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 c ontinuity of care for the benefici aries that received these items for medical treatment prior to January 1, 2012. Beneficiaries have been relyi ng on these items for their treatme nt 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 benefi ciaries. Furthermore, we believed that a vast majority of the categories of items that were classified as DME before January 1, 2012, didCMS-1526-P 139

function for 3 or more years. We also noted th at 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 reques ted further clarificati on on the application of the grandfathering provision for the 3-year ML R, we noted that we would consider issuing additional guidance to provide further clarifica tion, if necessary (76 FR 70290). For purposes of providing additional guidance on the scope of th e 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 un less 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 guidan ce 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 th at clarification. If th e product is modified (upgraded, refined, reengineered, et c.) 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 co vered 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 atCMS-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” a nd 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 furnishe d under Part B of the Medicare program is made through contractors known as Medicare Administrative Contractors (MACs). These contractors were previously referred to as ca rriers. Prior to 1988, in accordance with section 1842(b) of the Act, payment for most of thes e 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 factor s 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 servi ce, or the 50th percenti le of charges for an item or service over a 12-month period, was one f actor used in determ ining the reasonable charge. In accordance with §405.504, the “preva iling 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, aCMS-1526-P 141

“locality” is defined at §405.505 of our regulations and “may be a State (inc luding the District of Columbia, a territory, or a Common wealth), a political or economi c subdivision of a State, or a group of States.” The regulation further specifies that the locali ty “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 pa renteral 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 w ith 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 “infla tion-indexed charge (IIC),” was added to the factors taken into consideration in determini ng 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, incl uding supplies, and equipment reimbursed on a reasonable charge basis (excluding physicians’ serv ices) that is in eff ect on December 31 of the previous fee screen year, updated by the inflation adjustment fact or. The inflation adjustment factor is based on the current percentage cha nge 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 th e 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 clinic al diagnostic laboratory testsCMS-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 pro cess. Contractors must collect new charge data each year, perform the various calculations, and maintain pricing files and claims processing edits for the various charge screen s. For each item that is paid on a reasonable charge basis, administrative funding must be provided to co ntractors for the purpose of performaing these calculations and maintaining these pricing file s. Therefore, replac ing 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 addi ng a new subsection (s). Section 1842(s) of the Act provides authority for implementing stat ewide 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 interp ret 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 ot her categories listed in section 1842( s) of the Act. We believe that section 1842(s) of the Act is intended to pr ovide authority for establishing fee schedules forCMS-1526-P 143

all of the remaining, and relativ ely 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” a nd “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 te rms are excluded from such definition), and not intended to suggest these are mutu ally exclusive things. Accord ingly, we do not believe we are precluded from establishing fee schedules for IO Ls under the category of medical supplies under section 1842(s) of the Act. Nevertheless, we ar e specifically requesting comments on this issue. Section 1842(s)(1) of th e Act provides that the fee schedules for the services listed above are to be updated on an annual basis by the percenta ge 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 b een made under the reasonable charge payment methodology. As explained below, we used this au thority to establish fee schedules for parental and enteral nutrition (PEN) items a nd services for use in paying cl aims 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 servi ces for which section 1842(s) ofCMS-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 f ee schedules for the Parenteral a nd Enteral Nutrition (PEN) items and services, but not the other items and services, primarily re lated to concerns regarding data used for calculating fee schedule amounts for item s and service that ar e 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 basi s by the IIC, have been used to pay for the splint and cast materials. C onverting these amounts to nationa l 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-neutra lity. Currently, very few IOLs are inserted in a physician’s office nationall y. In 2011, total allowed charges for 437 IOLs furnished to 287 beneficiaries equaled $75,914. Sin ce IOLs are considerably low volume items furnished by very few suppliers nationally, there are some states wher e none of these items are furnished; therefore, charge data for use in calculati ng prevailing charges, even at the state level, are not available and budget-neutrality is not an issue. If the nationa l average allowed amount for these items is used as the fee schedule amount for the few IOLs that ar e still inserted in a ph ysician’s office, we do not believe that total allowed charges in the firs t year of the fee schedul e 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 clai ms in 2011 was less than $174 and in other cases the allowed charge was more than $174. Howe ver, given the low volume of items furnishedCMS-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 establis hing budget-neutral fee schedule amounts for splints and casts, and IOLs inserted in a physician’s office will save government resources in calculating the reasonab le charge payment for the low volume items. We are proposing to establish fee schedules for th ese 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 pr opose, under section 1842(s) of the Act, to implement fee schedules for splints and casts, an d IOLs inserted in a physician’s office falling under the category of medical supplies. In addend um C of this proposed rule, we have inserted the current 2013 reasonable charge amounts for splin ts, casts and IOLs inse rted in a physican’s office. The splints and casts are payment amoun t 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 estima te 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 fo r 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 sche dule methodology and updates as explained above for splints, casts, and IOLs inserted in a physican’s office. Subject to coinsurance andCMS-1526-P 146

deductible rules, Medicare paymen t 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 f ee schedule amounts for items furnished from January 1, 2014, thru December 31, 2014, base d on 2013 reasonable charges updated by the percentage increase in the consumer price inde x 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 increas e 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 Janu ary 1, 2012 through December 31, 2012, updated by the percentage increase in the consumer price inde x 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 increas e 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. BackgroundCMS-1526-P 147

Medicare pays for various DM EPOS 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 ex isting 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 De vices” to read “Subpart D- Payment for Durable Medical Equipment, Prosthetic and Orthotic Devices, and Surgical Dressings” to reflect that payment for surgical dressings is addr essed 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 prosthet ic and orthotic devices for Medicare beneficiaries.” as follows: “This s ubpart implements secti ons 1834 (a),(h), and (i) of the Act by specifying how payments are ma de for the purchase or rental of new and used durable medical equipment, prosthetic a nd orthotic devices, and surgical dressings for Medicare beneficiaries.” The Omnibus Budget Reconciliation Act of 1993 amended section 1834 of the Act by adding subsecti on (i), mandating payment on a fee schedule basis for surgical dressings. Althoug h §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 au thority for creating se parate classes of oxygen and oxygen equipment. Section 1834(a)(9 )(D)(ii) of the Act prohibits CMS fromCMS-1526-P 148

creating separate classes of oxygen and oxygen e quipment that result in expenditures for any year that are more or less than expend itures 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 oxyge n 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 monthl y fee schedule amounts for the stationary oxygen equipment class at § 414.226 (c)(1)(i) in order to esta blish budget neutrality for total oxygen and oxygen expenditures for all oxyge n classes. Increa ses in expenditures for oxygen and oxygen equipment that are attributed to higher payment amounts established for new classes of oxygen and oxyge n equipment are off set by reducing the monthly payment amount for stationary oxygen e quipment. 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 te xt at §414.226(c)(6) mistakenly states that budget neutrality s hould be achieved by ad justing all oxygen class rates. Section 414.226(c)(6) s hould read that only the sta tionary oxygen equipment rate should be adjusted to achieve budget ne utrality. 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 pa yment rate for items described in paragraph (c)(1)(i) of this section to en sure that such payment rates do not result in expenditures for any year that are more or less than the expe nditures that would have been made if such classes had not been established.”CMS-1526-P 149

• We are also making a techni cal correction to existing 42 CFR §414.102(c) to conform the regulation governing parenteral and entera l (PEN) nutrients, equipment and supplies covered item fee schedule update with the stat ute. Although secti on 1842(s)(1)(B)(ii) of the Act is self-implementing, the PEN nut rients, equipment and supplies payment regulations at 42 CFR 414 Subpart C were not updated to refl ect 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 regulati ons to specify that for years 2003 through 2010, the PEN items a nd services fee sche dule 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 y ear. 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 provi de 60-day notice in the Federal Register and solicit public comment before a co llection 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 co llection requirement shoul d be approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 re quires 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 inform ation collection burden on the affected public, including automate d 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 th at 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 di scussed in the regulation text contained in this document. The following is a discussi on of these information collections. 1. ESRD QIP a. Proposed Expanded ICH C AHPS 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 reporti ng measure, which assesses facility usage of the ICH CAHPS survey. Unlike the ICH CA HPS 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 repo rt (via a CMS-approved vendor) survey data toCMS-1526-P 151

CMS once for PY 2016, and, for PY 2017 and be yond, to administer (via a CMS-approved vendor) a second ICH CAHPS survey and report th e second set of survey data to CMS. Therefore, for PY 2016, we estimate the burden associ ated 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 eligib le to receive a score on this measure. We further estimate that all 5,506 facilities will re port (via a CMS-approve d 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 faciliti es). According to the Bur eau 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 eligib le to receive a score on this measure. We estimate that all 5,693 facilities will administ er 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 pe r year would be taken per facility. Interviewers from eachCMS-1526-P 152

vendor would therefore spend a total of appr oximately 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 fa cilities to comply w ith 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 Requi rements 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 fac ilities will be reimbursed by our validation contractor for the costs associated with copyi ng and mailing the requested records. The burden associated with this validation requirement is th e 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 fac ilities are tasked with providing the required documentation, the estimated annual burden for thes e 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 f acility in the sample. 2. The discussion on clarifying th e definition of routinely purc hased DME does not contain any new information collection requirements.

9 We note that this total represents an underestimate of the overall burden because it do es not include time costs for patients.CMS-1526-P 153

3. The clarification of the the 3-year Minimu m Lifetime Requirement for DME does not contain any new information collection requirements. 4. The proposed implementation of Budget-Ne utral Fee Schedules for Splints, Casts and Intraocular Lenses does not contain any ne w information collection requirements. To obtain copies of the supporting statemen t and any related forms for the proposed paperwork collections referenced above, access CMS’ Web site at http://www.cms.gov/PaperworkReduc tionActof1995/PRAL/list.asp#TopOfPage If you comment on these information collecti on and recordkeeping requirements, please do either of the following: 1. Submit your comments electronically as sp ecified in the ADDRESSES section of this proposed rule; or 2. Submit your comments to the Office of Info rmation 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 subse quent document, we will respond to the comments in the preamble to that document. X. Economic AnalysesCMS-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 a nd Review) and Executive Order 13563 on Improving Regulation and Regulat ory 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 ma ximize net benefits (including potential economic, environmental, public health and safety eff ects, distributive impacts, and equity). Executive Order 13563 emphasizes th e importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexib ility. This rule has been designated economically significant under sec tion 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 comm ents on the regulatory impact analysis provided. 2. Statement of Need This rule proposes a number of routine upda tes for renal dialysis services in CY 2014, proposes to implement the fourth year of the ES RD PPS transition, and proposes to make several policy changes to the ESRD PP S. These include proposed upda tes 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 utilizati on from 2007 with such data from 2012, to reduce the single payment amount to refl ect the Secretary’s estimate of th e change in the utilization of ESRD-related drugs and biologicals. Failure to publish this proposed rule would result in ESRDCMS-1526-P 155

facilities not receiving appr opriate payments in CY 2014. This rule proposes to implement the ES RD QIP for PY 2016 and beyond by proposing to adopt measures, scoring, and paym ent reductions to incen tivize 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 ES RDB market basket redu ced by the productivity adjustment, updates to outlier threshold amount s, the inclusion of the Pacific Rim ESRD facilities, updates to the wage index, and the drug utilizati on 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 pred icted payment reductions will equal about $26.4 million to result in a total im pact 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 fo r implementing the fee schedule amounts from reasonable charge payments will be budget ne utral 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 certai n items as cap rental items would impact certain DMEPOSCMS-1526-P 156

providers. We estimate that th e 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 aff ecting payments to different categories of ESRD facilities, it is necessa ry 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 pa yments and new payments. For this proposed rule, we used the D ecember 2012 update of CY 2012 National Claims History file as a basis for Me dicare dialysis treatments and payments under the ESRD PPS
. We updated the 2012 claims to 2013 and 2014 using various updates. Th e 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 es timated payments to ES RD 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 Policy 4 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 changes 5 G All Facilities 5,771 38.1 0.4% 0.0% 2.5% -12.0% -9.4% TypeCMS-1526-P 157

Freestanding 5,270 35.4 0.4% 0.0% 2.5% -12.0% -9.4% Hospital based 501 2.7 0.3% 0.1% 2.5% -11.9% -9.3% Ownership Type Large dialysis organization 3, 769 25.9 0.4% 0.0% 2.5% -12.0% -9.4% Regional chain 885 6.1 0.4% 0.0% 2.5% -12.0% -9.4% Independent 614 3.9 0.2% 0.1% 2.5% -12.0% -9.5% Hospital based 1 400 2.1 0.2% 0.1% 2.5% -11.9% -9.4% Unknown 103 0.2 0.3% -0.2% 2.5% -12.0% -9.6% Geographic Location Rural 1,257 6.3 0.4% -0.1% 2.5% -12.0% -9.5% Urban 4,514 31.8 0.4% 0.0% 2.5% -12.0% -9.4% Census Region East North Central 946 5.7 0.4% -0.2% 2.5% -11.9% -9.5% East South Central 477 2.9 0.5% -0.2% 2.5% -11.9% -9.5% Middle Atlantic 634 4.6 0.4% 0.5% 2.5% -12.0% -9.0% Mountain 340 1.8 0.3% 0.1% 2.5% -12.0% -9.4% New England 170 1.3 0.4% 0.2% 2.5% -12.0% -9.2% Pacific 2 684 5.3 0.1% 0.4% 2.5% -12.0% -9.3% Puerto Rico and Virgin Islands 41 0.3 0.4% -2.3% 2.5% -11.9% -11.5% South Atlantic 1,288 8.8 0.5% -0.3% 2.5% -12.0% -9.6% West North Central 416 2.0 0.4% -0.1% 2.5% -12.0% -9.5% West South Central 775 5.5 0.5% -0.1% 2.5% -11.9% -9.5% Facility Size Less than 4,000 treatments 3 1,044 2.6 0.4% 0.0% 2.5% -12.0% -9.4% 4,000 to 9,999 treatments 2,157 10.4 0.4% -0.1% 2.5% -12.0% -9.5% 10,000 or more treatments 2, 400 24.7 0.4% 0.0% 2.5% -12.0% -9.4% Unknown 170 0.4 0.4% -0.1% 2.5% -12.0% -9.5% Percentage of Pediatric Patients Less than 2% 5,662 37.7 0.4% 0.0% 2.5% -12.0% -9.4% Between 2% 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, Am erican 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. Th e impact to these low-volume facilities is a 9.5 percent de crease in payments.
4. Includes the effect of including the Pacific Rim ESRD facilitie s of Guam, American Samoa, and the Northern Mariana Islands i nto the PPS. 5. Includes the effect of Market Basket minus productivity incr ease 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 mu ltiplicative, not additiveCMS-1526-P 158

Column A of the impact table indicates th e number of ESRD facilities for each impact category and column B indicates th e number of dialysis treatmen ts (in millions). The overall effect of the proposed changes to the outlier payment policy descri bed in section II.B.6. of this proposed rule is shown in column C. For CY 20 14, the impact on all facilit ies 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 ES RD 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 i ndex on ESRD facilitie s 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 rece ive a 2.3 percent decrease in estimated payments in CY 2014. Since most of the fac ilities in this category are locate d 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 percen t 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 facili ties would be a 2.5 percent increase. Column F shows the effect of the drug util ization adjustment re quired by section 1881(b)(14)(I). For CY 2014, the impact on all facili ties 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 fr om 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 faci lities 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 s how 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 fac ilities are paid directly fo r the renal dialysis bundle and other provider types such as laboratories, DME suppliers, and pharmacies, may no longer bill Medicare directly for renal di alysis services. Rather, eff ective January 1, 2011, such other providers can only furnish renal dialysis servic es under arrangements w ith 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 implem entation of the ESRD PPS. Therefore, in CY 2014, the fourth year of the ESRD PPS, we estima te that the proposed ES RD 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 ap proximately $8 billion. This estimate takes into account a projected increase in fee-for-ser vice Medicare dialysis benefici ary enrollment of 3.8 percent inCMS-1526-P 160

CY 2014. d. Effects on Medicare Beneficiaries Under the ESRD PPS, beneficiaries are res ponsible for paying 20 percent of the ESRD PPS payment amount. As a result of the project ed 9.4 percent overall decrease in the proposed ESRD PPS payment amounts in CY 2014, we estima te that there will be a decrease in beneficiary co-insurance payments of 9.4 percen t in CY 2014, which translates to approximately $190 million. e. Alternatives Considered For this proposed rule, we proposed to im plement the full reducti on required by section 1881(b)(14)(I) in CY 2014. In particular, we pr oposed 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 redu ction 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 utiliza tion of ESRD-related drugs and biologi cals 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 pr event 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 th at reduces ESRD PPS payments by up to 2 percent for dialysis facilities that fail to m eet or exceed a TPS with respect to performance standards established by the S ecretary with respect to certain specified measures. The methodology that we are proposing to determine a f acility’s TPS is described in section III.C.11CMS-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 be gin 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 (inc luding those not receivi ng an ESRD QIP TPS), approximately 36 percent or 2,069 of the faciliti es 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 overa ll 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 f acilities 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 reducti on under the proposed approach, we scored each facility on achieveme nt and improvement on several measures we have previously finalized and for which ther e 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 an d the payment reduction table found in section III.C.11 of this proposed rule. Facilities were re quired 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 Pa tient Informed Consent for Anemia Treatment clinical measures, as well as the reporting m easures were not included due to lack of data availability. Therefore, the si mulated facility Total Performanc e Scores were calculated using only some of the clin ical measure scores. To estimate the total payment reductions in PY 2016 for each facility resulting from this proposed rule, we multiplied the total Medicare pa yments 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, yi elding a total payment reduction amount for each facility: (Total ESRD payment in Januar y 2012 through December 2012 times the estimated payment reduction percentage). For PY 2016 th e total payment reduction for all of the 2,069CMS-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 informa tion 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 resu lt, we estimate that ESRD facili ties 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/rura l and by region), and by f acility type (hospital based/freestanding facilities). Given that the ti me 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 Entities 1 1,014 5.9 861 461 -0.57% Unknown 103 0.2 66 25 -0.47%

Urban/Rural Status: Rural 1,257 6.3 1,191 416 -0.31% Urban 4,514 31.8 4,295 1,653 -0.35%

Census Region: Northeast 786 5.8 741 309 -0.40% Midwest 1,325 7.7 1,233 478 -0.37% South 2,501 17.1 2,440 923 -0.34% West 998 7.0 966 302 -0.27% US Territories 2 161 0.5 106 57 -0.66%

Census Division: Pacific Rim 7 0.1 7 5 -0.92% East North Central 946 5.7 868 354 -0.38% East South Central 477 2.9 465 147 -0.27% Middle Atlantic 634 4.6 595 254 -0.42% Mountain 340 1.8 325 82 -0.21% New England 170 1.3 154 58 -0.28% Pacific 677 5.2 652 224 -0.30% South Atlantic 1,288 8.8 1,245 490 -0.37% West North Central 416 2.0 383 129 -0.34% West South Central 775 5.5 754 298 -0.34%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 Territories 2 41 0.3 38 28 -0.86%

Facility Size (# of total treatments) Less than 4,000 treatments 1,044 2.6 853 273 -0.36% 4,000-9,999 treatments 2,157 10.4 2,136 730 -0.30% Over 10,000 treatments 2,400 24.7 2,384 1,027 -0.38% Unknown 170 0.4 113 39 -0.41% 1 Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported status. 2 Includes Puerto Rico and Virgin Islands. 3 Based on claims data through December 2012. b. Alternatives Considered for the PY 2016 ESRD QIP In the proposed PY 2016 ESRD QIP, we select ed 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 exam ple, can lead to avoi dable 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 es tablish 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 fu ture. In the case of the NHSN Bloodstream Event in Hemodialysis Outpatient measure, we cons idered proposing a reporting measure instead of a clinical measure, because we lacked the nece ssary 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 ha ve upon patients and the industry, we believe it isCMS-1526-P 166

important to begin assessing facilities on the nu mber of these events rather than on merely whether they report these events as soon as possible. Simila rly, 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 lack ed the necessary baseli ne data to establish achievement thresholds, performance standards, a nd 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 th e 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 alte rnative, we proposed the Comorbidity reporting measure to provide a reliable source of data th at 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 contri bute 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 th e clinical measures at 80 percent and the reporting measures at 20 pe rcent of the Total Performance Score. We ultimately decided to propose the weighti ng 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 fac ilities to meet the requi rements 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 dataCMS-1526-P 167

from CYs 2012 through 2013 to set achievement th resholds 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 re quired 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 preven ting infections in the ESRD population, we decided that it would be preferable to pr opose a clinical measure with equivalent baseline and perfor mance periods, rather than a re porting 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 us ed 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 facili ties to obtain informed consent from patients receiving anemia treatment. In considering pos sible scoring methodologies for the measure, we specifically considered setting the achievement th reshold at 100 percent be cause we believe that facilities should always obtain informed consen t from patients receiving ESA. However, we recognized that unexpected events in the clinic al setting might preclud e 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 percen t. We selected 92 perc ent 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 fo r more details). 3. DMEPOS Provisions a. Effects of the Implementation of Fee Schedules for Splints, Casts and IOLsCMS-1526-P 168

The implementation of fee schedules for use in paying claims for splints, casts, and IOLs inserted in a physician’s offi ce would result in administra tive savings asso ciated with determining and implementing the Medicare allo wed 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 reas onable charge basis. b. Clarification of the 3-year MLR for DME We expect no significant impact regarding ap plication 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 benefi ciaries have come to rely on ite ms 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 co nsistent with the regulation at § 414.202, CMS will not reopen those prior decisions and reclassi fy the equipment in light of the new 3-year standard. We believe that continuing the Medicar e 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 thes e items for medical treatment pr ior to January 1, 2012. As noted in the final rule (76 FR 70301, 70311) i t is difficult to predict ho w many different types of new devices will be introduced in the market in the futu re 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 curr ent interpretation of th e 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 th is regulatory clarification. . Additionally, to the extent the regulatory chan ge 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 over all impact to the program. In general, we expect that the final rule (76 FR 70311) and clarification we ar e now proposing of the 3-year MLR would have a minimal, if any, savings imp act on the expenditures u nder 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 cl assify 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 per cent of the time during the pe riod 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 purcha sed equipment set forth at se ction §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 dur ing the period July 1986 through June 1987.CMS-1526-P 170

As shown in Table 11 of section IV of th e preamble, our review identified 80 current HCPCS codes requiring reclassifica tion from routinely purchased DME to capped rental DME. The majority of codes relate to manual wheelch airs and wheelchair accessories. We have displayed in Column B accessori es of complex rehabilitative pow er wheelchairs that would be classified as capped rental items and for which su ppliers must also offer to the beneficiary on a lump sum purchase basis in accordance with §4 14.229(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 a nd 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 Recompet e 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 purchas e basis for items that would be reclassified. Table 17: Impact of Items Reclassi fied to Capped Rental DME Category

FY Impact to the federal government) (in $ millions) 2014 -20CMS-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 aggreg ate payments because many beneficiaries do not rent items for as long as 13 mont hs. In order to prepare our imp act 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 rece iving capped rental items during that period was 8 months. We therefore used 8 months as the estimated number of months beneficiarie s would rent items in Table 11 of section IV of the preamble that w ould not have a purchase option. All anticipated savings include the price growth for the c overed 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 unde r 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 pream ble 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 Purchas ed Items Reclassified to Capped RentalCMS-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 thre e items combined were approximately $60 million, which makes up almost half of approxi mately $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 Circul ar A-4 (available at http://www.whitehouse.gov/omb/circul ars_a004_a-4), in Table 19 be low, 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 -$25.3 million 2013 7% 2014 - 2018 Annualized Monetized Transfer Payments -$25.7 million 2013 3% 2014 - 2018 From Whom to Whom Federal gove rnment 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 th is 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 (Septemb er 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 sma ll 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 de finitions of a small entity. Fo r more information on SBA’s size standards, see the Small Business Administration’s Web site atCMS-1526-P 174

http://www.sba.gov/content/small-busi ness-size-standards (Kidney Di alysis Centers are listed as 621492 with a size standard of $35.5 million). We do not believe ESRD facilities are opera ted 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. Individu als and States are not in cluded in the definition of a small entity. For purposes of the RFA, we estimate that approximately 18 percen t of ESRD facilities are small entities as that term is used in th e RFA (which includes small businesses, nonprofit organizations, and small governmental jurisdiction s). This amount is based on the number of ESRD facilities shown in the ow nership category in Table 12. Using the definitions in this ownership category, we consider th e 614 facilities that ar e independent and the 400 facilities that are shown as hospital-based to be small entitie s. The ESRD faciliti es 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 locat ions are combined for each business (individual LDO or regional chain), and are not, ther efore, included as small entities. For the ESRD PPS updates proposed in this ru le, a hospital-based ESRD facility (as defined by ownership type) is estimated to rece ive a 9.4 percent decrease in payments for CY 2014. An independent facility (as defined by ow nership 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 experien ce a payment reduction (ranging from 0.5 percent up to 2.0 of total payments), as presented in Tabl e 13 (“Estimated Distribution of PY 2016 ESRDCMS-1526-P 175

QIP Payment Reductions”) and Table 15 (“Imp act of Proposed QIP Payment Reductions to ESRD Facilities for PY 2016”) above. We antic ipate 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 facili ties receiving a payment reduction. Using our projections of facility performance, we then estimated the impact of anticipated payment reductions on ESRD small entities, by compari ng the total payment reductions for the 461 small entities expected to receive a pa yment reduction, with the aggregat e ESRD payments to all small entities. We estimate that ther e are a total of 1,014 small entity f acilities. 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) a ffected 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 spli nts and casts are based on national reasonable charge amounts increased each year by the 12-m onth percentage change in the CPI-U ending June of the previous year. These national infl ation-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 ch arge 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 in traocular lenses inserted in a physician’s office, these entities do not rely on Medicare payment for these item s to support their businesses. Because the fee schedule amounts that would ta ke effect on January 1, 2014, for intraocularCMS-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 w ould 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 exam ple, 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 sma ll business for this item. Alternatively, if a particular physician office is a small business th at charges more than $174 per IOL, a national fee schedule amount of $174 could decrease paym ent for this small business for this item. However, with only 287 cases nationwide, implem enting 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 re lying on payment for these items to fund their businesses (physician practices) as a whole. Therefore, we expect th at 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 imp act 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 fu ll 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 ne w, separate 13-month ca pped 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 sm all entities. We solicit comment on the RFA analysis provided. In addition, section 1102(b) of th e Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the ope rations 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 th e 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 si gnificant impact on opera tions of a substantial number of small rural hospitals because most dial ysis facilities are frees tanding. While there are 159 rural hospital-based di alysis facilities, we do not know how many of them are based at hospitals with fewer than 100 beds. However, overall, the 159 rural ho spital-based dialysis facilities will experience an estimated 10.1 percen t decrease in payments. As a result, this proposed rule is estimated to have a significant impact on small rural hosp itals. Therefore, the Secretary has determined that this proposed ru le 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 co sts and benefits before issuing any rule whose mandates require spending in any 1 year $100 m illion in 1995 dollars, updated annually for inflation. In 2013, that threshold is approximate ly $141 million. This proposed rule does not include any mandates that would impose spending co sts on State, local, or Tribal governments in the aggregate, or by the priv ate sector, of $141 million.CMS-1526-P 178

XIII. Federalism Analysis Executive Order 13132 on Federalism (August 4, 1999) establishes certa in requirements that an agency must meet when it promulgates a proposed rule (and subseq uent 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, Federa lism, and have determined that it will not have substantial direct e ffects on the rights, roles, and responsi bilities 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 a nd 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 acce ssing 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.CMS-1526-P 179CMS-1526-P 180

List of Subjects
42 CFR Part 413 Health facilities, Kidney di seases, Medicare, Reporting and recordkeeping requirements.
42 CFR Part 414 Administrative practice a nd procedure, Health facilities, Heal th professions, Kidney diseases, Medicare, and Reporting and r ecordkeeping requirementsCMS-1526-P 181

For the reasons set forth in the preamble, the Centers for Medicar e & Medicaid Services proposes to amend 42 CFR chapter IV as follows: PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT
FOR END-STAGE RENAL DISEASE SERVI CES; OPTIONAL PROSPECTIVELY
DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 1. The authority citation for part 41 3 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 1395 ww); 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 rem oving “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 MEDI CAL 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 So cial Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(1)). 2. The heading for subpart C is revised to read as follows:CMS-1526-P 182

Subpart C--Fee Schedules for Parenteral a nd Enteral Nutrition (PEN) Nutrients, Equipment and Supplies, Splints, Casts, and Certain Intraocular Lenses (IOLs) 5. Section 414.100 is revise d 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 pa ragraphs (a) introduc tory 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 desc ribed 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 serv ice, as determined in accordance with §§ 414.104 thru 414.108. (b) * * * (1) CMS or the carrier determines fee sc hedules for parenteral and enteral nutrition (PEN) nutrients, equipment, and su pplies, splints and casts, and IO Ls 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 percentageCMS-1526-P 183

increase in the CPI-U for the 12-month period endi ng with June of the prec eding year. For each year subsequent to 2010 for PEN items and servi ces and for each year subsequent to 2014 for splints and casts, and IOLs inserted in a phys ician’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 am ount 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 increas e in the CPI-U for the 24-mont h period ending with June of
2013. 8. Revise the heading to Subpa rt D to read as follows: Subpart D – Payment for Durable Medical Equi pment, Prosthetic and Orthotic Devices, and Surgical DressingsCMS-1526-P 184

***** 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 surgic al dressings for Medicare beneficiaries. 10. Section 414.226 is amended by revising pa ragraph (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 Prog ram No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774, Medicare--Supplem entary 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-PCMS-1526-P

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