```

[Federal Register Volume 78, Number 231 (Monday, December 2, 2013)]
[Rules and Regulations]
[Pages 72155-72253]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28451]

[[Page 72155]]

Vol. 78

Monday,

No. 231

December 2, 2013

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 413 and 414

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

Federal Register / Vol. 78 , No. 231 / Monday, December 2, 2013 / 
Rules and Regulations

[[Page 72156]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 413 and 414

[CMS-1526-F]
RIN 0938-AR55

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

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

ACTION: Final rule.

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

DATES: Effective Date: These regulations are effective on January 1, 
2014, except for amendments to Sec. Sec.  414.100, 414.102, 414.106, 
414.108, 414.200, and 414.226, which are effective on April 1, 2014.

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

SUPPLEMENTARY INFORMATION:

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at http://www.gpo.gov/fdsys/.

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

    In the past, a majority of the Addenda referred to throughout the 
preamble of our proposed and final rules were available in the Federal 
Register. However, the Addenda of the annual proposed and final rules 
will no longer be available in the Federal Register. Instead, these 
Addenda to the annual proposed and final rules will be available only 
through the Internet on the CMS Web site. The Addenda to the End-Stage 
Renal Disease (ESRD) Prospective Payment System (PPS) rules are 
available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. Readers who 
experience any problems accessing any of the Addenda to the proposed 
and final rules of the ESRD PPS that are posted on the CMS Web site 
identified above should contact Michelle Cruse at 410-786-7540.

Table of Contents

I. Executive Summary
    A. Purpose
    1. End-Stage Renal Disease (ESRD) Prospective Payment System 
(PPS)
    2. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    3. Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS)
    B. Summary of the Major Provisions
    1. ESRD PPS
    2. ESRD QIP
    3. DMEPOS
    C. Summary of Costs and Benefits
    1. Impacts of the Final ESRD PPS
    2. Impacts for ESRD QIP
    3. Impacts for DMEPOS
    II. Calendar Year (CY) 2014 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background on the End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)
    B. Summary of the Proposed Provisions and Responses to Comments 
on the CY 2014 ESRD PPS
    C. Routine Updates and Policy Changes to the CY 2014 ESRD PPS
    1. Composite Rate Portion of the ESRD PPS Blended Payment
    2. ESRD PPS Base Rate
    a. Adjustment to the ESRD PPS Base Rate To Reflect the Change in 
Utilization of ESRD-Related Drugs and Biologicals
    i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate
    ii. Determining Utilization of ESRD-Related Drugs and 
Biologicals
    iii. Pricing of ESRD-Related Drugs and Biologicals
    iv. Calculation of the Amount of the Per Treatment Reduction
    v. Final Amount of the Drug Utilization Adjustment
    3. ESRD Bundled Market Basket
    a. Overview and Background
    b. Market Basket Update Increase Factor and Labor-related Share 
for ESRD Facilities for CY 2014
    c. Productivity Adjustment for CY 2014
    d. Calculation of the Final ESRDB Market Basket Update, Adjusted 
for Multifactor Productivity for CY 2014
    4. The CY 2014 Wage Index
    a. Payment under the ESRD PPS for Facilities Located in Guam, 
American Samoa, and the Northern Mariana Islands
    b. Policies for Areas With No Wage Data
    c. Reduction to the ESRD Wage Index Floor
    d. Wage Index Budget-Neutrality Adjustment
    5. Application of the International Classification of Diseases 
(ICD), Tenth Revision, to the Comorbidity Payment Adjustment Codes
    a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
    b. One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
    c. Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
    6. Revisions to the Outlier Policy
    a. Impact of Changes to the Outlier Policy
    b. Outlier Policy Percentage
    D. The Self-Dialysis and Home Dialysis Training Add On 
Adjustment
    a. Medicare Policy for Self-Dialysis Training, Home Dialysis 
Training, and Retraining
    b. Payment Methodology
    E. Delay of Payment for Oral-Only Drugs Under the ESRD PPS
    F. Miscellaneous Comments
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    A. Background
    B. Summary of the Proposed Provisions and Responses to Comments 
on the ESRD QIP for PY 2016
    C. Considerations in Updating and Expanding Quality Measures 
Under the ESRD QIP for PY 2016 and Subsequent PYs
    1. Value-Based Purchasing (VBP) Overview
    2. Brief Overview of Proposed PY 2016 Measures
    3. Measures Application Partnership Review
    D. 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

[[Page 72157]]

    2. Expansion of One PY 2015 Measure and Revision of Two PY 2015 
Measures for PY 2016 and Subsequent Payment Years
    a. Expanded ICH CAHPS Reporting Measure
    b. Revised Mineral Metabolism Reporting Measure
    c. Revised Anemia Management Reporting Measure
    3. New Measures for PY 2016 and Subsequent Payment Years of the 
ESRD QIP
    a. Anemia Management Clinical Measure Topic and Measures
    i. Anemia Management: Hgb >12
    ii. Anemia of Chronic Kidney Disease: Patient Informed Consent 
for Anemia Treatment
    b. Hypercalcemia
    c. Use of Iron Therapy for Pediatric Patients Reporting Measure
    d. NHSN Bloodstream Infection in Hemodialysis Outpatients 
Clinical Measure
    e. Comorbidity Reporting Measure
    4. Other Measures Under Development
    5. Scoring for the PY 2016 ESRD QIP and Future Payment Years
    6. Performance Period for the PY 2016 ESRD QIP
    7. Performance Standards for the PY 2016 ESRD QIP and Future 
Payment Years
    a. Clinical Measure Performance Standards
    b. Performance Standards for Clinical Measures
    c. Performance Standards for Reporting Measures
    8. Scoring for the PY 2016 ESRD QIP Measures
    a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    c. Calculating Facility Performance on Reporting Measures
    9. Weighting the PY 2016 ESRD QIP Measures and Calculating the 
PY 2016 ESRD QIP Total Performance Score
    a. Weighting Individual Measures To Compute Measure Topic Scores 
for the Kt/V Dialysis Adequacy Measure Topic, the Vascular Access 
Type Measure Topic, and the Anemia Management Clinical Measure Topic
    b. Weighting the Total Performance Score
    c. Examples of the PY 2016 ESRD QIP Scoring Methodology
    10. Minimum Data for Scoring Measures for the PY 2016 ESRD QIP 
and Future Payment Years
    11. Payment Reductions for the PY 2016 ESRD QIP and Future 
Payment Years
    12. Data Validation
    13. Scoring Facilities Whose Ownership Has Changed
    14. Public Reporting Requirements
IV. Clarification of the Definition of Routinely Purchased Durable 
Medical Equipment (DME)
    A. Background
    1. Background for DME
    2. Medicare Guidance and Rulemaking Regarding Definition of 
Routinely Purchased DME
    3. Payment for Inexpensive or Routinely Purchased Items and 
Capped Rental Items
    B. Current Issues
    C. Responses to Comments on the Clarification of the Definition 
of Routinely Purchased Durable Medical Equipment (DME)
V. Clarification of the 3-Year Minimum Lifetime Requirement (MLR) 
for DME
    A. Current Issues
    B. Scope of the 3-Year MLR for DME
    C. Response to Comments on the 3-Year MLR for DME
VI. Implementation of Budget-Neutral Fee Schedules for Splints, 
Casts and Intraocular Lenses (IOLs)
    A. Background
    1. Payment Under Reasonable Charges
    2. Payment Under Fee Schedules
    B. Summary of the Proposed Provisions and Responses to Comments 
on the Implementation of Budget Neutral Fee Schedules for Splints, 
Casts and IOLs
VII. DMEPOS Technical Amendments and Corrections
    A. Background
    B. Summary of the Proposed Provisions and Responses to Comments 
on the Proposed Technical Amendments and a Correction
VIII. Waiver of Delayed Effective Date
IX. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. Requirements in Regulation Text
    C. Additional Information Collection Requirements
X. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2014 End-Stage Renal Disease Prospective Payment System
    a. Effects on ESRD Facilities
    b. Effects on Other Providers
    c. Effects on the Medicare Program
    d. Effects on Medicare Beneficiaries
    e. Alternatives Considered
    2. End-Stage Renal Disease Quality Incentive Program
    a. Effects of the PY 2016 ESRD QIP
    b. Alternatives Considered for the PY 2016 ESRD QIP
    3. DMEPOS Provisions
    a. Effects of the Implementation of Fee Schedules for Splints, 
Casts and IOLs
    b. Clarification of the 3-Year MLR for DME
    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
ATRA American Taxpayer Relief Act of 2012 BLS Bureau of Labor 
Statistics
CBSA Core Based Statistical Area
CCN CMS Certification Number
CDC Centers for Disease Control and Prevention
CKD Chronic Kidney Disease
CY Calendar Year
DFC Dialysis Facility Compare
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies
ESA Erythropoiesis Stimulating Agent
ESRD End-Stage Renal Disease
ESRDB End-Stage Renal Disease bundled
ESRD PPS End-Stage Renal Disease Prospective Payment System
FDA Food and Drug Administration
GEM General Equivalence Mappings
HAIs Healthcare-Acquired Infections
HCPCS Healthcare Common Procedure Coding System
HHS Department of Health and Human Services
ICD International Classification of Diseases
ICD-9-CM International Classification of Disease, 9th Revision, 
Clinical Modification
ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems
IGI IHS Global Insight
IOLs Intraocular Lenses
IPPS Inpatient Prospective Payment System
MAP Medicare Allowable Payment
MFP Multifactor Productivity
MLR Minimum Lifetime Requirement
NCD National Coverage Determination
NHSN National Health Safety Network
NQF National Quality Forum
OMB Office of Management and Budget
PFS Physician Fee Schedule
QIP Quality Incentive Program
SHR Standardized Hospitalization Ratio Admissions
SMR Standardized Mortality Ratio
TPS Total Performance Score
VBP Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    This final rule updates and makes revisions to the End-Stage Renal 
Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 
2014. 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 (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

[[Page 72158]]

described in section 1886(b)(3)(B)(xi)(II) of the Act.
    In addition, section 1881(b)(14)(I) of the Act, as added by section 
632(a) of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240), requires the Secretary, by comparing per patient utilization from 
2007 with such data from 2012, to reduce the single payment amount to 
reflect the Secretary's estimate of the change in the utilization of 
ESRD-related drugs and biologicals. Section 632(b) of ATRA prevents the 
Secretary from paying for oral-only ESRD-related drugs and biologicals 
under the ESRD PPS before January 1, 2016.
2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This final rule also sets forth requirements for the ESRD Quality 
Incentive Program (QIP), including for payment year (PY) 2016. The 
program is authorized under section 153(c) of MIPPA, which added 
section 1881(h) to the Social Security Act (the Act). The ESRD QIP is 
the most recent step in fostering improved patient outcomes by 
establishing incentives for dialysis facilities to meet performance 
standards established by CMS.
3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
    This final rule clarifies 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 
final rule implements budget neutral fee schedules for splints and 
casts, and intraocular lenses (IOLs) inserted in a physician's office. 
Finally, this final rule makes 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, 
the ESRD PPS base rate is $239.02. This reflects the CY 2013 ESRD PPS 
base rate of $240.36 adjusted by the ESRDB market basket (3.2 percent) 
minus productivity (0.4 percent) increase factor of 2.8 percent, the 
wage index budget neutrality factor of 1.000454, and the home dialysis 
training add-on budget neutrality adjustment factor of 0.999912 to get 
$247.18 ($240.36 * 1.028 * 1.000454 * 0.999912 = $247.18). We reduced 
this amount by the portion of the CY 2014 drug utilization adjustment 
that is being transitioned this year, or $8.16, to arrive at a final CY 
2014 ESRD PPS base rate of $239.02 ($247.18-$8.16 = $239.02).
     The CY 2014 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. We did not propose any changes to the 
application of the wage index adjustment factor for CY 2014, and we 
will continue to apply the adjustment to the ESRD PPS base rate. For CY 
2014 and CY 2015, we are continuing our policy for the gradual phase-
out of the wage index floor and reducing the wage index floor values to 
0.45 and 0.40, respectively.
     The outlier policy: We are updating the outlier services 
fixed dollar loss amounts for adult and pediatric patients and Medicare 
Allowable Payments (MAPs) for adult patients for CY 2014 using 2012 
claims data. Based on the use of more current data, the fixed-dollar 
loss amount for pediatric beneficiaries would increase from $47.32 to 
$54.01 and the adjusted average outlier services MAP amount would 
decrease from $41.39 to $40.49 as compared to CY 2013 values. For adult 
beneficiaries, the fixed-dollar loss amount would decrease from $110.22 
to $98.67 and the adjusted average outlier services MAP amount would 
decrease from $59.42 to $50.25. The 1 percent target for outlier 
payments was not achieved in CY 2012. We believe using CY 2012 claims 
data to update the outlier MAP and fixed dollar loss amounts for CY 
2014 will increase payments for ESRD beneficiaries requiring higher 
resource utilization in accordance with a 1 percent outlier policy.
     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 are finalizing our 
proposed policy that all ICD-10-CM codes to which ICD-9-CM codes that 
are eligible for the comorbidity payment adjustments crosswalk will be 
eligible for the comorbidity payment adjustments with two exceptions.
     The self-dialysis and home dialysis training add-on 
adjustment: In response to public comments, we are finalizing an 
increase in the amount of the self-dialysis and home dialysis training 
add-on adjustment of 50 percent for both peritoneal dialysis (PD) and 
home hemodialysis (HHD) training treatments furnished on or after 
January 1, 2014. In CY 2014, the nursing time accounted for in the 
training add-on adjustment will increase from one hour to 1.5 hours per 
training treatment, resulting in an increase of $16.72, for a total 
training add-on adjustment of $50.16 per training treatment. We note 
that the increase to the training add-on adjustment will be made in a 
budget neutral manner in that we have applied a training add-on budget-
neutrality adjustment factor of 0.999912 to the base rate.
2. ESRD QIP
    This final rule implements requirements for the ESRD QIP. With 
respect to the PY 2016 ESRD QIP, we are continuing some of the previous 
ESRD QIP measures, adding new measures, and expanding the scope of some 
of the existing measures to cover the measure topics as follows:
 To evaluate anemia management:

    [cir] Hemoglobin Greater Than 12 g/dL, a clinical measure
    [cir] Anemia Management, a reporting measure [dagger] To evaluate dialysis adequacy:

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

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

    [cir] An arteriovenous fistula measure, a clinical measure
    [cir] A catheter measure, a clinical measure

 To address effective bone mineral metabolism management:

    [cir] Hypercalcemia, a clinical measure*
    [cir] Mineral Metabolism, a reporting measure [dagger] To address safety:

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

    [cir] ICH CAHPS survey reporting measure [Dagger]

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

    We also establish CY 2014 as the performance period for the PY 2016

[[Page 72159]]

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 final rule 
clarifies the definition of routinely purchased DME set forth at 
section Sec.  414.220(a), as well as addresses the classification of 
and payment for expensive items of DME and accessories (over $150) as a 
capped rental items in accordance with Sec.  414.229, if the items were 
not acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987.
 Clarification of to the 3-year MLR and Related Grandfathering 
Policy: This final rule provides further clarification about how we 
will apply the 3-year MLR set forth at Sec.  414.202, which must be 
satisfied for an item or device to be considered DME.
 Implementation of budget neutral fee schedules for splints and 
casts, and IOLs inserted in a physician's office: For CY 2014, we are 
implementing budget neutral fee schedule amounts for splints and casts, 
and IOLs inserted in a physician's office. Section 1842(s) of the Act 
authorizes CMS to implement fee schedule amounts for these items if 
they are established so that they are initially budget neutral. In 
2011, total allowed charges for splints and casts were $5.6 million, 
while total allowed charges for IOLs inserted in a physician's office 
were $76 thousand.

C. Summary of Costs and Benefits

    In section XI. of this final rule, we set forth a detailed analysis 
of the impacts that the changes will have on affected entities and 
beneficiaries. The impacts include the following:
1. Impacts of the Final ESRD PPS
    The impact chart in section XI.B.1.a. of this final rule displays 
the estimated change in payments to ESRD facilities in CY 2014 compared 
to estimated payments in CY 2013. The overall impact of the CY 2014 
changes is projected to result in an average increase in payments of 
0.0 percent from CY 2013 to CY 2014. Hospital-based ESRD facilities 
have an estimated 0.8 percent increase in payments compared with 
freestanding facilities with an estimated 0.0 percent increase.
    We estimate that there will be no change in aggregate ESRD PPS 
expenditures from CY 2013 to CY 2014. This reflects a $240 million 
increase from the payment rate update, a $30 million increase due to 
the updates to the outlier threshold amounts, and a $20 million 
increase due to the change in the blend of payments, and a $290 million 
decrease in expenditures specifically related to the drug utilization 
adjustment. The drug utilization adjustment for CY 2014 represents 27 
percent of the total drug utilization adjustment amount of $29.93. The 
estimated 0.0 percent overall payment change will result in a small 
reduction in beneficiary coinsurance compared to CY 2013 beneficiary 
because the CY 2014 ESRD PPS base rate is slightly less than that CY 
2013 base rate, discussed in section II.C.2.a.v.
2. Impacts for ESRD QIP
    The overall economic impact of the proposed ESRD QIP is an 
estimated $15.2 million in PY 2016. In PY 2016, we expect the total 
payment reductions to be approximately $15.1 million, and the costs 
associated with the collection of information requirements for certain 
measures to be approximately $39.5 thousand. For PY 2017 and future 
payment years, we expect the costs associated with the collection of 
information requirements for the expanded ICH CAHPS measure in the 
proposed ESRD QIP to be approximately $9.7 million.
    The ESRD QIP will continue to incentivize facilities to provide 
higher quality care to beneficiaries. The reporting measures associated 
with the collection of information requirements are critical to better 
understanding the quality of care beneficiaries receive, particularly 
patients' experience of care, and will be used to incentivize 
improvements in the quality of care provided.
3. Impacts for DMEPOS
    The overall impact of implementing fee schedules for splints and 
casts, and IOLs inserted in a physician's office is insignificant. The 
reasonable charge amounts that we convert to fee schedule amounts will 
be budget neutral the first year and will be updated annually 
thereafter based on the consumer price index for all consumers (CPI-U) 
for the 12-month period ending June 30 of the previous year and, 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. For the 3-year MLR, we believe that a 
vast majority of the categories of items that were classified as DME 
before January 1, 2012, did function for 3 or more years (76 FR 70289). 
The 3-year MLR is designed to represent a minimum threshold for 
determination of durability for equipment that is consistent with the 
statutory DME payment provisions and applies on a prospective basis, 
effective January 1, 2012. CMS recognizes that the healthcare industry 
and beneficiaries have come to rely on items that have qualified as DME 
on or prior to January 1, 2012, regardless of whether those items met 
the 3-year MLR set forth at Sec.  414.202. We note that given that 
reliance and consistent with the regulation at Sec.  414.202, CMS would 
not reopen those prior decisions and reclassify the equipment in light 
of the new 3-year standard. We believe that continuing the Medicare 
coverage for all the items that qualified as DME on or prior to January 
1, 2012, would avoid disrupting the continuity of care for the 
beneficiaries that received these items for medical treatment prior to 
January 1, 2012, without creating a significant fiscal impact on the 
Medicare Program. We also do not expect any significant impact as a 
result of how this rule will be applied in terms of equipment that is 
modified. Based on our experience with the Medicare Program, items 
covered as DME prior to 2012 that have lifetimes of less than 3 years 
are well established and have been used in treating illnesses or 
injuries of patients for many years. The items are designed to provide 
treatment for the period of time generally needed for the patient and 
it is unlikely that devices will be modified to be less durable.
    We expect that the overall impact of clarifying the definition of 
routinely purchased DME and finalizing our proposal to classify certain 
expensive items as cap rental will be a decrease in expenditures 
because payment on a 13-month capped rental basis rather than a lump 
sum purchase basis for certain, very expensive items will lower total 
payments for these items and because many beneficiaries would not rent 
the items for as long as 13 months.

II. Calendar Year (CY) 2014 End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)

A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment 
System (PPS)

    On August 12, 2010, we published in the Federal Register a final 
rule (75 FR 49030 through 49214) titled, ``End-Stage Renal Disease 
Prospective Payment System,'' (hereinafter referred to as the CY 2011 
ESRD PPS final rule). In the CY 2011 ESRD PPS final rule, we

[[Page 72160]]

implemented a case-mix adjusted bundled PPS for Medicare outpatient 
ESRD dialysis services beginning January 1, 2011, in accordance with 
section 1881(b)(14) of the Act, as added by section 153(b) of the 
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).
    On November 10, 2011, we published in the Federal Register, a final 
rule (76 FR 70228 through 70316) titled, ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System and Quality Incentive Program; 
Ambulance Fee Schedule; Durable Medical Equipment; and Competitive 
Acquisition of Certain Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies'' (hereinafter referred to as the CY 2012 ESRD 
PPS final rule). In that final rule, for the ESRD PPS, we made a number 
of routine updates for CY 2012, implemented the second year of the 
transition to the ESRD PPS, made several policy changes and 
clarifications, and made technical changes.
    On November 9, 2012, we published in the Federal Register, a final 
rule (77 FR 67450 through 67531) titled, ``Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Bad Debt Reductions for All Medicare Providers'' (hereinafter 
referred to as the CY 2013 ESRD PPS final rule). In that final rule, 
for the ESRD PPS, we made a number of routine updates for CY 2013, 
implemented the third year of the transition to the ESRD PPS, and made 
several policy changes and reiterations. For a summary of the 
provisions in that final rule, we refer readers to the CY 2014 ESRD PPS 
proposed rule at 78 FR 40836, 40840-40841 (July 8, 2013).

B. Summary of the Proposed Provisions and Responses to Comments on the 
CY 2014 ESRD PPS

    The proposed rule, titled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' (78 
FR 40836 through 40890), (hereinafter referred to as the CY 2014 ESRD 
PPS proposed rule), was published in the Federal Register on July 8, 
2013, with a comment period that ended on August 30, 2013. In that 
proposed rule, for the ESRD PPS, we proposed to (1) make a number of 
routine updates for CY 2014, (2) implement the fourth and last year of 
the transition where payments are based 100 percent on the ESRD PPS, 
and (3) make revisions to the ESRD PPS base rate as required by 
statute. We received approximately 1282 public comments on the ESRD PPS 
proposals, including comments from ESRD facilities; national renal 
groups, nephrologists and patient organizations; patients; 
manufacturers; health care systems; and nurses.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the CY 2014 ESRD PPS. 
Comments related to the paperwork burden are addressed in the 
``Collection of Information Requirements'' section in this final rule. 
Comments related to the impact analysis are addressed in the ``Economic 
Analyses'' section in this final rule.

C. Routine Updates and Policy Changes to the CY 2014 ESRD PPS

1. Composite Rate Portion of the ESRD PPS Blended Payment
    Section 1881(b)(14)(E)(i) of the Act requires a 4-year transition 
under the ESRD PPS. This final rule implements the fourth year of the 
transition for those ESRD facilities that did not elect to receive 100 
percent of the payment amount under the ESRD PPS. For services 
furnished beginning in CY 2014, under 42 CFR 413.239(a)(4), 100 percent 
of the payment amount will be determined in accordance with section 
1881(b)(14) of the Act. Accordingly, a blended rate will no longer be 
provided, all facilities will be paid 100 percent under the ESRD PPS, 
and there will no longer be a transition budget neutrality adjustment 
factor applied to these payments starting on January 1, 2014. 
Therefore, facilities that participate in the transition will no longer 
receive a portion of their payments based on the basic case-mix 
adjusted composite rate payment system. Because payments will no longer 
be based on the basic case-mix adjusted composite rate, we will not 
update the drug add-on or wage index values (which included a budget-
neutrality adjustment factor) that comprised that rate. In this final 
rule, we only discuss updates and policy changes that affect the 
components of the ESRD PPS.
2. ESRD PPS Base Rate
    In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we 
discussed the development of the ESRD PPS per treatment base rate that 
is codified in the Medicare regulations at Sec.  413.220 and Sec.  
413.230. The CY 2011 ESRD PPS final rule also provides a detailed 
discussion of the methodology used to calculate the ESRD PPS base rate 
and the computation of factors used to adjust the ESRD PPS base rate 
for projected outlier payments and budget neutrality in accordance with 
sections 1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) of the Act, 
respectively. Specifically, the ESRD PPS base rate was developed from 
CY 2007 claims (that is, the lowest per patient utilization year as 
required by section 1881(b)(14)(A)(ii) of the Act), updated to CY 2011, 
and represented the average per treatment Medicare Allowable Payment 
(MAP) for composite rate and separately billable services. In 
accordance with section 1881(b)(14)(D) of the Act and codified in 
regulations at Sec.  413.230, the ESRD PPS base rate is adjusted for 
the patient-specific case-mix adjustments, applicable facility 
adjustments, geographic differences in area wage levels using an area 
wage index, as well as applicable outlier payments or training 
payments.
    As discussed in section II.C.3. of this final rule, section 
1881(b)(14)(F)(i) of the Act, as added by section 153(b) of MIPPA and 
amended by section 3401(h) of the Affordable Care Act, provides that, 
beginning in 2012, the ESRD PPS payment amounts are required to be 
annually increased by the rate of increase in the ESRD market basket, 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II). Accordingly, we applied the 2.8 percent increase 
factor, that is the ESRDB market basket (3.2 percent) minus 
productivity (0.4 percent) to the CY 2013 ESRD PPS base rate of 
$240.36, which results in a CY 2014 ESRD PPS base rate of $247.09 
($240.36 x 1.028 = $247.09).
    In addition, as discussed in section II.C.4.d. of this final rule, 
we apply the wage index budget-neutrality adjustment factor of 1.000454 
to the CY 2014 ESRD PPS base rate (that is, $247.09), yielding a CY 
2014 ESRD PPS wage-index budget-neutrality adjusted base rate of 
$247.20 ($247.09 x 1.000454 = $247.20). Also, as discussed in section 
II.D.b. of this final rule, we finalized an increase in the home 
dialysis training add-on in a budget-neutral manner. Because this 
adjustment was applied in a budget-neutral manner, we needed to adjust 
the CY 2014 ESRD PPS base rate after the application of the wage index 
budget neutrality adjustment factor to account for the increase in 
training payments. This application yields a CY 2014 ESRD PPS base rate 
of $247.18 ($247.20 x 0.999912 = $247.18). This amount is then reduced 
by the portion of the drug utilization adjustment that is being 
implemented this year, which is $8.16, which yields a final CY 2014 
base rate of $239.02. The drug utilization adjustment is addressed in 
the following section.

[[Page 72161]]

a. Adjustment to the ESRD PPS Base Rate To Reflect the Change in 
Utilization of ESRD-Related Drugs and Biologicals
    Section 1881(b)(14)(I) of the Act, as added by section 632(a) of 
the ATRA, requires that, for services furnished on or after January 1, 
2014, the Secretary shall make reductions to the single payment for 
renal dialysis services to reflect the Secretary's estimate of the 
change in the utilization of ESRD-related drugs and biologicals 
(excluding oral-only ESRD-related drugs) by comparing per patient 
utilization data from 2007 with such data from 2012. Section 
1881(b)(14)(I) further requires that in making the reductions, the 
Secretary take into account the most recently available data on Average 
Sales Prices (ASP) and changes in prices for drugs and biologicals 
reflected in the ESRD market basket percentage increase factor under 
section 1881(b)(14)(F) of the Act. Consistent with these requirements, 
in the CY 2014 ESRD PPS proposed rule (78 FR 40843) we proposed to 
apply a payment adjustment to the CY 2014 ESRD PPS base rate that 
reflects the change in utilization of ESRD-related drugs and 
biologicals from CY 2007 to CY 2012.
i. Methodology for Reducing the CY 2014 ESRD PPS Base Rate
    In the CY 2014 ESRD PPS proposed rule (78 FR 40841 through 40843), 
we discussed the methodology used for calculating the drug utilization 
adjustment that will reduce the ESRD PPS base rate. Because the ESRD 
PPS base rate is a per treatment base rate, the adjustment is 
calculated on a per treatment basis. We proposed to calculate the 
amount of the per treatment adjustment by applying CY 2014 prices for 
ESRD-related drugs and biologicals to the utilization data for CY 2007 
and CY 2012. We noted that the CY 2014 ESRD PPS base rate is reflective 
of 2007 utilization because the base rate was derived from CY 2007 
data. We explained that using prices for drugs and biologicals inflated 
to 2014 levels allows us to appropriately measure changes that are 
attributable to utilization patterns as opposed to differences in 
pricing for drugs and biologicals in 2007 and 2012. In addition, 
because we proposed to make the reduction in CY 2014, we priced the 
ESRD-related drugs and biologicals for the year in which the adjustment 
applies. We explained that for purposes of this analysis, we view 
utilization of drugs and biologicals as units of an ESRD-related drug 
or biological furnished to a patient on a per treatment basis. We took 
the estimated amount of the per treatment difference between the 
estimated spending on drugs and biologicals in CY 2007 and CY 2012 and 
reduced this amount by the same adjustment factors that were used to 
calculate the ESRD PPS base rate from the CY 2007 unadjusted rate per 
treatment, which are the standardization, outlier, and the 98 percent 
budget-neutrality adjustments. A detailed explanation of these 
adjustment factors is provided in the CY 2011 ESRD PPS final rule (75 
FR 49081 through 49082). We proposed to reduce the CY 2014 ESRD PPS 
base rate by the resulting amount.
ii. Determining Utilization of ESRD-Related Drugs and Biologicals
    In the CY 2014 ESRD PPS proposed rule (78 FR 40841 through 40842), 
we explained how we determined utilization of ESRD-related drugs and 
biologicals. Section 1881(b)(14)(I) of the Act requires the single 
payment amount to be reduced by an amount that ``reflects the 
Secretary's estimate of the change in utilization of drugs and 
biologicals described in clauses (ii), (iii), and (iv) of subparagraph 
(B) (other than oral-only ESRD-related drugs, as such term is used in 
the final rule promulgated by the Secretary in the Federal Register on 
August 12, 2010 (75 FR 49030))''. As we mentioned above, for purposes 
of this analysis, we view utilization of drugs and biologicals as units 
of a drug or biological furnished to a patient per treatment. ESRD 
facilities report this information on claims. To calculate this 
adjustment, we analyzed the utilization of erythropoiesis stimulating 
agents (ESAs) and any oral forms of such agents furnished to 
individuals for the treatment of ESRD. We also analyzed the utilization 
of other injectable drugs and biologicals (such as iron sucrose and 
doxercalciferol) and any oral equivalent form of such drug or 
biological furnished to individuals for the treatment of ESRD that were 
included in the expanded bundle of services covered by the ESRD PPS. We 
did not include diagnostic laboratory tests or other items and services 
in the comparison analysis because section 1881(b)(14)(I) only refers 
to estimating the change in utilization of drugs and biologicals.
    Section 1881(b)(14)(I) of the Act requires the Secretary to compare 
per patient utilization data from 2007 with per patient utilization 
data from 2012. For the CY 2007 utilization data for ESRD-related drugs 
and biologicals, we proposed to use the data analysis prepared for the 
CY 2011 ESRD PPS final rule. In the CY 2011 ESRD PPS final rule (75 FR 
49071 through 49083), we discuss in detail the development of the ESRD 
PPS base rate and, as we stated above, the base rate represents the 
average MAP for composite rate and separately billable services, which 
was derived from 2007 claims data. We also explained in the CY 2011 
ESRD PPS final rule that in order to comply with section 
1881(b)(14)(A)(ii) of the Act, we determined that 2007 was the year 
with the lowest per patient utilization of renal dialysis services by 
Medicare ESRD beneficiaries among the years 2007, 2008, and 2009. 
Therefore, utilization data for ESAs and other drugs and biologicals 
including the oral-equivalent forms of those drugs and biologicals 
furnished for the treatment of ESRD was readily available for purposes 
of analyzing 2007 utilization.
    For the CY 2012 utilization data for ESRD-related drugs and 
biologicals, we proposed to use the latest available claims data based 
on the CY 2012 ESRD facility claims. For the proposed rule, we used CY 
2012 ESRD facility claims updated through December 31, 2012 (that is, 
claims with dates of service from January 1 through December 31, 2012, 
that were received, processed, paid, and passed to the National Claims 
History File as of December 31, 2012). We stated that we would use the 
CY 2012 claims file updated through June 30, 2013, (that is, claims 
with dates of service from January 1 through December 31, 2012, that 
were received, processed, paid, and passed to the National Claims 
History File as of June 30, 2013) to calculate 2012 utilization for the 
final rule. We solicited comments on the proposed use of 2007 and 2012 
claims data to capture the utilization of ESRD-related drugs and 
biologicals in those years. The comments and our responses are set 
forth below.
    Comment: Several commenters agreed with CMS that claims data from 
2007 and 2012 are reliable sources for ESRD-related drugs and 
biologicals utilization.
    Response: We thank the commenters for their support. For this final 
rule, we used the CY 2007 claims data that was used in preparation of 
the CY 2011 ESRD PPS final rule. In addition, we used the CY 2012 
claims file updated through June 30, 2013, (that is, claims with dates 
of service from January 1 through December 31, 2012, that were 
received, processed, paid, and passed to the National Claims History 
File as of June 30, 2013) to calculate 2012 utilization.
    In the CY 2014 ESRD PPS proposed rule (78 FR 40842), we explained 
that because section 1881(b)(14)(I) requires

[[Page 72162]]

that we compare per patient utilization of ESRD-related drugs and 
biologicals in 2007 with per patient utilization in 2012, we would also 
include utilization of drugs and biologicals furnished in ESRD 
facilities located in the United States Territories of Guam, American 
Samoa and the Northern Mariana Islands (the Pacific Rim), even though 
facilities in the Pacific Rim were not paid under the ESRD PPS during 
these years. Therefore, we proposed 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 the proposed rule, we 
did not readily have access to the 2007 utilization data for the ESRD 
facilities located in these areas; however, we planned to include these 
data in our calculation for the final rule. Because there are very few 
ESRD facilities in this region, we indicated that the inclusion of 
utilization of drugs and biologicals furnished in CY 2007 at these 
facilities would not have a significant impact on the amount of the 
adjustment.
    We solicited comments on the proposal to include data on the 
utilization of drugs and biologicals furnished in ESRD facilities 
located in the Pacific Rim when comparing utilization of drugs and 
biologicals in CY 2007 with CY 2012. We did not receive any comments 
objecting to the use of data from ESRD facilities located in the 
Pacific Rim in the analysis. In the analysis for this final rule, we 
have included the drug utilization data from facilities located in the 
Pacific Rim.
iii. Pricing of ESRD-Related Drugs and Biologicals
    In the CY 2014 ESRD PPS proposed rule (78 FR 40842 through 40843), 
we explained how we priced ESRD-related drugs and biologicals to CY 
2014 to allow for an accurate comparison between utilization of those 
drugs and biologicals furnished in CY 2007 with utilization in CY 2012. 
In order to price ESRD-related drugs and biologicals based on CY 2014 
prices, we started with CY 2011 prices as established and published in 
the CY 2011 ESRD PPS final rule.
    In developing the CY 2011 ESRD PPS base rate, we included the MAP 
amounts for ESRD-related drugs and biologicals that were, prior to 
January 1, 2011, separately paid under Part B. We used the second 
quarter of 2010 ASP+6 prices (which was the most current data available 
at the time) and then used the Producer Price Index (PPI) to inflate 
the prices to CY 2011 (75 FR 49079). We also included the MAP amounts 
for the ESRD-related oral-equivalent drugs and biologicals that were, 
prior to January 1, 2011, separately paid under Part D (75 FR 49080). 
For setting the CY 2011 ESRD PPS base rate for these drugs, we used the 
growth rates for overall prescription drug prices that were used in the 
National Health Expenditure Projections (NHE) for updating prices for 
former Part D drugs to CY 2011 from CY 2007.
    We proposed to inflate the prices established in the CY 2011 ESRD 
PPS final rule for ESRD-related drugs and biologicals and their oral 
equivalents to CY 2014 by applying the ESRD bundled (ESRDB) market 
basket, the productivity adjustment, and the wage index budget 
neutrality adjustment factors. Because the base rate and the ESRDB 
market basket account for ESRD-related drugs and biologicals and we 
have updated all components of the base rate annually using a market 
basket minus productivity with wage index budget neutrality adjustment 
factor, we believe that using these inflation factors is consistent 
with how these services are paid under the ESRD PPS. The drug component 
of the ESRDB market basket uses the PPI for prescription drugs as a 
proxy for the growth in drug prices. We believe using the ESRDB market 
basket to price drugs and biologicals for CY 2014 complies with the 
requirement in section 1881(b)(14)(I) that the Secretary take into 
account the changes in prices for drugs and biologicals reflected in 
the ESRDB market basket percentage increase factor. The ESRDB market 
basket minus productivity increase factors were 2.1 percent and 2.3 
percent for CY 2012 and CY 2013, respectively. The proposed CY 2014 
update was 2.5 percent. The wage index budget neutrality adjustment 
factors for the same years are 1.001520, 1.000613, and a CY 2014 
proposed factor of 1.000411. Therefore, we proposed to use a total 
growth update factor of 7.3 percent (1.021 * 1.023 * 1.025 * 1.001520 * 
1.000613 * 1.000411 = 1.073) to inflate prices for ESRD-related drugs 
and biologicals from CY 2011 levels to CY 2014 levels. We solicited 
comments on the use of the ESRDB market basket percentage increase 
factor to inflate prices for drugs and biologicals to CY 2014 levels. 
The comment and our response is set forth below.
    Comment: A few commenters expressed concern that inflating the 
prices from 2007 levels does not capture the true cost of the drugs and 
biologicals for small and independent ESRD facilities and small 
dialysis organizations (SDOs). One commenter stated that if the price 
is an average number, then SDOs and mid-sized dialysis organizations 
(MDOs) would be at a disadvantage because their prices are far greater 
than the prices paid by large dialysis organizations. Therefore, the 
commenters did not believe that the costs incurred by SDOs and MDOs 
were accounted for by using 7.3 percent to inflate prices for ESRD-
related drugs and biologicals from CY 2011 levels to CY 2014 levels and 
urged CMS to use actual drug costs reported on ESRD facility cost 
reports.
    Response: The drug utilization adjustment is a per treatment 
reduction to the single ESRD PPS base rate, which is a payment amount 
that reflects the average cost for an ESRD facility to furnish a 
dialysis treatment. Because the drug utilization adjustment is a 
reduction to the average payment, the drug utilization analysis needs 
to be performed at an aggregate level, that is, across all facilities 
using the same sources of data regardless of ownership type. In 
addition, we do not believe that it would be beneficial to SDOs/MDOs to 
use drug costs that are reported in ESRD facility cost reports. Even if 
we were to use cost report drug data, the SDO/MDO costs for drugs would 
continue to be averaged out by that of the large dialysis organizations 
(LDOs), which furnish the majority of dialysis treatments. More 
importantly, we would only be able to consider the ESRD facility cost 
reports for cost reporting periods ending in 2011 and in 2012 for the 
drug utilization adjustment analysis, We would not have the information 
for cost reporting periods ending in 2013, which is when significant 
price increases have reportedly occurred.
    For these reasons, we continue to believe using the ESRDB market 
basket to price drugs and biologicals for CY 2014 complies with the 
requirement in section 1881(b)(14)(I) that the Secretary take into 
account the changes in prices for drugs and biologicals reflected in 
the ESRDB market basket percentage increase factor and provides the 
most accurate way to price drugs at 2014 levels. Therefore, in this 
final rule we are finalizing the use of the ESRDB market basket 
percentage increase factor to inflate prices for drugs and biologicals 
to CY 2014 levels.
    To determine the final growth update factor's value, we used the 
methodology discussed above with one modification (described below) and 
updated the calculation using the final CY 2014 ESRDB market basket 
minus the CY 2014 multifactor productivity adjustment and the final CY 
2014 wage index budget neutrality adjustment factor, which are based on 
the most recently available data. The ESRDB

[[Page 72163]]

market basket minus productivity increase factors were 2.1 percent and 
2.3 percent for CY 2012 and CY 2013, respectively. The final ESRDB 
market basket minus productivity increase factor for CY 2014 is 2.8 
percent. The wage index budget neutrality adjustment factors for the 
same years are 1.001520, 1.000613, and a final CY 2014 factor of 
1.000454.
    In addition to the ESRDB market basket minus productivity increase 
factor and the wage index budget neutrality adjustment factor, to 
account for the home dialysis training add-on increase for CY 2014 we 
applied an additional factor of 0.999912. We made this modification so 
that the methodology for developing the growth update factor is 
consistent with the way we update the ESRD PPS base rate. For CY 2014, 
we are increasing the home dialysis training add-on in a budget-neutral 
manner, and therefore, we needed to include an adjustment that accounts 
for the increase. We are finalizing a total growth update factor of 
7.64 percent (1.021 * 1.023 * 1.028 * 1.001520 * 1.000613 * 1.000454 * 
0.999912 = 1.0764) to inflate prices for ESRD-related drugs and 
biologicals from CY 2011 levels to CY 2014 levels. For more information 
regarding the increase in the home dialysis training add-on payment, 
see section II.D.b. of this final rule.
    In addition to proposing the use of the ESRDB market basket 
percentage increase factor to inflate prices for drugs and biologicals 
to CY 2014 levels, in the CY 2014 ESRD PPS proposed rule (78 FR 40843) 
we discussed an alternative method of using ASP instead of the PPI. 
Specifically, section 1881(b)(14)(I) requires the Secretary to ``take 
into account the most recently available data on average sales prices 
and changes in prices for drugs and biologicals reflected in the ESRDB 
market basket percentage increase factor'' in making the reduction to 
the ESRD PPS base rate to reflect the change in utilization of ESRD-
related drugs and biologicals from CY 2007 to CY 2012. While we could 
have chosen to inflate prices for drugs and biologicals to 2014 levels 
with more recently available ASP data, we stated that we believed using 
a growth based on the ESRDB market basket is more appropriate because 
it reflects what Medicare is required to pay for drugs and biologicals 
through the ESRD PPS base rate.
    In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we discussed 
an alternative analysis using prices based on the first quarter 2013 
ASP+6 percent prices and the National Drug Code (NDC) prices published 
on the CMS Web site located at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Outlier_Services.html that are 
used for outlier calculations, and the PPI to project to CY 2014. The 
results were minimally different (a difference of $29.40 versus 
$29.52), and because we believed that the ESRDB market basket approach 
was a more appropriate measure of how Medicare pays for these drugs 
under the ESRD PPS, we proposed to use it to update drug prices. 
Nonetheless, we solicited comments on the potential use of ASP instead 
of the ESRDB market basket to inflate drug prices to 2014 levels for 
purposes of the drug utilization adjustment. The comments and our 
responses are set forth below.
    Comment: An SDO expressed concern that the alternative analysis of 
comparing ASP to PPI is not accurate because there is an inherent 
problem with using ASP data. The commenter stated that ASP data does 
not accurately reflect the cost of epogen because the ASP data reports 
the combined price of epogen and procrit. The commenter further 
explained that procrit has a lower price than epogen but it is not a 
drug that ESRD facilities can purchase as an ESA to furnish to their 
patients because it is indicated for non-ESRD use. The commenter stated 
that while the average cost of procrit has diminished since 2007, the 
cost of epogen has risen significantly for SDOs and therefore the 
commenter believes that this results in a lower overall ASP amount 
because procrit dilutes the ASP price. A national organization for SDOs 
and an MDO expressed concern that due to the lag in the reporting and 
publishing of ASP data, the price increases that they have experienced 
were not fully reflected in the analysis.
    Response: We thank the commenters for this information. The ASP+6 
payment limits are based on actual marketplace prices submitted by 
manufacturers to CMS. Given that the ASP is an average price, some 
National Drug Codes (NDCs) in a given HCPCS code will be available at 
prices below the payment limit and others will be above the payment 
limit. The payment limits are evaluated and updated on a quarterly 
basis. We will initiate discussions with appropriate staff regarding 
the ASP for epogen to gain a better understanding of how including 
procrit impacts the ASP. We agree that the lag in reporting price 
increases in the ASP system as well as the combination of ASP data for 
Epoetin with that of procrit makes the use of ASP+6 prices to update 
the prices of drugs and biologicals to 2014 levels less desirable.
    After consideration of the comments that we received on the use of 
ASP versus PPI, we continue to believe that using a growth based on the 
ESRDB market basket is more appropriate because it reflects what 
Medicare is required to pay for the drugs and biologicals through the 
ESRD PPS base rate and because, as commenters noted, ASP prices may not 
be accurate or up-to-date for drugs and biologicals used in the 
treatment of ESRD.
iv. Calculation of the Amount of the Per Treatment Reduction
    In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we provided 
detail on how the drug utilization reduction amount was calculated. We 
applied the 2014 prices to the CY 2007 and CY 2012 drug and biological 
utilization data to calculate aggregate amounts for each year. For 
drugs and biologicals for which we have utilization data for CY 2012, 
but that were not present on CY 2007 claims, we priced those 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. We noted that while most of these drugs 
had minimal utilization, feraheme was the only significant exception. 
Specifically, feraheme was not available until January 2010 and once 
the drug was available, the use of the drug rose to the top 12th drug 
furnished to ESRD beneficiaries.
    Next, we divided each year's estimated aggregate amount for drugs 
and biologicals by that year's count of treatments furnished to 
Medicare beneficiaries to get an average payment per treatment for the 
year. This resulted in a per treatment amount for drugs and biologicals 
of $83.76 in 2007 and a per treatment amount for drugs and biologicals 
of $51.42 in 2012. We then subtracted the average payment per treatment 
for CY 2012 from the average amount per treatment for CY 2007 to get a 
total of $32.34 ($83.76-$51.42 = $32.34). We then reduced this amount 
by the standardization, the outlier, and the 98 percent budget 
neutrality adjustments to get a total of $29.52 ($32.34 x .9407 x .99 x 
.98 = $29.52). We applied these adjustments before reducing the base 
rate because the base rate was reduced by these adjustments when it was 
first established, and the reduction should be adjusted in the same way 
to make the two figures comparable. We then reduced the CY 2014 
proposed base rate of $246.47 by $29.52, resulting in the CY 2014 
proposed base rate of $216.95. A

[[Page 72164]]

reduction of $29.52 from the proposed CY 2014 ESRD PPS base rate would 
have amounted to a 12 percent reduction in Medicare payments. We 
solicited comments on the proposed methodology for the reduction to the 
ESRD PPS base rate to reflect the change in the utilization of ESRD-
related drugs and biologicals from CY 2007 to CY 2012. The comments and 
our responses are set forth below.
    Comment: We received comments from national organizations and a 
drug manufacturer that stated they were unable to determine if the 
methodology CMS used to calculate the reduction was proper because they 
did not have access to the same data that was used in the calculation.
    Response: We disagree with commenters who contend that they were 
unable to determine whether CMS's methodology was proper because they 
did not have access to all of the data used to calculate the amount of 
the reduction. Our methodology for calculating the drug utilization 
adjustment required by section 1881(b)(14)(I) was described in 
substantial detail in the CY 2014 ESRD PPS proposed rule. As a result, 
we do not believe that it was necessary for commenters to have every 
data point used in our calculations in order to have commented 
meaningfully on the methodological approach to the adjustment. 
Nonetheless, between the information provided in the proposed rule and 
included in the CY 2011 ESRD PPS final rule, commenters did have data 
we used in calculating the drug utilization adjustment. Moreover, 
shortly after the CY 2014 ESRD PPS proposed rule was published we 
posted a table titled, ``Drug Utilization Adjustment'' onto the CMS Web 
site as a convenience to stakeholders following requests for the data 
points used in our calculation of the drug utilization adjustment 
amount. This table includes the data we used to perform the calculation 
of the reduction amount for the proposed rule and it is posted with the 
rule's addenda. Addendum C titled, ``Calculation of the Amount of the 
Per Treatment Reduction Using the End-Stage Renal Disease Bundled 
Market Basket'' contains updated data and the methodology used for this 
final rule. The Addendum can be found on the CMS Web site: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    Comment: We received a comment from the Medicare Payment Advisory 
Commission (MedPAC) stating that they compared their own analyses of 
the changes in drug utilization using CMS's methods and alternative 
methods to check for errors in the methodology. They concluded that 
CMS' methods are consistent with the ATRA mandate and appear to be 
reasonable.
    Response: We thank the MedPAC for their support.
v. Final Amount of the Drug Utilization Adjustment
    Using the methodology we proposed in the 2014 ESRD PPS proposed 
rule, we are updating the drug utilization adjustment based on the most 
current claims data available, that is, CY 2012 claims with dates of 
service from January 1 through December 31, 2012 that were received, 
processed, paid, and passed to the National Claims History File as of 
June 30, 2013. We applied the 2014 prices to the CY 2007 and CY 2012 
drug and biological utilization data to calculate aggregate amounts for 
each year. For drugs and biologicals for which we have utilization data 
for CY 2012, but that were not present on CY 2007 claims, we priced 
those 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 ESRDB market basket, productivity, and wage index budget-
neutrality adjustment factors.
    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 $83.96 in 2007 and a per treatment amount for drugs and biologicals 
of $51.17 in 2012. We then subtracted the average payment per treatment 
for CY 2012 from the average amount per treatment for CY 2007 to get a 
total of $32.79 ($83.96-$51.17 = $32.79). We then reduced this amount 
by the standardization, the outlier, and the 98 percent budget 
neutrality adjustments to get a total of $29.93 ($32.79 x .9407 x .99 x 
.98 = $29.93). As in the proposed rule, we applied these adjustments 
because the base rate was reduced by these adjustments when it was 
first established, and the reduction should be adjusted in the same way 
to make the two figures comparable. We are finalizing the drug 
utilization adjustment amount of $29.93. As discussed further below, 
this amount will be applied to the base rate over the course of a 3- to 
4-year transition.
    Comment: Several national organizations representing the dialysis 
industry and dialysis patients believe our CY 2011 ESRD PPS base rate 
is incorrect and recommended that we correct the base rate prior to 
application of the drug utilization adjustment to account for 
overstated estimates of payment adjustments, especially the comorbidity 
case-mix adjusters, the outlier policy, and the low-volume adjuster. 
Because these adjustments have been paid out at a rate less than 
anticipated, the commenters stated that we have not met our obligation 
under section 1881(b)(14)(A)(ii) of the Act, which requires the 
Secretary to ensure that the estimated total amount of payments for 
2011 for renal dialysis services equals 98 percent of the estimated 
total amount of payments that would have been made for services 
furnished in 2011 if the ESRD PPS had not been implemented. 
Furthermore, these commenters indicated that they were unable to 
receive discharge information from hospitals to document the comorbid 
conditions, which is necessary to seek reimbursement for the 
comorbidity payment adjustments. In order to the make the comorbidity 
adjustments more accessible, the commenters urged us to revisit the 
documentation requirements or remove the comorbidity adjustments 
entirely and return the dollars to the base rate.
    Dialysis organizations also encouraged CMS to substantially reduce 
the percentage of the outlier pool or eliminate it entirely. One 
commenter is concerned that SDO and non-profit providers are 
disproportionately impacted by this provision because they do not have 
the infrastructure of larger providers and therefore are less likely to 
capture all of the costs for a patient. The commenter went on to state 
the net effect of the outlier policy is that a provision that was 
originally put into place to protect small providers is actually 
penalizing them by decreasing the base rate. This same commenter 
recommended that CMS either suspend or, if that is not feasible, lower 
the outlier withhold from 1.0 percent to 0.5 percent.
    Finally, several commenters referenced the GAO report 13-287, 
entitled, ``End-Stage Renal Disease: CMS Should Improve Design and 
Strengthen Monitoring of Low-Volume Adjustment'' and published March 1, 
2013, that found discrepancies in the identification of low-volume 
facilities. One commenter suggested that CMS delay implementation of 
the drug utilization adjustment until the purported problems with the 
underlying PPS can be resolved.
    Response: In developing the final ESRD PPS base rate for 2011, in 
accordance with section 1881(b)(14)(A)(ii) of the Act, we standardized 
the rate to account for the

[[Page 72165]]

payment adjustments and the outlier policy. As stated in the 2011 ESRD 
PPS final rule (75 FR 49081), to account for the overall effects of the 
proposed ESRD PPS case-mix patient and facility adjustment factors and 
wage indexes, we had to standardize payments in order to ensure that 
total projected PPS payments were equal to what would otherwise have 
been paid had the ESRD PPS not been implemented, prior to application 
of the 98 percent budget-neutrality adjustment. The standardization 
factor was calculated by dividing total estimated payments in 2011 
under the basic case-mix adjusted composite rate payment system by 
estimated payments under the final ESRD PPS in 2011. We do not intend 
to revise the standardization factor that was applied to the 2011 ESRD 
PPS base rate to reflect actual payments made under each of the 
adjustments and therefore we did not propose to re-standardize the CY 
2014 ESRD PPS base rate. Rather, we used the best data available and 
made a good faith effort to simulate payments under the ESRD PPS to 
determine the standardization factor that was applied to the CY 2011 
ESRD PPS base rate. The final standardization adjustment was .9407 or a 
reduction of 5.93 percent from the unadjusted per treatment base rate.
    Since the ESRD PPS began, organizations representing LDOs have 
expressed concern about the comorbidity adjustments and requested that 
we return the 5.93 percent standardization factor to the base rate. In 
response to this concern, in preparation for this final rule, we 
performed an analysis of the composition of the standardization factor 
and determined that the bulk of the 5.93 percent standardization 
reduction to the base rate arises from factors other than the 
comorbidities. Age adjustments account for approximately 3.0 percent, 
the onset of dialysis adjustment accounts for approximately 2.4 
percent, the low volume adjustment accounts for approximately 0.3 
percent, the body size adjustments account for approximately 0.2 
percent, and the wage adjustment accounts for approximately -0.7 
percent (this was negative and partially offset the effects of the 
other adjustments because the average wage adjustment was less than 
1.00, unlike the other adjustments). The comorbidity adjustments 
jointly account for approximately 0.8 percent.
    Section 632(c) of ATRA requires the Secretary, by not later than 
January 1, 2016, to conduct an analysis of the case mix payment 
adjustments under section 1881(b)(14)(D)(i) of the Act and make 
appropriate revisions to those adjustments. Pursuant to this authority, 
CMS plans to conduct a regression analysis for the CY 2016 ESRD PPS 
rulemaking cycle to reassess the appropriateness of the patient and 
facility level payment adjustments. At that time, we plan to analyze 
the various payment adjustments under the PPS to determine whether they 
should continue to apply as well as whether the magnitude of the 
adjustments is appropriate.
    In responses to the comments regarding the comorbidity adjustments, 
we will consider whether changes to documentation requirements are 
warranted with respect to qualifying for the comorbidity payment 
adjustment.
    In regards to the outlier policy, as we explained in section 
II.C.6. of this final rule, section 1881(b)(14)(D)(ii) of the Act 
requires that the ESRD PPS include a payment adjustment for high cost 
outliers due to unusual variations in the type or amount of medically 
necessary care, including variations in the amount of erythropoiesis 
stimulating agents necessary for anemia management. Each year, we 
simulate payments under the ESRD PPS in order to set the outlier fixed 
dollar loss and MAP amounts for adult and pediatric patients to try to 
achieve the 1 percent outlier policy. We would not increase the base 
rate in years where outlier payments were less than 1 percent of total 
ESRD PPS payments, nor would we reduce the base rate if the outlier 
payments exceed 1 percent of total ESRD PPS payments. Rather, we would 
simulate payments in the following year and adjust the fixed dollar 
loss and MAP amounts to try to achieve outlier payments that meet the 1 
percent outlier percentage. This approach to updating the outlier 
policy is consistent with how we update outlier policies in other 
Medicare prospective payment systems, for example, the prospective 
payment system for inpatient psychiatric facilities. We believe that 
the outlier policy continues to be important for patient access to 
ESRD-related services because it offsets the cost of high-cost 
patients, particularly those who receive more drugs and biologicals 
than the average patient. We will reassess the outlier policy along 
with our review of the other payment adjustments for the CY 2016 ESRD 
PPS. With respect to the low-volume payment adjustment, we are 
reviewing the GAO's findings and are considering their recommendations.
    Comment: A national organization representing large dialysis 
organizations (LDOs) and ESRD facilities recommended that prior to 
making any adjustment to reduce payments to reflect changes in 
utilization of drugs and biologicals, CMS should take into 
consideration what these commenters believe to be a cross subsidization 
of items and services that were previously paid for under the basic 
case-mix adjusted composite rate payment system with payments for 
formerly separately billable items. The commenters believe that because 
the composite rate, which historically did not have annual market 
basket increases, was underfunded, payments for separately billable 
drugs, laboratory tests, and supplies offset those losses. The 
organization provided a report that estimates that $15-20 of costs for 
items and services that were previously paid for under the basic case-
mix adjusted composite rate payment system are subsidized by the 
incorporation into the base rate of formerly separately billable drugs 
and biologicals, laboratory tests, and supplies. The commenters stated 
that CMS has the authority to take into account that Congress intended 
that some previously separately billable drug dollars be used to 
compensate for items and services formerly paid for under the 
purportedly underfunded basic case-mix adjusted composite rate payment 
system. This comment was supported by other national providers and 
patient organizations.
    Response: Section 1881(b)(14)(I) of the Act requires that the 
single payment amount be reduced by an amount that reflects the 
Secretary's estimate of the change in utilization of drugs and 
biologicals. It does not provide for the reduction to account for 
cross-subsidization of other components of the base rate. We do not 
believe we would be in compliance with section 1881(b)(14)(I) if we 
were to eliminate most of the drug utilization reduction to reflect the 
purported need for cross-subsidization of the composite rate with 
separately billable services.
    Comment: In making the reduction to the ESRD PPS base rate, 
national organizations representing the dialysis industry and dialysis 
patients recommended that we factor in the 2 percent reduction already 
made to the original ESRD PPS base rate in 2011 as required by section 
1881(b)(14)(A)(ii), which was implemented in the form of the 98 percent 
budget neutrality adjustment. The comments indicated that this 
reduction accounts for the anticipated reduction in drug utilization 
and has already been built into the payment rate. The commenters stated 
that CMS has the authority to temper the drug utilization adjustment 
because section 1881(b)(14)(I) does not require a dollar-for-dollar 
adjustment. Rather, the statute indicates that the adjustment

[[Page 72166]]

should ``reflect'' the Secretary's estimate of the change in 
utilization of drugs and biologicals. Therefore, the commenters 
contended, CMS has the authority to consider the 2 percent reduction 
implemented in 2011 as part of the drug utilization adjustment.
    Response: In the CY 2014 ESRD PPS proposed rule (78 FR 40843), we 
explained that once we determined the per-treatment difference in 
utilization of drugs and biologicals ($32.34), we reduced this amount 
by the standardization, the outlier, and the 98 percent budget 
neutrality adjustment to yield the proposed drug utilization adjustment 
amount of $29.52. As noted previously, for this final rule, the 
difference in drug utilization per treatment was computed to be $32.79 
and this amount was also reduced by the standardization, the outlier, 
and the 98 percent budget neutrality adjustment to yield the final drug 
utilization adjustment amount of $29.93. Therefore, the 98 percent 
budget neutrality adjustment was considered in computing the drug 
utilization adjustment. Moreover, because the 98 percent budget 
neutrality adjustment and the drug utilization adjustment both apply to 
the ``single'' payment rate required by section 1881(b)(14)(A), we do 
not believe it would be appropriate to reduce the drug utilization 
adjustment by the amount of the 98 percent budget neutrality 
adjustment, absent a clear statement of congressional intent that we 
should do so.
    Comment: Several national dialysis organizations indicated that CMS 
has an obligation to ensure that the single payment amount is 
consistent with the factors set forth in section 1881(b)(2)(B) of the 
Act, which provides that payment amounts for renal dialysis services be 
determined on a ``cost-related basis or other economical and equitable 
basis.'' The commenters submitted data that displayed profit margins 
for ESRD facilities prior to the proposed one-time reduction and then 
what the profit margins would look like after the one-time reduction. 
The comments stated that if payment rates do not reflect the cost of 
providing care, then they are neither economical nor equitable. Also, 
since section 1881(b)(14)(I) did not repeal section 1881(b)(2)(B) and 
the sections do not conflict with one another, both must be considered. 
In addition, because Congress inserted an ``and'' between section 
1881(b)(2)(B) requirements and section 1881(b)(7)--the reference to the 
payment system in effect at the time the provision was modified--this 
suggests the intent to have a two-step process for setting the payment 
rate. Commenters claim this conjunction suggests that the Secretary 
must not only apply the provisions that prescribe the payment model, 
but also evaluate the final payment amount against the factors outlined 
in subsection (b)(2)(B). Using these authorities, commenters claim CMS 
could temper any payment reduction so the final amount remains based 
either upon the cost of providing services or upon economic and 
equitable factors. The commenters indicated that a payment amount that 
does not cover the cost of providing care would not be cost-related or 
equitable. The commenters believe use of the word ``reflect'' in 
section 1881(b)(14)(I) provides CMS the authority to adjust the drug 
utilization adjustment consistent with other provisions of section 
1881. The commenters contend that this interpretation is also supported 
by the fact that section 1881(b)(14)(I) notes that the drug utilization 
adjustment applies to ``this paragraph'' (which establishes the PPS 
bundle) and thus, does not override or repeal other provisions of this 
section, including section 1881(b)(2)(B).
    Response: We disagree with the commenters that section 
1881(b)(2)(B) of the Act applies to the ESRD PPS. The MIPPA revisions 
to section 1881 of the Act did not specify that we must take section 
1881(b)(2) of the Act into account in implementing the ESRD PPS. 
Instead, it required that we base the ESRD PPS on the lowest per 
patient utilization year out of 2007, 2008, and 2009 and that the 
system should result in payments that are 98 percent of what would 
otherwise have been paid. Once we established that 2007 was the lowest 
per patient utilization year, we used cost report and claims data to 
compute the base rate. Section 1881(b)(14)(I) requires the Secretary to 
compare per patient utilization data for 2007 with such data for 2012 
and then make reductions to the ESRD PPS single payment amount to 
reflect the Secretary's estimate of the change in utilization of drugs 
and biologicals. We do not believe this very specific statutory 
provision gives us discretion to mitigate the amount of the reduction 
based on the very general authority of section 1881(b)(2)(B), which, 
moreover, we believe no longer applies to payment for renal dialysis 
services.
    Other commenters pointed out that the prospective payment systems 
should protect beneficiary access while conserving beneficiaries' and 
taxpayers' resources. Accordingly, in addition to proposing a full 
reduction of $29.52 in CY 2014, in the CY 2014 ESRD PPS proposed rule 
(78 FR 40843), we noted that a one-time reduction to the ESRD PPS base 
rate could be a significant reduction for ESRD facilities for the year 
and potentially impact beneficiary access to care. Therefore, we 
solicited comments on a potential transition or phase-in period of the 
proposed 12 percent reduction and the number of years for such 
transition or phase-in period. The comments related to a transition and 
our responses are set forth below.
    Comment: We received a comment from MedPAC providing the details 
from their March 2013 report to Congress which is one of two reports 
that they issue each year to advise Congress on issues affecting the 
Medicare program (the March 2013 report is available at the following 
link: http://www.medpac.gov/documents/Mar13_entirereport.pdf). 
Specifically, MedPAC noted that there is historical evidence that 
implementation of PPSs in Medicare has been characterized by providers 
quickly reducing use of services included in the payment bundle, 
resulting in periods of ``overpayment'' where providers benefit from 
the change in practice patterns and the Medicare program does not 
realize savings until the payment is adjusted. The MedPAC recommended 
that the Medicare program move expeditiously toward correcting 
overpayments, while also adjusting payments so that providers have time 
to respond in a way that does not disrupt beneficiary access. The 
MedPAC further recommended that CMS consider their analyses of Medicare 
margins, that is, the extent to which facilities are reimbursed more 
than their cost of furnishing services to Medicare beneficiaries, in 
implementing the drug utilization reduction. Based upon the available 
2011 cost reports at the time of their analysis, MedPAC estimated an 
aggregate 2011 Medicare margin of about 4 percent for free standing 
ESRD facilities.
    Specifically, MedPAC recommended that the Secretary take action to 
freeze the payment rates for 2014 at 2013 levels, consistent with their 
recommendation to the Congress in their March 2013 report. MedPAC 
explained that this method would accomplish several goals. First, it 
would start to move the payment system toward greater accuracy and in 
doing so, protect scarce Medicare resources paid for by the beneficiary 
and the taxpayer. Second, it would protect beneficiary access and give 
MedPAC the ability to report back to Congress on any developing access 
issues should they occur. Third, it would give ESRD facilities time to 
respond to payment changes by identifying efficiencies in care. Lastly, 
it would give CMS,

[[Page 72167]]

MedPAC, and the Congress time to consider policies that should be 
changed concurrent with further refinements, such as targeting 
facilities critical to beneficiary access (rather than protecting 
industry-wide payment rates) and improving the case-mix adjustments.
    Response: We agree with the MedPAC suggestion that freezing 
payments could ensure access to essential ESRD services while not 
further perpetuating overpayments. However, we believe that section 
1881(b)(14)(I) of the Act requires that, effective January 1, 2014, we 
``make reductions to the single payment that would otherwise apply. . . 
.'' and therefore, we believe the base rate must be reduced by some 
portion of the drug utilization adjustment amount to be consistent with 
this provision. We interpreted MedPAC's recommendation of freezing 
payment rates at the CY 2013 level, provided in both their public 
comment and in their March 2013 Report to Congress, to mean that 
payment is adequate in CY 2013. We believe that we can be in compliance 
with section 1881(b)(14)(I) and follow MedPAC's recommendation by 
applying a portion of the drug utilization reduction to the base rate 
to offset the payment update, that is, the ESRDB market basket minus 
productivity increase factor, and other impacts (such as, changes in 
the outlier thresholds) to create an overall impact of zero percent for 
ESRD facilities from the previous year's payments in CYs 2014 and 2015. 
We relied on the impact chart provided in the impact analysis section 
of our annual rules to determine the impact of various policy changes 
on aggregate ESRD facility payments and took those values into 
consideration to determine the drug utilization adjustment for this 
year, and we will do the same next year.
    To implement a portion of the drug utilization adjustment in CY 
2014, we adjusted the CY 2013 ESRD PPS base rate by the CY 2014 ESRDB 
market basket minus productivity increase factor, the wage index 
budget-neutrality factor, and the home dialysis training add-on budget-
neutrality factor. As we mentioned above, we took into consideration 
other impacts (provided in Table 12 presented in section XI.B.1.a. of 
this final rule) of the CY 2014 ESRD PPS that will cause a change in 
average payments to ESRD facilities in order to create and overall 
impact of zero percent. Specifically, for CY 2014, we are accounting 
for the changes to outlier payments and the movement from a 75/25 blend 
of PPS and pre-PPS payments to 100 percent ESRD PPS payments (for those 
ESRD facilities transitioning to the ESRD PPS) to create a zero percent 
average impact for facilities from the CY 2013 estimated payments. As 
indicated in Table 12, the average increase resulting from changes to 
the fixed dollar loss threshold and Medicare allowable payment (MAP) 
amounts under the ESRD PPS outlier policy is estimated to be a 0.4 
percent increase over 2013 payments. For the ESRD PPS transition change 
to 100 percent ESRD PPS payments, the estimated average increase is 0.2 
percent. These percentage increases, in addition to the ESRDB market 
basket minus productivity adjustment increase of 2.8 percent as 
discussed in section II.C.3. of this final rule, yield a drug 
utilization reduction for CY 2014 of 3.3 percent or $8.16 per 
treatment. Specifically, in Table 12, the overall impact of all of the 
changes for CY 2014 ESRD PPS totals 3.4 percent, however, in a 
multiplicative system to achieve a zero percent overall impact we had 
to divide 1 by 1.034 to derive a 0.967 or 3.3 percent decrease. 
Therefore, we are finalizing a transition of the drug utilization 
adjustment amount as an annual offset to payment rate updates and other 
impacts that would otherwise cause a change in average payments to ESRD 
facilities, thereby creating an overall impact of zero percent for ESRD 
facilities from the previous year's payments. We are finalizing this 
methodology for CY 2014 and CY 2015.
    For CY 2016, we will evaluate how to apply the balance of the 
adjustment when we conduct an analysis of the case-mix adjustments 
required by section 632(c) of ATRA and implement the inclusion of oral-
only ESRD-related drugs and biologicals consistent with section 632(b) 
of ATRA. At that time, this evaluation will allow us to determine if we 
should apply the balance of the reduction in CY 2016 or provide one 
additional transition year so that the entire amount of the drug 
utilization adjustment will have been applied to the base rate no later 
than CY 2017. This transition approach will make it easier for ESRD 
facilities to plan and budget, allow time for providers to respond to 
payment changes by identifying efficiencies, and allow time for CMS to 
consider further refinements to the ESRD PPS.
    Comment: We received several comments from national organizations 
representing ESRD facilities stating that they were unable to provide 
useful or constructive comments on the nature, extent and operation of 
a transition until they understand how CMS intends to correct the base 
rate to reflect cross-subsidization of the composite rate services with 
separately billable services, standardization, comorbidity case-mix 
adjusters, the low-volume adjuster, and the outlier policy. However, 
the commenters stated that the transition should not be viewed as a 
substitute for making necessary corrections to the current payment 
system.
    The commenters suggested that if CMS does utilize a transition to 
implement the drug utilization adjustment, then it should do so over a 
period of 2 to 4 years to minimize system disruption for beneficiaries, 
assess the impact on access, and correct course, as needed. The 
commenters further explained that a transition would allow providers to 
adjust to the payment reduction and engage in a more thoughtful process 
to evaluate and close facilities that cannot be made viable, reduce 
service, and change staffing. The commenters also explained that the 
transition would allow CMS to evaluate the impact of the payment 
reduction.
    Response: As stated previously, we do not intend to offset the drug 
utilization adjustment amount to reflect purported cross-subsidization 
of items and services paid for under the composite rate with formerly 
separately billable services, nor do we intend to update the 
standardization and outlier reductions made to the 2011 ESRD PPS base 
rate to reflect actual payments of the adjustments. However, the 
transition approach we are adopting will spread the reduction over a 3- 
to 4-year period to minimize system disruption.
    Comment: One national organization that represents small dialysis 
organizations and several independent ESRD facilities suggested that we 
treat small dialysis organizations differently from large dialysis 
organizations when implementing a transition of the reduction to the 
base rate because we determined in the CY 2014 ESRD PPS proposed rule 
(78 FR 40888) that a one-time reduction to the base rate would have a 
significant economic impact on a substantial number of small entities. 
The commenter explained that ESRD facilities that are owned by small 
dialysis organizations have less flexibility and working capital to 
withstand a substantial decrease in revenue. The commenter urged CMS to 
hold off on implementing the reduction for the first 6 months of CY 
2014 because the rule is not likely to be finalized until November 2013 
and without a 6-month delay, ESRD facilities would not have sufficient 
time to plan for and make adjustments in their operations. The 
commenter further suggested that the amount of the reduction should be 
transitioned over a period of 6 years after the 6-month

[[Page 72168]]

deferral and should not exceed 2 percent of the base rate in any given 
year.
    Another national organization that represents not-for-profit ESRD 
facilities with support from several ESRD facilities recommended a 
transition under which the base rate is not reduced by more than $5.00 
in a given year. One commenter recommended that CMS continue to provide 
a market basket update each year and apply the drug utilization 
adjustment to the base rate after the market basket update is applied. 
The commenter stated that CMS does not have an obligation to meet a 
certain overall reduction in expense over time and that it has 
discretion to implement a transition that does not effectively end with 
a lower rate than would have been in place if there were no transition. 
One commenter suggested that CMS implement the transition as optional, 
just as how the original ESRD PPS implementation allowed the option of 
accepting the full bundle or a 4-year transition.
    Another commenter suggested that CMS create a differential payment 
for non-profit and SDOs. The commenter pointed out that the Regulatory 
Flexibility Act allows CMS to assess the impact of the regulation on 
small entities. A medium dialysis organization that was created as a 
result of a divestiture requirement imposed by the Federal Trade 
Commission (FTC) pointed out that the proposed drug utilization 
adjustment will undermine specific FTC action to preserve competition 
in the dialysis facility's marketplace. The commenter stated that 
overall the diminished competition in the marketplace will result in 
lower capacity, lower quality of care, and higher private payer prices 
in those markets.
    Response: We agree with the commenters that implementing the full 
amount of the drug utilization adjustment in CY 2014 would have a 
significant impact on access to ESRD services. We believe that the 
transition approach we are taking, which will apply the drug 
utilization adjustment amount to the base rate over several years, will 
allow ESRD facilities an opportunity to plan for and adjust their 
future operations accordingly. Because facilities are currently 
operating efficiently under the CY 2013 payment rates and we are 
largely offsetting future increases to achieve an average impact of 
zero percent for ESRD facilities in CYs 2014 and 2015, we do not 
believe a 6-month grace period is necessary. We note that the dollar 
value of the 3.3 percent drug utilization reduction for CY 2014 is 
$8.16 per treatment. Although this amount is higher than the $5.00 
reduction suggested by the commenters, we believe that ESRD facilities 
will be able to maintain their current programs and services because 
payments will remain close to CY 2013 levels for the next 2 years. With 
regard to the comment that we should provide a market basket increase 
prior to application of the reduction, we note that under our approach 
to the drug utilization adjustment we apply the ESRDB market basket 
minus productivity increase prior to making the drug utilization 
reduction.
    In regards to the commenters that suggested that CMS create a 
different payment amount or transition scheme for non-profit ESRD 
facilities and SDOs, as well as for those ESRD facilities that were 
created due to FTC-ordered divestiture, we believe that we must provide 
for a single payment rate in accordance with section 1881(b)(14)(A)(i) 
of the Act, but that the transition will mitigate the potential 
negative effects of the adjustment that commenters pointed out. In 
addition, any other adjustments to the payment rate, such as an 
adjustment for non-profit facilities and SDOs would be established 
through regression analysis.
    Comment: One patient advocacy group supported the drug utilization 
reduction but pointed out that the industry got the benefit of a base 
rate that included higher utilization of ESRD-related drugs and 
biologicals since CY 2011, but CMS did not make an adjustment to the 
payment until CY 2014 and continued to increase the base rate using the 
ESRDB market basket. The commenter further pointed out that prior to 
implementation of the ESRD PPS, annual increases to the composite rate 
were sporadic.
    Response: We share the commenter's view that small, medium, and 
large dialysis facilities have benefited from an inflated base rate 
since CY 2011. As noted previously, there is historical evidence that 
implementation of PPSs has resulted in providers quickly reducing use 
of services included in the bundle, thereby creating periods of 
overpayment in which providers benefit from the change in practice 
patterns and the Medicare program does not realize savings until the 
payment is adjusted. Section 1881(b)(14)(I) of the Act provided the 
specific authority to reduce the base rate to reflect only the change 
in utilization of ESRD-related drugs and biologicals and not all renal 
dialysis services. We note that annual market basket increases to the 
ESRD PPS base rate are required by section 1881(b)(14)(F)(i)(I) of the 
Act, although these increases are reduced by the multifactor 
productivity adjustments required by section 1881(b)(14)(F)(i)(II) of 
the Act.
    Comment: Several commenters expressed concern that with the 
implementation of the ESRD PPS and QIP have come a significant number 
of unfunded mandates that the Agency has not acknowledged in any 
specific way and the market basket does not address. The commenters 
recommended that a thorough analysis of costs should include those that 
have increased since the initiation of the bundle when calculating the 
drug utilization reduction. Notable among these are the costs of new IT 
requirements for participation in CROWNWeb, administration of Consumer 
Assessment of Healthcare Providers and Systems (CAHPS) surveys, 
participation in the National Healthcare Safety Network (NHSN), and 
transitioning to ICD-10-CM coding. One small dialysis organization 
indicated that the costs of these initiatives are as much as $5 per 
treatment. In addition to the costs discussed, commenters urged us to 
consider the reductions caused by sequestration and QIP penalties. The 
commenters urged us to take these costs into consideration when 
computing the drug utilization adjustment.
    Response: We understand the commenter's concerns. Nonetheless, 
section 1881(b)(14)(I) of the Act requires us to make reductions to the 
single payment amount to reflect the Secretary's estimate of the change 
in utilization of drugs and biologicals from 2007 to 2012. Section 
1881(b)(14)(I) does not give us authority to take into account any 
additional factors that may impact the cost of care, such as the 
sequestration, and the QIP requirements. We note that entering data in 
CROWNWeb is a Condition for Coverage for dialysis facilities (42 CFR 
Sec.  494.180(h)), and that CROWNWeb was implemented in accordance with 
the 1995 Paperwork Reduction Act. In regards to the transition to ICD-
10-CM coding scheme, this is a requirement that is shared by all Health 
Insurance Portability and Accountability Act of 1996 covered entities 
and is not unique to ESRD facilities.
    Comment: Hundreds of comments from ESRD patients, their family 
members, friends and caregivers, to national organizations representing 
dialysis patients and facilities, to ESRD facility staff expressed 
grave concerns about steps facilities would take if we were to adopt 
the proposed drug utilization adjustment. They were concerned about 
facility closures, staffing cuts, cuts to hours of operation,

[[Page 72169]]

loss of transportation services, and their continued access to life-
saving ESRD treatment. Some commenters indicated that facilities have 
already begun to shift costs to patients and cut back staffing and 
programs even though the reduction will not be applied until January 1, 
2014. Patients who attend nocturnal dialysis programs stated that 
without these programs they would be unable to continue working. ESRD 
facility staff also expressed concern about the magnitude of the 
proposed reduction and the likelihood of facility closures and 
resulting job losses. One commenter pointed out that pediatric patients 
often require more intensive staffing; it is not uncommon for younger 
pediatric patients to need a staffing ratio of two nurses to one 
patient. The commenter stated that the drastic payment reduction 
proposed by CMS will challenge pediatric facilities to provide safe 
care for these vulnerable patients.
    Commenters expressed concern about facility closures and their 
continued access to quality ESRD services, especially in rural and 
inner city areas. Many commenters noted the burden and expense of 
traveling long distances should their facilities close. Another 
commenter stated that the drug utilization adjustment threatens the 
networks of dialysis facilities where profitable facilities allow 
organizations to subsidize those facilities that operate at a loss in 
underserved areas. Conversely, a few comments indicated support for the 
proposed drug utilization adjustment, stating that facilities are 
primarily interested in higher profits and high corporate salaries at 
the expense of patient care.
    One patient advocacy group expressed concern about the corporate 
practice by ESRD facilities of shifting the responsibility of 
prescribing therapy and medication from the nephrologist to the 
dialysis organization. Another commenter representing nephrology nurses 
expressed concern that the proposed reduction will cause ESRD 
facilities to curtail the number of nursing positions and no longer 
maintain staff education and competencies. Other commenters pointed out 
that many commercial payers use Medicare reimbursement rates as a basis 
for their reimbursement, limiting ESRD facilities' ability to make up 
the lost revenue from other sources. Several commenters expressed 
concern that the 12 percent payment reduction in CY 2014 may hinder the 
ESRD facilities' ability to participate in the Center for Medicare and 
Medicaid Innovation's (CMMI) Comprehensive ESRD Care model which is 
testing innovative models of care.
    Response: We believe that the approach we have taken to transition 
the drug utilization reduction over a 3 to 4-year timeframe will 
minimize disruption in the delivery of ESRD services and will hopefully 
lead facilities to reverse cuts they may have already implemented in 
anticipation that the full amount of the drug utilization adjustment 
would be applied to the base rate in CY 2014. In addition, part of our 
rationale for the transition was to enable facilities to maintain their 
current programs and services. We developed a comprehensive claims-
based monitoring system when we implemented the ESRD PPS in 2011 and 
will use that system to identify changes in practice patterns, 
prescribing patterns, health outcomes, and ownership that may impact 
the furnishing of ESRD services. We have provided sufficient 
information in this final rule about how we plan to transition the drug 
utilization adjustment so that ESRD facilities can assess whether to 
participate in the CMMI Comprehensive ESRD Care model.
    Comment: One commenter recommended that CMS specify how it plans to 
ensure that access to and quality of care is not compromised by the 
drug utilization adjustment. They provided a list of monitoring 
elements including ESA and other drug utilization rates, hospital 
admission/readmission rates, transfusion rates, availability to 
patients of dietitian and social worker services, changes in numbers of 
shifts per facility, changes in staffing ratios or staffing composition 
(that is, fewer nurses), consolidation/sales of dialysis facilities in 
markets with limited numbers of providers, and facility closures. The 
commenter recommended that CMS post quarterly updates on monitored 
aspects of care that are feasible to report publically.
    Response: We intend to monitor access through the comprehensive 
claims monitoring program we implemented when the ESRD PPS began in 
2011. We believe that the transition approach we are adopting for 
implementing the drug utilization reduction will mitigate many of the 
unintended consequences identified by the commenters. We note that many 
of the suggested monitoring elements are already part of the 
comprehensive claims monitoring program (for example, ESA and other 
drug utilization rates, use of inpatient hospital services, and 
transfusion rates). Other elements suggested by the commenters warrant 
additional review by CMS to assess the burden associated with 
collecting the information. We currently provide a workbook that 
displays several key trends from CY 2011 through CY 2013 on the CMS Web 
site: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Spotlight.html. This workbook is updated on a quarterly 
basis.
    Comment: Comments from ESRD patients indicated that they believe 
Medicare will no longer pay for dialysis or that the cost of the 
reduction would be shifted to patients.
    Response: We want to reassure ESRD patients, their families, and 
caregivers that Medicare will continue to cover dialysis services, but 
at a lower rate. As a result of the small reduction to the ESRD PPS 
base rate (that is, from the CY 2013 ESRD PPS base rate of $240.36 to 
CY 2014 ESRD PPS base rate of $239.02), beneficiary co-insurance will 
also decrease slightly. We believe the transition approach we are 
finalizing makes cost shifting to beneficiaries less likely.
    In summary, to comply with section 1881(b)(14)(I) of the Act we 
have computed the drug utilization adjustment to be $29.93 as detailed 
in section II.C.2.a.v. above. Specifically, we used the CY 2007 claims 
data that was used in the preparation of the CY 2011 ESRD PPS final 
rule for CY 2007 utilization and included the drug utilization data 
from facilities located in the Pacific Rim. For CY 2012 utilization we 
used the CY 2012 claims file updated through June 30, 2013, (that is, 
claims with dates of service from January 1 through December 31, 2012, 
that were received, processed, paid, and passed to the National Claims 
History File as of June 30, 2013) to calculate 2012 utilization.
    To determine the final growth update factor's value, we used the 
methodology discussed above resulting in a 7.64 percent growth update 
factor to inflate prices for ESRD-related drugs and biologicals from CY 
2011 levels to CY 2014 levels. The 7.64 percent growth update factor 
represents the ESRDB market basket minus the multifactor productivity 
adjustments finalized in CYs 2012, 2013, and 2014, the wage index 
budget-neutrality adjustment factors finalized in CYs 2012, 2013, and 
2014, and the home dialysis training add-on budget neutrality 
adjustment factor finalized for CY 2014. We applied the CY 2014 prices 
to the CY 2007 and CY 2012 drug utilization data to calculate aggregate 
amounts for each year. 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

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in a per treatment amount for drugs and biologicals of $83.96 in 2007 
and a per treatment amount for drugs and biologicals of $51.17 in 2012. 
We then subtracted the average payment per treatment for CY 2012 from 
the average amount per treatment for CY 2007 to get a total of $32.79 
($83.96 - $51.17 = $32.79). We then reduced this amount by the 
standardization, the outlier, and the 98 percent budget neutrality 
adjustments to get a total of $29.93 ($32.79 x .9407 x .99 x .98 = 
$29.93). We are finalizing $29.93 as the total drug utilization 
reduction.
    In response to comments we are finalizing the following approach 
for implementing the amount of the drug utilization adjustment over a 
3- to 4-year transition period. For CYs 2014 and 2015, we are 
implementing a transition of the drug utilization adjustment by 
offsetting the payment update, that is the ESRDB market basket minus 
productivity increase factor and other impacts (such as, changes to the 
outlier thresholds), by a portion of the reduction amount necessary to 
create an overall impact of zero percent for ESRD facilities from the 
previous year's payments. We relied on the impact chart provided in the 
impact analysis section of our annual rules to determine the impact of 
various policy changes on aggregate ESRD facility payments and took 
those values into consideration to determine the drug utilization 
adjustment for this year, and we will do the same for next year.
    For CY 2014, this approach results in a base rate reduction of 
$8.16, which yields a CY 2014 ESRD PPS base rate of $239.02. This 
reflects the CY 2013 ESRD PPS base rate of $240.36 adjusted by the 
ESRDB market basket minus productivity increase factor of 2.8 percent, 
the wage index budget neutrality factor of 1.000454, and the home 
dialysis training add-on budget neutrality adjustment factor of 
0.999912 to get $247.18 ($240.36*1.028*1.000454*0.999912 = $247.18). 
Then we reduced this amount by the portion of the drug utilization 
reduction that is being implemented this year--$8.16--to arrive at a 
final CY 2014 ESRD PPS base rate of $239.02 ($247.18 - $8.16=$239.02).
    For CY 2016, we will evaluate how to apply the balance of the 
reduction when we conduct an analysis of the case-mix adjustments as 
required by section 632(c) of ATRA and implement the inclusion of oral-
only ESRD-related drugs and biologicals as permitted by section 632(b) 
of ATRA. Following this evaluation, we will determine whether we should 
apply the balance of the reduction in CY 2016 or provide one additional 
transition year so that the full amount of the drug utilization 
adjustment will have been applied to the base rate over a 4-year 
transition period ending in CY 2017.
3. ESRD Bundled Market Basket
a. Overview and Background
    In accordance with section 1881(b)(14)(F)(i) of the Act, as added 
by section 153(b) of MIPPA and amended by section 3401(h) of the 
Affordable Care Act, beginning in 2012, the ESRD payment amounts are 
required to be annually increased by an ESRD market basket increase 
factor that is reduced by the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. The application of the 
productivity adjustment described may result in the increase factor 
being less than 0.0 for a year and may result in payment rates for a 
year being less than the payment rates for the preceding year. The 
statute also provides that the market basket increase factor should 
reflect the changes over time in the prices of an appropriate mix of 
goods and services used to furnish renal dialysis services.
b. Market Basket Update Increase Factor and Labor-related Share for 
ESRD Facilities for CY 2014
    As required under section 1881(b)(14)(F)(i) of the Act, CMS 
developed an all-inclusive ESRDB input price index (75 FR 49151 through 
49162). Although ``market basket'' technically describes the mix of 
goods and services used for ESRD treatment, this term is also commonly 
used to denote the input price index (that is, cost categories, their 
respective weights, and price proxies combined) derived from a market 
basket. Accordingly, the term ``ESRDB market basket,'' as used in this 
document, refers to the ESRDB input price index.
    We proposed to use the CY 2008-based ESRDB market basket described 
in the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162) to 
compute the CY 2014 ESRDB market basket increase factor and labor-
related share based on the best available data. Consistent with 
historical practice, we estimate the ESRDB market basket update based 
on IHS Global Insight (IGI), Inc.'s forecast using the most recently 
available data. IGI is a nationally recognized economic and financial 
forecasting firm that contracts with CMS to forecast the components of 
the market baskets.
    Using this methodology and the IGI forecast for the first quarter 
of 2013 of the CY 2008-based ESRDB market basket (with historical data 
through the fourth quarter of 2012), and consistent with our historical 
practice of estimating market basket increases based on the best 
available data, the proposed CY 2014 ESRDB market basket increase 
factor was 2.9 percent.
    For the CY 2014 ESRD payment update, we proposed 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).
    Comment: Several commenters supported the ESRDB proposed market 
basket update.
    Response: We appreciate the commenters support and are finalizing 
our update to the ESRDB market basket for CY 2014 based on the most 
recent forecast of the ESRDB market basket.
c. Productivity Adjustment for CY2014
    Under section 1881(b)(14)(F)(i) of the Act, as amended by section 
3401(h) of the Affordable Care Act, for CY 2012 and each subsequent 
year, the ESRD market basket percentage increase factor shall be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity 
adjustment as equal to the 10-year moving average of changes in annual 
economy-wide private nonfarm business multifactor productivity (MFP) 
(as projected by the Secretary for the 10-year period ending with the 
applicable fiscal year, year, cost reporting period, or other annual 
period) (the ``MFP adjustment''). The Bureau of Labor Statistics (BLS) 
is the agency that publishes the official measure of private nonfarm 
business MFP. Please see http://www.bls.gov/mfp to obtain the BLS 
historical published MFP data.
    CMS notes that the proposed and final methodology for calculating 
and applying the MFP adjustment to the ESRD payment update is similar 
to the methodology used in other payment systems, as required by 
section 3401 of the Affordable Care Act.
    The projection of MFP is currently produced by IGI. The details 
regarding the methodology for forecasting MFP and how it is applied to 
the market basket were finalized in the CY 2012 ESRD PPS final rule (76 
FR 70232 through 70234). Using this method and the IGI forecast for the 
first quarter of 2013 of the 10-year moving average of MFP, the 
proposed CY 2014 MFP factor was 0.4 percent. We did not receive any 
comments on this proposal.
    Accordingly, are finalizing the CY 2014 MFP adjustment to the ESRDB 
market basket for CY 2014 based on the most recent forecast available.

[[Page 72171]]

d. Calculation of the Final ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2014
    Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD 
PPS payment amounts shall be annually increased by an ESRD market 
basket percentage increase factor reduced by the productivity 
adjustment. We proposed to use the same methodology for calculating the 
ESRDB market basket updates adjusted for MFP that was finalized in the 
CY 2012 ESRD PPS final rule (76 FR 70234) and based on the most recent 
forecast of the data.
    It is our policy that if more recent data are available after 
publication of the proposed rule (for example, a more recent estimate 
of the market basket or MFP adjustment), we will use such data, if 
appropriate, to determine the CY 2014 market basket update and MFP 
adjustment in the CY 2014 ESRD PPS final rule. Thus, in accordance with 
section 1881(b)(14)(F)(i) of the Act, the final ESRDB market basket 
percentage increase factor for CY 2014 is based on the 3rd quarter 2013 
forecast of the CY 2008-based ESRDB market basket, which is estimated 
to be 3.2 percent. This market basket percentage is then reduced by the 
MFP adjustment (the 10-year moving average of MFP for the period ending 
CY 2014) of 0.4 percent, which is based on IGI's 3rd quarter 2013 
forecast. The resulting final MFP-adjusted ESRDB market basket update 
for CY 2014 is equal to 2.8 percent, or 3.2 percent less 0.4 percentage 
point.
4. The CY 2014 Wage Index
    Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD 
PPS may include a payment adjustment by geographic wage index payment 
adjustment, such as the index referred to in section 1881(b)(12)(D) of 
the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized 
the use of the Office of Management and Budget's (OMB) Core-Based 
Statistical Areas (CBSAs)-based geographic area designations to define 
urban and rural areas and their corresponding wage index values. In the 
CY 2012 ESRD PPS final rule (76 FR 70239-70241), we finalized that, 
under the ESRD PPS, we will continue to utilize the ESRD PPS wage index 
methodology, first established under the basic case-mix adjusted 
composite rate payment system, for updating the wage index values using 
the OMB's CBSA-based geographic area designations to define urban and 
rural areas and corresponding wage index values; the gradual reduction 
of the wage index floor during the transition; and the policies for 
areas with no hospital data. The CBSA-based geographic area 
designations were originally described in OMB bulletin 03-04, issued 
June 6, 2003. This bulletin, as well as subsequent bulletins, are 
available online at http://www.whitehouse.gov/omb/bulletins_default.
    OMB publishes bulletins regarding CBSA changes, including changes 
to CBSA numbers and titles. In accordance with our established 
methodology, we have historically adopted any CBSA changes that are 
published in the OMB bulletin that correspond with the IPPS hospital 
wage index. For CY 2014, we use the FY 2014 pre-floor, pre-reclassified 
hospital wage index to adjust the ESRD PPS payments. On February 28, 
2013, OMB issued OMB Bulletin No. 13-01, which establishes revised 
delineations of statistical areas based on OMB standards published in 
the Federal Register on June 28, 2010 and 2010 Census Bureau data. 
Because the FY 2013 pre-floor, pre-reclassified hospital wage index was 
finalized prior to the issuance of this Bulletin, the FY 2013 pre-
floor, pre-reclassified hospital wage index does not reflect OMB's new 
area delineations based on the 2010 Census. Further, as stated in the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), because the bulletin 
was not issued until February 28, 2013, with supporting data not 
available until later, and because the changes made by the bulletin and 
their ramifications must be extensively reviewed and verified, we were 
unable to undertake such a lengthy process before publication of the FY 
2014 IPPS/LTCH PPS proposed rule; therefore, the FY 2014 pre-floor, 
pre-reclassified hospital wage index does not reflect OMB's new area 
delineations based on the 2010 Census. CMS intends to propose changes 
to the hospital wage index based on this OMB Bulletin in the FY 2015 
IPPS/LTCH PPS proposed rule. Therefore, we anticipate that the OMB 
Bulletin changes will be reflected in the FY 2015 hospital wage index. 
Because we base the ESRD PPS wage index on the hospital wage index, we 
anticipate that the OMB Bulletin changes would be reflected in the FY 
2015 hospital wage index and, thus, in the CY 2015 ESRD PPS wage index.
    For CY 2014, we will continue to use the same methodology as 
finalized in the CY 2011 ESRD PPS final rule (75 FR 49117), for 
determining the wage indices for ESRD facilities in CY 2014. 
Specifically, we proposed to adjust wage indices for CY 2014 to account 
for annually updated wage levels in areas in which ESRD facilities are 
located. We proposed to use the most recent, FY 2014 IPPS pre-floor, 
pre-reclassified hospital wage index, which, as discussed above, does 
not reflect OMB's new area delineations based on the 2010 Census. The 
ESRD PPS wage index values are calculated without regard to geographic 
reclassifications authorized under section 1886(d)(8) and (d)(10) of 
the Act and utilize pre-floor hospital data that are unadjusted for 
occupational mix. The CY 2014 wage index values for urban areas are 
listed in Addendum A (Wage Indices for Urban Areas) and the CY 2014 
wage index values for rural areas are listed in Addendum B (Wage 
Indices for Rural Areas). Addenda A and B are located on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a 
policy to use the labor-related share of 41.737 for the ESRD PPS 
portion of the payment. For the CY 2014 ESRD PPS, we did not propose 
any changes to the labor-related share of 41.737. However, because all 
providers that elected to participate in the transition are entering 
the fourth year of the transition and will begin being paid 100 percent 
under the ESRD PPS, the 53.711 labor-related share that was applied to 
the composite rate portion of the blended payment is no longer 
applicable. We discuss the methodology for the ESRD PPS labor-related 
share in our CY 2011 ESRD PPS final rule (75 FR 49161), where we noted 
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.C.3.b. of this final rule.
    Comment: We received several comments expressing concern about 
applying the same labor-related share in CY 2014, as was finalized in 
CY 2011. Many commenters suggested that CMS review the labor-related 
share and update the factor to reflect 2012 cost report data. Other 
commenters noted that smaller providers cannot ``offset negative 
impacts across a national market base'' and therefore are disadvantaged 
by rising salary costs in labor markets that compete regionally. A few 
commenters suggested that CMS has erred in not updating the labor-
related share for CY 2014 to appropriately reflect the decrease in 
pharmaceutical spending identified in ESRD facility cost reports for 
2011 and 2012. One commenter noted that the current labor-related share 
calculation is based upon

[[Page 72172]]

2008 cost report data, and the decrease in pharmaceutical spending 
since that time has resulted in an ``understated labor-related share'' 
used to adjust wages when making ESRD PPS payments.
    Response: The ESRD bundled labor-related share is based on the cost 
weights for wages and salaries, benefits, housekeeping and operation, 
professional fees, labor-related services and a portion of the capital-
related building and equipment expenses. Because we did not propose to 
rebase or revise the ESRDB market basket for CY 2014, the labor-related 
share will remain 41.737 percent. At the time of preparing the CY 2014 
ESRD PPS proposed rule we had access to cost report data through 2010. 
The 2011 cost report data was captured on the revised ESRD cost report 
form and complete data files were not available in time to estimate 
cost shares on the 2011 data in time for the proposed rule. In order to 
estimate if any major changes had occurred since 2008 (the current base 
years of the ESRDB market basket) we did produce ESRD market basket 
cost shares based on the Medicare Cost Report data for 2009 and 2010 
(which were the latest, complete year of data we had available at the 
time) and we did not have access to the files in order to estimate the 
cost weights based on data from 2011 or later. We did run the cost 
report data for 2009 and 2010 and found that the cost share weights for 
the market basket and the estimated labor-related share as described in 
the CY 2011 ESRD PPS final rule (75 FR 49161) did not change 
significantly. We understand that under the bundled payment system the 
relative shares of wages and salaries and pharmaceuticals may change. 
We will be rebasing and revising the ESRD market basket for CY 2015 
based on the most up-to-date and complete year of cost report data 
available, which will be based on data from a year after 2011. This 
will reflect the costs for ESRD services that were reported in a 
payment year under the bundled system.
a. Payment Under the ESRD PPS for Facilities Located in Guam, American 
Samoa, and the Northern Mariana Islands
    It came to our attention after the ESRD PPS was implemented that 
ESRD facilities located in the United States Territories of Guam, 
American Samoa and the Northern Mariana Islands (collectively, the 
Pacific Rim) have been paid on the basis of reasonable costs and 
charges, rather than under the ESRD PPS. Because section 
1881(b)(14)(A)(i) of the Act requires the Secretary to implement a 
payment system under which a single payment is made to a renal dialysis 
facility for renal dialysis services in lieu of any other payment for 
services furnished on or after January 1, 2011, and section 
1881(b)(14)(E)(i) requires that the payment amounts under the ESRD PPS 
by fully implemented for services furnished on or after January 1, 
2014, ESRD facilities located in the Pacific Rim must be paid under the 
ESRD PPS beginning for services furnished on or after January 1, 2014. 
In order to pay these facilities under the ESRD PPS, we would need to 
identify a wage index value for these areas to make payment adjustments 
for geographic wages according to Sec.  413.231 of the regulations. We 
proposed to use the current value calculated under the existing 
methodology, that is, the pre-floor, pre-reclassified, hospital wage 
data that is unadjusted for occupational mix for the island of Guam of 
0.9611, which is displayed in Addendum B (Wage Indices for Rural 
Areas), because the FY 2014 IPPS pre-floor, pre-reclassified hospital 
wage data does not include wage data for American Samoa and the 
Northern Mariana Islands. Accordingly, we proposed to apply the wage 
index value for Guam to facilities located in American Samoa and the 
Northern Mariana Islands as discussed below in section II.C.4.b. of 
this final rule.
    Comment: We received two comments suggesting that the ESRD PPS does 
not sufficiently account for the unique economic circumstances faced by 
dialysis facilities located in the Territory of Guam. One commenter 
noted higher costs for shipping and warehousing of supplies, as well as 
significant training costs, which results from high employee turnover 
when military personnel and their families relocate to the mainland. 
Another commenter requested that Medicare continue to make payments to 
ESRD facilities located in Guam under reasonable costs and charges 
payment methodologies.
    Response: We appreciate the concern expressed by commenters' 
regarding the payment change. However, section 1881(b)(14)(A)(i) of the 
Act requires the Secretary to implement a payment system under which a 
single payment is made to a renal dialysis facility for renal dialysis 
services in lieu of any other payment. In order to comply with the 
statute, ESRD facilities located in the Pacific Rim must be paid under 
the ESRD PPS and will be paid under this system for renal dialysis 
services furnished on or after January 1, 2014. We understand that ESRD 
facilities located in Guam, as well as many other geographic areas 
where Medicare services are furnished, have unique geographic, labor, 
or regulatory circumstances that have an impact on their provision of 
dialysis services. For example, the states of Hawaii and Alaska have 
similar shipping and storage considerations as Guam and these areas are 
paid under the ESRD PPS. Likewise, the island of Puerto Rico, (which 
shares the status of a United States Territory), must comply with 
unique staffing requirements, in that only registered nurses may 
furnish dialysis services to dialysis patients and these facilities are 
paid under the ESRD PPS. Further, many ESRD facilities are located near 
military bases where there is high turnover of staff and these 
facilities are also paid under the ESRD PPS. Nonetheless, CMS has no 
authority to continue to pay ESRD facilities located in the Territory 
of Guam or elsewhere in the Pacific Rim based on reasonable costs or 
any other payment methodology. Therefore, beginning January 1, 2014, in 
accordance with section 1881(b)(14)(A)(i) of the Act, all ESRD 
facilities furnishing renal dialysis services to Medicare beneficiaries 
will be paid 100 percent under the ESRD PPS, including ESRD facilities 
located in the Pacific Rim.
b. Policies for Areas With No Wage Data
    In the CY 2011 ESRD PPS final (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. We further explained our 
approach for areas with no hospital data in the CY 2012 ESRD PPS final 
rule (76 FR 70241). For urban areas with no hospital data, we compute 
the average wage index value of all urban areas within the State and 
use that value as the wage index. For rural areas with no hospital 
data, we compute the wage index using the average wage index values 
from all contiguous CBSAs to represent a reasonable proxy for that 
rural area. Therefore, we use our established methodology to compute an 
appropriate wage index using the average wage index values from 
contiguous CBSAs, to represent a reasonable proxy.
    As stated previously, the FY 2014 IPPS pre-floor, pre-reclassified 
hospital wage data does not include wage data for American Samoa and 
the Northern Mariana Islands, which are rural areas with no hospital 
data. While we appreciate that the islands of the Pacific Rim are not 
actually contiguous, we believe the same principle applies here, and 
that Guam is a reasonable proxy for American Samoa and the Northern

[[Page 72173]]

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. We noted that if hospital 
data becomes available for American Samoa or the Northern Mariana 
Islands, we will use that data for the CBSA instead of the proxy. As 
discussed previously, the current wage index value for Guam using the 
existing methodology is 0.9611. Therefore, for CY 2014, we proposed to 
apply this wage index value of 0.9611 to ESRD facilities located in 
America Samoa and the Northern Mariana Islands and included this value 
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 
final rule (77 FR 67459), we will continue to use the statewide urban 
average based on the average of all urban areas within the state for 
urban areas without hospital data. Accordingly, we proposed to apply 
the statewide urban average wage index value for Georgia of 0.7582 to 
Hinesville-Fort Stewart, GA and included this value in Addendum A.
    We received no public comments regarding our proposal to use the 
wage index value for Guam of 0.9611 as an appropriate proxy for 
American Samoa and the Northern Mariana Islands. Therefore, we are 
finalizing our proposal. For renal dialysis services furnished in 
American Samoa or the Northern Mariana Islands and paid under the ESRD 
PPS on or after January 1, 2014, a wage index value of 0.9611, as 
calculated for the Territory of Guam, will be applied to the ESRD PPS 
base rate when making Medicare payments. The wage index values for 
Guam, America Samoa and the Northern Mariana Islands are included in 
Addendum B.
    We received no comments on our proposal to apply the computed 
statewide urban average wage index value for Georgia to the CBSA for 
Hinesville-Fort Stewart, GA. Therefore, we are finalizing the proposal 
with the following clarification. In the CY 2014 ESRD PPS proposed rule 
(78 FR 40845), we incorrectly stated the computed value for the 
statewide urban average wage index value for Georgia of 0.7582. The 
correct value computed for the urban average wage index value for 
Georgia and applied to Hinesville-Fort Stewart, GA was correctly 
identified in Addendum A of the CY 2014 ESRD PPS proposed rule as 
0.8602. We apologize for this error. In addition, the urban wage index 
values have been updated with more recent data for this final rule, and 
therefore for CY 2014 we are finalizing a statewide urban average wage 
index value for Georgia of 0.8700 and will apply this value to the CBSA 
for Hinesville-Fort Stewart, GA and include this value in Addendum A.
c. 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. In the CY 2012 ESRD PPS final rule (76 FR 70241), we 
finalized the 0.05 reduction to the wage index floor for CYs 2012 and 
2013, resulting in a wage index floor of 0.550 and 0.500, respectively. 
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.
    As described above, our intention has been to provide a wage index 
floor only through the transition to 100 percent implementation of the 
ESRD PPS (75 FR 49116 through 49117; 76 FR 70240 through 70241). 
However, 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), and we believe that both rural and urban 
facilities in Puerto Rico would benefit from continuing the gradual 
reduction of the floor. We believe that continuing the wage index floor 
for CY 2014 and CY 2015 will allow renal dialysis facilities located in 
Puerto Rico the benefit afforded to other geographical areas in the 
fifty states, that is, a gradual and systematic elimination of the wage 
index floor. Therefore, for CY 2014 and for CY 2015, we proposed to 
continue to apply the wage index floor to areas with wage indexes below 
the floor. For CY 2014, Puerto Rico is the only area with a wage index 
value below the proposed floor; however, to the extent that other 
geographical areas fall below the floor in CY 2015, we believe they 
should have the benefit of a gradual reduction in the floor as well. 
Thus, for CY 2014 and CY 2015, we proposed to continue our policy of 
gradually reducing the wage index floor by 0.05 per year. Specifically, 
we proposed a wage index floor value of 0.450 for CY 2014 and a wage 
index floor value of 0.400 for CY 2015. We believe that continuing our 
policy of applying a wage index floor for an additional two years would 
allow Puerto Rico to benefit from the anticipated and predictable phase 
out of the wage index floor. While we would not expect to continue this 
policy past CY 2015, we will review the appropriateness of a wage index 
floor for CY 2016 at that time.
    Comment: We received a few comments requesting that CMS review 
hospital wage data and consider the appropriateness of a wage index 
floor. For example, a commenter from Wheeling, WV, suggested that CMS 
consider increasing the wage index floor value, so that rural 
facilities with low wage index values will be able to compete with 
urban facilities in attracting qualified staff members. Another 
commenter requested that CMS modify the current wage index methodology 
to capture ``true'' ESRD facility wages in Puerto Rico. The current 
methodology relies upon hospital wage data and the commenter contended 
that the hospital occupational wage mix does not adequately reflect 
wages in ESRD facilities in Puerto Rico, where registered nurses are 
required to furnish dialysis care. In addition, the commenter requested 
that the wage index floor be frozen at 2011 levels.
    Response: We thank the commenters for their comments and we 
appreciate their concerns regarding the impact of a wage index floor on 
dialysis facilities. We have committed to reviewing the appropriateness 
of applying a wage index floor for CY 2016. However, for CY 2014 and CY 
2015, we are finalizing our proposal. We will continue our policy of 
gradually reducing the wage index floor by 0.05 per year. Accordingly, 
we are finalizing in this rule a wage index floor value of 0.450 for CY 
2014, and a wage index floor value of 0.400 for CY 2015. This policy 
will benefit ESRD facilities located in Puerto Rico, where wage index 
values remain below the wage index floor values finalized in this rule. 
We note that if another geographic CBSA area wage index value falls 
below the floor in CY 2015, the facilities in that CBSA will also have 
the benefit of the wage index floor.
    In summary, for CY 2014, we will continue to use the same wage 
index methodology as finalized in the CY 2011 ESRD PPS final rule (75 
FR 49117). That is, we will use the most recent IPPS pre-floor, pre-
reclassified hospital wage index to calculate the ESRD PPS wage index 
values. Thus, for CY 2014, we will use the FY 2014 IPPS pre-floor, pre-
reclassified hospital wage index to

[[Page 72174]]

calculate the CY 2014 ESRD PPS waged index. The 2014 wage index values 
for urban areas, Addendum A (Wage Indices for Urban Areas) and the CY 
2014 wage index values for rural areas, Addendum B (Wage Indices for 
Rural Areas) may be viewed at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html.
    Lastly, for CY 2014 and CY 2015, we are continuing our policy of 
gradually reducing the wage index floor by 0.05 per year. That is, we 
are finalizing a wage index floor value of 0.450 for CY 2014, and a 
wage index floor value of 0.400 for CY 2015.
d. Wage Index Budget-Neutrality Adjustment
    Section 1881(b)(14)(D)(iv)(II) of the Act gives us broad discretion 
to implement payment adjustments to the ESRD PPS, including an 
adjustment of the ESRD PPS by a geographic index. Section 
1881(b)(14)(D)(iv)(II) specifically refers to section 1881(b)(12)(D) as 
an example of such a geographic index, and in the CY 2011 ESRD PPS 
final rule, we finalized the use of the same wage index methodology 
that we utilized under the basic case-mix adjusted composite rate 
payment system (75 FR 49116). We had applied a wage index budget-
neutrality adjustment factor under the basic case-mix adjusted 
composite payment system, and accordingly, in the CY 2012 ESRD PPS 
final rule, we finalized a policy for CY 2012 and future years to apply 
wage index budget-neutrality adjustment factors to the composite rate 
portion of the ESRD PPS blended payments for facilities participating 
in the transition as well as to the base rate for the ESRD PPS portion 
of the blended payment and the full ESRD PPS for those facilities that 
elected to receive 100 percent of their payment under that system (76 
FR 70241 and 70242). We also finalized the methodology for computing 
the wage index budget-neutrality adjustment factors for CY 2012 and 
subsequent years (76 FR 70242).
    For CY 2014, we did not propose any changes to the methodology, but 
we noted that we will no longer compute a wage index budget-neutrality 
adjustment factor for the composite rate portion of the ESRD PPS 
blended payment because all facilities will be paid 100 percent under 
the ESRD PPS in CY 2014. For ease of reference, we explain the 
methodology for computing the budget-neutrality adjustment factor here. 
For the CY 2014 wage index budget-neutrality adjustment factor, we use 
the fiscal year (FY) 2014 pre-floor, pre-reclassified, non-occupational 
mix-adjusted hospital data to compute the wage index values, 2012 
outpatient claims (paid and processed as of June 30, 2013), and 
geographic location information for each facility, which may be found 
through Dialysis Facility Compare. Dialysis Facility Compare (DFC) can 
be found at the DFC Web page on the CMS Web site at http://www.medicare.gov/dialysisfacilitycompare/. The FY 2014 hospital wage 
index data for each urban and rural locale by CBSA may also be accessed 
on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html?redirect=/AcuteInpatientPPS/. The wage index data are located in the section 
entitled, ``FY 2014 Final Rule Occupational Mix Adjusted and Unadjusted 
Average Hourly Wage and Pre-Reclassified Wage Index by CBSA''.
    We computed the proposed CY 2014 wage index budget-neutrality 
adjustment factor using treatment counts from the 2012 claims and 
facility-specific CY 2013 payment rates to estimate the total dollar 
amount that each ESRD facility would have received in CY 2013. The 
total of these payments became the target amount of expenditures for 
all ESRD facilities for CY 2014. Next, we computed the estimated dollar 
amount that would have been paid for the same ESRD facilities using the 
ESRD wage index for CY 2014. The total of these payments becomes the 
new CY 2014 amount of wage-adjusted expenditures for all ESRD 
facilities.
    The wage index budget-neutrality factor is calculated as the target 
amount divided by the new CY 2014 amount. When we multiplied the wage 
index budget-neutrality factor by the applicable CY 2014 estimated 
payments, aggregate payments to ESRD facilities would remain budget 
neutral when compared to the target amount of expenditures. That is, 
the wage index budget-neutrality adjustment factor ensures that wage 
index adjustments do not increase or decrease aggregate Medicare 
payments with respect to changes in wage index updates. Therefore, we 
proposed a wage index budget-neutrality adjustment factor of 1.000411, 
which would be computed in ESRD PPS base rate payment methodology when 
making payment for renal dialysis services in CY 2014.
    We received no public comments on this proposal, and therefore, we 
are finalizing the proposed CY 2014 wage index budget-neutrality 
adjustment factor as updated with the most recently available data. In 
the proposed rule, the CY 2014 wage index budget-neutrality adjustment 
factor was computed at 1.000411. This calculation was based upon the 
use of the FY 2014 pre-floor, pre-reclassified, non-occupational mix-
adjusted hospital data computed for wage index values and the CY 2012 
Medicare outpatient claims data file as of December 31, 2012. For CY 
2014, we are finalizing a wage index budget-neutrality adjustment 
factor of 1.000454. This final calculation reflects the most recent 
Medicare claims data available, which is the FY 2014 pre-floor, pre-
reclassified, non-occupational mix-adjusted hospital data computed for 
wage index values and the CY 2012 Medicare outpatient claims data file 
(that is, claims with dates of service from January 1, through December 
31, 2012, that were received, processed, paid, and passed to the 
National Claims History file as of June 30, 2013).
5. Application of the International Classification of Diseases (ICD), 
Tenth Revision, to the Comorbidity Payment Adjustment Codes
    In the CY 2011 ESRD PPS final rule (75 FR 49094), we explained that 
section 1881(b)(14)(D)(i) of the Act, as added by section 153(b) of 
MIPPA, requires that the ESRD PPS include a payment adjustment based on 
case-mix that may take into account, among other things, patient 
comorbidities. Comorbidities are specific patient conditions that 
coexist with the patient's principal diagnosis that necessitates 
dialysis. The comorbidity payment adjustments recognize the increased 
costs associated with comorbidities and provide additional payment for 
certain conditions that occur concurrently with the need for dialysis.
    To develop the comorbidity payment adjustments, we used a stepwise 
regression model to analyze comorbidity data and found that certain 
comorbidities are predictors of variation in payments for ESRD 
patients. Details on the development of the comorbidity categories 
eligible for a comorbidity payment adjustment, including an explanation 
of the stepwise regression model that we used to analyze comorbidity 
data, is discussed in the CY 2011 ESRD PPS final rule (75 FR 49094 
through 49108). We analyzed the comorbidity categories and excluded 
those categories from the comorbidity payment adjustments that met any 
of three exclusion criteria (75 FR 49095 through 49100): (1) Inability 
to create accurate clinical definitions; (2) potential for adverse 
incentives regarding care; and (3) potential for

[[Page 72175]]

ESRD facilities to directly influence the prevalence of the comorbidity 
either by altering dialysis care, changing diagnostic testing patterns, 
or liberalizing the diagnostic criteria.
    We finalized six comorbidity categories that are eligible for a 
comorbidity payment adjustment, each with associated International 
Classification of Disease, 9th Revision, Clinical Modification (ICD-9-
CM) diagnosis codes (75 FR 49100). Among these categories are three 
acute, short-term diagnostic categories (pericarditis, bacterial 
pneumonia, and gastrointestinal tract bleeding with hemorrhage) and 
three chronic diagnostic categories (hereditary hemolytic anemia with 
sickle cell anemia, myelodysplastic syndrome, and monoclonal 
gammopathy). The comorbidity categories eligible for an adjustment and 
their associated ICD-9-CM codes were published in the Appendix of the 
CY 2011 ESRD PPS final rule as Table E: ICD-9-CM Codes Recognized for a 
Comorbidity Payment Adjustment (75 FR 49211).
    In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that 
the ICD-9-CM codes eligible for a comorbidity payment adjustment are 
subject to the annual ICD-9-CM coding updates that occur in the 
hospital IPPS final rule and are effective October 1st of every year. 
We explained that any updates to the ICD-9-CM codes that affect the 
categories of comorbidities and the diagnoses within the comorbidity 
categories that are eligible for a comorbidity payment adjustment would 
be communicated to ESRD facilities through sub-regulatory guidance. 
Accordingly, Change Request (CR) 7476, Transmittal 2255, entitled, 
``Quarterly Update to the End-Stage Renal Disease Prospective Payment 
System,'' was issued on July 15, 2011 to update the ICD-9-CM codes 
eligible for a comorbidity payment adjustment in accordance with the 
annual ICD-9-CM update effective October 1, 2011. This CR can be found 
on the CMS Web site at the following link: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2255CP.pdf. 
There have not been updates to the ICD-9-CM codes eligible for a 
comorbidity payment adjustment since October 1, 2011.
    Effective October 1, 2014, CMS will implement the 10th revision of 
the ICD coding scheme--ICD-10-CM. Because the transition to ICD-10-CM 
coding will occur during CY 2014, we discuss here the crosswalk from 
ICD-9-CM to ICD-10-CM codes for the purpose of determining eligibility 
for a comorbidity payment adjustment.
    We crosswalked the ICD-9-CM codes that are eligible for a 
comorbidity payment adjustment to ICD-10-CM codes using the General 
Equivalence Mappings (GEM) tool, which is the authoritative source for 
crosswalking developed by the National Center for Health Statistics and 
CMS. The crosswalk from ICD-9-CM to ICD-10-CM diagnosis codes resulted 
in three scenarios: one ICD-9-CM code crosswalked to one ICD-10-CM 
code; one ICD-9-CM code crosswalked to multiple ICD-10-CM codes; or 
multiple ICD-9-CM codes crosswalked to one ICD-10-CM code. We applied 
the three exclusion criteria listed above to each of the ICD-10-CM 
codes to which the ICD-9-CM codes crosswalked.
    In our clinical evaluation, we found the ICD-9-CM codes generally 
crosswalked to one ICD-10-CM code that codes for the same diagnosis, 
has the same code descriptor, and does not meet any of our exclusion 
criteria. Accordingly, with the exceptions noted below, we proposed 
that ICD-10-CM codes will be eligible for a comorbidity payment 
adjustment where they crosswalk from ICD-9-CM codes that are eligible 
for a comorbidity payment adjustment. There are, however, two instances 
where ICD-9-CM codes crosswalk to ICD-10-CM codes that we believe meet 
one or more of the exclusion criteria described above, and we proposed 
to exclude these codes from eligibility for a comorbidity payment 
adjustment.
a. One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
    Table 1 lists all the instances in which one ICD-9-CM code 
crosswalks to one ICD-10-CM code. We proposed that all of those ICD-10-
CM codes would receive a comorbidity payment adjustment with the 
exception of K52.81 Eosinophilic gastritis or gastroenteritis. 
Currently, 535.71 Eosinophilic gastritis with hemorrhage is one of 40 
ICD-9-CM diagnosis codes under the acute comorbidity category of 
Gastrointestinal (GI) Bleeding. The descriptor of K52.81, the ICD-10-CM 
code to which this ICD-9-CM code crosswalks, does not include the word 
``hemorrhage.'' In the CY 2011 ESRD PPS final rule (75 FR 49097), we 
specifically limited the GI bleeding category for the comorbidity 
payment adjustment to GI bleed with hemorrhage because we believed that 
the gastrointestinal tract bleeding category met our first exclusion 
criterion--inability to create accurate clinical definitions--because 
it was overly broad. We also believed that use of this diagnosis 
category could lead to gaming consistent with the second and third 
exclusion criteria listed above. For these reasons, we limited the 
gastrointestinal tract bleeding diagnosis category to gastrointestinal 
tract bleeding with hemorrhage, which we believe creates accurate 
clinical definitions and mitigates the potential for adverse incentives 
in ESRD care. Accordingly, we proposed to exclude ICD-10-CM code K52.81 
Eosinophilic gastritis or gastroenteritis from eligibility for the 
comorbidity payment adjustment because the code descriptor does not 
indicate the diagnosis of a hemorrhage. We proposed that all of the 
other ICD-10-CM codes listed in the Table 1 below would be eligible for 
a comorbidity payment adjustment.

                           Table 1--One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                            GASTROINTESTINAL BLEEDING
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
530.21           Ulcer of esophagus with bleeding        K22.11           Ulcer of esophagus with bleeding
535.71           Eosinophilic gastritis, with            K52.81           Eosinophilic gastritis or
                  hemorrhage                                               gastroenteritis
537.83           Angiodysplasia of stomach and duodenum  K31.811          Angiodysplasia of stomach and duodenum
                  with hemorrhage                                          with bleeding
569.85           Angiodysplasia of intestine with        K55.21           Angiodysplasia of colon with
                  hemorrhage                                               hemorrhage
----------------------------------------------------------------------------------------------------------------
                                               BACTERIAL PNEUMONIA
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
003.22           Salmonella pneumonia                    A02.22           Salmonella pneumonia

[[Page 72176]]

 
482.0            Pneumonia due to Klebsiella pneumonia   J15.0            Pneumonia due to Klebsiella pneumoniae
482.1            Pneumonia due to Pseudomonas            J15.1            Pneumonia due to Pseudomonas
482.2            Pneumonia due to Hemophilus influenzae  J14              Pneumonia due to Hemophilus influenzae
                  [H. influenzae]
482.32           Pneumonia due to Streptococcus, group   J15.3            Pneumonia due to streptococcus, group
                  B                                                        B
482.40           Pneumonia due to Staphylococcus,        J15.20           Pneumonia due to staphylococcus,
                  unspecified                                              unspecified
482.41           Methicillin susceptible pneumonia due   J15.211          Pneumonia due to Methicillin
                  to Staphylococcus aureus                                 susceptible Staphylococcus aureus
482.42           Methicillin resistant pneumonia due to  J15.212          Pneumonia due to Methicillin resistant
                  Staphylococcus aureus                                    Staphylococcus aureus
482.49           Other Staphylococcus pneumonia          J15.29           Pneumonia due to other staphylococcus
482.82           Pneumonia due to escherichia coli [E.   J15.5            Pneumonia due to Escherichia coli
                  coli]
482.83           Pneumonia due to other gram-negative    J15.6            Pneumonia due to other aerobic Gram-
                  bacteria                                                 negative bacteria
482.84           Pneumonia due to Legionnaires' disease  A48.1            Legionnaires' disease
507.0            Pneumonitis due to inhalation of food   J69.0            Pneumonitis due to inhalation of food
                  or vomitus                                               and vomit
507.8            Pneumonitis due to other solids and     J69.8            Pneumonitis due to inhalation of other
                  liquids                                                  solids and liquids
510.0            Empyema with fistula                    J86.0            Pyothorax with fistula
510.9            Empyema without mention of fistula      J86.9            Pyothorax without fistula
----------------------------------------------------------------------------------------------------------------
                                                  PERICARDITIS
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
420.91           Acute idiopathic pericarditis           I30.0            Acute nonspecific idiopathic
                                                                           pericarditis
----------------------------------------------------------------------------------------------------------------
                                   HEREDITARY HEMOLYTIC AND SICKLE CELL ANEMIA
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
282.0            Hereditary spherocytosis                D58.0            Hereditary spherocytosis
282.1            Hereditary elliptocytosis               D58.1            Hereditary elliptocytosis
282.41           Sickle-cell thalassemia without crisis  D57.40           Sickle-cell thalassemia without crisis
282.43           Alpha thalassemia                       D56.0            Alpha thalassemia
282.44           Beta thalassemia                        D56.1            Beta thalassemia
282.45           Delta-beta thalassemia                  D56.2            Delta-beta thalassemia
282.46           Thalassemia minor                       D56.3            Thalassemia minor
282.47           Hemoglobin E-beta thalassemia           D56.5            Hemoglobin E-beta thalassemia
282.49           Other thalassemia                       D56.8            Other thalassemias
282.61           Hb-SS disease without crisis            D57.1            Sickle-cell disease without crisis
282.63           Sickle-cell/Hb-C disease without        D57.20           Sickle-cell/Hb-C disease without
                  crisis                                                   crisis
282.68           Other sickle-cell disease without       D57.80           Other sickle-cell disorders without
                  crisis                                                   crisis
----------------------------------------------------------------------------------------------------------------
                                            MYELODYSPLASTIC SYNDROME
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
238.7            Essential thrombocythemia               D47.3            Essential (hemorrhagic)
                                                                           thrombocythemia
238.73           High grade myelodysplastic syndrome     D46.22           Refractory anemia with excess of
                  lesions                                                  blasts 2
238.74           Myelodysplastic syndrome with 5q        D46.C            Myelodysplastic syndrome with isolated
                  deletion                                                 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 proposed 
that all the crosswalked ICD-10-CM codes would receive a comorbidity 
payment adjustment, with the exception of D89.2 Hypergammaglobulinemia, 
unspecified. ICD-9-CM code 273.1 Monoclonal paraproteinemia is the only 
ICD-9-CM code eligible for the comorbidity payment adjustment under the 
chronic comorbidity category of Monoclonal gammopathy. ICD-9-CM code 
273.1 Monoclonal paraproteinemia crosswalks to two ICD-10-CM codes: 
D47.2 Monoclonal gammopathy and D89.2 Hypergammaglobulinemia, 
unspecified. We analyzed both of these ICD-10-CM codes and determined 
that D47.2 Monoclonal gammopathy should be eligible for the comorbidity 
payment adjustment because, like ICD-9-CM code 273.1 Monoclonal 
paraproteinemia, it indicates that there is an excessive amount of a 
single monoclonal gammaglobulin. When we analyzed the comorbidity 
category for the CY 2011 ESRD PPS final rule, single monoclonal 
gammaglobulin was shown to have an association with higher ESA usage, 
thereby resulting in higher costs to dialysis facilities. After 
clinical evaluation of D89.2 Hypergammaglobulinemia, unspecified, 
however, we determined that this ICD-10-CM code should not be eligible 
for the comorbidity payment adjustment because D89.2 
Hypergammaglobulinemia, unspecified indicates only that 1 or more 
immunoglobulins are elevated, but does not identify which 
immunoglobulin(s) are elevated. We believe that the lack of specificity 
of this particular code results in an inability to create an accurate 
clinical definition, which is the first of the three exclusion 
criteria. Accordingly, we proposed that D89.2 Hypergammaglobulinemia, 
unspecified would not be eligible for the comorbidity payment 
adjustment. We proposed that all of the other ICD-10-CM codes listed in 
Table 2 below would be eligible for the comorbidity payment adjustment.

[[Page 72177]]

                        Table 2--One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                                            GASTROINTESTINAL BLEEDING
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
562              Diverticulosis of small intestine with  K57.11           Diverticulosis of small intestine
                  hemorrhage                                               without perforation or abscess with
                                                                           bleeding
                                                         K57.51           Diverticulosis of both small and large
                                                                           intestine without perforation or
                                                                           abscess with bleeding
562.03           Diverticulitis of small intestine with  K57.01           Diverticulitis of small intestine with
                  hemorrhage                                               perforation and abscess with bleeding
                                                         K57.13           Diverticulitis of small intestine
                                                                           without perforation or abscess with
                                                                           bleeding
                                                         K57.41           Diverticulitis of both small and large
                                                                           intestine with perforation and
                                                                           abscess with bleeding
                                                         K57.53           Diverticulitis of both small and large
                                                                           intestine without perforation or
                                                                           abscess with bleeding
562.12           Diverticulosis of colon with            K57.31           Diverticulosis of large intestine
                  hemorrhage                                               without perforation or abscess with
                                                                           bleeding
                                                         K57.91           Diverticulosis of intestine, part
                                                                           unspecified, without perforation or
                                                                           abscess with bleeding
                                                         K57.51           Diverticulosis of both small and large
                                                                           intestine without perforation or
                                                                           abscess with bleeding
562.13           Diverticulitis of colon with            K57.21           Diverticulitis of large intestine with
                  hemorrhage                                               perforation and abscess with bleeding
                                                         K57.33           Diverticulitis of large intestine
                                                                           without perforation or abscess with
                                                                           bleeding
                                                         K57.41           Diverticulitis of both small and large
                                                                           intestine with perforation and
                                                                           abscess with bleeding
                                                         K57.53           Diverticulitis of both small and large
                                                                           intestine without perforation or
                                                                           abscess with bleeding
----------------------------------------------------------------------------------------------------------------
                                               BACTERIAL PNEUMONIA
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
513.0            Abscess of lung                         J85.0            Gangrene and necrosis of lung
                                                         J85.1            Abscess of lung with pneumonia
                                                         J85.2            Abscess of lung without pneumonia
----------------------------------------------------------------------------------------------------------------
                                                  PERICARDITIS
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
420.0            Acute pericarditis in diseases          A18.84           Tuberculosis of heart
                  classified elsewhere
                                                         I32              Pericarditis in diseases classified
                                                                           elsewhere
                                                         M32.12           Pericarditis in systemic lupus
                                                                           erythematosus
420.90           Acute pericarditis, unspecified         130.1            Infective pericarditis
                                                         I30.9            Acute pericarditis, unspecified
420.99           Other acute pericarditis                I30.8            Other forms of acute pericarditis
                                                         I30.9            Acute pericarditis, unspecified
----------------------------------------------------------------------------------------------------------------
                                   HEREDITARY HEMOLYTIC AND SICKLE CELL ANEMIA
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
282.2            Anemias due to disorders of             D55.0            Anemia due to glucose-6-phosphate
                  glutathione metabolism                                   dehydrogenase [G6PD] deficiency
                                                         D55.1            Anemia due to other disorders of
                                                                           glutathione metabolism
282.3            Other hemolytic anemias due to enzyme   D55.2            Anemia due to disorders of glycolytic
                  deficiency                                               enzymes
                                                         D55.3            Anemia due to disorders of nucleotide
                                                                           metabolism
                                                         D55.8            Other anemias due to enzyme disorders
                                                         D55.9            Anemia due to enzyme disorder,
                                                                           unspecified
282.42           Sickle-cell thalassemia with crisis     D57.411          Sickle-cell thalassemia with acute
                                                                           chest syndrome
                                                         D57.412          Sickle-cell thalassemia with splenic
                                                                           sequestration
                                                         D57.419          Sickle-cell thalassemia with crisis,
                                                                           unspecified
282.62           Hb-SS disease with crisis               D57.00           Hb-SS disease with crisis, unspecified
                                                         D57.01           Hb-SS disease with acute chest
                                                                           syndrome
                                                         D57.02           Hb-SS disease with splenic
                                                                           sequestration
282.64           Sickle-cell/Hb-C disease with crisis    D57.211          Sickle-cell/Hb-C disease with acute
                                                                           chest syndrome
                                                         D57.212          Sickle-cell/Hb-C disease with splenic
                                                                           sequestration
                                                         D57.219          Sickle-cell/Hb-C disease with crisis,
                                                                           unspecified
282.69           Other sickle-cell disease with crisis   D57.811          Other sickle-cell disorders with acute
                                                                           chest syndrome
                                                         D57.812          Other sickle-cell disorders with
                                                                           splenic sequestration
                                                         D57.819          Other sickle-cell disorders with
                                                                           crisis, unspecified
----------------------------------------------------------------------------------------------------------------

[[Page 72178]]

 
                                              MONOCLONAL GAMMOPATHY
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
273.1            Monoclonal paraproteinemia              D47.2            Monoclonal gammopathy
                                                         D89.2            Hypergammaglobulinemia, unspecified
----------------------------------------------------------------------------------------------------------------
                                            MYELODYSPLASTIC SYNDROME
----------------------------------------------------------------------------------------------------------------
ICD-9            Descriptor                              ICD-10           Descriptor
----------------------------------------------------------------------------------------------------------------
238.72           Low grade myelodysplastic syndrome      D46.0            Refractory anemia without ring
                  lesions                                                  sideroblasts, so stated
                                                         D46.1            Refractory anemia with ring
                                                                           sideroblasts
                                                         D46.20           Refractory anemia with excess of
                                                                           blasts, unspecified
                                                         D46.21           Refractory anemia with excess of
                                                                           blasts 1
                                                         D46.4            Refractory anemia, unspecified
                                                         D46.A            Refractory cytopenia with multilineage
                                                                           dysplasia
                                                         D46.B            Refractory cytopenia with multilineage
                                                                           dysplasia and ring sideroblasts
238.75           Myelodysplastic syndrome, unspecified   D46.9            Myelodysplastic syndrome, unspecified
                                                         D46.Z            Other myelodysplastic syndromes
----------------------------------------------------------------------------------------------------------------

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

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

[[Page 72179]]

    In summary, based on our clinical evaluation of the ICD-10-CM codes 
to which the eligible ICD-9-CM codes crosswalk, we proposed that both 
D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic 
gastritis or gastroenteritis would not be eligible for the comorbidity 
payment adjustment. We proposed that all other ICD-10-CM codes to which 
eligible ICD-9-CM codes crosswalk that are listed in the Tables above 
would be eligible for a comorbidity payment adjustment effective 
October 1, 2014. We solicited comment on the ICD-10-CM codes that we 
proposed to exclude and those that we proposed would be eligible for a 
comorbidity adjustment. The comments that we received and our responses 
are set forth below.
    Comment: We received a few comments that acknowledged the 
implementation of the ICD-10-CM coding scheme. Two commenters supported 
our proposal to exclude D89.2 Hypergammaglobulinemia, unspecified and 
K52.81 Eosinophilic gastritis or gastroenteritis from eligibility for a 
comorbidity payment adjustment.
    Response: We thank commenters for their support. We are finalizing 
our proposal that the ICD-10-CM codes listed in the Tables above are 
eligible for a comorbidity payment adjustment, and that ICD-10-CM codes 
D89.2 Hypergammaglobulinemia, unspecified and K52.81 Eosinophilic 
gastritis or gastroenteritis are excluded from eligibility for a 
comorbidity payment adjustment.
    Comment: One commenter questioned why CMS includes monoclonal 
gammopathy but excludes multiple myeloma and plasma cell leukemia. The 
commenter encouraged CMS to determine methods for proper disease 
identification as myeloma is the most common malignancy leading to 
ESRD.
    Response: In the CY 2011 ESRD PPS final rule (75 FR 49099), we 
discuss the exclusion of the cancer comorbidity diagnostic category 
from eligibility for a comorbidity payment adjustment. We explained 
that providing a payment adjustment for the cancer comorbidity category 
could overstate costs for some patients whose dialysis treatment is no 
longer affected by their history of cancer and could understate the 
costs of patients whose current cancer diagnosis and treatment affect 
their dialysis treatments. Until we are able to differentiate the cost 
between the two groups, we are unable to accurately reflect the ESRD 
resources being used to determine a comorbidity payment adjustment for 
patients with multiple myeloma and leukemia.
    Comment: We received two comments stating that implementing ICD-10-
CM in 2014 will be another unfunded mandate and small dialysis 
organizations will suffer the most.
    Response: We understand that the transition from ICD-9-CM to ICD-
10-CM may present a challenge for some ESRD facilities; however, the 
compliance date for implementation of ICD-10-CM is October 1, 2014 for 
all Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
covered entities, regardless of their size.
6. Revisions to the Outlier Policy
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Our regulations at 42 CFR Sec.  
413.237(a)(1) provide that ESRD outlier services are the following 
items and services that are included in the ESRD PPS bundle: (i) ESRD-
related drugs and biologicals that were or would have been, prior to 
January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-
related laboratory tests that were or would have been, prior to January 
1, 2011, separately billable under Medicare Part B; (iii) medical/
surgical supplies, including syringes, used to administer ESRD-related 
drugs, that were or would have been, prior to January 1, 2011, 
separately billable under Medicare Part B; and (iv) renal dialysis 
service drugs that were or would have been, prior to January 1, 2011, 
covered under Medicare Part D, excluding ESRD-related oral-only drugs.
    In the CY 2011 ESRD PPS final rule (75 FR 49142), we stated that 
for purposes of determining whether an ESRD facility would be eligible 
for an outlier payment, it would be necessary for the facility to 
identify the actual ESRD outlier services furnished to the patient by 
line item on the monthly claim. The ESRD-related drugs, laboratory 
tests, and medical/surgical supplies that we would recognize as outlier 
services were specified in Attachment 3 of Change Request 7064, 
Transmittal 2033 issued August 20, 2010, rescinded and replaced by 
Transmittal 2094, dated November 17, 2010. With respect to the outlier 
policy, Transmittal 2094 identified additional drugs and laboratory 
tests that may be eligible for ESRD outlier payment. Transmittal 2094 
was rescinded and replaced by Transmittal 2134, dated January 14, 2011, 
which was issued to correct the subject on the Transmittal page and 
made no other changes.
    In the CY 2012 ESRD PPS final rule (76 FR 70246), we eliminated the 
issuance of a specific list of eligible outlier service drugs which 
were or would have been separately billable under Medicare Part B prior 
to January 1, 2011. However, we use separate guidance to continue to 
identify renal dialysis service drugs which were or would have been 
covered under Part D for outlier eligibility purposes in order to 
provide unit prices for calculating imputed outlier services. We also 
can identify, through our monitoring efforts, items and services that 
are incorrectly being identified as eligible outlier services in the 
claims data. Any updates to the list of renal dialysis items and 
services that qualify as outlier services are made through 
administrative issuances.
    Our regulations at 42 CFR Sec.  413.237 specify the methodology 
used to calculate outlier payments. An ESRD facility is eligible for an 
outlier payment if its actual or imputed Medicare Allowable Payment 
(MAP) amount per treatment for ESRD outlier services exceeds a 
threshold. The MAP amount represents the average incurred amount per 
treatment for services that were or would have been considered 
separately billable services prior to January 1, 2011. The threshold is 
equal to the ESRD facility's predicted ESRD outlier services MAP amount 
per treatment (which is case-mix adjusted) plus the fixed dollar loss 
amount. In accordance with Sec.  413.237(c) of the regulations, 
facilities are paid 80 percent of the per treatment amount by which the 
imputed MAP amount for outlier services (that is, the actual incurred 
amount) exceeds this threshold. ESRD facilities are eligible to receive 
outlier payments for treating both adult and pediatric dialysis 
patients.
    In the CY 2011 ESRD PPS final rule, using 2007 data, we established 
the outlier percentage at 1.0 percent of total payments (75 FR 49142 
through 49143). We also established the fixed dollar loss amounts that 
are added to the predicted outlier services MAP amounts. The outlier 
services MAP amounts and fixed dollar loss amounts are different for 
adult and pediatric patients due to differences in the utilization of 
separately billable services among adult and pediatric patients (75 FR 
49140).
    As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 
49139), the predicted outlier services MAP amounts for a patient are 
determined by multiplying the adjusted average outlier services MAP 
amount by the product of the applicable patient-specific case-mix

[[Page 72180]]

adjusters using the outlier services payment multipliers developed from 
the regression analysis to compute the payment adjustments. The average 
outlier services MAP amount per treatment for CY 2011 was based on 
payment amounts reported on 2007 claims and adjusted to reflect 
projected prices for 2011. For CY 2012, the outlier services MAP 
amounts and fixed dollar loss amounts were based on 2010 data (76 FR 
70250). Thus, for CYs 2011 and 2012, the MAP and fixed dollar loss 
amounts were computed based on pre-ESRD PPS claims data and 
utilization. For CY 2013, the outlier services MAP amounts and fixed 
dollar loss amounts were based on 2011 data (77 FR 67464). Therefore, 
the outlier thresholds for CY 2013 were based on utilization of ESRD-
related items and services furnished under the ESRD PPS. Because of the 
lower utilization of erythropoietin stimulating agents (ESA) and other 
outlier services in CY 2011, we lowered the MAP amounts and fixed 
dollar loss amounts for both adult and pediatric patients for CY 2013 
to allow for an increase in payments for ESRD beneficiaries requiring 
higher resources.
a. Impact of Changes to the Outlier Policy
    In the CY 2014 ESRD PPS proposed rule (78 FR 40850 through 40852), 
we did not propose any changes to the methodology used to compute the 
MAP or fixed dollar loss amounts. Rather, we proposed to update 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 (that is, claims with dates of service 
January 1 through December 31, 2012, that were received, processed, 
paid, and passed to the National Claims History File as of December 31, 
2012). In this final rule, for CY 2014, we used the June 2013 update of 
the CY 2012 National Claims History File to update the outlier services 
MAP amounts and fixed dollar loss amounts. The impact of this update is 
shown in Table 4 below, which compares the outlier services MAP amounts 
and fixed dollar loss amounts used for the outlier policy in CY 2013 
with the updated estimates for CY 2014. The estimates for the CY 2014 
outlier policy, which are included in Column II of Table 4, were 
inflation adjusted to reflect projected 2014 prices for outlier 
services.

               Table 4--Outlier Policy: Impact of Using Updated Data to Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                   Column I Final outlier policy  Column II Final outlier policy
                                                  for CY2013 (based on 2011 data  for CY2014 (based on 2012 data
                                                     price inflated to 2013)*        price inflated to 2014)*
                                                 ---------------------------------------------------------------
                                                     Age = 18       Age = 18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $38.65          $61.38          $37.29          $51.97
 treatment \1\..................................
Adjustments:
    Standardization for outlier services \2\....          1.0927          0.9878          1.1079          0.9866
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
Adjusted average outlier services MAP amount \3\          $41.39          $59.42          $40.49          $50.25
Fixed dollar loss amount that is added to the             $47.32         $110.22          $54.01          $98.67
 predicted MAP to determine the outlier
 threshold \4\..................................
Patient months qualifying for outlier payment...            7.6%            5.1%            6.7%            5.3%
----------------------------------------------------------------------------------------------------------------
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated
  prices for outlier services (that is, 2013 prices in Column I and projected 2014 prices in Column II).
\1\ Excludes patients for whom not all data were available to calculate projected payments under an expanded
  bundle. The outlier services MAP amounts are based on 2012 data. The medically unbelievable edits of 400,000
  units for Epoetin and 1,200 mcg for aranesp that are in place under the ESA claims monitoring policy were
  applied.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing
  case mix adjusters for adult and pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the
  predicted outlier services MAP for each patient.
\4\ The fixed dollar loss amounts were calculated using 2012 data to yield total outlier payments that represent
  1 percent of total projected payments for the ESRD PPS.

    As shown in Table 4, the estimated fixed dollar loss amount that 
determines the 2014 outlier threshold amount for adults (Column II) is 
lower than that used for the 2013 outlier policy (Column I). The 
estimated fixed dollar loss amount that determines the 2014 outlier 
threshold amount for pediatric patients (Column II) is higher than that 
used for the 2013 outlier policy (Column I). The main reason for the 
reduction for adult patients is that the lower utilization of ESA and 
other outlier services continued to decline during the second year of 
the PPS. This can be seen by comparing the outlier service MAP amount 
per treatment for adult patients in Column I ($61.38, which is based on 
2011 data) with that amount in Column II ($51.97, which is based on 
2012 data).
    For pediatric patients, the overall average outlier service MAP 
amount per treatment decreased from $38.65 in 2011 to $37.29 in 2012. 
In addition, there was a greater tendency in 2012 for a relatively 
small percentage of pediatric patients to account for a 
disproportionate share of the total outlier service MAP amounts. The 
one percent target for outlier payments is therefore expected to be 
achieved based on a smaller percentage of pediatric outlier cases using 
2012 data compared to 2011 data (6.7 percent of pediatric patient 
months are expected to qualify for outlier payments rather than 7.6 
percent). These patterns led to the estimated fixed dollar loss amount 
for pediatric patients being higher for the outlier policy for CY 2014 
compared to the outlier policy for CY 2013. Generally, there is a 
relatively higher likelihood for pediatric patients that the outlier 
threshold may be adjusted to reflect changes in the distribution of 
outlier service MAP amounts. This is due to the much smaller overall 
number of pediatric patients compared to adult patients, and 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.
    For this final rule, based on the use of the most recently 
available data, we are updating the fixed dollar loss amounts that are 
added to the predicted MAP amounts per treatment to

[[Page 72181]]

determine the outlier thresholds for CY 2014 from $110.22 to $98.67 for 
adult patients and from $47.32 to $54.01 for pediatric patients 
compared with CY 2013 amounts. We are also updating the adjusted 
average outlier services MAP amounts for CY 2014 from $59.42 to $50.25 
for adult patients and from $41.39 to $40.49 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 5.3 percent and 6.7 
percent for adult and pediatric patients, respectively, based on the 
2012 data. The pediatric outlier MAP and fixed dollar loss amounts 
continue to be lower for pediatric patients than adults due to the 
continued lower use of outlier services (primarily reflecting lower use 
of ESAs and other injectable drugs).
b. Outlier Policy Percentage
    42 CFR 413.220(b)(4) stipulates that the per treatment base rate is 
reduced by 1 percent to account for the proportion of the estimated 
total payments under the ESRD PPS that are outlier payments. For this 
final rule, based on analysis of the June 2013 update of the CY 2012 
National Claims History File, outlier payments represented 
approximately 0.2 percent of total payments, again falling short of the 
1 percent target due to the continuing decline in use of ESAs and other 
outlier services. Use of 2012 data to recalibrate the thresholds, which 
reflect lower utilization of ESAs and other outlier services, is 
expected to result in aggregate outlier payments close to the 1 percent 
target in CY 2014 and result in increased payments for ESRD 
beneficiaries requiring higher resource utilization.
    We note that recalibration of the fixed dollar loss amounts for CY 
2014 outlier payments results in no change in payments to ESRD 
facilities for beneficiaries with renal dialysis items and services 
that are not eligible for outlier payments, but increases payments to 
providers for beneficiaries with renal dialysis items and services that 
are eligible for outlier payments. Therefore, beneficiary co-insurance 
obligations increase for renal dialysis services eligible for outlier 
payments.
    We received the following comments on this proposal:
    Comment: Commenters generally supported CMS's proposal to use CY 
2012 claims data to update and recalibrate the outlier policy with the 
most recent data available for adult and pediatric patients for CY 
2014.
    Response: We thank the commenters for their support of our CY 2014 
proposal to update the ESRD PPS outlier payment policy for adult and 
pediatric patients with the most recent data available. As stated 
previously, for this final rule, we used the June 2013 update of the 
2012 National Claims History File. This data file represents the most 
recent available data of CY 2012 paid Medicare claims.
    Comment: A few commenters urged CMS to ensure with a ``high level 
of probability'' that the full one percent outlier holdback will be 
expended in CY 2014. One commenter contended that updating the outlier 
policy with recent data does not address the ongoing problem of 
``overstating the outlier'' and ``artificially'' reducing the base 
rate. Some commenters suggested that the ``chronic underpayment of the 
outlier pool'' suggests that an outlier policy is unnecessary. Other 
commenters urged CMS to avoid future ``underpayment'' of the outlier 
policy by lowering or eliminating the threshold for CY 2014. A few 
commenters requested that CMS ``consider giving back'' the amounts not 
paid in CY 2012 by increasing the CY 2014 base rate to include outlier 
monies held back but not paid out in CY 2012.
    Response: We are unable to assure the commenters that the one 
percent outlier holdback will fully be expended in CY 2014. The total 
amount of outlier payments are dependent upon patient utilization of 
high cost outlier-eligible services (most significantly ESAs), that are 
furnished to Medicare beneficiaries in a given payment year. Using the 
most recent claims and utilization data, we simulated 2014 Medicare 
payments and established the MAP and fixed dollar loss amounts to 
achieve one percent of the total ESRD PPS payments for CY 2014. Given 
the continued decline in utilization of ESAs and other outlier services 
from CY 2011 to CY 2013, it is possible that the one percent outlier 
may not be fully paid out in CY 2014. At the same time, since the MAP 
and fixed dollar loss amounts have been reduced, it is also possible 
that the outlier payments could exceed the 1 percent of payments that 
are held back. Either outcome is possible because we cannot predict 
with certainty the utilization of outlier services in a future year. 
However, we make a good faith effort to estimate future use of outlier 
services by simulating payment using the most current data available. 
To the extent that actual 2014 outlier payment do not reach that level, 
we will update the MAP and fixed dollar loss amounts for CY 2015.
    We disagree with the commenter who contended that CMS is 
overstating the outlier and artificially reducing the base. We remind 
the commenter that updating the outlier payment policy for CY 2014 does 
not change payments for dialysis items and services that are not 
eligible for outlier payments. Rather, the outlier payment is a per 
treatment payment increase, available to ESRD facilities when they 
furnish Medicare beneficiaries with high cost dialysis items and 
services that are eligible for outlier payments. If the ESRD facilities 
are not furnishing high cost, outlier-eligible, dialysis items and 
services to the patient then we believe that the base rate, and 
applicable adjustments, is an appropriate payment. Nonetheless, we 
continue to believe that use of the most recent data available to 
update the outlier payment policy should result in appropriate outlier 
payments. We disagree with the commenters who contended that CMS 
outlier payment policy has resulted in ``chronic underpayment of the 
outlier,'' and we continue to believe that the one percent outlier 
policy has not been fully realized under the ESRD PPS because of the 
continued decline in ESA utilization, rather than an inherent flaw in 
the outlier payment methodology. We also disagree with commenters who 
suggest that CMS has the authority to eliminate the outlier policy for 
CY 2014 or at some point in the future, as the statute at section 
1881(b)(14)(D)(ii) clearly states that the ESRD PPS ``shall include a 
payment adjustment for high cost outliers due to unusual variations in 
the type or amount of medically necessary care, including variations in 
the amount of erythropoiesis stimulating agents necessary for anemia 
management.''
    We also disagree that with commenters that we should ``give back'' 
outlier monies to account for not achieving the 1 percent outlier 
threshold. As we explained in the CY 2013 ESRD PPS final rule (77 FR 
67450, 67465), ``[t]he 1 percent outlier policy is a prospective 
payment mechanism in which thresholds are established and adjusted on a 
yearly basis based on historical data. In the FY 1997 Inpatient 
Prospective Payment System (IPPS) final rule (61 FR 46229 and 46230), 
we explained that we believe our outlier policies are consistent with 
the statute and the goals of the prospective payment system. Many of 
the factors used to set prospective payment amounts for a given year 
are estimates. These factors include not only the outlier thresholds, 
but also the market basket rate of increase, the update factors, and 
the required budget-neutrality provisions. We do not believe that 
Congress intended that the standardized amounts should be adjusted 
(upward or downward) to reflect differences between projected or

[[Page 72182]]

actual outlier payments for a given year. Moreover, retroactive 
adjustments would be extremely difficult or impracticable (if not 
impossible) to administer. We further explained that the thresholds for 
a given year reflect certain levels of costs, so that if costs are held 
down, fewer cases qualify for outlier payments and outlier payments are 
lower than expected. We believe that the same explanation applies to 
the ESRD PPS.'' Finally, we plan to review the outlier policy as a 
whole when we refine the system in the future.

D. The Self-Dialysis and Home Dialysis Training Add-On Payment

a. Medicare Policy for Self-Dialysis Training, Home Dialysis Training, 
and Retraining
    The existing Medicare policy for furnishing self-dialysis training, 
home dialysis training, and retraining was finalized in our CY 2011 
ESRD PPS final rule (75 FR 49062 through 49064) and further discussed 
in the Medicare Benefits Policy Manual, (Publication 100-02, Chapter 
11, Section 30). Self-dialysis or home dialysis can only be performed 
after an ESRD patient has completed an appropriate course of training. 
The scope of training services that a certified ESRD home dialysis 
training facility must furnish to ESRD patients as a condition of 
coverage are described at 42 CFR 494.100(a). For instance, 42 CFR 
494.100(a)(2) states that the training must be conducted by a 
registered nurse who meets the requirements of 42 CFR 494.140(b)(2). 
For additional information on the requirements for ESRD facilities in 
furnishing dialysis training, see 42 CFR Part 494, and for additional 
information regarding home dialysis training certification, see the 
State Operations Manual, which may be viewed on the Medicare Web site 
at the following link: http://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/GuidanceforLawsAndRegulations/Dialysis.html.
    Our regulation at 42 CFR 494.70 (Condition: Patients' rights) 
requires that facilities inform patients (or their representatives) of 
their rights and responsibilities when they begin their treatment and 
protect and provide for the exercise of those rights. Our regulation at 
42 CFR 494.70(a)(7) requires a facility to inform patients about all 
treatment modalities and settings, including but not limited to 
transplantation, home dialysis modalities, and in-facility 
hemodialysis. This includes the patient's right to receive resource 
materials for dialysis modalities not offered by the facility. We 
expect that all ESRD facilities comply with this regulation and furnish 
resource information on home dialysis, even if the home modality is not 
offered by the facility. When ESRD facilities are certified for home 
dialysis training, we expect the facility to provide training 
throughout the self-dialysis or home dialysis experience (42 CFR 
494.100). Self-dialysis or home dialysis training services and supplies 
may include but are not limited to personnel services, dialysis 
supplies, written training manuals and materials, and ESRD-related 
items and services.
    We discuss Medicare's training policies in Table 5 (Medicare's Self 
or Home Training by Modality) for the following dialysis modalities:
     Home Hemodialysis Training
     Intermittent Peritoneal Dialysis Training
     Continuous Ambulatory Peritoneal Dialysis Training
     Continuous Cycling Peritoneal Dialysis Training
    We would expect that patients who elect self-dialysis or home 
dialysis training will be good candidates for these modalities and that 
they will be successful in completing the training. We also expect 
facilities to comply with the patient assessment Condition of 
Participation including the requirement in 42 CFR 494.80(a)(9) to 
include in the assessment: ``Evaluation of the patient's abilities, 
interests, preferences, and goals, including the desired level of 
participation in the dialysis care process; the preferred modality 
(hemodialysis or peritoneal dialysis), and setting (for example, home 
dialysis), and the patient's expectations of care outcomes.''

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

b. Payment Methodology
    In our CY 2011 ESRD PPS final rule (75 FR 49062 through 49064), we 
included training costs in computing the ESRD PPS base rate, but stated 
that the ESRD PPS base rate alone does not account for the staffing 
costs associated with training treatments furnished by a registered 
nurse. Thus, we finalized the training add-on payment, to be an 
additional payment made under the ESRD PPS, when one-on-one self or 
home dialysis training is furnished by a nurse working for a Medicare-
certified training facility to a Medicare beneficiary for either 
hemodialysis or the peritoneal dialysis training modalities listed in 
Table 5. Likewise, we noted in our CY 2012 ESRD PPS final rule (76 FR 
70252), that ``ESRD facilities receive a per-treatment payment that 
accounts for case-mix, geographic location, low-volume, and outlier 
payment regardless [of whether] the patient receives dialysis at home 
or in the facility, plus the training add-on[,]'' if applicable.
    We discuss our policies for retraining sessions in the Medicare 
Benefit Policy Manual, Publication 100-02, Chapter 11, Section 30.2.E. 
The add-on payment is also applied for retraining sessions after a 
patient or caregiver has completed the initial training program and if 
the patient continues to be an appropriate candidate for self or home 
dialysis modalities. We would expect that most Medicare beneficiaries 
receive

[[Page 72183]]

retraining sessions when they receive new equipment, have a change in 
caregiver, or a change in modality. The ESRD facility may not bill 
Medicare for retraining services when they install home dialysis 
equipment or furnish monitoring services. For example, an ESRD facility 
nurse may not bill for retraining sessions when they update a home 
dialysis patient's treatment record, order monthly supplies, or 
instruct the patient on the use of a new medication for the treatment 
of infection. When retraining sessions are furnished to a patient or 
caregiver, there is an expectation that the patient or caregiver is 
already knowledgeable of the elements of home dialysis, and if 
additional training is being done for a change of equipment or a change 
in modality, fewer sessions would be necessary because of the 
transferability of certain basic skills for home dialysis.
    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 with the claim for the training or retraining session 
submitted for payment. Because the requirement of medical justification 
is specific to the patient's training needs, circumstances (such as a 
change in caregiver), or condition (change in modality), we would not 
expect that an ESRD facility would routinely bill Medicare for training 
or retraining sessions on any patient.
    In CY 2011, we finalized the amount for the training add-on 
adjustment at $33.44 per treatment, and noted that this amount would be 
added to the ESRD PPS payment when a training treatment is furnished by 
the ESRD facility to a Medicare beneficiary. In addition, we noted that 
because the training add-on payment is directly related to nursing 
salaries, and that nursing salaries differ greatly based on geographic 
location, we would adjust the training add-on payment by the geographic 
area wage index applicable to the ESRD facility. (For further 
discussions on wage indices, please see section II.C.4. of this final 
rule.) To summarize, when home dialysis training sessions are furnished 
to a Medicare beneficiary by a Medicare-certified home dialysis 
training facility, Medicare will make the ESRD PPS computed base rate 
payment with all applicable adjustments, and then the separate add-on 
payment for self or home dialysis training.
    In the CY 2013 ESRD PPS final rule (77 FR 67468 through 67469), we 
addressed comments on Medicare's self and home dialysis training 
policies under the ESRD PPS. In that final rule, we stated that 
commenters were concerned that the payment for home dialysis training 
is insufficient and does not reflect the true costs of training and 
that they indicated various ranges of time required for home training 
in terms of time per day and number of training sessions. At that time, 
we responded to those comments by confirming that CMS will continue to 
monitor and analyze trends in home dialysis training, but that we 
believe our payment methodology is adequate for ESRD facilities 
furnishing training services.
    In the CY 2014 ESRD PPS proposed rule, we sought public comments on 
the costs associated with furnishing self or home dialysis training (78 
FR 40854). We requested comments on the elements of PD vs. HHD training 
sessions, specifically the costs of furnishing such training, the 
appropriate number of training sessions, and the duration of the 
training sessions. Lastly, we sought comments on a ``holdback'' payment 
methodology, which we discussed in the CY 2011 ESRD PPS final rule (75 
FR 49063). Under this methodology, a portion of the training payments 
would be withheld from the ESRD facility until the ESRD patient 
demonstrates that they have successfully transitioned to a home 
modality. Specifically, in the CY 2014 proposed rule (78 FR 40854), we 
sought comments on the costs associated with furnishing self or home 
dialysis training, the training elements of PD and HHD training, and 
the number of training sessions.
    Although we did not specifically propose to increase the training 
add-on payment amount in the CY 2014 ESRD PPS proposed rule (78 FR 
40852 through 40854), we received several hundred comments from 
Medicare beneficiaries, dialysis patients, caregivers, friends and 
family members, industry stakeholders and other interested parties in 
response to our request for comments that overwhelmingly encouraged us 
to evaluate the training add-on adjustment and to increase the training 
add-on payment amount in this final rule. Commenters generally noted 
the substantial patient benefits of utilizing home dialysis modalities, 
including improved quality of life; continued employment; and the 
ability to travel and live a ``normal life.'' In addition, commenters 
identified many significant training elements that were not 
contemplated in the original training add-on adjustment payment 
methodology, such as self cannualation and certain aspects of operating 
a HHD machine.
    After a review of the considerable number of compelling public 
comments and MedPAC's ``Report to Congress'' of March 2013, 
``Considering alternative dialysis treatment options: Use of more 
frequent hemodialysis and home dialysis'' that advocates for greater 
use of home dialysis modalities among Medicare beneficiaries, we are 
finalizing a 50 percent increase to the home dialysis training add-on 
adjustment payment amount beginning in CY 2014. We are persuaded to 
finalize this increase because we agree with commenters that access to 
home modalities is limited, and that the current home dialysis training 
add-on payment amount per treatment, which represents 1 hour of nursing 
time, does not adequately represent the staff time required to ensure 
that a patient is able to perform home dialysis safely.
    Therefore, beginning January 1, 2014, the payment add-on will be 
computed based upon 1.5 hours of nursing time per training treatment, 
which amounts to a payment increase of $16.72 per training treatment. 
The training add-on adjustment payment amount for CY 2014 and future 
years will be $50.16 and will continue to be adjusted by the facility's 
wage index. We believe increasing the training time is an appropriate 
change because commenters largely contended that the number of 
allowable training sessions is adequate, but that the payment amount is 
insufficient.
    We also note that the finalized per training treatment add-on 
payment amount of $50.16 is in line with the costs reported on the 2010 
ESRD facility cost reports, which indicates an average facility 
training cost of $53.00 per training treatment. In addition to the home 
dialysis training add-on payment, the base rate also compensates 
facilities for the cost of providing home dialysis training.
    We received the following comments:
    Comment: The majority of commenters recognized the importance of 
dialysis training services and modality choice for a beneficiary's 
well-being. Many patient comments included personal stories about their 
ability to lead fulfilling lives after they transferred to HHD, 
including being able to return to work, travel, and participate in 
family activities. The commenters confirmed that the training elements 
for HHD are significant and require additional face-to-face nursing 
time. Commenters identified such elements as setting up

[[Page 72184]]

and orienting the patient to the HHD unit; explaining safety alarms; 
troubleshooting alarms; and teaching the patient self cannualation as 
training elements that they do not believe were adequately paid for by 
the base rate and the training add-on payment.
    Some commenters noted that a single training add-on payment amount 
for both PD and HHD training services disincentives HHD training. The 
commenters contend that the training add-on payment amount is 
sufficient for PD training services, but that higher training costs are 
incurred by the facility when they furnish HHD training services. A few 
commenters urged CMS to ``fix'' this bias in the training payment so 
that more patients have access to the modality of HHD services. One 
commenter pointed out that Medicare's existing regulations require that 
dialysis patients be informed of all dialysis options, however, the 
modality of HHD is not available to many patients because facilities 
will not invest in home dialysis training programs under the current 
payment methodology.
    Response: Again, we thank the patients for their willingness to 
share their home dialysis training experiences with CMS, and in 
particular, to patients for commenting on the importance of modality 
choice in returning to work and participating fully in their lives. 
While we did not propose to increase the home dialysis training add-on 
payment amount, we found the comments very compelling. In particular, 
we agree with commenters that the current home dialysis training add-on 
payment amount, together with the base rate, does not sufficiently 
cover the costs of providing the critical HHD training elements that 
commenters identified. We also agree with commenters that the single 
home dialysis training add-on payment could disincentivize training in 
HHD, as opposed to PD, as the cost of HHD training is higher than the 
cost of PD training. As we noted in the CY 2013 ESRD PPS final rule (77 
FR 67468), we do not intend to encourage the use of one type of home 
dialysis modality over another; rather we believe that decisions 
regarding the appropriate home dialysis modality should be made by 
beneficiaries in consultation with their physicians. Where a 
beneficiary and his or her physician decide that HHD is the appropriate 
home dialysis modality, we do not want the amount of the home dialysis 
training add-on payment to discourage the use of that modality.
    We appreciate the comments detailing face-to-face nursing time and 
the training provided during that time. These comments noted 
significant face-to-face training time for the training elements of 
self cannualation, effective machine set-up, explaining warning alarms, 
troubleshooting alarms, and what the patient and caregiver should do in 
case of an emergency. We agree with the commenters that these training 
elements are significant to a patient's ability to safely and 
effectively dialyze in the home, and that these training elements are 
unique to HHD training services. HHD training elements were not 
included in the original training add-on payment adjustment because 
prior to the PPS, home training services furnished to Medicare 
beneficiaries were largely based upon training elements for the 
modality of PD, with few patients receiving HHD services at home. We 
agree with commenters that self cannualation and troubleshooting alarms 
are critical training elements for HHD, and that they require 
additional training time. For all of these reasons, we are increasing 
the per-treatment home dialysis training treatment payment to account 
for 1.5 hours of nursing time per training session furnished on or 
after January 1, 2014, instead of 1 hour per training session.
    We expect all ESRD facilities to comply with our regulation at 42 
CFR 494.70(a)(7) and inform beneficiaries of the availability of HHD, 
even if this modality is not offered by the facility. Although we 
believe increasing the amount of the home dialysis training add-on 
payment adjustment in this final rule will further enable patients to 
dialyze at home, we also believe that the ESRD PPS, along with Medicare 
Conditions for Coverage requirements set forth in 42 CFR Sec.  
494.100(a), contributed to the increase in utilization rates for home 
modalities. In the CY 2011 ESRD PPS final rule, we stated that the ESRD 
PPS monitoring program would assess the effect of the expanded bundled 
payment on home dialysis utilization rates (75 FR 49058). We continue 
to monitor Medicare submitted and paid claims to assess home modality 
utilization rates. This data is available on the ESRD PPS Spotlight and 
may be viewed at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Spotlight.html.
    Comment: Commenters applauded CMS for seeking industry feedback for 
refinements to self and home dialysis training policies. In general, 
commenters requested that CMS increase the payment amount for dialysis 
training services to more accurately reflect the actual costs incurred 
by facilities when they furnish self or home dialysis training services 
to a Medicare beneficiary. Many commenters noted that the training add-
on payment, equal to 1 hour of registered nursing time, $33.44, is 
``inadequate'' to cover the training costs incurred by the facility 
when they furnish a home dialysis training treatment. Numerous 
commenters urged CMS to increase the training add-on payment amount to 
``appropriately recognize'' a facility's costs when furnishing home 
dialysis training services and specifically noted the higher cost 
incurred by the facility when they furnish HHD training services.
    Response: We thank the facility commenters who shared detailed 
analysis regarding their training costs. A few commenters furnished CMS 
with an ``Updated Home Hemodialysis Cost Study: 2010 Medicare Cost 
Report Analysis.'' The analysis shows that current Medicare policies to 
reimburse for home dialysis training fall short of the average costs 
facilities incur when they furnish training treatments. As stated 
above, we noted in our CY 2011 ESRD PPS final rule (75 FR 49062 through 
49064), that the ESRD PPS base rate alone does not account for the 
staffing costs associated with training treatments furnished by a 
registered nurse and that the training add-on payment is an additional 
payment made under the ESRD PPS to acknowledge the one-on-one self or 
home dialysis training furnished by a nurse. We clarified this policy 
again in the CY 2013 ESRD PPS final rule (77 FR 67468) where we stated, 
``Training costs are included in the ESRD PPS base rate, however, we 
also provide an add-on adjustment for each training treatment furnished 
by a Medicare-certified home dialysis training facility.'' As such, it 
is not the intent of the add-on treatment to reimburse a facility for 
all of the training costs furnished during training treatments. Rather, 
the single ESRD PPS base rate, all applicable case-mix and facility 
level adjustments, as well as the add-on payment should be considered 
the Medicare payment for each training treatment and not the training 
add-on payment alone. Nonetheless, we agree with commenters that the 
home dialysis add-on payment, together with the base rate, does not 
account for all of the training elements commenters identified.
    We note that patient and caregiver commenters indicated a training 
time for home dialysis training of 2 to 6 weeks in length, with face-
to-face nursing time of 2 to 6 hours per training day. Commenters also 
acknowledged that many of the training days took place in the training 
facility, in a group setting, and not in the patient's home.

[[Page 72185]]

In addition, some commenters reported that nursing staff were not 
present for the final week of training, as the patient had achieved 
total independent self-care. While we understand that training for home 
dialysis is specific to the patients' needs and that several factors, 
including a patient's health status and emotional and mental state, are 
considerations for the length and number of training services 
furnished, we are concerned about the wide-ranging variance in training 
times and the duration of training sessions indicated in the comments. 
While believe that an increase in the amount of the home dialysis 
training add-on payment is appropriate, we note that, based on the 
comments we received, training services furnished to Medicare 
beneficiaries appear inconsistent across training facilities. We will 
continue to monitor training services furnished to Medicare 
beneficiaries in the future.
    Comment: A few commenters urged CMS to increase the training add-on 
payment amount without making a reduction to the base rate to maintain 
budget neutrality. One commenter noted that, ``we believe that CMS has 
the discretion to independently make this change without adjustments 
for budget neutrality.'' A few commenters urged CMS to make no change 
to the training add-on payment amount that would further reduce the 
base rate for CY 2014.
    Response: We appreciate commenters concern for protecting the ESRD 
PPS base rate. However, we are not changing the payment methodology 
used to compute the training add-on adjustment and the training add-on 
payment will continue to be budget neutral, which means the base rate 
will be affected. We believe that an additional half hour per training 
session better reflects the costs facilities incurred when furnishing 
training services to Medicare beneficiaries. The training add-on 
payment increase will be budget neutral for CY 2014 in that we will 
reduce the base rate by $0.02 to account for the cost of the increase.
    We computed the final CY 2014 home dialysis training add-on budget-
neutrality adjustment factor using treatment counts from the 2012 
claims and facility-specific CY 2014 payment rates to estimate the 
total dollar amount that each ESRD facility would have received in CY 
2014 with no adjustment to the training add-on factor. The total of 
these payments became the target amount of expenditures for all ESRD 
facilities for CY 2014. Next, we computed the estimated dollar amount 
that would have been paid for the same ESRD facilities using the final 
adjusted home dialysis training add-on of $50.16 for CY 2014. The total 
of these payments becomes the new CY 2014 amount of expenditures for 
all ESRD facilities.
    The training add-on budget-neutrality factor is calculated as the 
target amount divided by the new CY 2014 amount. When we multiplied the 
training add-on budget-neutrality factor by the applicable CY 2014 
estimated payments, aggregate payments to ESRD facilities would remain 
budget-neutral when compared to the target amount of expenditures. The 
training add-on budget-neutrality factor ensures that training add-on 
adjustments do not affect aggregate Medicare payments. Therefore, we 
are finalizing a training add-on budget-neutrality adjustment factor of 
.999912, which will be applied directly to the CY 2014 ESRD PPS base 
rate.
    Comment: A few commenters noted that the training add-on payment is 
a ``fixed'' payment and does not adjust from year to year for inflation 
or wages. One commenter noted that the training add-on payment is not 
included in the annual market basket used to update the ESRD PPS and 
that CMS should address this inconsistency.
    Response: We agree with comments that the training add-on payment 
adjustment is a fixed payment amount and is not updated by the annual 
wage data from the Bureau of Labor and Statistics. However, we also 
note that although the training add-on payments are not adjusted by the 
ESRD PPS market basket, the payment is adjusted by the geographic wage 
index values. This geographic adjustment allows Medicare payments to 
appropriately reflect the local wage of a registered nurse in the 
geographic areas where the training services are furnished. We 
appreciate commenters' suggestions for updating the training add-on 
payment amount with a market basket or other inflation indicator such 
as the most recent wage data. We will take these comments into account 
in considering future refinements to the home dialysis training add-on 
payment adjustment.
    Comment: Several commenters discouraged CMS from considering a 
holdback payment methodology for making training add-on payments. One 
commenter expressed serious concerns regarding a holdback policy for 
home dialysis training, stating that the policy would ``penalize 
facilities'' for unsuccessful training. Another commenter contended 
that providers should not be held responsible for patients who decide 
that they are not able to adequately perform home dialysis.
    Response: We thank the commenters for their comments and note that 
CMS did not receive a single comment that endorsed the holdback payment 
methodology. We agree with commenters that a holdback payment 
methodology penalizes the facilities for patients who decide that they 
are not able to perform self or home dialysis and that this decision 
may not be a reflection of the quality of the training the patient 
received.
    In summary, in response to comments, CMS will finalize a payment 
increase of 50 percent for both PD and HD training treatments. 
Beginning January 1, 2014, the payment add-on will be computed based 
upon 1.5 hours of nursing time per training treatment, which amounts to 
a payment increase of $16.72 per training treatment. The training add-
on adjustment payment amount for CY 2014 and future years will be 
$50.16 and will continue to be adjusted by the facility's wage index. 
ESRD facilities may continue to bill a maximum of 25 training sessions 
per patient for HHD training and 15 sessions for CCPD and CAPD. For all 
home modalities, we will pay for additional training sessions when 
medical necessity is documented. We believe increasing the training 
time is an appropriate policy refinement, as CMS evaluated the training 
elements reported to be furnished during training treatments and 
determined that self-cannualation, equipment preparation and alarm 
management were significant training elements that require additional 
time per training treatment and that payment of an additional half hour 
per treatment would appropriately recognize the costs incurred by 
facilities when they furnish training treatments. We will reduce the 
base rate by $0.02 to account for the increase in the amount of the 
home dialysis training add-on payment adjustment.

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

    Section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of 
the Medicare Improvements for Patients and Providers Act of 2008 
(MIPPA), requires the Secretary to implement a payment system under 
which a single payment is made to a provider of services or a renal 
dialysis facility for ``renal dialysis services'' in lieu of any other 
payment. Section 1881(b)(14)(B) of the Act 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

[[Page 72186]]

biological[.]'' We interpreted this provision as including not only 
injectable drugs and biologicals used for the treatment of ESRD (other 
than ESAs, which are included under clause (ii)), but also all non-
injectable drugs used for the treatment of ESRD furnished under Title 
XVIII. We also concluded that, to the extent ESRD-related oral-only 
drugs do not fall within clause (iii) of the statutory definition of 
renal dialysis services, such drugs would fall under clause (iv), and 
constitute other items and services used for the treatment of ESRD that 
are not described in clause (i). Accordingly, we defined ``renal 
dialysis services'' at 42 CFR 413.174 as including, among other things, 
``[o]ther items and services that are furnished to individuals for the 
treatment of ESRD and for which payment was (prior to January 1, 2011) 
made separately under title XVIII of the Act (including drugs and 
biologicals with only an oral form).'' Although oral-only drugs are 
included in the definition of renal dialysis services, in the CY 2011 
ESRD PPS final rule we also finalized a policy to delay payment for 
these drugs under the PPS until January 1, 2014 (75 FR 49044). We 
stated that there were certain advantages to delaying the 
implementation of payment for oral-only drugs, including allowing ESRD 
facilities additional time to make operational changes and logistical 
arrangements in order to furnish oral-only ESRD-related drugs and 
biologicals to their patients. Accordingly, 42 CFR 413.174(f)(6) 
provides that payment to an ESRD facility for renal dialysis service 
drugs and biologicals with only an oral form is incorporated into the 
PPS payment rates effective January 1, 2014.
    On January 3, 2013, the Congress enacted ATRA. Section 632(b) of 
ATRA states that the Secretary ``may not implement the policy under 
section 413.176(f)(6) of title 42, Code of Federal Regulations 
(relating to oral-only ESRD-related drugs in the ESRD prospective 
payment system), prior to January 1, 2016.'' Accordingly, payment for 
oral-only drugs will not be made under the ESRD PPS before January 1, 
2016, instead of on January 1, 2014, which is the date originally 
finalized for payment of ESRD-related oral-only drugs under the ESRD 
PPS (75 FR 49044). We proposed to pay for oral-only drugs consistent 
with section 632(b) of ATRA and implement this delay by revising the 
effective date for providing payment for oral-only ESRD-related drugs 
under the ESRD PPS at 42 CFR 413.174(f)(6) from January 1, 2014 to 
January 1, 2016.
    Because we proposed that oral-only drugs will be included in the 
ESRD PPS starting in CY 2016, we also proposed to change the reference 
to January 1, 2014 for the outlier policy described in 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 
proposed to clarify our regulation at 42 CFR 413.237(a)(1)(iv) by 
changing the word ``excluding'' to ``including'' to make clear that 
oral-only drugs are ESRD outlier services for purposes of the outlier 
policy effective January 1, 2016, consistent with the policy we 
established in the CY 2011 final rule (75 FR 49138).
    We received the following comments on this proposal:
    Comment: A few comments supported our amended regulations codifying 
the delay of oral-only drugs paid under the ESRD PPS payment bundle 
until January 1, 2016. One commenter suggested that CMS use this 2-year 
delay to ``gather stakeholder input and conduct careful assessment'' of 
the costs facilities will incur when furnishing oral-only drugs to 
dialysis patients. Another commenter cautioned CMS not to ``negatively 
impact'' Medicare beneficiaries by taking away patient protections, 
such as comprehensive drug utilization reviews, currently enjoyed under 
Medicare Part D plans. The commenter contends that phosphate binders 
and calcimimetics have significant drug interactions with commonly 
prescribed ESRD medications and could result in significant drug safety 
issues for patients if effective mechanisms for identifying drug-drug 
interactions are not available.
    Response: We thank the commenters for their support in implementing 
section 632(b) of ATRA. We appreciate the commenters' suggestion on how 
CMS should best use the 2-year delay. In addition, we appreciate the 
commenters' concern for patient safety and beneficiary protections that 
are available under Medicare Part D. In anticipation of the inclusion 
of oral-only ESRD-related drugs in the payment bundle beginning in CY 
2016, we intend to consider appropriate patient protections.
    After consideration of the public comments we received, we are 
finalizing the proposed revisions to 42 CFR 413.174 and 413.237 without 
modification. We will delay the effective date for providing payment 
for oral-only ESRD-related drugs under the ESRD PPS at 42 CFR 
413.174(f)(6) until January 1, 2016. Likewise, 42 CFR 413.237(a)(1)(iv) 
is revised to make clear that oral-only drugs are ESRD outlier services 
for purposes of the outlier policy effective January 1, 2016.

F. Miscellaneous Comments

    We received many comments from Medicare beneficiaries, family 
members, ESRD facilities, nurses, physicians, professional 
organizations, renal organizations, and manufacturers related to issues 
that were not specifically addressed in the CY 2014 ESRD PPS proposed 
rule. Some of these comments are discussed below.
    Comment: A few commenters requested that CMS amend the ESRD 
facility cost report and eliminate the cap on medical director fees. 
One commenter noted that the limitation for reporting medical director 
fees on Medicare cost reports is $165,000 annually, and that this 
amount reflects the wage of a physician of internal medicine and not a 
board-certified nephrologist. The commenter requested that CMS evaluate 
wages for nephrologists and adjust the reasonable compensation 
equivalent (RCE) on ESRD facility cost reports. Other commenters 
requested that CMS recognize the cost of supporting the ESRD networks. 
One commenter suggested that CMS include the $0.50 per treatment 
network fee as a cost, or an offset to revenue, on ESRD cost reports.
    Response: We thank commenters for their suggestions. We will 
consider these comments for future refinements. We note that CMS has 
already implemented several updates and enhancements to the ESRD 
facility Medicare cost report. For example, the addition of cost report 
``Worksheet C'' allows facilities to report a computation of the 
average cost per treatment by modality furnished under the ESRD PPS 
payment bundle.
    Comment: Several commenters expressed confusion regarding 
eligibility requirements for the Low Volume Payment Adjustment (LVPA) 
available under the ESRD PPS. A few commenters requested clarification 
on the identification of free-standing and hospital-based low-volume 
facilities, while other commenters noted the Government Accountability 
Office (GAO) report 13-287 (End-Stage Renal Disease: CMS Should Improve 
Design and Strengthen Monitoring of Low-Volume Adjustment) and urged 
CMS to expeditiously refine this significant payment adjustment for 
deserving facilities as outlined in the report.
    Response: We agree with commenters that the LVPA is an important 
and

[[Page 72187]]

significant payment adjustment for eligible facilities under the ESRD 
PPS. CMS discussed the eligibility requirements for the LVPA payment 
adjustment in the CY 2011 ESRD PPS final rule (75 FR 49117 through 
49125), and codified the adjustment in our regulations at 42 CFR Sec.  
413.232. For specific inquiries regarding LVPA eligibility, we suggest 
that facilities contact their Medicare Administrative Contractor (MAC) 
directly. As part of potential future refinements, we plan to evaluate 
our current policies for the LVPA to ensure that we are effectively 
targeting low-volume facilities, in order to support access to dialysis 
services.
    Comment: Some commenters requested that CMS consider payment 
implications outside of the ESRD PPS payment methodology for dialysis 
services. For example, a few commenters cautioned CMS that a static 
payment policy may ``dampen'' incentives to develop innovations and new 
technologies in the treatment of ESRD and urged CMS to establish a new 
technology adjustment.
    Response: We thank the commenters and appreciate the suggestion 
that we consider different payment mechanisms that would encourage 
innovation for ESRD treatments and ensure quality patient care.
    Comment: A few commenters requested that CMS consider a ``case-mix 
adjustor to address racial and ethnic disparities in ESRD treatment,'' 
and noted that some patient sub-groups require higher utilization of 
ESAs and other pharmaceuticals in furnishing quality patient care.
    Response: We thank the commenters for expressing their concern 
regarding possible racial and ethnic disparities in the treatment of 
ESRD, and note that we discuss our analysis of a potential race case-
mix adjustor in our CY 2011 ESRD PPS final rule (75 FR 49108 through 
49115). In that rule, we noted that while section 1881(b)(14)(D)(i) of 
the Act allows CMS to consider the implementation of race/ethnicity 
payment adjustments, we believed that other patient characteristics 
such as ``body-size and co-morbidities,'' and not a patient's race 
contribute to higher treatment costs. We stated that ``[i]n particular, 
we are not convinced that race or ethnicity adjustments are necessary 
to ensure beneficiary access to ESRD services. That is, we believe that 
there may be race-neutral biological factors that have not yet been 
identified in the ESRD PPS modeling that could explain the increased 
cost associated with providing renal dialysis services to members of 
certain racial or ethnic groups.'' (75 FR 49109.) We will continue to 
monitor the health outcomes for all Medicare ESRD beneficiaries, and 
assess the underlying clinical conditions that incur higher treatment 
costs for future analysis.
    Comment: A few facility commenters noted a geographic effect on 
``payer mix trends'' for facilities located in inner city areas with 
nearly exclusive Medicare and Medicaid patients. Other commenters 
encouraged CMS to consider a payment mechanism that appropriately 
recognize the ``higher costs'' incurred by facilities when furnishing 
ESRD treatments to inner city patients, as these demographics have more 
minority patients, ``a large number of whom are African American, who 
have shown to require a higher volume of pharmaceutical products.''
    Response: We thank the commenters for sharing the economic 
perspective of inner city ESRD facilities and we agree that inner city 
communities may have unique economic or demographic factors to manage 
in furnishing ESRD services. However, we disagree that the ESRD PPS 
payment methodology does not appropriately recognize these unique 
circumstances when making payments for dialysis services. For example, 
the outlier policy is a payment mechanism specifically designed to 
recognize higher cost patients in terms of drug, laboratory services, 
and supply utilization. In addition, we provide a wage index adjustment 
to reflect geographic differences in wages. Likewise, patient case-mix 
(that is, body size and comorbidities) and the LVPA facility 
adjustments recognize patient and facility characteristics that 
contribute to higher costs of care. And lastly, ESRD facilities are 
allowed to recover a portion of uncollected beneficiary coinsurance as 
outlined in 42 CFR Sec.  413.89. While we continue to believe that the 
ESRD PPS payment methodology appropriately recognizes high cost 
patients and high cost geographic areas, we will continue to monitor 
patient utilization for all Medicare beneficiaries and will consider 
these comments in future refinements.
    Comment: One commenter noted that historical and future Medicare 
bad debt policies do not allow for the full recovery of a facility's 
bad debt and estimates a payment shortfall of approximately $4 to $5 
per treatment in uncompensated care. Other commenters pointed out that 
inner city facilities provide services in a ``fragile economic 
environment'' where they are unable to collect beneficiary co-payments.
    Response: We thank the commenter for sharing their concerns 
regarding Medicare bad debt policies. CMS finalized the self-
implementing statutory provision for the reduction in bad debt in the 
CY 2013 ESRD PPS final rule (77 FR 67518).
    Comment: An organization that represents kidney health 
professionals urged CMS to publicize ways for ESRD patients, their 
families, and care providers to alert CMS to changes in care delivery 
that raise concern about negative effects on the quality of care 
provided as a result of the drug utilization reduction. They suggested 
such mechanisms could include, but are not limited to; the Medicare 1-
800 number system; the ESRD Network complaint and quality of care 
reporting system; and a dedicated CMS email address.
    Response: We appreciate the commenters' concern regarding ensuring 
quality care; however, because the implementation strategy for the drug 
utilization reduction will be transitioned over time, we believe that 
ESRD facilities should be able to maintain their current programs and 
services. We do not expect that the drug utilization reduction will 
negatively impact the quality of service a facility provides; 
therefore, we believe that our current methods (the 1-800 number system 
and the ESRD Network complaint and quality of care reporting system, as 
opposed to a dedicated email address) for beneficiaries, their 
families, and providers to communicate with CMS are adequate at this 
time.
    Comment: Several commenters expressed concern regarding data 
transparency in rate setting, and requested that CMS release a CY 2014 
data rate setting file.
    Response: We agree with the commenters that a rate setting file 
would enhance transparency, and therefore, we are working to make such 
a file available in the future.
    Comment: A few national organizations representing dialysis 
facilities expressed concern that a change to the census process in the 
Consolidated Renal Operations in a Web-Enabled Network (CROWNWeb) has 
resulted in a delay in the date of first dialysis reconciliation and 
verification. The commenters noted that, as a result, facilities are 
unable to obtain, or there is a delay in receiving, the onset of 
dialysis payment adjustment.
    Response: We appreciate the commenters bringing the on-set payment 
adjustment issues to our attention. We will consider these comments and 
work with agency staff to ensure that the on-set payment adjustment is 
applied appropriately in the future.

[[Page 72188]]

    Comment: One commenter pointed out the significant payment 
difference in dialysis treatments furnished and paid through the 
hospital outpatient prospective payment system (OPPS) versus those paid 
under the ESRD PPS.
    Response: We agree with the commenter that the payment difference 
for emergency or unscheduled dialysis services and maintenance renal 
dialysis services is significant, and note that the OPPS payment amount 
is based upon hospital claims data and reflects a significantly higher 
level of effort and resources to treat the patient in the hospital.
    Comment: A commenter representing teaching hospitals expressed 
concern that the proposed drug utilization reduction would have a 
serious impact on teaching hospitals and the patients they treat. The 
commenter recommended that the regulatory impact analysis display the 
impact for hospital-based facilities according to teaching status for 
CY 2014.
    Response: We appreciate the commenter's recommendation. While we 
are unable to include this information for the CY 2014 impact analysis, 
we will consider modifying the impact table to identify hospital-based 
ESRD facilities that are part of teaching hospitals in the future.

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

A. Background

    For more than 30 years, monitoring the quality of care provided to 
patients with end-stage renal disease (ESRD) by dialysis facilities has 
been an important component of the Medicare ESRD payment system. The 
ESRD quality incentive program (QIP) is the most recent step in 
fostering improved patient outcomes by establishing incentives for 
dialysis facilities to meet or exceed performance standards established 
by CMS. The ESRD QIP is authorized by section 1881(h) of the Social 
Security Act (the Act), which was added by section 153(c) of Medicare 
Improvements for Patients and Providers Act (MIPPA). CMS established 
the ESRD QIP for payment year (PY) 2012, the initial year of the 
program in which payment reductions were applied, in two rules 
published in the Federal Register on August 12, 2010, and January 5, 
2011 (75 FR 49030 and 76 FR 628, respectively). Subsequently, on 
November 10, 2011, CMS published a rule in the Federal Register 
outlining the PY 2013 and PY 2014 ESRD QIP requirements (76 FR 70228). 
On November 9, 2012, CMS published a rule in the Federal Register 
outlining the ESRD QIP requirements for PY 2015 and future payment 
years (77 FR 67450).
    Section 1881(h) of the Act requires the Secretary to establish an 
ESRD QIP by (i) selecting measures; (ii) establishing the performance 
standards that apply to the individual measures; (iii) specifying a 
performance period with respect to a year; (iv) developing a 
methodology for assessing the total performance of each facility based 
on the performance standards with respect to the measures for a 
performance period; and (v) applying an appropriate payment reduction 
to facilities that do not meet or exceed the established Total 
Performance Score (TPS). This final rule discusses each of these 
elements and the policies we are finalizing for their application to PY 
2016 and future payment years of the ESRD QIP. As of January 1, 2014, 
ESRD facilities located in Guam, American Samoa, and the Northern 
Marina Islands will be paid under the ESRD PPS. Under section 
1881(h)(1)(A) of the Act, these facilities will receive a reduction to 
their ESRD PPS payments, beginning with January 1, 2014 dates of 
service, if they do not meet the requirements of the ESRD QIP.

B. Summary of the Proposed Provisions and Responses to Comments on the 
ESRD QIP for PY 2016

    The proposed rule, entitled ``Medicare Program; End-Stage Renal 
Disease Prospective Payment System, Quality Incentive Program, and 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' (78 
FR 40836), hereinafter referred to as the CY 2014 ESRD PPS proposed 
rule, appeared in the Federal Register on July 8, 2013, with a comment 
period that ended on August 30, 2013. In that proposed rule, we made 
proposals for the ESRD QIP, including introducing, expanding, and 
revising measures; refining the scoring methodology; modifying the 
program's public reporting requirements; and continuing the data 
validation pilot program. We received approximately 55 public comments 
on these proposals from many interested parties, including dialysis 
facilities, organizations representing dialysis facilities, 
nephrologists, nurses, dietitians, home health advocacy groups, 
pharmaceutical manufacturers, patients, patient advocacy groups, and 
the Medicare Payment Advisory Commission (MedPAC).
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the policies we are finalizing for the ESRD QIP. Comments 
related to the paperwork burden are addressed in the ``Collection of 
Information Requirements'' section in this final rule.

C. Considerations in Updating and Expanding Quality Measures Under the 
ESRD QIP for PY 2016 and Subsequent PYs

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

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

    We believe that the development of an ESRD QIP that is successful 
in supporting the delivery of high-quality healthcare services in 
dialysis facilities is paramount. We seek to adopt measures for the 
ESRD QIP that promote better, safer, and more-efficient care. Our 
measure development and selection activities for the ESRD QIP take into 
account national priorities such as those

[[Page 72189]]

established by the National Priorities Partnership (http://www.nationalprioritiespartnership.org/), HHS Strategic Plan (http://www.hhs.gov/secretary/about/priorities/priorities.html), the National 
Strategy for Quality Improvement in Healthcare (http://www.healthcare.gov/center/reports/quality03212011a.html), and the HHS 
National Action Plan to Prevent Healthcare Associated Infections (HAIs) 
(http://www.hhs.gov/ash/initiatives/hai/esrd.html). To the extent 
feasible and practicable, we have sought to adopt measures that have 
been endorsed by a national consensus organization, are recommended by 
multi-stakeholder organizations, and developed with the input of 
providers, beneficiaries, and other stakeholders.
2. Brief Overview of Proposed PY 2016 Measures
    For the PY 2016 ESRD QIP and future payment years, we proposed 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. We proposed to 
adopt the following measures to evaluate facilities on the clinical 
quality of care:
     To evaluate anemia management:

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

     To evaluate dialysis adequacy:

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

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

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

     To address effective bone mineral metabolism management:

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

     To address patient safety:

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

     To address patient-centered experience:

    [cir] In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems (ICH CAHPS), a reporting measure**

     To gather data regarding comorbidities:

    [cir] Comorbidity, a reporting measure*

    * Indicates that the proposed measure would be new to the ESRD QIP.
    ** Indicates that the proposed measure is newly expanded in the 
ESRD QIP.
    At that time, we did not propose to adopt measures that address 
care coordination, efficiency, population and community health, or cost 
of care. However, we solicited comments on potential measures that 
would cover these areas. Our responses to these comments are discussed 
in section III.C.4 below.
3. Measures Application Partnership Review
    Section 1890A(a)(1) of the Act, as added by section 3014(b) of the 
Affordable Care Act, requires the entity with a contract (currently the 
NQF) under section 1890(a) of the Act to convene multi-stakeholder 
groups to provide input to the Secretary on the selection of quality 
and efficiency measures for use in certain programs. Section 
1890A(a)(2) of the Act requires the Secretary to make available to the 
public (not later than December 1 of each year) a list of quality and 
efficiency measures that are under consideration for use in certain 
programs. Section 1890A(a)(3) of the Act requires the entity with a 
contract under section 1890(a) of the Act to transmit the input of the 
multi-stakeholder groups to the Secretary not later than February 1 of 
each year, beginning in 2012. Section 1890A(a)(4) of the Act requires 
the Secretary to take into consideration the input of the multi-
stakeholder groups in selecting quality and efficiency measures. The 
Measures Application Partnership is the public/private partnership 
comprised of multi-stakeholder groups convened by NQF for the primary 
purpose of providing input on measures as required by sections 
1890A(a)(1) and (3) of the Act. The Measures Application Partnership's 
input on the quality and efficiency measures under consideration for 
adoption in CY 2013 was transmitted to the Secretary on February 1, 
2013, and is available at (http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx). As required by 
section 1890A(a)(4) of the Act, we considered these recommendations in 
selecting quality and efficiency measures for the ESRD QIP.
    We publicly made available a number of measures in accordance with 
section 1890A(a)(2) of the Act, and these measures were reviewed by the 
Measures Application Partnership. Of these measures, a subset is 
related to a number of proposed new measures for the PY 2016 ESRD QIP 
(one each for anemia management, hypercalcemia, infection monitoring, 
comorbidity reporting, and ESA usage). The Measures Application 
Partnership supported the following:
     NQF-endorsed measure NQF 1454: Proportion of 
patients with hypercalcemia
     NQF-endorsed measure NQF 1433: Use of Iron 
Therapy for Pediatric Patients (which forms the basis for the proposed 
Pediatric Iron Therapy reporting measure)
     NQF-endorsed measure NQF 1460: National 
Healthcare Safety Network (NHSN) Bloodstream Infection Measure (which 
forms the basis for the proposed Bloodstream Infection in Hemodialysis 
Outpatients clinical measure)
     NQF-endorsed measure NQF 0369: Dialysis Facility 
Risk-adjusted Standardized Mortality Ratio (the proposed Comorbidity 
reporting measure may assist in calculating performance on this 
measure, should we propose to adopt it in the future)
    The Measures Application Partnership supported the direction of the 
following measures:
     NQF-endorsed measure NQF 1463: Standardized 
Hospitalization Ratio for Admissions (the proposed Comorbidity 
reporting measure may assist in calculating performance on this 
measure, should we propose to adopt it in the future)
     M2774: Blood Transfusion Appropriateness (which forms the 
basis for the Patient Informed Consent for Anemia Treatment clinical 
measure)
    We have taken comments from the Measures Application Partnership 
and the NQF into consideration for the PY 2016 ESRD QIP. In addition, 
we received several other comments on the Measures Application 
Partnership, and the measures development process in general. These 
comments and our responses are set forth below.
    Comment: Several commenters noted that four of the five new 
measures proposed for the PY 2016 ESRD QIP are not endorsed by the NQF. 
These commenters were also concerned that there are NQF-endorsed 
versions of some of these measures, and that the

[[Page 72190]]

MAP reviewed the NQF-endorsed versions during its pre-rulemaking 
activities. The commenters believe that by proposing to adopt measures 
that the MAP did not actually review, CMS has not acted in accordance 
with the pre-rulemaking process set forth at section 1890A(a) of the 
Act. Commenters also believe that measures ``based on'' NQF-endorsed 
measures lack credibility. Some commenters recommended adopting the 
NQF-endorsed versions of the measures instead of the versions that we 
proposed to adopt in the proposed rule. Other commenters recommended 
that if CMS makes modifications to NQF-endorsed measures, CMS should 
resubmit the modified measures to the NQF for endorsement before 
proposing to adopt them for the ESRD QIP.
    Response: We agree that consensus-building is an essential part of 
measure development and implementation, but we disagree that the new 
measures proposed for the PY 2016 program circumvented the MAP pre-
rulemaking review process. We note that one of the five newly proposed 
clinical measures, Hypercalcemia, has been NQF-endorsed (NQF 
1454). Another one of the newly proposed clinical measures, 
NHSN Bloodstream Infection in Hemodialysis Outpatients, is not 
substantively different than NQF-endorsed measure 1460. As 
described in more detail below, the only differences between the NQF-
endorsed NHSN measure and the proposed NHSN measure involve 
programmatic implementation (i.e., the requirement to complete the NHSN 
Dialysis Event Protocol and the requirement to submit 12 months of data 
to NHSN).
    As explained more fully below, we have decided not to finalize the 
Comorbidity reporting measure due to concerns raised in public comments 
submitted in response to the PY 2016 ESRD QIP proposed rule. However, 
we note that the measure would have required facilities to report data 
that could be incorporated into two NQF-endorsed measures that were 
reviewed by the MAP.
    A fourth measure, the Patient Informed Consent for Anemia Treatment 
clinical measure, is not being finalized due to concerns raised in 
public comments submitted in response to the proposed rule (explained 
in more detail below). Nevertheless, this measure did receive feedback 
from the MAP in February 2013, which voted to support the direction of 
the measure, pending further measure development.
    The proposed Pediatric Iron Therapy reporting measure is also not 
being finalized in this final rule in response to comments received on 
the proposed rule (explained in more detail below). This measure, 
however, would have been based on NQF 1433, which received a 
time-limited endorsement from NQF and was supported by the MAP.
    Comment: Several commenters disapproved of the current processes 
used for measure development because (1) the current process is neither 
transparent nor consensus based; and (2) it was impossible to provide 
meaningful comment on the future measures described in the proposed 
rule because the preamble did not provide sufficient information to 
understand what CMS was proposing to do in the future. These commenters 
urged CMS to establish a systematic, phased-in process for 
incorporating new measures into the ESRD QIP, and to work with the 
community to identify a few domains that can be appropriately and 
explicitly prioritized.
    Response: We currently develop measures using the Measures 
Management System Blueprint (Blueprint), which is described in detail 
at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MeasuresManagementSystemBlueprint.html. This process 
was used to develop some of the quality measures for use in the ESRD 
QIP. The development process we use is designed to be transparent and 
result in consensus-based measures that are appropriate for inclusion 
in our quality reporting and pay-for-performance programs. For example, 
we conduct extensive environmental scans and research other relevant 
evidence as part of measure development. We also seek advice from 
Technical Expert Panels (TEPs), which provide independent guidance on 
measures under development, and from the public through a comment 
solicitation process. We also ask the NQF to endorse many of the 
measures we develop, which gives the public another opportunity to 
provide input into the measures we are considering for our programs. 
When we consider adopting measures that we did not develop, we 
routinely consider measures that are NQF-endorsed because the NQF 
endorsement process ensures that measure specifications and testing 
remain transparent to the public. The NQF also provides the public with 
an opportunity to provide input and feedback prior to measure 
endorsement.
    We recognize that our list of potential future measures does not 
typically contain detailed information about measures that we are 
considering for future use. However, we nonetheless believe that the 
list further makes transparent our future policy goals. We also note 
that before we can adopt any measure on that list, we must complete the 
measure development process outlined above. We are always interested in 
hearing from the community regarding what measures should be 
prioritized for development and implementation and encourage a 
continued dialog.
    Comment: Several commenters recommended that nephrology nurses 
should be part of every TEP because, compared with physicians, they 
have a better understanding of the practical aspects of collecting and 
entering data.
    Response: We make an effort to include in our measure development 
process input from a variety of stakeholders, including nephrology 
nurses, who provide care to the ESRD population. We plan to continue 
this approach as we continue our measure development activities.

D. 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 proposed to continue to 
use nine of the ten measures for the PY 2016 ESRD QIP and future 
payment years, modifying three of the measures as follows:
     ICH CAHPS (reporting measure): Expand
     Mineral Metabolism (reporting measure): Revise
     Anemia Management (reporting measure): Revise
    For the PY 2016 ESRD QIP and future payment years, we proposed to 
add three new clinical measures (Patient Informed Consent for Anemia 
Treatment, Hypercalcemia, and NHSN Bloodstream Infection in 
Hemodialysis Outpatients) and two new reporting measures (Pediatric 
Iron Therapy, and Comorbidity). (See Table 7.) We believe that, 
collectively, these measures will continue to promote improvement in 
dialysis care in the PY 2016 ESRD QIP and in future payment years.

[[Page 72191]]

  Table 6--Measures Adopted for the PY 2015 ESRD QIP and Future Payment
                                  Years
------------------------------------------------------------------------
    NQF                 Measure title and description
------------------------------------------------------------------------
N/A..................  Anemia Management: Hgb >12.
                       Percentage of Medicare patients with a mean
                        hemoglobin value greater than 12 g/dL.
0249.................  Hemodialysis Adequacy: Minimum delivered
                        hemodialysis dose.
                       Percent of hemodialysis patient-months with spKt/
                        V greater than or equal to 1.2.
0318.................  Peritoneal Dialysis Adequacy: Delivered dose
                        above minimum.
                       Percent of peritoneal dialysis patient-months
                        with spKt/V greater than or equal to 1.7
                        (dialytic + residual) during the four month
                        study period.
1423.................  Pediatric Hemodialysis Adequacy: Minimum spKt/V.
                       Percent of pediatric in-center hemodialysis
                        patient-months with spKt/V greater than or equal
                        to 1.2.
0257.................  Vascular Access Type: Arterial Venous (AV)
                        Fistula.
                       Percentage of patient-months on hemodialysis
                        during the last hemodialysis treatment of the
                        month using an autogenous AV fistula with two
                        needles.
0256.................  Vascular Access Type: Catheter >= 90 days.
                       Percentage of patient-months for patients on
                        hemodialysis during the last hemodialysis
                        treatment of month with a catheter continuously
                        for 90 days or longer prior to the last
                        hemodialysis session.
N/A \1\..............  National Healthcare Safety Network (NHSN)
                        Dialysis Event Reporting.
                       Number of months for which facility reports NHSN
                        Dialysis Event data to the Centers for Disease
                        Control and Prevention (CDC).
N/A \2\..............  In-Center Hemodialysis Consumer Assessment of
                        Healthcare Providers and Systems (ICH CAHPS)
                        Survey Administration +.
                       Attestation that facility administered survey in
                        accordance with specifications.
N/A \3\..............  Mineral Metabolism Reporting +.
                       Number of months for which facility reports
                        uncorrected serum calcium and phosphorus for
                        each Medicare patient.
N/A..................  Anemia Management Reporting +.
                       Number of months for which facility reports ESA
                        dosage (as applicable) and hemoglobin/hematocrit
                        for each Medicare patient.
------------------------------------------------------------------------
\1\ We note that an NQF-endorsed bloodstream infection measure
  (NQF1460) exists.
\2\ We note that a related measure utilizing the results of this survey
  has been NQF-endorsed (0258). It is our intention to use this
  measure in future years of the ESRD QIP. We believe that a reporting
  measure is a necessary step in reaching our goal to implement
  NQF0258.
\3\ We note that this measure is based upon a current NQF-endorsed serum
  phosphorus measure (0255), and a calcium monitoring measure
  that NQF had previously endorsed (0261).
\+\ Indicates a measure we are proposing to revise for PY 2016 and
  future years of the ESRD QIP.

   Table 7--New Measures Proposed for the PY 2016 ESRD QIP and Future
                              Payment Years
------------------------------------------------------------------------
    NQF                         Measure title
------------------------------------------------------------------------
N/A..................  Anemia of chronic kidney disease: Patient
                        Informed Consent for Anemia Treatment.
N/A \1\..............  Use of Iron Therapy for Pediatric Patients
                        Reporting.
1454.................  Proportion of Patients with Hypercalcemia.
N/A \2\..............  NHSN Bloodstream Infection in Hemodialysis
                        Outpatients.
N/A \3\..............  Comorbidity Reporting.
------------------------------------------------------------------------
\1\ We note that the NQF has previously endorsed a pediatric iron
  therapy measure (1433) upon which this measure is based.
\2\ We note that the NQF has previously endorsed a National Healthcare
  Safety Network (NHSN) bloodstream infection measure (1460)
  upon which this measure is based.
\3\ We note that the NQF has previously endorsed risk-adjusted
  hospitalization and mortality measures (1463 and 0369). The proposed Comorbidity reporting measure may assist in
  calculating performance on these measures, should we propose to adopt
  them in the future.

    We received several comments on proposed measures for the PY 2016 
ESRD QIP and future payment years. The comments and our responses are 
set forth below.
    Comment: One commenter urged CMS to find a way to incentivize 
quality attainment and improvement rather than solely focusing on 
penalizing facilities.
    Response: We do not have the statutory authority to award bonus 
payments to facilities for high performance under the ESRD QIP. 
Furthermore, we continue to believe that the structure of the ESRD QIP 
appropriately incentivizes improvements in the quality of care for 
patients with ESRD.
    Comment: Several commenters stated that the ESRD QIP should have 
consistent exclusions for all measures unless there is a specific 
clinical or operational reason to do otherwise. These commenters 
recommended the following exclusions for PY 2014, PY 2015, and 
subsequent years: (i) beneficiaries who are regularly treated at the 
facility and who fit into one of these categories: (a) beneficiaries 
who die within the applicable month, (b) in-center hemodialysis 
patients who receive fewer than 7 treatments in a month (or home 
peritoneal dialysis patients with fewer than 14 days of treatment) 
because it is difficult to affect outcomes with fewer treatments or 
less treatment time, as patients may miss draws, and it is difficult to 
predict a hospitalization, and (c) beneficiaries receiving home 
dialysis therapy who miss their in-center appointments when there is a 
documented, good-faith effort to have them participate in such a visit 
during the applicable month because it may be difficult for facilities 
to procure adherence, but the good-faith exception ensures that 
facilities will attempt to ensure proper patient education and 
compliance; (ii) transient dialysis patients; (iii) pediatric patients 
(unless the measure is specific to this population); and (iv) kidney 
transplant recipients with a functioning graft. These commenters stated 
that their recommended exclusions are ``consistent with CMS' own 
measures that were NQF-endorsed in 2007, CROWNWeb, and the URR 
reporting specifications.'' Additionally, these commenters believe that 
their recommended exclusions would hold facilities accountable only for 
those patients to whom they regularly furnish care.

[[Page 72192]]

    Response: We thank the commenters for their recommendations 
regarding the uniform application of exclusion criteria to the ESRD 
QIP. We interpret the commenter's statement about CMS measures that 
were NQF-endorsed in 2007 to mean the Hemodialysis Adequacy (NQF 
0249), Peritoneal Adequacy (NQF 0318), Vascular 
Access Type: Fistula (NQF 0257) and Vascular Access Type: 
Catheter (NQF 0256) measures. While we generally agree that 
exclusion criteria should be consistent where feasible, we also believe 
that exclusions should take into account the population to which a 
given measure applies. In addition, we believe that exclusions should 
take into account the settings (for example, in-center hemodialysis as 
opposed to home hemodialysis) for which the measures were developed. We 
will continue to look for ways to align exclusion criteria for measures 
in the ESRD QIP in future payment years as long as there is evidence to 
support such consistency.
    Comment: Several commenters expressed concerns that the ESRD QIP is 
adopting too many measures. These commenters noted that as more 
measures are adopted, the importance of any single measure to a 
facility's payment is reduced. The commenters also noted that CMS 
established criteria for retiring an ESRD QIP measure in the PY 2015 
ESRD QIP, and the commenter is concerned that CMS has yet to propose 
the removal or retirement of any ESRD QIP measure while simultaneously 
continuing to propose the inclusion of new measures with little 
relative impact on patient outcomes (that is, patient informed consent 
of anemia treatment and reporting of comorbidities).
    Response: We recognize that as more measures are added to the ESRD 
QIP, the significance of a facility's score on any single measure in 
relation to the overall TPS is reduced. In the CY 2013 ESRD PPS final 
rule (77 FR 67475), we finalized a list of criteria we will use to make 
determinations about whether to remove or replace a measure: ``(1) 
measure performance among the majority of ESRD facilities is so high 
and unvarying that meaningful distinctions in improvements or 
performance can no longer be made; (2) performance or improvement on a 
measure does not result in better or the intended patient outcomes; (3) 
a measure no longer aligns with current clinical guidelines or 
practice; (4) a more broadly applicable (across settings, populations, 
or conditions) measure for the topic becomes available; (5) a measure 
that is more proximal in time to desired patient outcomes for the 
particular topic becomes available; (6) a measure that is more strongly 
associated with desired patient outcomes for the particular topic 
becomes available; or (7) collection or public reporting of a measure 
leads to negative unintended consequences.'' We are currently in the 
process of evaluating all of our ESRD QIP measures against these 
criteria, and based on our findings, we will consider removing or 
replacing one or more measures next year.
    Comment: One commenter expressed concerns that laboratory measures 
continue to be proposed for the ESRD QIP without reference to the 
sources, magnitude, and implications of unavoidable analytical 
variation. This commenter believes that between-laboratory variation 
renders laboratory-based clinical performance measures poor candidates 
for inclusion in a quality incentive program. The commenter recommended 
that the results of the same-sample, between-laboratory analysis should 
be shared with any TEP considering a laboratory-based performance 
measure.
    Response: In April 2013, CMS convened a mineral bone disease TEP 
that reached conclusions similar to those pointed out by this 
commenter, and recommended that CMS convene an additional TEP for the 
purpose of addressing the issue of variability in all laboratory-based 
measures. We are continuing to consider how this issue might best be 
addressed through future measure development.
1. PY 2015 Measures Continuing in PY 2016 and Future Payment Years
    We are continuing using six measures adopted in the CY 2013 ESRD 
PPS final rule for the PY 2016 ESRD QIP and future payment years of the 
program. We are also continuing to use two measure topics adopted. Our 
policies regarding the scoring of 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:
     The Hemoglobin Greater than 12 g/dL measure.
    The Dialysis Adequacy measure topic, which is comprised of
     Hemodialysis Adequacy Clinical Performance Measure III: 
Hemodialysis Adequacy--HD Adequacy--Minimum Delivered Hemodialysis Dose 
(NQF  0249),
     Peritoneal Dialysis Adequacy Clinical Performance Measure 
III--Delivered Dose of Peritoneal Dialysis Above Minimum (NQF 
0318);
     Minimum spKt/V for Pediatric Hemodialysis Patients (NQF 
423); and
    The Vascular Access Type measure topic, which is comprised of
     Vascular Access Type: Arterial Venous (AV) Fistula (NQF 
0257); and
     Vascular Access Type: Catheter >= 90 days (NQF 
0256).
    The technical specifications for these measures can be found at: 
http://www.dialysisreports.org/ESRDMeasures.aspx.
    We received the following comments on measures continuing in the PY 
2016 ESRD QIP:
    Comment: One commenter noted that measures appropriate for in-
center hemodialysis are not necessarily appropriate for peritoneal 
dialysis or home hemodialysis. The commenter recommended accounting 
more fully for these distinctions in existing measure specifications, 
as well as the adoption of quality measures that focus on home 
hemodialysis.
    Response: We agree that the needs of patients receiving dialysis 
through different modalities must be considered while implementing 
quality measures, and we seek to take these issues into account through 
TEP feedback during measure development and maintenance, as well as via 
public feedback. We continue to pursue additional quality measures that 
will support quality assessment and improvement for all modalities.
    Comment: Many commenters expressed concerns that the ESRD QIP 
includes catheter and fistula measures without including a graft 
measure. These commenters stated that this creates a disincentive for 
using a clinically appropriate access (that is, a graft) even when it 
is in the best interest of a patient.
    Response: We are aware of the concern relating to the lack of a 
graft measure in the ESRD QIP measure set. We are in the process of 
determining whether to propose to revise the current Vascular Access 
Type measures, and/or whether it is feasible to develop and propose to 
adopt an independent graft measure.
    Comment: One commenter expressed concerns that the low performance 
standard and benchmark for the hemoglobin greater than 12 g/dL measure 
places facilities with large numbers of home peritoneal dialysis 
patients at a disadvantage. The commenter stated that home peritoneal 
dialysis patients are more likely than in-center hemodialysis patients 
to have hemoglobin levels greater than 12 g/dL, so facilities with 
large numbers of home

[[Page 72193]]

peritoneal dialysis patients are disproportionately likely to have more 
than 1.2 percent of their patients with a hemoglobin level greater than 
12 g/dL.
    Response: We disagree that the apparent difference in average 
hemoglobin levels for in-center hemodialysis and home peritoneal 
dialysis patients warrants a revision to the measure specifications for 
the Hemoglobin Greater Than 12 g/dL measure. First, the FDA-approved 
labeling for ESAs does not differentiate appropriate hemoglobin levels 
based on dialysis modality. In addition, we are not aware of evidence-
based support for the assertion that it is acceptable for a greater 
proportion of ESA-treated peritoneal dialysis patients to achieve 
hemoglobin levels greater than 12 g/dL. For these reasons, we continue 
to believe that the Hemoglobin Greater Than 12 g/dL measure does not 
place certain types of facilities at a disadvantage.
    Comment: One commenter supported the continuation of the hemoglobin 
greater than 12 g/dL measure because of the potential problems stemming 
from the over-prescription of ESAs. However, the commenter stated that 
fewer ESRD QIP measures may be more effective in accurately and 
efficiently monitoring the quality of care delivered by dialysis 
facilities, and that CMS should focus more on a Hemoglobin Less Than 
10g/dL measure as a means to monitor anemia management.
    Response: We agree that quality measurement and assessment should 
contribute to the ESRD QIP as parsimoniously as is feasible while 
capturing quality for the complex treatment of dialysis patients. We 
will continue to take this into consideration in future rulemaking. Our 
rationale for removing the Hemoglobin Less Than 10 g/dL measure was 
published in the CY 2012 ESRD PPS proposed rule (76 FR 40519), and we 
believe those concerns remain sufficiently valid to merit not 
reintroducing the measure to the ESRD QIP at this time.
    Comment: Several commenters recommended retiring the Hemoglobin 
Greater Than 12 g/dL measure. These commenters noted that the benchmark 
for the measure is 0 percent and the performance standard is 1.2 
percent. The commenters believe that such a condensed performance range 
means the measure is incapable of distinguishing performance between 
facilities. The commenters also stated that the measure is no longer 
needed because facilities no longer have an incentive to overuse ESAs 
under the PPS.
    Response: We recognize that facility performance for the Hemoglobin 
Greater Than 12 g/dL measure is very high overall, and that this is 
likely a consequence of including ESAs in the ESRD PPS bundled payment. 
We decided to continue using the measure in the PY 2016 program because 
we continue to believe that over-prescription of ESA constitutes a 
significant risk for patients with ESRD, and we continue to believe 
that the Hemoglobin Greater than 12 g/dL measure helps ensure that 
patients are not over-prescribed ESAs.
2. Expansion of One PY 2015 Measure and Revision of Two PY 2015 
Measures for PY 2016 and Subsequent Payment Years
    As stated earlier, we believe it is important to continue using 
measures from one payment year to the next payment year of the program 
to encourage continued improvements in patient care. Therefore, we 
proposed to expand and revise the measures discussed below that we 
finalized in the CY 2013 ESRD PPS final rule. For all measures except 
for the ICH CAHPS reporting measure, these proposed requirements would 
apply to the measures for PY 2016 and future payment years. For the ICH 
CAHPS measure, certain proposed expanded requirements would apply to PY 
2016, and some additional proposed requirements would apply to PY 2017 
and future payment years.
a. 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 0258 \2\ CAHPS In-Center 
Hemodialysis Survey, which is based on how facilities perform on the 
ICH CAHPS survey. In PY 2015, we continued to use a reporting measure 
related to the ICH CAHPS survey, requiring that facilities attest they 
had administered the survey according to the specifications set by the 
Agency for Healthcare Research and Quality (AHRQ), but not requiring 
the submission of survey data. We required that facilities attest by 
January 31, 2014, to administering the ICH CAHPS survey during the 
performance period (77 FR 67480 through 67481).
---------------------------------------------------------------------------

    \2\ Please note that the proposed rule initially included a 
typographical error, such that the measure was referred to as NQF 
0285 instead of NQF 0258. We have revised the text 
here in response to a public comment, which is discussed below.
---------------------------------------------------------------------------

    We are taking several steps to develop the baseline data necessary 
to propose and implement NQF 0258 as a clinical measure in the 
PY 2018 ESRD QIP. We expect to be able to certify ICH CAHPS survey 
vendors beginning in early CY 2014. We are also building the capacity 
to accept survey data; developing detailed specifications for 
administering the ICH-CAHPS survey in light of questions vendors asked 
about previous procedures; and developing specifications for submitting 
data to CMS, such as file specifications, structure and instructions 
that the survey vendors will use. We have taken these steps in order to 
make it possible for facilities to contract with third-party vendors to 
transfer survey data results to CMS, so that we might collect the 
baseline data necessary to propose and implement NQF 0258.
    For PY 2016, we proposed that each facility arrange by July 2014 
for a CMS-approved vendor to conduct the ICH CAHPS survey according to 
CMS (rather than AHRQ) specifications, available at the ICH CAHPS Web 
site (https://ichcahps.org). Facilities will need to register on the 
https://ichcahps.org Web site in order to authorize the CMS-approved 
vendor to administer the survey and submit data on their behalf. Each 
facility must administer (via its vendor) the survey once during the 
performance period and, by 11:59 ET on January 28, 2015, report the 
survey data to CMS using the specifications on the ICH CAHPS Web site.
    For PY 2017 and subsequent payment years, we proposed similar 
requirements except that each facility must arrange to have the survey 
administered twice during each performance period and must report the 
data (via its CMS-approved vendor) to CMS by the date specified on the 
ICH CAHPS Web site.
    Although we have required that other types of providers, including 
home health agencies and acute care hospitals, administer and submit 
CAHPS survey data on a monthly, continuous basis, we recognize that 
there are generally low rates of turnover in dialysis-facility patient 
populations. For this reason, we do not see the same need to require 
facilities to administer the survey as frequently and, as proposed 
above, we would require facilities to administer the survey once during 
the performance period for PY 2016 (in order to allow facilities enough 
time to select a vendor) and twice for subsequent payment years. We 
believe that this frequency of survey administration will enable us to 
gather sufficient data to adopt in future rulemaking a clinical version 
of this

[[Page 72194]]

measure without unduly burdening facilities. The technical 
specifications for this proposed measure are located at http://www.dialysisreports.org/pdf/esrd/public-measures/ICHCAHPS-2016NPRM.pdf.
    We requested comments on this proposal. The comments we received on 
these proposals and our responses are set forth below.
    Comment: Many commenters supported monitoring patients' 
experiences. However, these commenters stated that the ICH CAHPS survey 
is too burdensome and lengthy for patients to complete. Commenters 
suggested that the ICH CAHPS survey be divided into three parts, with 
each patient receiving one of these parts and a group of core 
questions.
    Response: We do not agree that the ICH CAHPS survey is overly 
burdensome and we clarify that only 38 core survey questions are 
applicable to all respondents, plus 21 questions in the ``About You'' 
section. To be considered as complete, 19 of the 38 core questions must 
be answered. As we noted in the CY 2012 ESRD PPS final rule (76 FR 
70269 through 70270) and the CY 2013 ESRD PPS final rule (77 FR 67480), 
we continue to believe that assessing the experiences of patients is 
vital to quality care. Patient surveys can, and should, draw a 
facility's attention to issues that can only be raised by those 
receiving care. Although commenters may consider the survey to be 
burdensome to patients, the ICH CAHPS tool went through extensive 
testing during development including focus groups and one-on-one 
patient sessions which assessed this burden and created specifications 
accordingly. Furthermore, we believe that concerns about patient burden 
can be at least partially mitigated without decreasing the number of 
questions on the survey or how the survey is administered. For example, 
as the specifications indicate, patients may take a break during the 
administration of the survey or take the survey in multiple sittings if 
they feel that the number of questions is too great to answer at one 
time.
    Additionally, there are no plans to change the measure 
specifications used in the AHRQ version, which received NQF endorsement 
in 2007. The ICH CAHPS survey underwent rigorous testing when it was 
being developed, and the testing refers to the survey in its entirety. 
The suggestion to parse the survey into three parts would make 
implementation too complex. In addition, the survey is designed to 
address many aspects of a patient's experience with in-center 
hemodialysis. Breaking the survey up into three separate components 
would mean that any single patient would not be asked about the full 
range of their experience.
    Comment: One commenter sought clarification on the measure 
specifications for the ICH CAHPS measure. The commenter asked if the 
case minimum for the measure pertains to total patients, eligible 
patients, or respondents to the survey. Another commenter requested 
clarification on the 30-case minimum for the ICH CAHPS measure. One 
commenter wanted to know the period of time used to determine numbers 
of eligible patients treated (for example, between January and the end 
of April).
    Response: The case minimum pertains to patients who are eligible 
for the survey, and patients over the age of eighteen with at least 3 
months of experience on hemodialysis at their current facility are 
eligible. We further clarify that the performance period (for example, 
January through December 2014 for PY 2016) is the period of time that 
should be used to determine numbers of eligible patients.
    Comment: One commenter did not agree that the target number of 
completed ICH CAHPS surveys should be 200. The commenter stated this 
target number makes no sense, regardless of clinic size, and should be 
removed.
    Response: We selected 200 as the target number of completed surveys 
because we found that this was the number needed to reach a confidence 
interval of +/-0.07--a range that we believe ensures that facility 
scores will be accurate and comparable between facilities. We recognize 
that it will be difficult for smaller facilities to reach this target. 
We clarify that there are no penalties if a facility submits less than 
200 complete surveys.
    Comment: A few commenters raised concerns about the inclusion of 
homeless persons and nursing home patients with respect to eligibility 
for the ICH CAHPS survey because these patients may be difficult to 
contact for purposes of administering the survey.
    Response: We are aware that it might be difficult to contact 
homeless and nursing home patients for any survey. However, these 
subgroups are important groups of people who may have different 
concerns than other dialysis patients. Although we have identified 200 
completed surveys as a target response rate, there is no required 
minimum number of surveys that a facility must submit in order to 
satisfy the reporting requirements for the measure.
    Comment: Several commenters stated that facilities should not be 
held accountable, leading to a penalty, for low response rates from 
such populations for which CMS's contact information may be inaccurate 
and/or out-of-date or based on the number of responses in the survey. 
Some commenters stated that facilities have no way to ensure that 
patients' contact information is as accurate and up-to-date as possible 
because the survey is administered by a third-party vendor. Other 
commenters did not support the ICH CAHPS measure specifications that 
require each patient to fill out at least half of the survey for the 
survey to count as complete. Commenters were also concerned because 
patients often skip or refuse to answer survey questions, and the 
commenters do not believe that facilities should be penalized for this.
    Response: Facilities do not face any penalties for low-response 
rates. Survey vendors will receive contact information for patients 
sampled from a facility directly from CMS and its contractor, which 
will extract addresses and telephone numbers from CROWNWeb.
    There are only 38 core survey questions that are applicable to all 
respondents, plus 21 questions in the ``About You'' section. To be 
considered as complete, 19 of the 38 core questions must be answered. 
Answering the survey is voluntary, and respondents may refuse to answer 
specific questions. With pre-notification by the vendor of the 
importance of their input, we hope that sampled patients will be 
willing to participate. Nevertheless, we clarify that facilities will 
not be penalized if they submit incomplete surveys.
    Comment: Several commenters sought clarity on the ICH CAHPS measure 
specifications, which read that ``survey responses will not be shared 
with individual facilities, even if the respondent were to provide 
permission to do so.'' These commenters recommended that the 
specifications should clearly state that aggregate responses will be 
provided, but individual survey responses will not be shared.
    Response: In an effort to protect the confidentiality of responses 
to the survey among this highly vulnerable population, in-center 
hemodialysis facilities must hire a third-party vendor to administer 
the survey. In addition, CMS will not allow vendors to share the 
responses of individual patients with in-center hemodialysis 
facilities. Vendors may provide aggregate results to facilities, but 
these results cannot include demographic data or other information that 
could be used to match patients and their survey responses. These 
measure specifications are consistent with the AHRQ specifications

[[Page 72195]]

for fielding the survey and handling the survey responses.
    Comment: Several commenters did not support the proposal to adopt 
the ICH CAHPS measure because it is not appropriate to publicly publish 
scores that aggregate survey results when facilities have no means to 
impact responses to some of the questions. For example, cuts to the 
ESRD PPS payment rates may result in physicians spending less time with 
patients, and patients are also asked in the survey to comment on 
physicians that are not associated with the facility. Some commenters 
recommended including the physician component of the ICH CAHPS measure 
in the Physician Quality Reporting System instead of in the ESRD QIP.
    Response: We believe that the survey results, in the aggregate, 
will be sufficient to promote quality improvement and, as we explain 
above, also believe that the interest in protecting patient anonymity 
and confidentiality outweighs the cost of making public individual 
survey responses. We also note that ICH CAHPS has been in the public 
domain since 2007, and dialysis facilities are already using the survey 
(with the ARHQ specifications) to meet the requirements for the PY 2014 
ESRD QIP.
    Questions about physicians are only one component of the ICH CAHPS 
survey, but we believe that the experience patients have with their 
physicians is critical to understanding and measuring their experience 
at the facility overall. We continue to believe that facilities can 
impact their performance on the physician component of the survey by 
encouraging physicians who see the facilities' patients to improve the 
quality of care they provide.
    Comment: Many commenters discussed the impact of facility size on 
survey administration. Some commenters stated that small facilities 
would likely have low response rates that could skew results. Other 
commenters did not support the proposal to exclude facilities with 
fewer than 30 eligible patients from ICH CAHPS survey. These commenters 
stated that in CY 2011, nearly 20 percent of all in-center dialysis 
facilities would have been excluded from the measure; that CMS should 
evaluate patient experience of care in small facilities; and that CMS 
should develop further methodologies to collect reliable data from 
small facilities. Commenters also did not support the measure 
specifications for the ICH CAHPS measure. Specifically, these 
commenters noted that while the measure specifications require 
facilities with more than 200 patients to minimize overlap between the 
random sample of patients who receive each semi-annual survey, it will 
be difficult for facilities with close to 200 patients to minimize 
sampling overlap because many patients will likely be sampled in both 
of the bi-annual surveys.
    Response: For our survey measures, we want to ensure that we are 
measuring true performance. In any measurement system there is a 
mixture of signal (true performance) and noise (random error). By using 
a case minimum of 30, we can increase reliability of the ICH CAHPS 
measure and the likelihood that it is measuring signal and not noise. 
Facilities with fewer than 30 eligible cases are excluded from the ICH 
CAHPS survey because results from these facilities might not be 
reliable. We recognize that when facilities have close to 200 patients, 
most of these patients will receive both of the semi-annual surveys in 
PY 2017 and future payment years. Nevertheless, these facilities should 
attempt to minimize overlapping patients by removing patients from the 
second survey if they were sampled in the first survey, and most 
facilities serve 99 or fewer unique patients per year.
    Comment: Many commenters did not support the proposal to require 
facilities to administer the ICH CAHPS survey twice annually, starting 
in PY 2017, particularly in light of the proposed cuts to the ESRD PPS. 
Some of these commenters stated that it makes sense for hospitals to 
conduct the survey regularly because they generally do not treat the 
same patients more than once; however, dialysis facilities see the same 
patients over the course of the year, so there is no need to conduct a 
second survey. Commenters also stated that there are no data 
demonstrating that semi-annual surveys improve the validity of survey 
results. Additionally, many commenters did not support the proposal to 
administer the ICH CAHPS survey twice annually because doing so will 
lead to ``survey fatigue'' by decreasing the response rates to the ICH 
CAHPS survey, and other surveys administered by dialysis facilities, 
including the Kidney Disease Quality of Life-36 survey, which commenter 
states are required by the ESRD Conditions for Coverage (CfC) 
regulations. These commenters recommended fielding the survey once 
annually.
    Response: We decided to require semi-annual administration of the 
survey in order to collect data about patients' experiences with 
dialysis care at different points in the calendar year, to ensure that 
patients could accurately recall their experience of care, and to 
ensure that survey responses were collected in timely fashion. 
Conducting the survey on an annual basis increases the likelihood of 
collecting outdated or inaccurate information, while making it more 
difficult to solicit information that accurately reflects the 
experiences of patients. Although we recognize that the requirement to 
conduct a second, semi-annual ICH CAHPS survey may decrease response 
rates to other surveys that facilities are required to complete (such 
as the Kidney Disease Quality of Life-36 survey), we believe that the 
drawbacks associated with the possibility of survey fatigue are 
outweighed by improvements in the reliability of the data collected 
through the ICH CAHPS survey.
    Comment: Several commenters disagreed with the proposal to adopt 
the expanded ICH CAHPS measure because the survey is too expensive to 
administer.
    Response: Although we acknowledge that there is a cost to 
administer the ICH CAHPS survey, we suggest that dialysis facilities 
compare several vendors before deciding on a vendor. We strongly 
believe that the information facilities gain from the ICH CAHPS survey 
outweighs the costs to administer the survey, because facilities can 
use this information to improve the care provided to patients with 
ESRD. Furthermore, as stated in the CY 2013 ESRD PPS final rule (77 FR 
67481), ``Facilities may report allowable operating expenses in their 
Medicare cost reports. We believe that it is consistent with this 
payment policy for facilities to include the ICH CAHPS costs on their 
cost reports because they are allowable operating expenses.''
    Comment: Some commenters suggested that CMS redesign the survey to 
account for special populations (for example, low literacy, hearing and 
vision impaired, elderly, and physically handicapped). Other commenters 
stated that the ICH CAHPS survey should not be administered in 
languages other than English and Spanish, as proper translation of 
surveys requires a complicated forward and backward translation 
process, and it is unlikely that surveys conducted in other languages 
can be properly compared to surveys conducted in English and Spanish 
because of the complexity of the translation process.
    Response: The survey administration procedures take into account 
the needs of special populations such as low literacy, hearing and 
vision impaired, elderly, and physically handicapped. Patients can get 
assistance in answering the survey as long as they, and not the 
assistor, actually answer the questions.

[[Page 72196]]

In addition, for telephone as well as in-person interviews, the 
interviewer will be instructed to permit respondents to take breaks as 
needed and to call back at another time if a respondent becomes 
fatigued. Finally, participation in the survey is completely voluntary 
on the part of the patients. They may refuse to participate or refuse 
to answer any questions they do not wish to answer. Facilities are not 
required to administer the survey in languages other than English and 
Spanish. However, CMS-approved vendors may use other approved 
translations that are authorized and developed by CMS.
    Comment: A few commenters raised concerns about the administration 
of the survey and ways to ensure that sampled patients would/could 
complete the survey, especially those who may have lost their mail 
version of the survey or those with cognitive and/or language barriers.
    Response: Responsiveness might vary by survey mode, language 
barriers, cognitive issues, literacy, and health issues. We believe 
that the ICH CAHPS measure is designed to maximize patient response 
rates while retaining its voluntary nature. Every sampled patient will 
receive a pre-notification letter from CMS (on its letterhead) prior to 
receipt of the mail survey or initial telephone call. This letter will 
describe the survey and the patient's role in providing feedback to 
improve the quality of care at the facility. The survey methodology 
also allows for assistance for patients who might have difficulty 
completing the survey.
    The measure specifications suggest that survey vendors use current 
best practices to enhance response rates by (1) standardizing the 
survey materials; (2) improving readability; (3) allowing multiple 
contacts (up to 5) for follow-up in the telephone or mixed-mode; (4) 
offering call back times that are best suited for the sample patient; 
and/or (5) breaking up the survey over multiple calls.
    In all three modes of administration (mail-only, telephone-only, 
and mixed modes), a pre-notification letter will include both email 
addresses and telephone numbers to call CMS or its ICH CAHPS contractor 
if the respondent has questions or problems with the survey. For the 
mail-only sample patients, cover letters will include the contact 
information of the CMS-approved survey vendors, who can replace lost 
surveys. Lost surveys should not be an issue for the telephone-only 
mode. For the other modes, sample patients will receive multiple 
surveys during the follow-up period or may contact the vendor for 
replacements.
    Comment: A few commenters suggested making the survey available for 
patients online.
    Response: We are aware that online surveys are popular, but this 
capability does not currently exist. We will continue to investigate 
new modes of administration, and in the meantime will continue with 
more traditional efforts to reach patients.
    Comment: Many commenters expressed concerns that the ICH CAHPS 
survey only covers in-center hemodialysis patients. Many of these 
commenters recommended that CMS assess the experience of home dialysis 
patients and peritoneal dialysis patients as well.
    Response: We thank commenters for their feedback. Eighty-nine 
percent of all ESRD patients receive in-center hemodialysis. Even those 
receiving peritoneal or home dialysis, have their initial care at an 
in-center hemodialysis facility. Therefore, this survey was 
specifically designed to capture the experience of in-center 
hemodialysis patients. Surveys for peritoneal and home dialysis 
patients may be considered for future development.
    Comment: One commenter stated that there is a discrepancy between 
the proposed rule and the measure specifications for the ICH CAHPS 
measure. Specifically, the measure specifications establishes the 
survey periodicity for CY 2014 as ``twice annually,'' yet the proposed 
rule establishes the survey periodicity for CY 2014 as annually.
    Response: We proposed that facilities would only have to administer 
the ICH CAHPS survey once in CY 2014. This is consistent with the 
measure specifications that appear at https://ichcahps.org/Portals/0/ICH_DifferencesBtwAHRQandICHCAHPSSurveySpecs.pdf.
    Comment: One commenter noted that on page 40857, second column, 
subsection a, there is a typographical error. NQF 285 should 
be NQF 258.
    Response: We thank the commenter for pointing out this 
typographical error. We have corrected it above.
    Comment: Several commenters requested clarification about whether 
each facility will need to register on the www.ichcahps.org Web site, 
or if umbrella organizations that include a number of facilities will 
be able to authorize a selected vendor to administer the survey and 
submit data on behalf of each its facilities. These commenters stated 
that the contracting for this process will be centralized, and it would 
be inefficient for individual facilities to complete these steps when 
they could be done on an organization-wide basis. Concerns were also 
raised about having time to meet the system requirements for submitting 
ICH CAHPS data to CMS.
    Response: Dialysis organizations may hire and authorize a single 
vendor to conduct the survey and submit data for all facilities under 
the corporate umbrella of the organization, but the corporate umbrella 
must report facility-level data to ensure that results can be 
attributed to individual facilities. The vendor may batch data from 
several facilities into a single zip file for submission.
    Because third-party vendors are already conducting ICH CAHPS 
surveys on behalf of multi-facility organizations, we believe that the 
facilities will be able to timely meet the system requirements for 
administering the survey.
    Comment: One commenter did not support the proposal to change the 
measure specifications for the ICH CAHPS measure from the AHRQ version 
to the CMS version. This commenter stated that doing so will make it 
hard to compare results between the two versions of the survey, and 
also cause confusion for facilities.
    Response: Changes to the AHRQ measure specifications, which 
received NQF endorsement in 2007, are not substantive. Rather, the CMS 
measure specifications provide more details about the field operations 
and data submission in order to standardize the procedures used by 
third-party vendors. These non-substantive changes to the measure 
specifications were made in response to requests for this 
standardization. We have found that it is easier for vendors to 
administer the survey when they have detailed specifications, and we 
believe that this standardization helps ensure that the data will be 
comparable across all facilities.
    For these reasons, we are finalizing the expanded ICH CAHPS 
reporting measure as proposed for the PY 2016 ESRD QIP and for future 
payment years. The technical specifications for this finalized measure 
can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/ICHCAHPS-2016FR.pdf.
b. Revised Mineral Metabolism Reporting Measure
    Adequate management of bone mineral metabolism and disease in 
patients with ESRD continues to be a high priority because it can cause 
severe consequences such as osteoporosis, osteomalacia, and 
hyperparathyroidism. The PY 2015 ESRD QIP has a reporting

[[Page 72197]]

measure focused on mineral metabolism (77 FR 67484 through 67487). We 
proposed two changes for PY 2016 and future payment years. First, when 
we finalized the measure in the CY 2013 ESRD PPS final rule, we 
inadvertently excluded home peritoneal dialysis patients from the 
measure specifications. For PY 2016 and future payment years, we 
proposed to include home peritoneal dialysis patients in the Mineral 
Metabolism reporting measure. Therefore, we proposed that a qualifying 
case for this measure will be defined as (i) an in-center Medicare 
patient who had been treated at least seven times by the facility; and 
(ii) a home dialysis Medicare patient for whom the facility submitted a 
claim at least once per month.
    Second, if the proposed Hypercalcemia clinical measure (described 
below) is finalized based on public comment, then we believe it would 
be redundant, and unduly burdensome, for facilities to also continue 
reporting serum calcium levels as part of the Mineral Metabolism 
reporting measure. Accordingly, in light of our proposal to adopt the 
Hypercalcemia measure, we proposed to change the specifications for the 
Mineral Metabolism measure such that it no longer requires facilities 
to report serum calcium levels. We solicited comments on this proposal, 
and in particular on whether we should retain the reporting of serum 
calcium levels as part of the Mineral Metabolism reporting measure if 
the proposed Hypercalcemia measure was not finalized.
    As described in more detail below (Proposed Minimum Data for 
Scoring Measures), we also proposed to eliminate the 11-case minimum 
for this measure, which was finalized in the CY 2013 ESRD PPS final 
rule (77 FR 67486). Because of the proposed revised case minimum, and 
because there are circumstances that might make it challenging for a 
facility to draw a sample from certain patients, such as those who are 
admitted to hospital during the month, we proposed that, in order to 
receive full points on this measure, facilities that treat 11 or more 
qualifying cases over the entire performance period will have to report 
at the lesser of the 50th percentile of facilities in CY 2013 or 97 
percent per month, on a monthly basis, for each month of the 
performance period. We further proposed that facilities that treat 
fewer than 11 qualifying cases during the performance period will have 
to report on a monthly basis the specified levels for all but one 
qualifying case. If a facility only has one qualifying case during the 
entire performance period, a facility will have to attest to that fact 
in CROWNWeb by January 31 of the year following the performance period 
in order to avoid being scored on the measure. We made 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).
    The comments we received on these proposals and our responses are 
set forth below.
    Comment: Several commenters supported the proposal to include home 
peritoneal dialysis patients in the Mineral Metabolism reporting 
measure.
    Response: We thank the commenters for their support.
    Comment: Many commenters supported removing calcium from the 
reporting requirements of the Mineral Metabolism reporting measure if 
the Hypercalcemia measure is finalized, and retaining calcium in the 
Mineral Metabolism measure if the Hypercalcemia measure is not 
finalized.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the proposal to modify the Mineral 
Metabolism measure and asked whether the revised Mineral Metabolism 
reporting measure would also include home hemodialysis patients.
    Response: We thank the commenter for the support. We clarify that 
the measure includes home hemodialysis patients, as well as home 
peritoneal dialysis patients.
    Comment: Some commenters stated the Mineral Metabolism reporting 
measure should include an exclusion for patients not on chronic 
dialysis to make the measure consistent with the anemia management 
reporting measure.
    Response: We clarify that patients not on chronic dialysis have 
always been excluded from the Mineral Metabolism reporting measure, 
which is appropriate because the measure was designed for patients on 
chronic dialysis. We have updated the measure specifications to state 
this explicitly.
    Comment: Several commenters noted that there is an inconsistency 
between the proposed rule and the measure specifications for the 
Mineral Metabolism reporting measure. The proposed rule states that 
``if a facility only has 1 qualifying case during the entire 
performance period, a facility will have to attest to that fact in 
CROWNWeb by January 31 of the year following the performance period in 
order to avoid being scored on the measure.'' By contrast, the measure 
specifications state that ``fewer than 1 patient during the performance 
period who are (i) in-center Medicare patients who have been treated at 
least 7 times by the facility during the reporting month; or (ii) home 
dialysis Medicare patients for whom the facility submits a claim during 
the reporting month must attest to this fact in CROWNWeb to not be 
scored on this measure.''
    Response: We thank commenters for identifying this discrepancy. We 
have changed the measure specifications to state that the case minimum 
is one eligible patient. Facilities with two or more eligible patients 
will be scored on the measure, and facilities with one eligible patient 
will be scored on the measure unless they attest to this fact in 
CROWNWeb. We made this proposal to enable us to gather data on patients 
in small facilities.
    Comment: One commenter recommended that the Mineral Metabolism 
reporting measure specifications be modified to indicate that plasma 
and serum should both be acceptable blood samples for the measurement 
of calcium. The commenter stated that plasma testing is more stable and 
requires less manipulation, has been used since 2006, has been 
validated for most clinical chemistry analyzers, and has been deemed 
acceptable and equivalent by analyzer manufacturers.
    Response: We disagree that the measure specification should be 
modified to include plasma calcium measurements. This issue was 
discussed at length during the April 2013 mineral bone disease TEP 
(http://www.cms.gov/Medicare/End-Stage-Renal-Disease/CPMProject/index.html). Overall, TEP members determined that there is a lack of 
strong evidence supporting the acceptance of measurements of serum 
phosphorus on plasma (vs. serum). Published literature indicates that 
the difference in phosphorus levels measured on plasma vs. serum are 
not trivial and may be as high as 10 percent.\3\ Based on these 
observations, TEP members voted and unanimously recommended to keep the 
measure unchanged, such that facilities are required to report serum 
levels.
---------------------------------------------------------------------------

    \3\ Carothers, JE et. al. Clinical Chemistry, volume 22, Issue 
11, 1976 (Table 3).
---------------------------------------------------------------------------

    Comment: One commenter stated that the Mineral Metabolism measure 
will not improve patient care because it does not measure outcomes. The 
commenter recommended adopting an outcomes-based phosphorus measure in 
future payment years.
    Response: As stated in the CY 2013 ESRD PPS final rule (77 FR 
67486), we

[[Page 72198]]

continue to believe that the Mineral Metabolism reporting measure will 
help improve patient outcomes. Kidney Disease Improving Global Outcomes 
(KDIGO) recommends monthly measurements and emphasizes the importance 
of following trends versus single measurements, thus supporting 
relatively frequent measurements (for example, monthly).\4\ There is 
evidence that extreme phosphorus levels may be associated with poor 
clinical outcomes. Monthly measurements will identify elevated levels 
of serum phosphorus and trigger therapeutic interventions, thus 
contributing to high-quality care.
---------------------------------------------------------------------------

    \4\ KDIGO recommends measurement of serum phosphorus every 1-3 
months in Chapter 3, KDIGO Clinical Practice Guideline for the 
Diagnosis, Evaluation, Prevention, and Treatment of Chronic Kidney 
Disease-Mineral and Bone Disorders (CKD-MBD) Kidney International 
vol 76, supplement 113, August 2009.
---------------------------------------------------------------------------

    Comment: Many commenters supported the inclusion of home dialysis 
patients in the Mineral Metabolism reporting measure. However, these 
commenters expressed concern that the inclusion of these patients will 
discourage home hemodialysis, force home dialysis patients to visit a 
facility too frequently or otherwise present greater challenges for 
regular blood draws, and cause difficulties for small facilities that 
only treat home dialysis patients.
    Response: We disagree that the inclusion of home peritoneal 
dialysis patients in the Mineral Metabolism measure will force the 
patients to visit their dialysis facility too frequently, or otherwise 
discourage patients from receiving dialysis at home. Between May 2012 
and March 2013, a large percentage of patients had blood testing 
performed each month. The percentage of patients with monthly testing 
varied by modality and specific blood test, but all populations 
provided data for between 72 percent and 89 percent of qualifying 
patients. Furthermore, the ESRD CfCs, implemented in October 2008, 
require monthly testing for some labs (for example, Albumin, 
Hemoglobin/Hematocrit at Sec.  494.90(a)(2) and Sec.  494.90(a)(4), 
respectively) and require that all patients (including home dialysis 
patients) see a practitioner (for example, a physician, physician's 
assistant, or nurse practitioner) at least monthly as specified at 
Sec.  494.90(b)(4). Therefore, we do not believe that requiring monthly 
measurements of serum phosphorus will discourage patients from 
receiving dialysis at home, since the vast majority of home dialysis 
patients already receive monthly blood tests, and facilities are 
already required under the CfCs to conduct some other lab tests on a 
monthly basis.
    Comment: One commenter stated that the language used to finalize 
the Mineral Metabolism reporting measure in the CY 2013 ESRD PPS was 
unclear about what was meant by ``monthly basis.'' The commenter asked 
whether this means the percent of complete months in which 96 percent 
of eligible patients were tested, or if this means the percent of 
eligible patients for that facility who had monthly testing in excess 
of 96 percent. The commenter also sought clarification with respect to 
the equation used to calculate scores on the Mineral Metabolism 
measure.
    Response: By ``monthly basis,'' we mean meeting the reporting 
threshold for each month during the performance period. Facilities are 
scored on the measure based on the number of months in which the 
facility successfully meets this reporting threshold. Measure scores 
are not determined by the percent of months in which the facility meets 
this reporting threshold, but rather according to the equation below, 
which appears in the CY 2013 ESRD PPS final rule (77 FR 67506). We also 
affirm that this methodology will be used to calculate scores on the 
Mineral Metabolism measure in the PY 2015 and PY 2016 programs, as well 
as future payment years.
[GRAPHIC] [TIFF OMITTED] TR02DE13.000

    For the reasons stated above, and the reasons stated in section 
III.C.10 below, we are finalizing the Mineral Metabolism reporting 
measure for the PY 2016 ESRD QIP and for future payment years. 
Additionally, because we are finalizing the Hypercalcemia clinical 
measure (see Section III.C.3.b below), we are also finalizing the 
proposal to change the specifications for the Mineral Metabolism 
measure such that the measure no longer requires facilities to report 
serum calcium levels. Technical specifications for the revised Mineral 
Metabolism reporting measure can be found at: http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Reporting-2016FR.pdf.
c. Revised Anemia Management Reporting Measure
    Section 1881(h)(2)(A)(i) requires ``measures on anemia management 
that reflect the labeling approved by the Food and Drug Administration 
for such management.'' In the CY 2013 ESRD PPS final rule, we finalized 
an Anemia Management reporting measure for the reasons stated in that 
final rule (77 FR 67491 through 67495). However, we inadvertently 
excluded home peritoneal patients from the measure specifications. For 
PY 2016 and future payment years, we proposed to include home 
peritoneal patients in the Anemia Management reporting measure. 
Therefore, we proposed that a qualifying case for this measure will be 
defined as (i) an in-center Medicare patient who had been treated at 
least seven times by the facility; and (ii) a home dialysis Medicare 
patient for whom the facility submitted a claim at least once per 
month.
    We believe that there are circumstances that might make it 
challenging to draw a sample from certain patients. Therefore we 
proposed that, in order to receive full points on this measure, 
facilities that treat 11 or more qualifying cases over the entire 
performance period must report at the lesser of the 50th percentile of 
facilities in CY 2013 or 99 percent per month, on a monthly basis for 
each month of the performance period. In addition, we proposed that, in 
order to receive full points on this measure, facilities that treat 
fewer than 11 qualifying cases during the performance period must 
report on a monthly basis the specified levels for all but one 
qualifying case. If

[[Page 72199]]

a facility only has one qualifying case during the entire performance 
period, a facility will have to attest to that fact in CROWNWeb by 
January 31 of the year following the performance period in order to 
avoid being scored on the measure. We made 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).
    The comments we received on these proposals and our responses are 
set forth below.
    Comment: Many commenters supported the proposal to include home 
peritoneal dialysis patients in the Anemia Management reporting 
measure.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported the inclusion of home 
peritoneal dialysis patients in the Anemia Management reporting 
measure. However, these commenters expressed some concern that the 
inclusion of these patients will discourage home hemodialysis, force 
home dialysis patients to visit a facility too frequently, and cause 
difficulties for small facilities that only treat home dialysis 
patients.
    Response: We disagree that the inclusion of home peritoneal 
dialysis patients in the Anemia Management reporting measure will force 
the patients to visit their dialysis facility too frequently, or 
otherwise discourage patients from receiving dialysis at home. Most 
home dialysis patients, including peritoneal dialysis patients, receive 
blood testing on a monthly basis. Furthermore, the CfCs require monthly 
testing for some labs (for example, Albumin, Hemoglobin/Hematocrit at 
Sec.  494.90(a)(2) and Sec.  494.90(a)(4), respectively) and require 
that all patients (including home dialysis patients) see a practitioner 
(for example, a physician, physician's assistant, nurse practitioner) 
at least monthly as specified at Sec.  494.90(b)(4). Therefore, we do 
not believe the inclusion of home peritoneal dialysis patients will 
discourage home dialysis, because most home dialysis patients already 
visit dialysis facilities for monthly blood tests, and because 
facilities are already required to conduct monthly hemoglobin/
hematocrit tests for all dialysis patients.
    Comment: Several commenters noted that there is an inconsistency 
between the proposed rule and the measure specifications for the Anemia 
Management reporting measure. The proposed rule states that ``if a 
facility only has 1 qualifying case during the entire performance 
period, a facility will have to attest to that fact in CROWNWeb by 
January 31 of the year following the performance period in order to 
avoid being scored on the measure.'' By contrast, the measure 
specifications state that ``fewer than 1 patient during the performance 
period who are (i) in-center Medicare patients who have been treated at 
least 7 times by the facility during the reporting month; or (ii) home 
dialysis Medicare patients for whom the facility submits a claim during 
the reporting month, must attest to this fact in CROWNWeb to not be 
scored on this measure.''
    Response: We thank commenters for identifying this discrepancy. We 
have changed the measure specifications to state that the case minimum 
is one eligible patient. Facilities with two or more eligible patients 
will be scored on the measure, and facilities with one eligible patient 
will be scored on the measure until they attest to this in CROWNWeb. We 
made this proposal to enable us to gather data on patients in small 
facilities.
    For these reasons, and the reasons stated in section III.C.10 
below, we are finalizing the Anemia Management reporting measure as 
proposed for the PY 2016 ESRD QIP and for future payment years. 
Technical specifications for this proposed measure can be found at 
http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-Reporting-2016FR.pdf.
3. New Measures for PY 2016 and Subsequent Payment Years of the ESRD 
QIP
    As the program evolves, we believe it is important to continue to 
evaluate and expand the measures selected for the ESRD QIP. Therefore, 
for the PY 2016 ESRD QIP and future payment years, we proposed 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. Anemia Management Clinical Measure Topic and Measures
    Section 1881(h)(2)(A)(i) of the Act states that the measures 
specified for the ESRD QIP are required to include measures on ``anemia 
management that reflect the labeling approved by the Food and Drug 
Administration for such management.'' For PY 2016 and future payment 
years, we proposed to create a new anemia management clinical measure 
topic, which consists of one measure initially finalized in the PY 2012 
ESRD QIP final rule and most recently finalized for PY 2015 and future 
PYs in the CY 2013 ESRD PPS final rule, and one new proposed measure, 
described below. We note that, like other measure topics, we proposed 
that the Anemia Management clinical measure topic consist only of 
clinical and not reporting measures.
i. Anemia Management: Hgb > 12
    For the PY 2016 ESRD QIP and future payment years of the program, 
we proposed 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 proposed to retain the Hgb > 12 measure as an independent 
measure. We solicited comments on this proposal.
    We did not receive any comments on these proposals.
ii. Anemia of Chronic Kidney Disease: Patient Informed Consent for 
Anemia Treatment
    This is a measure of the proportion of dialysis patients for whom a 
facility attests that risks, potential benefits, and alternative 
treatment options for anemia were evaluated, and that the patient 
participated in the decision-making regarding an anemia treatment 
strategy. We believe that this measure is consistent with recent 
changes to the FDA-approved labeling \5\ for ESAs and Kidney Disease: 
Improving Global Outcomes (KDIGO) Anemia Management Guidelines \6\ that 
highlight the evolving understanding of risks associated with ESA 
therapy, as required in section 1881(h)(2)(A)(i) of the Act. We believe 
it is appropriate for facilities and physicians to ensure that steps 
are taken to make patients aware of those potential risks within the 
context of treatment for anemia. For these reasons, we proposed to 
adopt this measure (Anemia of Chronic Kidney Disease: Patient Informed 
Consent for Anemia Treatment) for the ESRD QIP in PY 2016 and future 
payment years of the program. In order to meet the requirements of this 
proposed measure, facilities must attest in CROWNWeb for each 
qualifying patient, on an annual basis, that informed consent was 
obtained from that patient, or that patient's legally authorized 
representative, during the performance period. We proposed that 
qualifying

[[Page 72200]]

cases for this measure would be defined as patients who received 
dialysis in the facility for 30 days or more. The proposed deadline for 
reporting these attestations for the PY 2016 ESRD QIP would be January 
31, 2015, or, if that is not a regular business day, the first business 
day thereafter. Missing attestation data for a patient would be 
interpreted as failure to obtain informed consent from that patient.
---------------------------------------------------------------------------

    \5\ http://www.fda.gov/Drugs/DrugSafety/ucm259639.htm.
    \6\ Kidney Disease: Improving Global Outcomes (KDIGO) Anemia 
Work Group. KDIGO Clinical Practice Guideline for Anemia in Chronic 
Kidney Disease. Kidney inter., Suppl. 2012 (2): 279-335.
---------------------------------------------------------------------------

    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Many commenters expressed a variety of concerns about the 
proposed Patient Informed Consent of Anemia Treatment clinical measure 
and did not support its adoption for the ESRD QIP. Some commenters 
stated that obtaining informed patient consent is already a standard of 
clinical care, and that the measure would therefore not promote quality 
care, but would instead add more, unnecessary recordkeeping. Other 
commenters stated that the informed consent measure would be 
duplicative and possibly inconsistent with the FDA's Risk Evaluation 
and Mitigation Strategy (REMS) for ESAs, which already requires 
physicians to discuss with patients the risks of ESA therapy. Other 
commenters expressed conflicting opinions about the proposed measure. 
One group of commenters stated that nephrologists, not dialysis 
facilities, prescribe ESAs, so it would be unreasonable to expect 
facilities to obtain informed consent from patients. A different group 
of commenters noted that obtaining informed patient consent is already 
an ESRD CfC for dialysis facilities, so it would be unnecessary for the 
ESRD QIP to adopt a measure on the topic.
    Response: We appreciate the commenters' concerns. We continue to 
believe that this measure is a useful complement to the other anemia 
management measures currently used in the ESRD QIP, as those measures 
focus exclusively on hemoglobin levels and not the patient's knowledge 
of the risks and benefits of anemia treatment. We also believe that it 
is essential to provide patients with this information, in light of the 
lack of scientific evidence regarding ESAs and ideal hemoglobin levels 
in this patient population. Additionally, we disagree that this 
measures and the FDA REMS accomplish the same goal. The FDA REMS 
program is focused on ensuring that patients are aware of the risks 
associated with aspects of ESA use in overall anemia management, 
particularly in the setting of cancer chemotherapy. The informed 
consent measure, by contrast, would require facilities to provide a 
balanced discussion of both the risks and the potential benefits of a 
contemplated treatment.
    However, we agree with commenters who noted that providing informed 
consent is already a standard of care that is at least partially 
regulated through the ESRD CfCs. We do not want to create additional 
recordkeeping requirements for facilities when there is already an 
existing standard that facilities are required to meet. For this 
reason, we are not finalizing the Patient Informed Consent for Anemia 
Treatment clinical measure at this time. Because we are not finalizing 
this measure, we are also not finalizing the proposed Anemia Management 
Clinical measure topic. Instead, the Hemoglobin Greater Than 12 g/dL 
clinical measure will remain an independent clinical measure, 
unassociated with a clinical measure topic, as it has in previous 
payment years. Technical specifications for the Hemoglobin Greater Than 
12 g/dL measure can be found at http://www.dialysisreports.org/pdf/esrd/public-measures/AnemiaManagement-HGB-2016FR.pdf.
b. Hypercalcemia
    Section 1881(h)(2)(A)(iii)(II) of the Act states that the measures 
specified for the ESRD QIP shall include other measures as the 
Secretary specifies, including, to the extent feasible, measures of 
bone mineral metabolism. Abnormalities of bone mineral metabolism are 
exceedingly common, and contribute significantly to morbidity and 
mortality in patients with advanced Chronic Kidney Disease (CKD). Many 
studies have associated disorders of mineral metabolism with mortality, 
fractures, cardiovascular disease, and other morbidities. Therefore, we 
believe it is critical to adopt a clinical measure that encourages 
adequate management of bone mineral metabolism and disease in patients 
with ESRD.
    Elevated serum calcium level (or hypercalcemia) has been shown to 
be significantly associated with increased all-cause mortality in 
patients with advanced CKD. Both KDIGO Clinical Practice Guideline for 
the Diagnosis, Evaluation, Prevention, and Treatment of Chronic Kidney 
Disease-Mineral and Bone Disorder (CKD-MBD) and the National Kidney 
Foundation's Kidney Disease Outcomes Quality Initiative (KDOQI) support 
maintaining serum calcium levels within reference ranges. Hypercalcemia 
is also a proxy for vascular and/or valvular calcification 
7 8 and subsequent risk for cardiovascular deaths. We 
previously proposed a hypercalcemia clinical measure for the PY 2015 
ESRD QIP (77 FR 40973 through 40974), but decided not to finalize the 
measure because we lacked baseline data that could be used to calculate 
performance standards, achievement thresholds, and benchmarks (77 FR 
67490 through 67491). We now possess enough baseline data to calculate 
these values. Therefore, we proposed to adopt the NQF-endorsed measure 
NQF 1454: Proportion of Patients with Hypercalcemia, for PY 
2016 and future payment years of the ESRD QIP.
---------------------------------------------------------------------------

    \7\ Wang A, Woo J, Law C, et al. Cardiac Valve Calcification as 
an Important Predictor for All-Cause Mortality and Cardiovascular 
Mortality in Long-Term Peritoneal Dialysis Patients: A Prospective 
Study. J Am. S. Nephrology 2011 (14/1): 159-168.
    \8\ Wang A, Ho S, Wang M, et al. Cardiac Valvular Calcification 
as a Marker of Atherosclerosis and Arterial Calcification in End-
stage Renal Disease. JAMA 2005 (165/3): 327-332.
---------------------------------------------------------------------------

    The proposed Hypercalcemia measure assesses the number of patients 
with uncorrected serum calcium greater than 10.2 mg/dL for a 3-month 
rolling average. (``Uncorrected'' means not corrected for serum albumin 
concentration.) In order to enable us to calculate this measure, each 
facility will be required to enter in CROWNWeb, on a monthly basis, an 
uncorrected calcium level for each in-center and home dialysis patient 
over the age of eighteen.
    Performance on this measure is expressed as a proportion of 
patient-months for which the 3-month rolling average exceeds 10.2 mg/
dL. The numerator is the total number of eligible patient-months where 
the 3-month rolling average is greater than 10.2 mg/dL, and the 
denominator is the total number of eligible patient-months. We proposed 
that facilities would begin to submit data on this measure based on 
January 2014 uncorrected serum calcium levels but that we would 
calculate the first 3-month rolling average for each eligible patient 
in March 2014 using January, February, and March 2014 data. We would 
then calculate a new 3-month rolling average each successive eligible 
patient-month (April through December measure calculations) by dropping 
the oldest month's data and using instead the newest month's data in 
the 3-month period. The facility's performance will be determined by 
calculating the proportion of the 3-month averages calculated monthly 
(March through December, each time using the latest 3

[[Page 72201]]

months of data) for all eligible patients that was greater than 10.2 
mg/dL.
    Because we proposed to adopt this measure not only for PY 2016, but 
also for subsequent payment years, we also proposed that, beginning 
with the PY 2017 program, we would measure hypercalcemia beginning in 
January of the applicable performance period. This will allow us to 
have a 3-month rolling average for all months in the performance 
period. We proposed that the 3-month rolling average rate for January 
would be calculated using the rates from November and December of the 
previous year, as well as January of that year. Likewise, we proposed 
that the rate for February would be calculated using the rates from 
December, January, and February to calculate the 3-month rolling 
average, and so on.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: One commenter supported the proposal to adopt the 
hypercalcemia measure because ``this measure represents an incentive 
for maintaining this important standard of care and protecting 
patients'' in light of the ``intention to include oral drugs, such as 
phosphorus binders, in the PPS in 2016.'' The commenter also stated 
that there is no clinical rationale for needing a full year of baseline 
data for improvement and achievement scoring.
    Response: We thank the commenter for the support.
    Comment: Several commenters strongly supported the inclusion of 
mineral metabolism measures in the ESRD QIP, including the proposal to 
adopt the hypercalcemia measure. These commenters also supported the 
adoption of other mineral metabolism measures (for example, PTH and 
phosphorus), in future payment years because oral drugs used to 
regulate mineral metabolism are moving from Medicare Part D to the ESRD 
PPS bundled payment in CY 2016.
    Response: We thank the commenters for their support. Additionally, 
we agree that we should explore other measures to assess mineral 
metabolism for future payment years. We are currently developing such 
measures, and will continue to do so.
    Comment: Many commenters supported the proposal to adopt the 
hypercalcemia measure. However, some of these commenters stated that 
patients who present with other non-ESRD conditions that may cause 
hypercalcemia should be excluded from the 3-month rolling average. 
Commenters also stated that patients treated fewer than seven times by 
a facility should be excluded from the measure. Additionally, one 
commenter noted that the 10.2 mg/dL threshold used to evaluate the 
hypercalcemia measure is higher than the KDOQI and KDIGO guidelines, 
which recommend a threshold of 9.5 mg/dL. This commenter prefers the 
9.5 threshold, but supports the adoption of the hypercalcemia measure 
because having an upper target for calcium is a valuable addition to 
the ESRD QIP.
    Response: We thank the commenters for the support. While we 
acknowledge that calcium levels in dialysis patients might be impacted 
by conditions unrelated to ESRD, we also believe it is appropriate to 
monitor and minimize the prevalence of hypercalcemia in all patients 
with ESRD, since mineral and bone disorder are highly prevalent in this 
population, and because some dialysis-related treatments impact serum 
calcium levels.
    We further note that patients are included in the denominator only 
if they are on dialysis for at least 90 days as of the first day of the 
most recent month of the ``measurement period'' (that is, the 3-month 
period used to calculate the rolling average for the measure) and are 
in the facility for at least 30 days as of the last day of the most 
recent month of the measurement period. These NQF-endorsed exclusion 
criteria will exclude the vast majority of in-center patients who are 
treated fewer than seven times by a facility. However, the NQF-endorsed 
exclusion criteria are broad enough to include home dialysis patients. 
We believe that the NQF-endorsed exclusion criteria are more 
appropriate because they will not exclude home dialysis patients, who 
are rarely treated at a facility seven or more times in a month.
    Finally, the 10.2 threshold is consistent with KDIGO guideline 
4.1.2 [2009] ``In patients with CKD stages 3-5D, we suggest maintaining 
serum calcium in the normal range,'' since 10.2 mg/dL is considered the 
upper limit of the normal range in the majority of clinical 
laboratories. This threshold is also consistent with the value 
discussed and supported by the 2006 TEP. The hypercalcemia measure 
using the 10.2 threshold was developed by the 2010 TEP as summarized in 
the final TEP report posted by CMS at http://www.cms.gov/Medicare/End-Stage-Renal-Disease/CPMProject/index.html.
    Comment: Several commenters did not support the proposal to adopt 
the hypercalcemia measure. These commenters stated that this metric is 
not the best measure in the mineral metabolism domain to impact patient 
outcomes, in the absence of clinical metrics for other related mineral 
disturbances, such as phosphorus and PTH. Some of these commenters 
recommended adopting the hypercalcemia measure as a reporting measure.
    Response: We believe that the hypercalcemia measure is the best 
measure supported by current evidence available for implementation in 
the ESRD QIP at this time. CMS has convened three discrete TEPs since 
2006 charged with developing quality measures related to management of 
bone and mineral disorders in chronic dialysis patients. The 3-month 
rolling average hypercalcemia measure is the first outcome measure 
developed in this topic area that has received NQF endorsement. The 
measure is important because it addresses a potential healthcare-
associated condition, hypercalcemia, that may result from treatments 
chosen by dialysis providers to treat CKD-related bone disease. 
However, we are currently exploring the feasibility of adopting in the 
future additional measures to address PTH monitoring to ensure that 
dialysis patients' bone and mineral disease laboratory outcomes are 
monitored at a frequency consistent with clinical consensus guidelines.
    Comment: Some commenters did not support the proposal to adopt the 
hypercalcemia measure because there is no consensus that the measure is 
appropriate. These commenters also stated that the measure should only 
apply to Medicare patients because CMS should not collect data on 
patients who are not enrolled in Medicare. Commenters recommended that 
calcium and phosphorus data continue to be collected via the mineral 
metabolism reporting measure.
    Response: The Hypercalcemia measure (NQF 1454) has been 
endorsed by the NQF, and we believe that this endorsement reflects 
broad consensus that the measure is appropriate for assessing 
hypercalcemia within the ESRD population. In addition, the collection 
of all-patient data on this measure allows us to assess the quality of 
care provided to Medicare patients with ESRD, in part, by analyzing how 
that care compares to the quality of care provided to the ESRD 
population overall. Because we are finalizing the adoption of the 
Hypercalcemia measure for the ESRD QIP, facilities will not be required 
to submit calcium data for the Mineral Metabolism reporting measure.
    Comment: One commenter did not support the proposal to adopt the 
hypercalcemia measure because there is

[[Page 72202]]

no evidence that facilities are not adequately managing hypercalcemia, 
and because there is no agreement on how calcium should be adjusted (if 
at all) for albumin levels.
    Response: The published literature indicates that large numbers of 
patients with ESRD are affected by 
hypercalcemia.9 10 11 12 13 In addition, patient-level 
analysis of CROWNWeb data collected for July 2012 shows that of 441,681 
patients, 81.9 percent had uncorrected serum calcium reported during 
the month, 59.8 percent met the denominator for this proposed measure, 
and 3.0 percent had hypercalcemia based on a rolling-average from May 
2012 through July 2012. We agree that there is lack of agreement on the 
need to correct serum calcium for serum albumin concentration. 
Furthermore, there is lack of agreement on the accuracy of different 
available methods for correction of serum calcium for albumin 
concentration. We are therefore using uncorrected calcium to score the 
Hypercalcemia clinical measure, instead of scoring the measure on the 
basis of corrected calcium.
---------------------------------------------------------------------------

    \9\ National Kidney Foundation: K/DOQI Clinical Practice 
Guidelines for Bone Metabolism and Disease in Chronic Kidney 
Disease. American Journal of Kidney Disease 2003 42:S1-S202 (suppl 
3).
    \10\ Kidney Disease: Improving Global Outcomes (KDIGO) CKD-MBD 
Work Group: KDIGO Clinical Practice Guideline for the Diagnosis, 
Evaluation, Prevention, and Treatment of Chronic Kidney Disease-
Mineral and Bone Disorder (CKD-MBD). Kidney International 2009 76 
(Suppl 113): S1-S130.
    \11\ Block GA, Klassen PS, Lazarus JM, et al. Mineral 
metabolism, mortality, and morbidity in maintenance hemodialysis. 
Journal of the American Society of Nephrology: JASN 2004 15:2208-18.
    \12\ Young EW, Albert JM, Satayathum S, et al. Predictors and 
consequences of altered mineral metabolism: the Dialysis Outcomes 
and Practice Patterns Study. Kidney international 2005 67:1179-87.
    \13\ Kalantar-Zadeh K, Kuwae N, Regidor DL, et al. Survival 
predictability of time-varying indicators of bone disease in 
maintenance hemodialysis patients. Kidney international 2006 70:771-
80.
---------------------------------------------------------------------------

    Comment: Several commenters did not support the proposal to adopt 
the hypercalcemia measure because it may lead to unintended 
consequences (for example, sudden cardiac death) and because it will 
incentivize facilities to decrease calcium levels in patients with 
serum calcium levels near 10.2 mg/dL.
    Response: Although patients with serum calcium concentrations below 
the lower limit of normal may be at increased risk for cardiac 
arrhythmias, the available literature reviewed by KDIGO suggests that 
the risk of hypocalcemia occurs below 8.4 mg/dl calcium concentration, 
if at all. While facilities are incentivized to prevent patients from 
developing extremely high levels of calcium, we believe the threshold 
is sufficiently high that it is unlikely to incentivize facilities to 
cause hypocalcemia in patients. Therefore we do not anticipate an 
increased risk for sudden death, provided that clinicians properly 
monitor calcium levels.
    Comment: One commenter did not support the proposal to adopt the 
Hypercalcemia measure for a number of reasons: (1) The measure should 
exclude patients not on dialysis for at least 90 days to ensure that 
the 3-month rolling average is calculated using a consistent 
methodology; (2) the measure should provide a method for calculating a 
3-month rolling average when data is only reported for months 1 and 3; 
and (3) the measure should specify that values were obtained during the 
current dialysis facility admission, and that samples must be obtained 
before hemodialysis treatment. The commenter recommends retaining the 
Mineral Metabolism reporting measure (to include reporting of serum 
calcium) until these issues are addressed.
    Response: We will respond to each issue in turn.
    First, the measure excludes patients not on dialysis for less than 
90 days, as described in the proposed measure specifications. Patients 
are included in the denominator if they are 18 years or older as of the 
first day of the most recent month of the measurement period, are on 
dialysis for at least 90 days as of the first day of the most recent 
month of the measurement period, are in the facility for at least 30 
days as of the last day of the most recent month of the measurement 
period, and have at least one serum calcium measurement within the 
measurement period.
    Second, the patient must have at least one serum calcium 
measurement in the three month period. If the patient only had one 
serum calcium measurement in the three month period, then the average 
serum calcium would be that value. If the patient only had serum 
calcium measurement for months 1 and 3 within the three month period, 
then the average would only use these two values.
    Third, the measure specifies that only patients who have been at 
the facility for at least 30 days should be included. In addition, this 
measure uses serum calcium concentrations reported in CROWNWeb. 
CROWNWeb data dictionary directions specify reporting of pre-dialysis 
serum calcium only. While not stated in the measure specifications, it 
is well understood that the vast majority of blood samples for serum 
calcium testing are drawn before the patient receives hemodialysis 
treatment on a particular treatment day.
    Comment: Several commenters did not support the proposal to adopt 
the Hypercalcemia measure. Commenters stated that CMS has not collected 
a full year of data that would support the performance standards, 
achievement thresholds, and benchmarks for the measure. These 
commenters stated that having at least one year of reporting data is a 
core criterion for moving structural reporting measures to clinical 
measures. Some of the commenters recommended adopting the Hypercalcemia 
measure as a reporting measure.
    Response: As stated in the CY 2013 ESRD PPS final rule (77 FR 
67488), we believe that achievement thresholds, benchmarks, and 
performance standards should be based on a full year of data whenever 
possible. However, we also believe that in certain circumstances it is 
not practical or necessary to use a full year of baseline data. In this 
case, we only have data for the Hypercalcemia measure starting in May 
2012 because that was when CROWNWeb was rolled out nationally. In this 
case, we believe that it is appropriate to use 7 months of baseline 
data because serum calcium levels are not subject to seasonal 
variations, and because the 7-month time window offers a consistent 
representation of national facility performance. Based on CROWNWeb 
data, monthly patient-level uncorrected serum calcium averages were 
stable during May 2012 through March 2013, with averages ranging from 
8.99 mg/dL to 9.06 mg/dL.
    Comment: One commenter did not support the proposal to adopt the 
Hypercalcemia measure because manually reporting calcium values is 
overly burdensome.
    Response: We do not agree that entering patients' calcium 
phosphorus levels into CROWNWeb on a monthly basis is overly 
burdensome. The Mineral Metabolism measure finalized in the CY 2012 
ESRD PPS final rule (76 FR 70271) required facilities to enter this 
information, so the Hypercalcemia measure does not impose any 
additional burden for facilities.
    Comment: One commenter expressed concerns that CROWNWeb will not be 
able to accurately capture data needed to calculate the Hypercalcemia 
measure because it cannot handle situations when a patient switches 
modalities in the middle of a month, and because CROWNWeb is lacking 
data for roughly 10 percent of patients.
    Response: We recognize that CROWNWeb is currently experiencing 
issues if a patient switches modalities during a clinical month and the 
facility attempts to indicate this through the submission of batch 
data. This is a

[[Page 72203]]

serious concern, and we are working to address it. However, this issue 
does not affect patient data when facilities manually enter the data. 
We therefore recommend that facilities manually enter patient data when 
patients switch modalities during a clinical month. Furthermore, we are 
currently conducting an analysis to determine what percentage of 
patient data are missing data in CROWNWeb. We recognize that CROWNWeb 
should not lack data for a high percentage of patients. Nevertheless, 
we continue to believe that CROWNWeb possesses valid data for the vast 
majority of patients, and we continue to affirm that facilities are 
responsible for ensuring that patient data are accurately reflected in 
CROWNWeb. For these reasons, we believe it is appropriate to use 
CROWNWeb as the primary data source for the Hypercalcemia clinical 
measure.
    For these reasons, we are finalizing the Hypercalcemia clinical 
measure (NQF 1454) as proposed for the PY 2016 ESRD QIP and 
for future payment years. Technical specifications for this measure can 
be found at http://www.dialysisreports.org/pdf/esrd/public-measures/MineralMetabolism-Hypercalcemia-2016FR.pdf
c. Use of Iron Therapy for Pediatric Patients Reporting Measure
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must include 
measures on ``anemia management that reflect the labeling approved by 
the Food and Drug Administration for such management.'' Appropriate 
anemia management requires the presence of sufficient stores of 
iron.\14\ Iron deficiency is a leading cause of non-response to ESA 
therapy, and several studies suggest that providing oral or IV iron is 
effective in correcting iron deficiency in the pediatric 
population.15 16 Pediatric patients have previously been 
excluded from all anemia management measures, limiting the 
participation of dialysis facilities with substantial numbers of 
pediatric patients in the ESRD QIP. In an effort to address this issue, 
and account for the quality of care dialysis facilities provide to 
pediatric patients, we proposed to adopt a pediatric iron therapy 
measure for the ESRD QIP in PY 2016 and future payment years of the 
program.
---------------------------------------------------------------------------

    \14\ 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.
    \15\ Warady BA, Zobrist RH, Wu J, Finan E. Sodium ferric 
gluconate complex therapy in anemic children on hemodialysis. 
Pediatr Nephrol 20: 1320-7, 2005.
    \16\ Frankenfield DL, Neu AM, Warady BA, et al. Anemia in 
pediatric hemodialysis patients: results from the 2001 Clinical 
Performance Measures Project. Kidney International 64:1120-4, 2003.
---------------------------------------------------------------------------

    We considered proposing an NQF-endorsed clinical measure on the use 
of iron therapy for pediatric patients as part of the proposed Anemia 
Management clinical measure topic (NQF 1433: Use of Iron 
Therapy for Pediatric Patients). This measure is an assessment of the 
percentage of all pediatric hemodialysis and peritoneal dialysis 
patients who received IV iron or were prescribed oral iron within three 
months of attaining the following conditions: (i) Patient had 
hemoglobin less than 11.0 g/dL; (ii) patient had simultaneous values of 
serum ferritin concentration less than 11.0; and (iii) patient's 
transferrin saturation (TSAT) was less than 20 percent. Upon 
investigation, we discovered that there were not enough patients who 
would qualify for this measure to establish reliable baseline data that 
would allow us to propose to adopt this measure as a clinical measure 
for PY 2016. We also note that the clinical measure currently presents 
other issues related to the minimum number of cases that would need to 
be reported for scoring, and we are considering the use of an adjuster 
that could be applied where the sample size is small. While we continue 
to consider these and other issues related to the adoption of a 
pediatric iron therapy clinical measure, we proposed 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 proposed that facilities 
must enter in CROWNWeb on a quarterly basis, for each qualifying case 
(defined in the next sentence): (i) Patient admit/discharge date; (ii) 
hemoglobin levels; (iii) serum ferritin levels; (iv) TSAT percentages; 
(v) the dates that the lab measurements were taken for items (ii)-(iv); 
(vi) intravenous IV iron received or oral iron prescribed (if 
applicable); and (vii) the date that the IV iron was received or oral 
iron was prescribed (if applicable). We proposed that qualifying cases 
for this measure would be defined as in-center and home dialysis 
patients under the age of eighteen.
    We proposed that each facility must report data on the Use of Iron 
Therapy for Pediatric Patients measure if it treats one or more 
qualifying cases during the performance period. Because this reporting 
measure requires that a facility enter data in CROWNWeb only once per 
quarter for each patient, we believe that the burden is appropriate and 
will not unduly impact small facilities, since it is proportionate to 
the number of patients that facilities treat. However, for the same 
reasons stated in the final description of the PY 2014 ESRD QIP Mineral 
Metabolism measure (which had a one patient minimum) (77 FR 67472 
through 67474), we proposed that, in order to receive full points on 
this measure, facilities that treat 11 or more qualifying cases over 
the performance period will have to report at the lesser of the 50th 
percentile of facilities in CY 2013 or 97 percent per quarter, for each 
quarter of the performance period. We proposed that facilities that 
treat fewer than 11 qualifying cases during the performance period will 
have to report on a quarterly basis the specified data elements for all 
but one qualifying case. If a facility only has one qualifying case 
during the entire performance period, a facility will have to attest to 
that fact in CROWNWeb by January 31 of the year following the 
performance period in order to avoid being scored on the measure.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters expressed concerns about the proposal 
to adopt the pediatric iron therapy reporting measure. Some commenters 
recommended that facilities should only be required to report that they 
prescribed oral iron therapy or administered IV iron, since patients 
typically take over-the-counter iron supplements and the facility would 
not be able to verify that patients obtained non-prescription 
medications. Other commenters stated that the measure would unduly 
burden pediatric facilities, which are typically small and do not use 
batch data submissions.
    Response: We thank commenters for raising these concerns. We will 
consider alternate implementation of quality reporting for pediatric 
patients and facilities relating to iron therapy through future 
rulemaking. Independent of these concerns, we conducted an analysis of 
the scope and impact of the proposed pediatric iron therapy measure. 
Over the course of the analysis, we determined that fewer than 100 
patients would be eligible for this measure if it was adopted as a 
clinical measure. We also determined that facilities would not be 
required to report data for many of these patients because the proposed 
measure specifications for the reporting measure excluded facilities 
with one or fewer eligible patients. The purpose of adopting the 
reporting measure would have been to collect the baseline data needed 
to adopt a clinical measure in future

[[Page 72204]]

payment years, but our analysis suggests that this would not be 
feasible. These data were not available through CROWNWeb at the time 
the measure was proposed. Accordingly, we are not finalizing this 
measure for the ESRD QIP.
    Comment: Several commenters supported the proposal to adopt the 
Pediatric Iron Therapy reporting measure because it is important for 
measures in the ESRD QIP to cover pediatric patients.
    Response: We appreciate the commenters' support. However, we have 
concluded that it is not feasible to adopt the measure because very few 
patients would be eligible for the measure.
    For the reasons noted above, we are not finalizing the Pediatric 
Iron Therapy reporting measure at this time. However, we will continue 
to investigate measures on anemia management for pediatric patients, 
and we intend to adopt a measure on this topic in future payment years.
d. NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical 
Measure
    Healthcare-acquired infections (HAI) are a leading cause of 
preventable mortality and morbidity across different settings in the 
healthcare sector, including dialysis facilities. Bloodstream 
infections are a pressing concern in a population where individuals are 
frequently immunocompromised and depend on regular vascular access to 
facilitate dialysis therapy. In a national effort to reduce infection 
rates, CMS has partnered with the CDC to encourage facilities to report 
to the NHSN as a way to track and facilitate action intended to reduce 
HAIs. The NHSN is a secure, internet-based surveillance system that is 
managed by the Division of Healthcare Quality Promotion at the CDC. 
NHSN has been operational since 2006, and tracks data from acute care 
hospitals, long-term care hospitals, psychiatric hospitals, 
rehabilitation hospitals, outpatient dialysis centers, ambulatory 
surgery centers, and long-term care facilities. We continue to believe 
that accurately reporting dialysis events to the NHSN by these 
facilities supports national goals for patient safety, particularly 
goals for the reduction of HAIs. In addition, we believe that 
undertaking other activities designed to reduce the number of HAIs 
supports national goals for patient safety. For further information 
regarding the NHSN's dialysis event reporting protocols, please see 
http://www.cdc.gov/nhsn/dialysis/index.html.
    We have worked during the past 2 years to help dialysis facilities 
become familiar with the NHSN system through the adoption of an NHSN 
Dialysis Event reporting measure. We now believe that facilities are 
sufficiently versed in reporting this measure to the NHSN. In light of 
the importance of monitoring and preventing infections in the ESRD 
population, and because a clinical measure would have a greater impact 
on clinical practice by holding facilities accountable for their actual 
performance, we proposed to replace the NHSN Dialysis Event reporting 
measure that we adopted in the CY 2013 ESRD PPS final rule (77 FR 67481 
through 67484) with a new clinical measure for PY 2016 and future 
payment years. This proposed measure, NHSN Bloodstream Infection in 
Hemodialysis Outpatients, is based closely on NQF 1460 in that 
it evaluates the number of hemodialysis outpatients with positive blood 
cultures per 100 hemodialysis patient-months.
    We proposed that facilities must submit 12 months of accurately 
reported dialysis event data (defined in the next sentence) to NHSN on 
a quarterly basis. In order to ensure that a facility submits data that 
can be used to identify the source of bloodstream infections, to 
preserve the internal validity of bloodstream infection data, and to 
help prevent future bloodstream infections, we proposed to define 
``accurately reported dialysis event data'' as data reported by 
facilities that follow the NHSN enrollment and training guidelines 
specified by the CDC (available at http://www.cdc.gov/nhsn/dialysis/enroll.html and http://www.cdc.gov/nhsn/Training/dialysis/index.html), 
according to the reporting requirements specified within the NHSN 
Dialysis Event Protocol. (This protocol, which facilities are already 
using to meet the requirements of the NHSN Dialysis Event reporting 
measure, includes information about IV antimicrobial starts and 
evidence of vascular access site infection, as well as information 
about the presence of a bloodstream infection.)
    Additionally, we proposed that each quarter's data would be due 3 
months after the end of that quarter. For example, data from January 1 
through March 31, 2014 would need to be entered by June 30, 2014; data 
from April 1 through June 30, 2014 would need to be submitted by 
September 30, 2014; data from July 1 through September 30, 2014 would 
need to be submitted by December 31, 2014; and data from October 1 
through December 31, 2014, would need to be submitted by March 31, 
2015. If facilities do not report 12 months of these data according to 
the requirements and the deadlines specified above, we proposed that 
they would receive a score of zero on the measure. We also proposed 
that facilities with a CCN open date after January 1, 2014 will be 
excluded from the measure. We note that in previous payment years we 
have awarded partial credit to facilities that submitted less than 12 
months of data to encourage them to enroll in and report data in the 
NHSN system. However, we proposed to require 12 months of data on this 
clinical measure because infection rates vary through different seasons 
of the year.
    We note that this proposed measure only applies to facilities 
treating in-center hemodialysis patients (both adult and pediatric). We 
will determine whether a facility treats in-center patients by 
referencing the facility's information in the Standard Information 
Management System and CROWNWeb.
    We recognize that the CDC has published Core Interventions for BSI 
Prevention in Dialysis, which are listed at http://www.cdc.gov/dialysis/prevention-tools/core-interventions.html. We encourage 
facilities to adopt the nine listed interventions in order to help 
prevent infections, but did not propose to require facilities to adopt 
any of these interventions at this time.
    We requested comments on this proposal, and in particular on the 
issue of whether it is appropriate at this time to convert the current 
NHSN Dialysis Event Reporting measure into a clinical measure. The 
comments we received on these proposals and our responses are set forth 
below.
    Comment: Several commenters supported the proposal to adopt the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure. These commenters stated that the monitoring of bloodstream 
infections and the adoption of CDC's core prevention interventions will 
reduce healthcare acquired infections in the ESRD patient population.
    Response: We thank the commenters for their support.
    Comment: Several commenters did not support the proposal to adopt 
the NHSN clinical measure because they believe that the measure does 
not reflect actual patient-exposure time each month. Specifically, 
these commenters stated that using a monthly census on the first two 
working days of the month ignores patient hospitalization during the 
month, and can be adversely impacted by an influx of new patients after 
the first two working days of the month.

[[Page 72205]]

    Response: CDC has conducted pilot validation work with a group of 
dialysis facilities and found that the census on the first two working 
days of the month was an accurate predictor of the entire month's 
census. The alternative of counting denominator data on a daily basis 
has been required in inpatient settings, but was determined by CDC to 
be unacceptably burdensome for the dialysis facility setting because 
this setting has a relatively stable patient population. Although 
patients with ESRD may be hospitalized at various times during a month, 
we have no reason to believe this would systematically be more likely 
to occur at a certain time relative to the first two working days of 
the month. Similarly, we are unaware of admission or transfer patterns 
whereby there is an increased likelihood of patient influx after the 
first two working days of the month.
    Comment: Many commenters expressed concerns that the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure will 
misattribute infections to a dialysis facility. Some of these 
commenters stated that the measurement of positive blood cultures is 
not specific enough to detect HAIs contracted at another facility, and 
may include blood cultures associated with another site or contaminated 
samples. Commenters also raised concerns that these types of issues 
will result in an overestimate of the number of dialysis-related 
bloodstream infections, limit the capacity to develop reliable 
benchmark data, and may increase the possibility that facilities will 
be improperly penalized.
    Other commenters stated that elderly, newly diagnosed dialysis 
patients with other chronic conditions and wounds are particularly 
likely to have infections that are unrelated to vascular access. Some 
commenters worried that infections in these patients will be 
inappropriately attributed to dialysis facilities because the NHSN 
measure does not focus on access-related bloodstream infections. 
Commenters also expressed concerns that the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure does not risk adjust for 
common comorbidities in the ESRD patient population.
    Another commenter stated that the rate of positive blood cultures 
should be interpreted in the context of the facility's rate of empiric 
antibiotic treatment, also recorded by NHSN, since some physicians and 
facilities may treat empirically rather than on the basis of culture 
results.
    Several commenters stated that culture results needed to designate 
the event as a bloodstream infection for NHSN reporting purposes are 
frequently not available to facilities. Therefore, between-facility 
differences in NHSN-reported BSI rates currently reflect differences 
not in infection rates, but rather in the availability and capture of 
blood culture results. Given this, the commenters believe that the 
measure will incentivize under-reporting of blood culture results, 
thereby undoing the great benefit that the current NHSN reporting 
metric has afforded dialysis facilities.
    One commenter stated that sufficient knowledge and infrastructure 
does not exist to determine the type of vascular access to which the 
infection was related. This commenter further stated that the TEP that 
reviewed the NHSN Bloodstream Infection in Hemodialysis Outpatients 
clinical measure concluded that the ``vascular access infection CPMs 
should not be used for reimbursement purposes.''
    Commenters provided several recommendations in light of these 
perceived issues. Some commenters recommended retaining the NHSN 
reporting measure until these technical issues are resolved. Other 
commenters stated that it would be inappropriate to adopt the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure 
under any circumstances. Another commenter recommended adopting, in a 
staggered manner, three alternative HAI measures: Local access site 
infection, access-related bloodstream infection, and vascular access 
infection.
    Response: We do not believe that misattribution is a significant 
enough issue to warrant a delay in the adoption of the NHSN clinical 
measure. The NHSH Bloodstream Infection in Hemodialysis Outpatients 
clinical measure tracks infection events that present real dangers to 
patients. We believe that tracking these infection events and rewarding 
facilities for minimizing these events is of critical importance to 
protecting patient safety and improving the quality of care provided to 
patients with ESRD.
    First, NQF endorsed a bloodstream infection measure (NQF 
1460, the measure upon which the proposed NHSN Bloodstream 
Infection in Hemodialysis Outpatients clinical measure is based) 
because bloodstream infections can be objectively identified. By 
contrast, NQF raised concerns about an access-related bloodstream 
infection measure because determining the source of infections (for 
example, determining whether an infection was related to vascular 
access) requires subjective assessments. The NHSH Bloodstream Infection 
in Hemodialysis Outpatients clinical measure avoids this subjectivity 
by including all positive blood cultures. This makes it simpler and 
more reliable than an access-related bloodstream infection measure. 
While we recognize that the NHSH Bloodstream Infection in Hemodialysis 
Outpatients clinical measure may occasionally misattribute bloodstream 
infections to dialysis facilities, we believe that the measure's 
objectivity, simplicity, and reliability make it the most appropriate 
measure for assessing facility performance. NHSN relies upon use of 
standard definitions to ensure that infection events are reported in 
the same manner across facilities. The vast majority of reported 
bloodstream infection events represent true, HAIs that are not the 
result of misclassification or misattribution. Therefore, considering 
the benefits to patients associated with strong incentives to reduce 
bloodstream infections, we believe that these technical issues are not 
significant enough to warrant a delay in adopting the NHSH Bloodstream 
Infection in Hemodialysis Outpatients clinical measure. CDC will 
continue to assess the possibility that certain facility-related 
factors could systematically overestimate infection rates, and it will 
consider risk-adjusting the measure to take these factors into account.
    Second, our goal is to eliminate all preventable HAIs, including 
those in elderly patients and patients with certain comorbidities. 
Therefore, we do not believe it is appropriate to risk-adjust the 
measure to account for those patient characteristics.
    Third, regardless of whether antibiotics are started before culture 
results become available, facilities are required to report positive 
blood culture results to NHSN. We recognize that additional information 
reported to NHSN, including antibiotic starts, provide useful 
contextual information to help interpret rates and facilitate 
prevention efforts. We believe that this information is important for 
identifying strategies to reduce bloodstream infections.
    Fourth, with respect to concerns about between-facility differences 
in NHSN-reported BSI rates, we are legitimately concerned about this 
issue of differential capture rate and the potential impact it could 
have on valid inter-facility comparisons. Facilities are expected to 
follow the NHSN reporting protocol, which includes reporting all 
positive blood cultures drawn from their patients in the outpatient 
setting or within one calendar day after a hospital admission. In both 
of these scenarios, facilities should have access to blood

[[Page 72206]]

culture results to properly diagnose and treat patients under their 
care, and to include in the patient's medical record. Although results 
of blood cultures that were drawn outside of the dialysis center can 
sometimes be challenging to retrieve, facilities should be working to 
develop systems to enable complete capture of all positive blood 
cultures that meet reporting criteria.
    Fifth, we agree with the commenters' concerns about determining the 
type of vascular access to which the infection was related, and we 
reiterate that NQF endorsed a bloodstream infection measure and not an 
access-related bloodstream infection measure. The NQF endorsement 
process includes an expert review assessing the feasibility of 
implementing of the measure. The NQF determined that the infrastructure 
and clinical expertise needed to determine the source of bloodstream 
infections do exist in the dialysis-facility setting. Therefore, the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical measure 
only requires facilities to report positive blood culture results. It 
does not involve a clinical diagnosis of infection, nor does it rely 
upon a determination of vascular access-relatedness or identification 
of the access to which the infection is related. When an event is 
reported to NHSN, all vascular accesses the patient has in place at the 
time of the event are reported. The user is not asked to attribute the 
event to a particular access. This is consistent with the 
recommendations of the TEP that the commenter cited.
    Finally, we appreciate the commenters' recommendations. In light of 
the responses detailed above, and the urgent need to provide facilities 
with strong incentives to improve patient safety, we believe that the 
technical issues raised by commenters are not significant enough to 
warrant a delay in the adoption of the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure.
    Comment: Many commenters expressed concerns about the methodology 
used to score the NHSN Bloodstream Infection in Hemodialysis 
Outpatients clinical measure. Some commenters did not support the 
proposal to use CY 2014 as the performance period for the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure. 
These commenters stated that under the proposed timeline, a facility 
will not be able to determine whether it is meeting the goals of the 
measures or still need to improve. Other commenters urged CMS to wait 
to penalize facilities until there are established performance 
standards, until facilities have a chance to adopt practices that 
demonstrably reduce infection rates, and until CMS has collected the 
data needed to calculate improvement scores. Other commenters did not 
support the proposal to use CY 2014 as the performance period and the 
baseline period for the NHSN Bloodstream Infection in Hemodialysis 
Outpatients clinical measure, and to define the performance standard as 
the 50th percentile of facility performance in CY 2014. These 
commenters stated that this methodology guarantees a 50-percent 
``failure rate,'' which is inconsistent with quality improvement 
approaches to medicine. In light of these concerns, some commenters 
recommended postponing the adoption of the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure until CMS has collected 
one year of baseline data.
    Response: We appreciate the commenters' concerns about penalizing 
facilities for their performance on the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure before we have collected the 
data needed to establish both the achievement and improvement 
performance standards. We also recognize that, in so doing, we are 
deviating somewhat from the scoring methodology used in the PY 2014 and 
PY 2015 programs. However, as stated in the PY 2016 proposed rule (78 
FR 40863), we believe it is important to begin assessing facilities on 
the number of these events as soon as possible, rather than on merely 
whether they report these events, because of the abnormally large 
impact HAIs have upon patients and the healthcare industry.
    Furthermore, when calculating the minimum TPS facilities need to 
achieve in order to avoid a payment reduction, we set the number low 
enough that a facility can meet the minimum TPS even if it receives 
zero achievement points on the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure, as long as it meets or 
exceeds the performance standard for each of the other finalized 
clinical measures and scores 5 points on each of the finalized 
reporting measures. We did this to balance our policy goal to provide 
facilities with strong incentives to improve patient safety as soon as 
possible against our recognition that we will not initially have enough 
data to award improvement points to facilities. In some circumstances, 
a facility may score zero points on the NHSN Bloodstream Infection in 
Hemodialysis Outpatients and receive a payment reduction. Nevertheless, 
the payment reduction a facility would receive in these circumstances 
(using the scoring methodology we are finalizing for the measure) would 
necessarily be no more than the payment reduction it would have 
received if the NHSN Bloodstream Infection in Hemodialysis Outpatients 
clinical measure was not included in the minimum TPS calculations. 
Therefore, we strongly believe that these considerations should 
alleviate concerns associated with the atypical scoring methodology.
    Comment: One commenter approved of CMS's support of CDC's core 
prevention interventions, but stated that CMS should require facilities 
to follow core interventions 7 and 8 (that is (i) the use of alcohol-
based chlorhexidine >0.5 percent, the first line skin antiseptic for 
central line insertions and dressing changes, and (ii) reducing risk of 
intraluminal biofilm by ``scrubbing hubs'' prior to accession or 
disconnection).
    Response: We thank the commenter for the support. We continue to 
encourage facilities to adopt all of CDC's core prevention 
interventions. However, they are not required under the ESRD QIP 
because we do not believe it is feasible at this time to design a 
performance measure that would accurately evaluate facility compliance.
    Comment: One commenter raised concerns that the NHSN Bloodstream 
Infection in Hemodialysis Outpatients clinical measure, as proposed, 
will unduly penalize small facilities because these facilities will be 
disproportionately impacted by a small number of infections. Instead, 
the commenter recommends using the Standardized Infection Rate risk-
adjustment method, along with the development of a publicized data 
validation process for NHSN data.
    Response: As stated in the proposed measure specifications, the 
measure will be calculated using a Standardized Infection Ratio with 
adjustment for volume of exposure to address this issue. We also agree 
with the need for a publicized data validation process for the NHSN 
data. As stated in the PY 2016 ESRD QIP proposed rule (78 FR 40872), we 
are considering a feasibility study for validating NHSN data, and we 
will publicize the data validation process after the conclusion of the 
feasibility study.
    Comment: Several commenters did not support the proposal that 
facilities must submit 12 months of data or receive a score of 0 on the 
NHSN measure. These commenters stated that facilities cannot improve in 
such an all-or-nothing environment.

[[Page 72207]]

    Response: We disagree that the requirement to report 12 months of 
NHSN data is an unreasonable expectation. Facilities began reporting 
NHSN data for the PY 2014 program during CY 2012, so they will have had 
two years of experience at the beginning of the performance period for 
the PY 2016 program. We strongly believe that two years is a sufficient 
amount of time for facilities to become acclimated to the NHSN system. 
We also note that it would be inappropriate to score facilities on less 
than 12 months of data because HAIs are subject to seasonal 
variability. Furthermore, given the critical importance of reducing 
HAIs and the NHSN system's capacity to address this pressing issue, we 
believe that it is appropriate to provide facilities with the strongest 
possible incentives to report NHSN data.
    Comment: One commenter did not support the proposal to adopt the 
NHSN clinical measure because NHSN was intended to be a surveillance 
system, not for scoring facilities on the ESRD QIP.
    Response: We believe that the NHSN system can be used for the 
purposes of incentivizing quality improvement. HAIs are implicated in 
significant clinical problems for patients, and they are an important 
source of increased medical costs. Given the importance of HAIs for 
patients and providers, we strongly believe that reducing HAIs is a 
central pillar in efforts to improve the quality of healthcare offered 
in the dialysis setting, and we continue to believe that facilities 
have the strongest incentive to improve when their performance is 
linked to payment. Furthermore, we note that facilities are scored 
based on their performance on NHSN infection measures in the Hospital 
Value Based Purchasing Program.
    Comment: One commenter recommends aligning the Vascular Access Type 
measure topic and census requirement for the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure to reduce administrative 
burden. Commenter notes that the Vascular Access Type measure topic is 
based on the last treatment of the month, while the NHSN census is 
based on the ESRD facility's first two working days of the month.
    Response: We appreciate the comment, and will further investigate 
whether the divergent dates for the two measures increases the 
reporting burden for facilities.
    Comment: One commenter did not agree with CMS's position that the 
urgency of reducing bloodstream infections warrants the adoption of the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical measure 
before two years of baseline data are available to calculate 
achievement and improvement scores. The commenter stated that central 
venous catheters present the greatest risk for bloodstream infections 
in the ESRD patient population, and that the ESRD QIP already has a 
measure that addresses this issue (Vascular Access Type--Catheter 
greater than 90 Days).
    Response: According to the 2012 Annual Data Report of the United 
States Renal Data System, hemodialysis patients experienced an adjusted 
hospitalization rate of 103 per 1,000 due to vascular access infection 
in 2010. We recognize that these rates have declined since 2005, but we 
believe they are still unacceptably high. Additionally, rates of 
adjusted hospitalizations due to bacteremia/sepsis in hemodialysis 
patients have increased significantly since 2000, rising to 116 per 
1,000 in 2010.\17\ These and other indicators have led to the inclusion 
of ESRD facilities in the Assistant Secretary for Health's National 
Action Plan to Prevent Health Care-Associated Infections, and the 
inclusion of dialysis facilities in this report reflects the urgency of 
reducing HAIs in patients with ESRD. We agree with the commenter's 
observation that central venous catheters present the greatest risk for 
bloodstream infections in the ESRD patient population. However, 
considering that these rates increased at same time as the Fistula 
First Breakthrough Initiative sought to reduce the use of catheters, we 
do not believe that the Vascular Access Type measure topic is 
sufficient to reduce rates of HAIs. Additionally, for the reasons 
stated above, we believe the significance of HAIs warrants adopting a 
clinical measure before we have collected the baseline data needed to 
calculate achievement and improvement scores. Therefore, we strongly 
believe that Vascular Access Type measure topic and the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure are 
complimentary, not duplicative, because they address infections in 
different and equally valid ways.
---------------------------------------------------------------------------

    \17\ United States Renal Data System, 2012 USRDS Annual Data 
Report, Volume 2: Atlas of End-Stage Renal Disease in the United 
States, pg. 240.
---------------------------------------------------------------------------

    Comment: Some commenters did not support the proposal to adopt the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical measure 
because the measure is dependent upon voluntary reporting of data that 
is often subjective. These commenters stated that the identification of 
positive bloodstream infections often relies upon subjective 
assessments of whether a bacteremia is access-related. The commenters 
believed that facilities will be less likely to identify and report 
positive bloodstream infections if they will be financially penalized 
for doing so.
    Response: The NHSN Bloodstream Infection in Hemodialysis 
Outpatients clinical measure is an objective measure based solely on 
the presence of a positive blood culture. Although NHSN collects 
information on access-relatedness to provide additional information 
that is of use for prevention purposes, the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure does not rely upon 
assessments of whether the bloodstream infection was access-related. 
There may still be perceived disincentives to conduct thorough 
surveillance to identify all positive blood cultures that meet the 
bloodstream infection definitional criteria. For this reason, it is 
important that the data be validated in a rigorous manner, and we are 
in the process of evaluating the feasibility of launching a pilot 
program to validate NHSN data.
    For these reasons, we are finalizing the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure for the PY 2016 ESRD QIP 
and for future payment years. The technical specifications for this 
measure are located at http://www.dialysisreports.org/pdf/esrd/public-measures/NHSNBloodstreamInfection-2016FR.pdf.
e. Comorbidity Reporting Measure
    The NQF endorsed a clinical measure for Dialysis Facility Risk-
Adjusted Standardized Mortality Ratio (0369) in 2008, and a 
clinical measure for Standardized Hospitalization Ratio for Admissions 
(1463) in 2011. We have long been interested in adding a 
Standardized Mortality Ratio (SMR) measure and a Standardized 
Hospitalization Ratio (SHR) measure to the ESRD QIP. As articulated in 
the CY 2013 ESRD PPS final rule, ``We believe that dialysis facilities 
own partial responsibility for the rate at which their patients are 
hospitalized, in particular when that rate is substantially higher than 
at other peer facilities and may not be explained by variation in the 
illness of patients'' (77 FR 67496). Similarly, we continue to believe 
that the ``SMR may help distinguish the quality of care offered by 
dialysis facilities as determined by mortality, a key health care 
outcome used to assess quality of

[[Page 72208]]

care in other settings, such as hospitals'' (77 FR 67497).
    Although we believe that SHR and SMR capture important indicators 
of morbidity and mortality, we are considering whether and how we might 
be able to adopt them through future rulemaking in a way that properly 
takes into account the effect that comorbidities have on 
hospitalization and mortality rates for the ESRD population. We also 
acknowledge concerns raised by commenters in the past that the NQF-
endorsed SMR and SHR measures are not adequately risk-adjusted (77 FR 
67496). Currently, information about patient comorbidities is collected 
by CMS via the Medical Evidence Reporting Form 2728, which is typically 
only submitted by facilities to CMS when a new patient first begins to 
receive dialysis treatment. We also use Form 2728 to capture the date 
of first dialysis in order to help determine patient exclusions for all 
of the clinical measures finalized in the PY 2013 ESRD PPS final rule. 
However, facilities are not required to update this form, which makes 
it difficult to capture information about comorbidities that develop 
after the initiation of dialysis treatment. We acknowledge the concerns 
of commenters who stated that ``there is currently no mechanism either 
for correcting or updating patient comorbidity data on CMS' Medical 
Evidence Reporting Form 2728, and these comorbidities affect the 
calculation of the measure'' (76 FR 70267).
    We proposed to adopt a Comorbidity reporting measure for the PY 
2016 ESRD QIP and future payment years of the ESRD QIP. The purpose of 
this measure is two-fold. First, the proposed reporting measure offers 
a mechanism for collecting annual information about patient 
comorbidities, thereby providing a reliable source of data that we can 
use to develop a risk-adjustment methodology for the SHR and SMR 
clinical measures, should we propose to adopt such measures in the 
future. Second, the reporting measure will make it possible to improve 
our understanding of the risk factors that contribute to morbidity and 
mortality in the ESRD patient population. The data we gather will 
enable us to develop risk-adjustment methodologies for possible use in 
calculating the SHR and SMR measures, should we propose to adopt those 
measures in the future, and therefore more reliably calculate expected 
hospitalization and mortality rates in future payment years of the ESRD 
QIP. When we examine updated data on comorbidities, we will determine 
the appropriateness of including that data as additional risk-
adjustment factors for the SMR and SHR measures by considering the 
extent to which each comorbidity may be influenced by the quality of 
dialysis facility care, as opposed to factors outside of a facility's 
control.
    Section 1881(h)(2)(B)(i) of the Act requires that, unless the 
exception set forth in section 1881(h)(2)(B)(ii) of the Act applies, 
the measures specified for the ESRD QIP under section 
1881(h)(2)(A)(iii) of the Act must have been endorsed by the entity 
with a contract under section 1890(a) of the Act (which is currently 
NQF). Under the exception set forth in section 1881(h)(2)(B)(ii) of the 
Act, in the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) of the Act, the Secretary may specify a measure that is not so 
endorsed, so long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary.
    NQF has not endorsed a measure for updating comorbidity information 
for patients with ESRD. We have given due consideration to endorsed 
measures, as well as those adopted by a consensus organization, and we 
are proposing this measure under the authority of 1881(h)(2)(B)(ii) of 
the Act. We believe that the proposed measure's potential to improve 
clinical understanding and practice outweighs the minimal burden it 
would impose upon facilities. Additionally, we believe that this 
measure will provide data that is currently unavailable through Form 
2728 because the measure accounts for the most recent information about 
patient risk factors, which may change over time as a patient continues 
receiving dialysis.
    For this proposed reporting measure, we proposed 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 proposed to define a ``qualifying case'' as a hemodialysis 
or peritoneal dialysis patient being treated at the facility as of 
December 31 of the performance period, according to admit and discharge 
dates entered into CROWNWeb. In fulfilling this reporting requirement, 
facilities would select one or more of the following for each 
qualifying case.

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

    Therefore, to receive full points on this measure, we proposed that 
facilities would be required to provide the updates in CROWNWeb by 
January 31, 2015, or, if that is not a regular business day, the first 
business day thereafter. While we proposed to require facilities to 
report a single annual update per patient, we encourage facilities to 
update this information more frequently in order to more closely 
monitor their patients' risk factors, and to improve the quality of the 
data.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: While several commenters supported the proposal to adopt 
the Comorbidity reporting measure and the decision to collect more 
information before adopting the SMR and SHR measures, many commenters 
did not support the proposal. Several commenters stated that they did 
not think the Comorbidity reporting measure was a quality measure and 
expressed a concern that it had never been developed nor endorsed by a 
consensus-based organization or reviewed by the MAP. Commenters also 
stated that CMS should either use the ESRD CfCs or revise Form 2728 to 
accomplish this data collection, rather

[[Page 72209]]

than using the ESRD QIP for this purpose.
    Response: We appreciate the many comments we received on the 
Comorbidity reporting measure. As a result of the significant concerns 
expressed about the measure, we have decided not to finalize the 
measure at this time. We will consider whether there is a better way to 
update this important comorbidity information, including the suggestion 
to collect comorbidity data under the CfCs, in the future.
    For these reasons, we are not finalizing the Comorbidity reporting 
measure as proposed for the PY 2016 ESRD QIP and for future payment 
years.
4. Other Measures Under Development
    As part of our effort to continuously improve the ESRD QIP, we 
continue to work on developing additional robust measures that provide 
valid assessments of the quality of care furnished by facilities to 
patients with ESRD. We are considering the feasibility of developing 
quality measures in other topic areas (for example, blood transfusions, 
kidney transplantation, quality of life, and health information 
technology) for quality improvement at the point of care as well as for 
the electronic exchange of information in support of care coordination 
across providers and settings. Additional areas of potential interest 
include residual renal function, complications associated with ESRD, 
and frequently comorbid conditions (for example, diabetes and heart 
disease).
    We requested comments on these potential areas of future 
measurement, and welcomed suggestions on other topics for measure 
development. The comments we received on these proposals and our 
responses are set forth below.
    Comment: Many commenters provided recommendations on potential 
areas of future measurement. Some commenters urged CMS to adopt 
measures on patient education (covering, for example, renal replacement 
therapies, diet, and access placements), health information technology, 
kidney transplants, fluid management, blood transfusions, quality of 
life, care coordination, symptom management, clinical depression, pain 
screening, dyspnea, advanced care planning, emergency department use, 
30-day hospital readmissions, use of home dialysis, hospitalization 
rates, and mortality rates. Other commenters urged CMS to not adopt 
measures on blood transfusions, hospitalization rates, mortality rates, 
30-day hospitalization readmissions, quality of life, kidney 
transplants, and care coordination.
    Response: We thank the commenters for their recommendations and 
will consider them as we develop our policies for future years of the 
ESRD QIP.
    Comment: Many commenters urged CMS to adopt a hemoglobin measure 
that establishes a minimum safe hemoglobin level for patients. These 
commenters stated that the use of the Hemoglobin Greater Than 12 g/dL 
measure has led to an increase in transfusions, which are not covered 
in the ESRD PPS bundled payment but remain an expense for Medicare. 
Some commenters believe that there is a consensus in the field that 
keeping hemoglobin levels above 10 g/dL yields optimal patient 
outcomes.
    Response: Using a Hemoglobin Less Than 10 g/dL measure without a 
corresponding measure that targeted high hemoglobin levels might place 
patients at increased risk for complications of aggressive ESA therapy. 
Furthermore, we note that randomized, controlled trials targeting 
patients to higher, rather than lower hemoglobin levels, or comparing 
the effect of ESAs against a placebo have indicated an increased risk 
of myocardial infarction, stroke, venous thromboembolism, thrombosis of 
vascular access, and overall mortality, and in patients with a history 
of cancer, tumor progression or recurrence. Because we cannot yet 
identify which patients would be included in this subset (and 
accordingly exclude them from the specifications of a Hemoglobin Less 
Than 10g/dL measure) we have concluded that it is not appropriate at 
this time to include such a measure in the ESRD QIP. Finally, we note 
that our rationale for removing the Hemoglobin Less Than 10 g/dL was 
published in the PY 2013 ESRD QIP proposed rule (76 FR 40519), and we 
believe those concerns remain sufficiently valid to merit not 
reintroducing the measure to the ESRD QIP at this time.
5. Scoring for the PY 2016 ESRD QIP and Future Payment Years
    Section 1881(h)(3)(A)(i) of the Act requires the Secretary to 
develop a methodology for assessing the total performance of each 
facility based on the performance standards established with respect to 
the measures selected for the performance period. We believe that the 
methodology set forth in the CY 2013 ESRD PPS final rule incentivizes 
facilities to meet the goals of the ESRD QIP; therefore, with the 
exception of the proposed changes further discussed in the applicable 
section below, we proposed to adopt a scoring methodology for the PY 
2016 ESRD QIP and future payment years that is nearly identical to the 
one finalized in the CY 2013 ESRD PPS final rule. To the extent that 
the scoring methodology differs, those differences are discussed below.
    Comment: Many commenters recommended adding a provision to the rule 
to exempt facilities forced to close temporarily due to natural 
disaster or other extenuating circumstances from the requirements of 
all of the clinical and reporting measures (and the NHSN measure in 
particular). These commenters stated that such a provision exists in 
the Hospital Inpatient Quality Reporting Program. The commenters stated 
that adopting a similar policy for the ESRD QIP would allow facilities 
to avoid payment reductions due to circumstances they cannot control.
    Response: We agree that there are times when facilities are unable 
to submit required quality data due to extraordinary circumstances that 
are not within their control, and we do not wish to penalize facilities 
for such circumstances or unduly increase their burden during these 
times. We are developing a disaster/extraordinary circumstances 
exception process, and we intend to propose to adopt such a process in 
future rulemaking.
6. Performance Period for the PY 2016 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a year, and that the 
performance period occur prior to the beginning of such year. In the CY 
2013 ESRD PPS final rule, we finalized a performance period of CY 2013. 
We stated our belief that, for most measures, a 12-month performance 
period is the most appropriate for the program because this period 
accounts for any potential seasonal variations that might affect a 
facility's score on some of the measures, and also provides adequate 
incentive and feedback for facilities and Medicare beneficiaries. For 
the reasons outlined in the CY 2013 ESRD PPS final rule (77 FR 67500), 
we have determined for PY 2016 that CY 2014 is the latest period of 
time during which we can collect a full 12 months of data and still 
implement the payment reductions beginning with renal dialysis services 
furnished on January 1, 2016. Therefore, for the PY 2016 ESRD QIP, we 
proposed to establish CY 2014 as the performance period for all of the 
measures.
    We requested comment on this proposal. We did not receive any 
comments on this proposal. We will, therefore, finalize that CY 2014 is 
the performance period for the PY 2016 ESRD QIP.

[[Page 72210]]

7. Performance Standards for the PY 2016 ESRD QIP and Future Payment 
Years
    We proposed to adopt performance standards for the PY 2016 ESRD QIP 
measures that are similar to what we finalized in the CY 2013 ESRD PPS 
final rule. Section 1881(h)(4)(A) provides that ``the Secretary shall 
establish performance standards with respect to measures selected . . . 
for a performance period with respect to a year.'' Section 
1881(h)(4)(B) of the Act further provides that the ``performance 
standards . . . shall include levels of achievement and improvement, as 
determined appropriate by the Secretary.'' We use the performance 
standards to establish the minimum score a facility must achieve to 
avoid a Medicare payment reduction.
    We received several comments on performance standards for the PY 
2016 ESRD QIP and future payment years. The comments and our responses 
are set forth below.
    Comment: Many commenters registered their concern with CMS's 
reliance on CROWNWeb data to establish performance benchmarks for 
achievement and improvement, particularly for the Hypercalcemia 
measure. These commenters stated that CROWNWeb is unreliable because 
(1) frequent changes to the business requirements have resulted in an 
inconsistent set of rules under which data are collected, making the 
data collected unreliable for setting performance standards and 
benchmarks; (2) CROWNWeb collects less than 100% of facility data, and 
a facility could be found not to meet the ESRD QIP performance standard 
because the CROWNWeb system ``kicks out'' a particular patient and/or 
data for a particular patient; (3) CROWNWeb defects open the 
possibility of ``gaming the system'' by manually and preferentially 
excluding the data for patients who fail to meet a particular goal; and 
(4) there is still a problem with accurate reconciliation with dialysis 
census data and the patient counts in CROWNWeb, which could result in 
the misattribution of patients to facilities. The commenters 
recommended that CROWNWeb should not be relied upon for setting 
performance standards and benchmarks or to collect individual patient-
level data until (1) facility and CROWNWeb patient attribution lists 
are identical; (2) only 1 percent of the data are ``kicked out'' by 
CROWNWeb; and (3) clear business rules remain in place for at least one 
year to allow for the consistent collection data before the data are 
used for the ESRD QIP. Commenters also recommended that (1) CMS 
establish a CROWNWeb Help Desk to assist them in real time to resolve 
roster data discrepancies; (2) new data definitions be shared with the 
provider community for comment well in advance of including them in 
CROWNWeb; (3) CMS initiate a formal quality assessment and process 
improvement program that would field-test each CROWNWeb update before 
it is scheduled for general release; and (4) current CROWNWeb data not 
be shared for the purpose of measure development with CMS TEPs until 
and unless the recorded data have been carefully evaluated for 
completeness, accuracy, and reliability.
    Response: We appreciate commenters' concerns about CROWNWeb and we 
welcome the opportunity to respond. We will address each issue in turn.
    First, CROWNWeb has been updated six times since the national 
rollout in June 2012. We recognize that facilities received revised 
information for entering data with every release of CROWNWeb. 
Nevertheless, we note that the clinical fields in the single user 
interface and batch submissions have stayed the same. We believe that 
this continuity in the clinical fields has minimized data 
inconsistencies resulting from changes to the business requirements, 
and we will continue to correct and standardize the business 
requirements for data submission, collection, and reporting.
    Second, CROWNWeb does not ``kick out'' patients or data once the 
patients have been entered into the CROWNWeb. Rather, patient data 
(such as, demographic information, clinical values, and information 
about vascular access) may not be allowed into CROWNWeb via the batch 
submission process if CROWNWeb determines that the data are 
inconsistent or invalid. Facilities entering data manually do not 
experience such issues, and we note that electronic data interchange 
(EDI) users are able to view and correct data that do not pass 
validations testing. We have already implemented two successful patches 
to alleviate CROWNWeb systems barriers to EDI, and we will continue to 
release patches to address additional areas of concern. Nevertheless, 
we affirm that facilities are responsible for ensuring that their 
patient censuses and patient clinical data in CROWNWeb is complete and 
accurate.
    Third, we understand there are concerns about ``gaming the 
system,'' possibly due to the fact that facilities are not required to 
enter clinical data elements in order to proceed in the CROWNWeb 
system. We do not believe this is a system defect; in certain 
instances, it might not be appropriate to enter such data, and the 
system is not designed to make these determinations. Additionally, we 
are not aware of any defects that allow facilities to preferentially 
exclude patients. If facilities and submission organizations are aware 
of other defects, we encourage them to report this to the QualityNet 
Helpdesk or on EDI Data Discrepancy Support calls. If we receive such 
reports, we will investigate them immediately and prioritize patches 
for the next available CROWNWeb patch release.
    Fourth, we are aware that CROWNWeb is currently experiencing some 
issues related to the attribution of patients to facilities. We are in 
the process of implementing new business requirements that should 
address this known defect. We continue to encourage facilities to 
ensure that their patient censuses are accurately reflected in 
CROWNWeb.
    With respect to commenters' recommendations for improving the 
accuracy of CROWNWeb data, we agree that facility attribution lists 
should match patient censuses in CROWNWeb. As stated above, we are 
actively working to resolve this issue, and we encourage facilities to 
review their patient censuses in CROWNWeb to ensure that they match 
their attribution lists. Additionally, we agree that CROWNWeb should 
minimize the amount of accurate data that does not pass validation 
testing while ensuring that inaccurate data is not used to calculate 
scores on ESRD QIP clinical performance measures. As stated above, we 
affirm that facilities are responsible for ensuring that patient data 
is accurately reflected in CROWNWeb while we continue to improve the 
EDI submission process. Furthermore, we do not agree that business 
rules need to remain in place for one year before the data can be used 
to calculate scores on ESRD QIP clinical performance measures, as long 
as changes to the business rules are not significant enough to render 
data from the baseline period incomparable with data from the 
performance period. Finally, we note that facilities are able to report 
concerns about roster-data discrepancies to the QualityNet helpdesk. We 
note that new data definitions are regularly provided to the ESRD 
community.
    We appreciate the recommendation to not share CROWNWeb data with 
any CMS TEPs due to concerns about completeness, accuracy, and 
reliability. We will consider these concerns before sharing CROWNWeb 
data with CMS TEPs in the future. We also appreciate

[[Page 72211]]

the recommendation to field-test CROWNWeb updates before they are 
scheduled for general release, and we are working on a process that 
would allow users and ``beta testers'' to test system functionalities 
in real-world settings.
    Comment: One commenter did not support the addition of other 
measures to the ESRD QIP until concerns about the program's complexity 
and the reliability of CROWNWeb are alleviated.
    Response: We appreciate the commenter's concerns about the 
complexity of the ESRD QIP and the reliability of CROWNWeb. We make 
every effort (e.g., through National Provider Calls, CROWN Memos, and 
other educational programs) to ensure that facilities receive the 
information they need to understand the ESRD QIP. We also work 
diligently to make reporting requirements and measurement methodologies 
as simple as possible. Additionally, we appreciate the commenter's 
concerns about the reliability of CROWNWeb, and we are working to 
address related concerns that have been raised by the ESRD community. 
However, given the fact that facilities are able to ensure that their 
data is accurately represented in CROWNWeb at any time, as well as the 
fact that CMS and its contractors check the validity of CROWNWeb data 
when calculating measure scores, we believe that there are processes in 
place to ensure that technical issues with CROWNWeb do not impact the 
measure scores that facilities receive. We therefore do not believe it 
is appropriate or necessary to postpone programmatic developments until 
these technical issues are completely resolved.
    Comment: Several commenters asked CMS to provide sufficient data 
and explanation to allow the kidney care community to understand the 
methodology underlying the models used to estimate ESRD QIP payment 
adjustments and the minimum TPS. These commenters stated that without 
this data, it is difficult to know the assumptions CMS uses in its 
modeling and to offer meaningful comments on the proposed rule.
    Response: We appreciate commenters' request. We will make publicly 
available facility-level data that is used to estimate ESRD QIP payment 
adjustments and the minimum TPS. Information used to estimate these 
values in the CY 2014 ESRD PPS proposed rule will be released by 
December 31, 2013. Information used to estimate these values in 
proposed rules for future payment years will be released within two 
weeks of the publication of the applicable proposed rule. However, 
since this data is preliminary, individual facility identifiers will be 
removed before the data is released so that it will not be possible to 
connect estimated measure scores to individual facilities. 
Additionally, final data used to determine finalized ESRD QIP payment 
adjustments and the finalized minimum TPS will continue to be posted on 
a CMS Web site every year in December.
    Comment: Some commenters noted that many of the measure 
specifications list SIMS as a data source. These commenters sought 
clarity on this, as SIMS has been decommissioned.
    Response: We thank commenters for noting this discrepancy. When the 
proposed rule was published, it was not clear that SIMS would be 
decommissioned. We have updated the final measure specifications to 
reflect the fact that SIMS has been decommissioned.
a. Clinical Measure Performance Standards
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we proposed for PY 2016 to set the performance 
standards (both achievement and improvement) based on the national 
performance rate (that is, the 50th percentile) of facility performance 
in CY 2012, except as specified below.
    With respect to the proposed NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure, we proposed to begin data 
collection beginning with CY 2014 events. We do not have data prior to 
CY 2014 for purposes of setting a performance standard based on the 
national performance rate of facility performance in CY 2012. For that 
reason, we proposed that the performance standard for the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure for 
PY 2016 be the 50th percentile of the national performance rate on the 
measure during CY 2014. Because we lack the baseline data needed to 
calculate an improvement score, we also proposed that, for PY 2016, 
facilities be scored only on achievement for this measure, and not on 
the basis of improvement. Although we recognize that with other 
measures that lacked baseline data we instituted a reporting measure to 
ensure that both an achievement and improvement score could be 
assessed, we believe that it is appropriate, in this case, to adopt a 
clinical measure without the baseline data necessary for an improvement 
score. Hospital Acquired Infections (HAIs) are a leading cause of 
preventable mortality and morbidity across different settings in the 
healthcare sector, including dialysis facilities, costing patient lives 
and billions of dollars. CMS has recognized that reducing HAIs is 
critically important to the Agency's three main goals of improving 
healthcare, improving health, and reducing healthcare costs. Because of 
the abnormally great impact HAIs have upon patients and the healthcare 
industry, we believe it is important to begin assessing facilities on 
the number of these events as soon as possible, rather than on merely 
whether they report these events. Additionally, the NHSN measure has 
been a reporting measure since PY 2014, which will give facilities 2 
years to report data before they are scored on the data results. Thus, 
although we do not yet have complete baseline data to give improvement 
scores in PY 2016, we believe it is appropriate to implement this 
measure using only achievement scores because of the urgency in 
reducing these events and the time facilities have had to prepare 
themselves for such a measure. Finally, we proposed that facilities 
would receive a score of zero on the NHSN clinical measure if they do 
not submit 12 months of data, as defined in Section III.C.3.d above, 
and by the deadlines specified in Section III.C.3.d above.
    For the proposed Patient Informed Consent for Anemia Treatment, we 
stated that we believed that facilities should meet the standard 100 
percent of the time. However, we recognized that unexpected events 
might make a 100 percent standard difficult to meet, so we proposed 
that facilities should be allowed to meet the standard for less than 
100 percent of their patients. Because prior data are unavailable for 
the establishment of a performance standard, benchmark, and achievement 
threshold, we developed a methodology to determine appropriate 
achievement standards. As described in Section III.C.10 of the proposed 
rule, we proposed that a small facility adjuster would be applied to 
facilities with between 11 and 25 qualifying patients. Since facilities 
with between 11 and 25 patients would be subject to the favorable 
scoring modifications applied by the small-facility adjuster, these 
facilities would have an easier time achieving the proposed achievement 
standards. Therefore, the minimum number of cases a facility may have 
and not benefit from a small-facility adjuster would be 26. We 
calculated that if a facility with 26 cases failed to obtain consent 
for two qualifying cases, it would have obtained consent 92 percent

[[Page 72212]]

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 believed that these values (92 and 96 percent) encourage a high 
consistency of care for patients with ESRD that is reasonably 
attainable by all facilities, while accounting for the possibility that 
facilities would be unable to obtain informed consent for reasons 
beyond their control. Therefore, we proposed that the achievement 
threshold be defined as obtaining informed consent for 92 percent of 
qualifying cases during the performance period, and that the benchmark 
would be defined as obtaining informed consent for 96 percent of such 
cases. Furthermore, we proposed to calculate the proposed performance 
standard using the average of the benchmark and achievement threshold, 
which is 94 percent. We sought comments on this performance standard.
    Because we lack the baseline data needed to calculate improvement 
scores for the Patient Informed Consent for Anemia Treatment measure, 
we also proposed that for PY 2016, facilities be scored only on 
achievement for this measure, and not on the basis of improvement. We 
recognized that with other measures where we lacked baseline data, we 
adopted a reporting measure to ensure that both an achievement and 
improvement score could be assessed. However, we stated that we believe 
that it is appropriate, in this case, to adopt a clinical measure 
without the baseline data necessary for an improvement score. Anemia 
management is a topic highlighted in the ESRD QIP authorizing statute, 
requiring measures that reflect labeling approved by the Food and Drug 
Administration. (See section 1881(h)(2)(A) of the Act.) The inclusion 
of the topic in statue highlights its importance to CMS and to dialysis 
patients. ESA labeling has changed over time as additional safety 
information has become available, and the informed consent process is 
designed to ensure that the most current safety information is 
communicated to patients before ESAs are administered. In addition, 
obtaining informed consent for anemia treatment is a standard of 
practice that should already be in place at dialysis facilities, so 
facilities should already have procedures in place to support the 
measure. Thus, although we did not yet have complete baseline data to 
give improvement scores in PY 2016, we stated that we believed it would 
be appropriate to implement this measure using only achievement scores 
because of the importance of providing patients with current 
information about the risks and benefits of anemia therapy, and because 
this is already a standard clinical practice.
    For the proposed Hypercalcemia measure, the first month that we can 
use to establish the baseline is May 2012. This is because the 
Hypercalcemia measure relies on CROWNWeb as its data source, CROWNWeb 
was first rolled out nationally in May 2012, and data submitted to 
CROWNWeb before that time is considered test or pilot data. For that 
reason, we proposed to set the performance standard as the 50th 
percentile of national performance from May 2012 through November 2012.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters stated that measures should have at 
least one year of reporting data available using consistent, well-
defined data elements before being adopted as clinical measures.
    Response: As stated in the CY 2013 ESRD PPS final rule (77 FR 
67488), we believe that achievement thresholds, benchmarks, and 
performance standards should be based on a full year of data whenever 
possible. However, we also believe that, in certain circumstances, it 
not practical or necessary to use a full year of baseline data. For 
example, as stated in the proposed rule, we believe the clinical 
importance of reducing HAIs warrants the adoption of the NHSN clinical 
measure without a full year of baseline data. Similarly, we believe 
that it is appropriate to use seven months of baseline data for the 
Hypercalcemia measure because serum calcium levels are not subject to 
seasonal variations, and because the seven-month time window offers a 
reliable representation of national facility performance.
    Comment: Several commenters stated that measures that lack the 
baseline data to calculate achievement and improvement scores should 
not be part of the ESRD QIP.
    Response: Although we believe that achievement and improvement 
scores should generally be based on two years of baseline data, we also 
believe that other considerations may warrant the adoption of clinical 
measures before this baseline data is available. In particular, we 
believe that the urgency of addressing substantial gaps in the quality 
of clinical care may outweigh the benefits associated with using two 
years of baseline data if these gaps present safety concerns for 
patients. Given the significant increases in healthcare acquired 
infections in dialysis patients discussed above, we believe the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure 
meets this criterion. As we explained above, we have taken steps to 
minimize the financial impact on facilities associated with adopting 
this measure in the PY 2016 ESRD QIP, and we will propose to award both 
achievement and improvement points to facilities on this measure as 
soon as the baseline data is available. We also note that the ESRD QIP 
has used reporting measures since the PY 2014 program. These measures 
are not scored on the basis of achievement and improvement. Rather, 
they exist in order to help facilities become familiar with different 
reporting mechanisms, ensure that facilities capture data that can 
improve the quality of care they provide, and collect the baseline data 
needed to calculate achievement and improvement scores.
    Comment: One commenter approved of the ESRD QIP overall. However, 
the commenter urged CMS to use measures that have been tested for 
reliability and validity, and that all clinical data should be 
retrieved from a single source.
    Response: We thank the commenter and affirm that all the measures 
in the ESRD QIP have been tested for reliability and validity. With 
respect to the suggestion that we limit clinical data to a single data 
collection source, it is infeasible at this time to collect all ESRD 
QIP data from a single source. Although we are mindful of the reporting 
burden for facilities, we strive to make use of existing data 
collection systems, and we consider the benefits and drawbacks of 
collecting data in different reporting systems.
    After consideration of the comments, we are finalizing the 
following performance standards for all of the PY 2016 clinical 
measures, except the Patient Informed Consent for Anemia Management 
clinical measure. We are not finalizing a performance standard for the 
Patient Informed Consent for Anemia Management clinical measure because 
we are not adopting that measure for the ESRD QIP.

[[Page 72213]]

b. Performance Standards for Clinical Measures

  Table 8--Finalized Numerical Values for the Performance Standards for
the PY 2016 ESRD QIP Clinical Measures Using the Most Recently Available
                                Data \18\
------------------------------------------------------------------------
                  Measure                       Performance  Standard
------------------------------------------------------------------------
Vascular Access Type:
    %Fistula..............................  62.3%
    %Catheter.............................  10.6%
Kt/V:
    Adult Hemodialysis....................  93.4%
    Adult Peritoneal Dialysis.............  85.7%
    Pediatric Hemodialysis................  93% \1\
Hemoglobin > 12 g/dL......................  0%
Hypercalcemia.............................  1.7%
NHSN Bloodstream Infection in Hemodialysis  50th percentile of eligible
 Outpatients.                                facilities' performance
                                             during the performance
                                             period.
------------------------------------------------------------------------
\1\ According to the most recent data available, the performance
  standard for the Kt/V Pediatric Hemodialysis Adequacy measure is
  91.9%. Because this is lower than the performance standard of 93% from
  the PY 2015 ESRD QIP, we are finalizing a performance standard of 93%.

     
---------------------------------------------------------------------------

    \18\ Medicare claims data from 2012 were used to calculate the 
performance standard for the Hemoglobin > 12 g/dL, Dialysis 
Adequacy, and Vascular Access Type clinical measures. CROWNWeb data 
from May 2012 through December 2012 were used to estimate the 
performance standard for the Hypercalcemia clinical measure.
---------------------------------------------------------------------------

    If the final numerical values for the PY 2016 performance standards 
are worse than PY 2015 for a measure, then we proposed to substitute 
the PY 2015 performance standard for that measure. We stated our belief 
that the ESRD QIP should not have lower standards than in previous 
years.
    We requested comment on this proposal. We did not receive any 
comments on this proposal. Using the most recent available data, we 
determined that the performance standard for the Kt/V Pediatric 
Hemodialysis Adequacy measure is 91.9%. Because this is lower than the 
performance standard of 93 percent from the PY 2015 ESRD QIP, we are 
finalizing a performance standard of 93 percent for the PY 2016 ESRD 
QIP. The finalized performance standards for the PY 2016 ESRD QIP 
clinical measures are set forth above in Table 8.
c. Performance Standards for Reporting Measures
    For the proposed ICH CAHPS reporting measure, we proposed to set 
the performance standard for PY 2016 as the facility's successful 
submission, by January 28, 2015, of ICH CAHPS survey data collected 
during the performance period in accordance with the measure CMS 
specifications at https://ichcahps.org. For PY 2017 and future payment 
years, we proposed that the PY 2016 performance standard continue 
except that, in each performance period, facilities are required to 
submit data from the two surveys conducted during the performance 
period, rather than one, and that the survey data must be submitted by 
the dates specified by CMS at https://ichcahps.org.
    For the proposed Mineral Metabolism reporting measure, we proposed 
to set the performance standard as successfully reporting the measure 
for the number of qualifying cases specified in Section III.C.2.b for 
each month of the 12-month duration of the performance period.
    For the proposed Anemia Management reporting measure, we proposed 
to set the performance standard as successfully reporting the measure 
for the number of qualifying cases specified in Section III.C.2.c for 
each month of the 12-month duration of the performance period.
    For the proposed Anemia Management: Pediatric Iron Therapy 
reporting measure, we proposed to set the performance standard as 
successfully reporting for each qualifying case each quarter the 
following: (i) patient admit/discharge date; (ii) hemoglobin levels; 
(iii) serum ferritin levels; (iv) TSAT percentages; (v) the dates that 
the lab measurements were taken for items (ii)-(iv); (vi) intravenous 
IV iron prescribed or oral iron prescribed (if applicable); and (vii) 
the date that the IV iron or oral iron was prescribed (if applicable).
    For the proposed Comorbidity reporting measure, we proposed to set 
the performance standard as successfully updating in CROWNWeb at least 
once during the performance period for each qualifying case, the 
patient's comorbidities. We also proposed 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.
    We requested comment on these proposals. We did not receive any 
comments on these proposals. We will therefore finalize the reporting 
measure performance standards as proposed except for the Anemia 
Management: Pediatric Iron Therapy and the Comorbidity reporting 
measures, which we are not finalizing for adoption in the ESRD QIP.
8. Scoring for the PY 2016 ESRD QIP Measures
    In order to assess whether a facility has met the performance 
standards, we finalized a methodology for the PY 2014 ESRD QIP under 
which we separately score each clinical and reporting measure. We score 
facilities based on an achievement and improvement scoring methodology 
for the purposes of assessing their performance on the clinical 
measures (76 FR 70272 through 70273). We proposed to use a similar 
methodology for the purposes of scoring facility performance on each of 
the clinical measures for the PY 2016 ESRD QIP and future payment 
years, except that we proposed that there will only be an achievement 
score for the NHSN Bloodstream Infection in Hemodialysis Outpatients 
and Patient Informed Consent for Anemia Treatment clinical measures, 
because data are not available to calculate an improvement score.
    In determining a facility's achievement score for the PY 2016 
program and future payment years, we proposed to continue using the 
current methodology described above, under which facilities would 
receive points along an achievement range based on their performance 
during the proposed performance period for each measure, which we 
define as a scale between the achievement threshold and the benchmark 
explained below. We proposed to define the achievement threshold for 
each of the proposed clinical measures as the 15th percentile of the 
national performance rate during CY 2012, except as otherwise specified 
below for the NHSN Bloodstream Infection in Hemodialysis Outpatients 
clinical measure, the Patient Informed Consent for Anemia Treatment 
clinical measure, and the Hypercalcemia clinical measure. We believe 
that this achievement threshold will provide an incentive for 
facilities to continuously improve their performance, while not 
reducing incentives to facilities that score at or above the national 
performance rate for the clinical measures (77 FR 67503). We proposed 
to define the benchmark as the 90th percentile of the national 
performance rate during CY 2012, except as proposed below for the NHSN 
Bloodstream Infection in Hemodialysis Outpatients clinical measure and 
the Patient Informed Consent for Anemia Treatment clinical measure, 
because it represents a

[[Page 72214]]

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 proposed that the achievement 
threshold and benchmark be the 15th and 90th percentiles, respectively, 
of national performance during CY 2014.
    For the proposed Patient Informed Consent for Anemia Treatment 
clinical measure, and for the reasons described in Section III.C.7.a, 
we proposed that the achievement threshold be defined as obtaining 
informed consent for 92 percent of qualifying cases during the 
performance period, and that the benchmark be defined as obtaining 
informed consent for 96 percent of such cases.
    For the reasons described above, the first month that we can use to 
establish the baseline for the proposed Hypercalcemia measure is May 
2012. Therefore, we proposed to set the achievement threshold as the 
15th percentile of national performance and the benchmark as the 90th 
percentile of national performance from May 2012 through November 2012.
    With the exception of the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent Anemia Treatment clinical measure, we proposed that facilities 
receive points along an improvement range, defined as a scale running 
between the improvement threshold and the benchmark. We proposed to 
define the improvement threshold as the facility's performance on the 
measure during CY 2013. The facility's improvement score would be 
calculated by comparing its performance on the measure during CY 2014 
(the proposed performance period) to its performance rate on the 
measure during CY 2013. Because we lack the baseline data needed to 
calculate improvement scores for the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent for Anemia Treatment clinical measure, we proposed that 
facilities will not receive improvement scores for these measures for 
PY 2016.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters supported the achievement/improvement 
scoring methodology that is carried over from the PY 2015 program.
    Response: We thank the commenters for their support.
    Comment: Several commenters believed that the achievement/
improvement scoring methodology is inappropriate for measures with 
compressed performance ranges. These commenters stated that in such 
cases, noncompliance for a single patient can easily result in a 
facility receiving 0 points instead of 10, resulting in a standard of 
perfection that is impossible to meet. In such cases, the commenters 
recommended giving a facility a pass for one noncompliant patient or 
otherwise altering the scoring methodology to award higher scores to 
facilities with very few noncompliant patients..
    Response: We recognize that measures with compressed performance 
scores, such as the Hemoglobin Greater Than 12 g/dL measure, present 
special challenges for the achievement/improvement methodology 
finalized in the CY 2013 ESRD PPS final rule. We will consider the 
commenters' suggestion as we work to address these challenges in future 
payment years.
    Comment: One commenter recommended that new facilities should be 
scored the first year they are open on all of the clinical and 
reporting measures, and that their scores should be publicly reported, 
but that they should not be eligible to receive a payment reduction. 
The commenter stated that this is a fair way to handle new facilities, 
because they will have to post a Performance Score Certificate, but 
they would not experience adverse financial consequences.
    Response: We appreciate the commenter's concerns about the 
difficulties new facilities face when meeting the requirements of the 
ESRD QIP. It is because of these concerns that facilities with CCN open 
dates after July 1 of the performance period are excluded from the 
reporting measures and are therefore not eligible to receive a TPS. 
However, we disagree that it is unfair for a facility to be eligible 
for a payment reduction if it has a CCN open date before July 1 of the 
performance period because we believe that 6 months is enough time to 
become familiarized with the ESRD QIP requirements, and because we 
believe that financial incentives provide the strongest enticement to 
improve the quality of care provided to patients with ESRD.
    Comment: One commenter recommended that facilities be given a 
monthly report that previews the facility's performance rate on each of 
the measures in the ESRD QIP. The commenter believes this would provide 
facilities with a better opportunity to monitor and improve 
performance.
    Response: We appreciate the commenter's request for CMS to provide 
timely information about facilities' performance on the ESRD QIP. 
However, we believe that offering a monthly preview of a facility's 
performance rate may not provide an accurate estimate of a facility's 
actual score during the performance period. Most clinical measures 
require at least four months of data, and a monthly preview may not 
include enough data for the first several months. Additionally, case 
minimums for the clinical and reporting measures are based on numbers 
of patients treated during the performance period, so it would not be 
possible to determine if a facility were eligible to receive a score on 
each of the measures until the conclusion of the performance period. 
Furthermore, attestations through CROWNWeb are due by January 31 of the 
year following the performance period, and this information could not 
be incorporated into the monthly reporting.
    After consideration of the comments, we are finalizing the 
achievement thresholds, benchmarks, and improvement thresholds for the 
PY 2016 ESRD QIP clinical measures that are listed below. We are not 
finalizing achievement thresholds, benchmarks, and improvement 
thresholds for the Informed Consent for Anemia Management clinical 
measure because we are not adopting that measure for the ESRD QIP. We 
have calculated the numerical values for the achievement threshold and 
benchmarks based on data from the dates described above; we will 
calculate the numerical values for the improvement thresholds (where 
applicable) based on individual facilities' data from CY 2013. The 
numerical values for the achievement thresholds and benchmarks for the 
PY 2016 ESRD QIP clinical measures are set forth below in Table 9.

[[Page 72215]]

Table 9--Finalized Achievement Thresholds and Benchmarks for the PY 2016
 ESRD QIP Clinical Measures Using the Most Recently Available Data \19\
------------------------------------------------------------------------
                                   Achievement
           Measure                  threshold             Benchmark
------------------------------------------------------------------------
%Fistula....................  49.9%...............  77.0%
%Catheter...................  19.9%...............  2.8%
Kt/V:
  Adult Hemodialysis........  86%\1\..............  97.4%
  Adult, Peritoneal Dialysis  67.8%...............  94.8%
  Pediatric Hemodialysis....  83%\2\..............  97.1%
Hemoglobin > 12 g/dL........  1.2%................  0%
Hypercalcemia...............  5.4%................  0%
NHSN Bloodstream Infection    15th percentile of    90th percentile of
 in Hemodialysis Outpatients.  eligible              eligible
                               facilities'           facilities'
                               performance during    performance during
                               the performance       the performance
                               period.               period.
------------------------------------------------------------------------
\1\ According to the most recent data available, the achievement
  threshold for the Adult Hemodialysis Adequacy measure is 85.6%.
  Because this is lower than the achievement threshold of 86% from the
  PY 2015 ESRD QIP, we are finalizing an achievement threshold of 86%.
\2\ According to the most recent data available, the achievement
  threshold for the Pediatric Hemodialysis Adequacy measure is 71.3%.
  Because this is lower than the achievement threshold of 83% from the
  PY 2015 ESRD QIP, we are finalizing an achievement threshold of 83%.

     
---------------------------------------------------------------------------

    \19\ Medicare claims data from 2012 were used to calculate the 
achievement threshold and benchmark for the Hemoglobin > 12 g/dL, 
Dialysis Adequacy, and Vascular Access Type clinical measures. 
CROWNWeb data from May 2012 through December 2012 were used to 
estimate the percentiles for the Hypercalcemia clinical measure.
---------------------------------------------------------------------------

    We proposed that if the final PY 2016 numerical values for the 
achievement thresholds and benchmarks are worse than PY 2015 for a 
given measure, we will substitute the PY 2015 achievement thresholds 
and benchmarks for that measure. We stated our belief that the ESRD QIP 
should not have lower standards than previous years.
    We requested comments on this proposal. We did not receive any 
comments on this proposal. Using the most recent available data, we 
determined that the achievement threshold for the Kt/V Adult 
Hemodialysis Adequacy measure is 85.6 percent. Because this is lower 
than the achievement threshold of 86 percent from the PY 2015 ESRD QIP, 
we are finalizing an achievement threshold of 86 percent for the PY 
2016 ESRD QIP. Using the most recent available data, we determined that 
the achievement threshold for the Kt/V Pediatric Hemodialysis Adequacy 
measure is 71.3 percent. Because this is lower than the achievement 
threshold of 83 percent from the PY 2015 ESRD QIP, we are finalizing an 
achievement threshold of 83 percent for the PY 2016 ESRD QIP. We will, 
therefore, finalize the achievement thresholds and benchmarks set forth 
above in Table 9 for the PY 2016 ESRD QIP clinical measures.
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    Using the same methodology we finalized in the CY 2013 ESRD PPS 
final rule, we proposed to award between 0 and 10 points for each of 
the proposed clinical measures (77 FR 67504). As noted, we proposed 
that the score for each of these clinical measures will be based upon 
the higher of an achievement or improvement score on each of the 
clinical measures, except for the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent for Anemia Treatment clinical measure, which we proposed to 
score on achievement alone. For purposes of calculating achievement 
scores for the clinical measures, we proposed to base the score on 
where a facility's performance rate falls relative to the achievement 
threshold and the benchmark for that measure. (Performance standards do 
not enter into the calculation of improvement or achievement scores.) 
Identical to what we finalized in the CY 2013 ESRD PPS final rule, we 
proposed that if a facility's performance rate during the performance 
period is:
     Equal to or greater than the benchmark, then the facility 
would receive 10 points for achievement;
     Less than the achievement threshold, then the facility 
would receive 0 points for achievement; or
     Equal to or greater than the achievement threshold, but 
below the benchmark, then the following formula would be used to derive 
the achievement score:
    [9 * ((Facility's performance period rate--achievement threshold)/
(benchmark--achievement threshold))] + .5, with all scores rounded to 
the nearest integer, with half rounded up.
    Using this formula, a facility would receive a score of 1 to 9 
points for a clinical measure based on a linear scale distributing all 
points proportionately between the achievement threshold and the 
benchmark, so that the interval in the performance between the score 
for a given number of achievement points and one additional achievement 
point is the same throughout the range of performance from the 
achievement threshold to the benchmark.
    We did not receive any comments on this proposal. Therefore, we are 
finalizing the achievement scoring methodology for the PY 2016 ESRD QIP 
and future payment years, with the exception of the Informed Consent 
for Anemia Management clinical measure, because we are not adopting 
that measure for the ESRD QIP.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    Using the same methodology we have previously finalized for the 
ESRD QIP, we proposed that facilities would earn between 0 and 9 points 
for each of the clinical measures that will have an improvement score 
(that is, all clinical measures except the NHSN Bloodstream Infection 
in Hemodialysis Outpatients clinical measure and the Patient Informed 
Consent for Anemia Treatment), based on how much their performance on 
the measure during CY 2014 improved from their performance on the 
measure during CY 2013 (77 FR 67504). A specific improvement range for 
each measure would be established for each facility. We proposed that 
if a facility's performance rate on a measure during the performance 
period is:
     Less than the improvement threshold, then the facility 
would receive 0 points for improvement; or
     Equal to or greater than the improvement threshold, but 
below the benchmark, then the following formula would be used to derive 
the improvement score:
    [10 * ((Facility performance period rate--Improvement threshold)/
(Benchmark--Improvement

[[Page 72216]]

threshold))]--.5, with all scores rounded to the nearest integer, with 
half rounded up.
    Note that if the facility score is equal to or greater than the 
benchmark, then it would receive 10 points on the measure based on the 
achievement score methodology discussed above.
    We did not receive any comments on this proposal. We will therefore 
finalize the improvement scoring methodology for the PY 2016 ESRD QIP 
and future payment years with the exception of the Informed Consent for 
Anemia Management clinical measure, because we are not adopting that 
measure for the ESRD QIP.
c. Calculating Facility Performance on Reporting Measures
    As noted above, reporting measures differ from clinical measures in 
that they are not scored based on clinical values; rather, they are 
scored based on whether facilities are successful in achieving the 
reporting requirements associated with each of these proposed measures. 
The criteria that we proposed would apply to each reporting measure are 
discussed below.
    With respect to the proposed Anemia Management reporting measure 
and the proposed Mineral Metabolism reporting measure, we proposed to 
award points to facilities using the same formula that we finalized in 
the CY 2013 ESRD PPS final rule for Mineral Metabolism and Anemia 
Management (77 FR 67506):
[GRAPHIC] [TIFF OMITTED] TR02DE13.001

    With respect to the proposed Use of Iron Therapy for Pediatric 
Patients reporting measure, we proposed to award points to facilities 
using the following formula:
[GRAPHIC] [TIFF OMITTED] TR02DE13.002

    We proposed to score the Pediatric Iron Therapy measure differently 
than the proposed Anemia Management reporting measure and the proposed 
Mineral Metabolism reporting measure because it requires quarterly 
rather than monthly reporting; therefore, scoring based on monthly 
reporting rates is not feasible.
    With respect to the proposed ICH CAHPS reporting measure and 
Comorbidity reporting measure, we proposed that a facility receive a 
score of 10 points if it satisfies the performance standard for the 
measure, and 0 points if it does not. We proposed to score these 
reporting measures differently than the other reporting measures 
because these measures require annual or biannual reporting, and 
therefore scoring based on monthly or quarterly reporting rates is not 
feasible.
    We requested comments on the proposed methodology for scoring the 
PY 2016 ESRD QIP reporting measures. We did not receive any comments on 
this proposal. We will, therefore, finalize the scoring methodology for 
the reporting measures as proposed, with the exception of the Pediatric 
Iron Therapy and Comorbidity reporting measures, because we are not 
adopting those measures for the ESRD QIP.
9. Weighting the PY 2016 ESRD QIP Measures and Calculating the PY 2016 
ESRD QIP Total Performance Score
    Section 1881(h)(3)(A)(iii) of the Act provides that the methodology 
for calculating the facility TPS shall include a process to weight the 
performance scores with respect to individual measures to reflect 
priorities for quality improvement, such as weighting scores to ensure 
that facilities have strong incentives to meet or exceed anemia 
management and dialysis adequacy performance standards, as determined 
appropriate by the Secretary. In determining how to appropriately 
weight the PY 2016 ESRD QIP measures for purposes of calculating the 
TPS, we considered two criteria: (1) the number of measures we proposed 
to include in the PY 2016 ESRD QIP; and (2) the National Quality 
Strategy priorities.
a. Weighting Individual Measures To Compute Measure Topic Scores for 
the Kt/V Dialysis Adequacy Measure Topic, the Vascular Access Type 
Measure Topic, and the Anemia Management Clinical Measure Topic
    In the CY 2013 ESRD PPS final rule, we established a methodology 
for deriving the overall scores for measure topics (77 FR 67507). For 
the reasons described in the CY 2013 ESRD PPS final rule, we proposed 
to use the same methodology in PY 2016 and future payment years to 
calculate the scores for the three measure topics. After calculating 
the individual measure scores within a measure topic, we proposed to 
calculate a measure topic score using the following steps: (i) Dividing 
the number of patients in the denominator of each measure by the sum of 
the number of patients in each denominator for all of the applicable 
measures in the measure topic; (ii) multiplying that figure by the 
facility's score on the measure; (iii) summing the results achieved for 
each measure; and (iv) rounding this sum (with half rounded up). We 
proposed that if a facility does not have enough patients to receive a 
score on one of the measures in the measure topic (as discussed below), 
then that measure would not be included in the measure topic score for 
that facility. Only one measure within the measure topic needs to have 
enough cases to be scored in order for the measure topic to be scored 
and included in the calculation of the TPS. We also proposed that the 
measure topic score would be equal to one clinical measure in the 
calculation of the TPS. For an additional explanation, see the examples 
provided at 77 FR 67507.
    We did not receive any comments on this proposal. We will therefore 
finalize this methodology of weighting individual measure scores to 
derive a measure topic score for the PY 2016 ESRD QIP and future 
payment years with the exception of the Anemia Management Clinical 
measure topic, because we are not adopting that measure topic for the 
ESRD QIP.
b. 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

[[Page 72217]]

performance across all of these measures, resulting in overall 
improvement in the quality of care provided to patients with ESRD. We 
also continue to believe that, while the reporting measures are 
valuable, the clinical measures evaluate actual patient outcomes and 
therefore justify a higher combined weight (77 FR 67506 through 67508). 
For the reasons outlined in the CY 2013 ESRD PPS final rule, we 
proposed to continue weighting clinical measures as 75 percent and 
reporting measures as 25 percent of the TPS. We requested comments on 
this proposed methodology for weighting the clinical and reporting 
measures.
    We have also considered the issue of awarding a TPS to facilities 
that do not report data on the proposed minimum number of cases with 
respect to one or more of the measures or measure topics. For the 
reasons stated in the CY 2013 ESRD PPS final rule, for PY 2016 and 
future payment years, we proposed to continue to require a facility to 
have at least one clinical and one reporting measure score to receive a 
TPS (77 FR 67508). We requested comments on our proposals to require a 
facility to be eligible for a score on at least one reporting and one 
clinical measure in order to receive a TPS.
    Finally, we proposed that the TPSs be rounded to the nearest 
integer, with half of an integer being rounded up. We requested 
comments on this proposal. For further examples regarding measure and 
TPS calculations, we refer readers to the figures below.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters supported the proposed methodology for 
weighting measures in the TPS.
    Response: We thank the commenters for their support.
    Comment: One commenter did not support the adoption of the 
Hypercalcemia measure because hypercalcemia might not be an important 
clinical indicator, and the measure would dilute the effectiveness of 
the ESRD QIP by reducing the weight of other clinical measures. Other 
commenters did not support the adoption of the Hypercalcemia measure 
but recommended weighting it at 10 percent of the TPS if the measure 
was adopted.
    Response: Given commenters' concerns about the clinical 
significance of the Hypercalcemia measure (see Section III.C.3.b 
above), particularly because the measure does not incorporate other 
indicators of mineral metabolism, we agree with the recommendation to 
decrease the measure's weight in the TPS. We note that if the 
Hypercalcemia measure were weighted at 10 percent of the TPS, and the 
clinical measures continued to comprise 75 percent of the TPS overall, 
then the weight of the Hypercalcemia measure would be receive roughly 
two-thirds the weight of the four other clinical measures. We believe 
that decreasing the Hypercalcemia measure's weight by one-third 
appropriately reflects the fact that in the absence of other 
information about mineral management, the Hypercalcemia measure is less 
clinically significant than the other clinical measures.
    Therefore, for PY 2016 and future payment years, we are finalizing 
that the Hypercalcemia measure will weighted at two-thirds the weight 
of the other clinical measures, and that the clinical measures will 
continue to constitute 75 percent of the TPS. If a facility is not 
eligible for one or more of the clinical measures, we are finalizing 
that the Hypercalcemia measure will still be weighted at two-thirds the 
weight of the other clinical measures, and that the other measures will 
be equally weighted, such that the clinical measures comprise 75 
percent of the TPS.
    Comment: Several commenters did not support either the proposal to 
equally weight all clinical measures or the proposal to equally weight 
all reporting measures. These commenters expressed concerns that this 
methodology over-weights new measures and may not place enough emphasis 
on measures that have the most clinical importance. The commenters 
recommended establishing a set of weighting principles that take into 
account (1) how long the measure has been included in the ESRD QIP; (2) 
whether room for improvement exists; (3) the measure's clinical 
significance; and (4) the number of patients affected by the measure. 
The commenters also recommended that CMS should collaborate with the 
MAP to determine measure weights.
    Response: We agree that it is not appropriate to equally weight all 
of the clinical measures if their clinical significance is not equal. 
That is why we are reducing the weight of the Hypercalcemia clinical 
measure, as explained above. Using this criterion, we do not agree that 
the reporting measures should be weighted differently because the 
reporting measures have similar clinical significance.
    Furthermore, we appreciate the recommended principles for weighting 
the measures' contribution to the TPS. We will consider these 
recommendations in future rulemaking except for the recommendation to 
collaborate with the MAP on measure weighting.
    Although the MAP provides input on measures under consideration, 
its statutorily authorized function does not include commenting on 
Medicare quality incentive program implementation policy.
    Comment: One commenter recommended that the clinical measures 
should constitute 90 percent of the TPS and the reporting measures 
should constitute 10 percent. The commenter stated that the ESRD QIP 
should evaluate providers' performance rather than their ability to 
track and report information, and that a 90 percent/10 percent 
weighting methodology would accomplish that.
    Response: We agree that it is important to weight the clinical 
measures significantly more than the reporting measures because the 
clinical measures evaluate provider's clinical performance, rather than 
their ability to track and report information. However, we also believe 
that the reporting measures should carry enough weight to provide 
facilities with an incentive to report data to CMS. We are finalizing 5 
clinical measures/measure topics and 3 reporting measures. Since this 
ratio is not significantly different than our proposal to adopt 6 
clinical measures/measure topics and 5 reporting measures we continue 
to believe that the 75 percent/25 percent distribution appropriately 
balances the need to incentivize performance with the need to incentive 
the reporting of data.
    For these reasons, we are finalizing that the clinical measures 
will be weighted at 75 percent of the TPS and that the reporting 
measures will be weighted at 25 percent of the TPS. We are also 
finalizing that the Hypercalcemia clinical measure will be weighted at 
two-thirds the weight of the other clinical measures, and that the 
reporting measures will be weighted equally.
c. Examples of the PY 2016 ESRD QIP Scoring Methodology
    In this section, we provide examples to illustrate the scoring 
methodology for PY 2016. Figures 1-3 illustrate the scoring for the 
Vascular Access Type--Fistula measure. Figure 1 shows Facility A's 
performance on the measure. Note that for this example, the facility 
has performed very well. The example benchmark (the 90th percentile of 
performance nationally in CY 2012) calculated for this clinical measure 
is 77 percent, and the example achievement threshold (which is the 15th 
percentile

[[Page 72218]]

of performance nationally in CY 2012) is 50 percent. Therefore, 
Facility A's performance of 86 percent on the clinical measure during 
the performance period exceeds the benchmark of 77 percent, so Facility 
A would earn 10 points (the maximum) for achievement for this measure. 
(Because, in this example, Facility A has earned the maximum number of 
points possible for this measure, its improvement score is irrelevant.)
[GRAPHIC] [TIFF OMITTED] TR02DE13.003

    Figure 2 shows an example of scoring for another facility, Facility 
B. As illustrated below, the facility's performance on the Vascular 
Access Type--Fistula 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 Vascular Access 
Type--Fistula measure.
    To calculate the achievement score, we would apply the formula 
discussed above. The result of this formula for this example is [9 * 
((54--50)/(77--50))] + .5, which equals 1.83, and we round to the 
nearest integer, which is 2.
    Likewise, to calculate the improvement score, we apply the 
improvement formula discussed above. The result of this formula for 
this is example is [10 * ((54--26)/(77--26))]--.5, which equals 4.99 
and we round to the nearest integer, which is 5.
    Therefore, for the Vascular Access Type--Fistula measure, Facility 
B's achievement score is 3, and its improvement score is 5. We award 
Facility B the higher of the two scores for this clinical measure. 
Thus, Facility B's score on this measure is 5.

[[Page 72219]]

[GRAPHIC] [TIFF OMITTED] TR02DE13.004

    In Figure 3, Facility C's performance on the Vascular Access Type--
Fistula measure drops from 26 percent in CY 2013 to 23 percent during 
the performance period, a decline of 3 percent. Because Facility C's 
performance during the performance period falls below the achievement 
threshold of 26 percent, it receives 0 points for achievement. Facility 
C also receives 0 points for improvement, because its performance 
during the performance period was lower than its performance during CY 
2013. Therefore, in this example, Facility C would receive 0 points for 
the Vascular Access Type--Fistula measure.

[[Page 72220]]

[GRAPHIC] [TIFF OMITTED] TR02DE13.006

    The methods illustrated above would be applied to each clinical 
measure in order to obtain a score for each measure. (Scores for 
reporting measures are calculated based upon their individual criteria, 
as discussed earlier.)
    After calculating the scores for each measure, we would calculate 
the TPS. As an example, by applying the weighting criteria to a 
facility that receives a score on all finalized measures, we would 
calculate the facility's TPS using the following formula:

Total Performance Score = [(.161 * Vascular Access Type Measure Topic) 
+ (.161 * Kt/V Dialysis Adequacy Measure Topic) + (.161 * Hemoglobin 
Greater Than 12 g/dL) + (.107 * Hypercalcemia Measure) + (.161 * NHSN 
Bloodstream Infection in Hemodialysis Outpatients) + (.083 * ICH CAHPS 
Survey Reporting Measure) + (.083 * Mineral Metabolism Reporting 
Measure) + (.083 * Anemia Management Reporting Measure)] * 10.

The TPS would be rounded to the nearest integer (and any individual 
measure values ending in .5 would be rounded to the next higher 
integer).
    The formula changes in the event that a facility does not receive a 
score on a particular measure. If, for example, a facility did not 
receive a score (that is, did not have enough qualifying cases) on the 
NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure, then the facility's TPS would be calculated as follows:

Total Performance Score = [(.205 * Vascular Access Type Measure Topic) 
+ (.205 * Kt/V Dialysis Adequacy Measure Topic) + (.205 * Hemoglobin 
Greater Than 12 g/dL) + (.137 * Hypercalcemia) + (.083 * ICH CAHPS 
Survey Reporting Measure) + (.083 * Mineral Metabolism Reporting 
Measure) + (.083 * Anemia Management Reporting Measure)] * 10.

Again, the TPS would be rounded to the nearest integer (and any 
individual measure values ending in .5 would be rounded to the next 
higher integer).
    If, for example, a facility did not receive a score (that is, did 
not have enough qualifying cases) on the Hypercalcemia clinical 
measure, then the facility's TPS would be calculated as follows:

Total Performance Score = [(.188 * Vascular Access Type Measure Topic) 
+ (.188 * Kt/V Dialysis Adequacy Measure Topic) + (.188 * Hemoglobin 
Greater Than 12 g/dL) + (.188 * NHSN Bloodstream Infection in 
Hemodialysis Outpatients) + (.083 * ICH CAHPS Survey Reporting Measure) 
+ (.083 * Mineral Metabolism Reporting Measure) + (.083 * Anemia 
Management Reporting Measure)] * 10.

    If a facility is eligible for only two of the reporting measures, 
then the facility's TPS would be calculated as follows:

    Total Performance Score = [(.161 * Vascular Access Type Measure 
Topic) + (.161 * Kt/V Dialysis Adequacy Measure Topic) + (.161 * 
Hemoglobin Greater Than 12 g/dL) + (.107 * Hypercalcemia Measure) + 
(.161 * NHSN Bloodstream Infection in Hemodialysis Outpatients) + (.125 
* ICH CAHPS Survey Reporting Measure) + (.125 * Anemia Management 
Reporting Measure)] * 10.

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

[[Page 72221]]

limited qualifying cases for earlier reporting measures (77 FR 67480, 
67483, 67486 and 67493). We proposed 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 those 
reasons, we proposed that the case minimum for all reporting measures 
except for ICH CAHPS be one.
    For the proposed expanded ICH CAHPS reporting measure, we proposed 
that facilities with fewer than 30 qualifying cases during the 
performance period not be scored on the measure. In the CY 2013 ESRD 
PPS final rule, we excluded facilities with 10 or fewer adult in-center 
hemodialysis patients from the ICH CAHPS measure because we recognized 
that, for many small dialysis facilities, hiring a third-party 
administrator to fulfill the ICH CAHPS survey requirements would have 
been impractical or prohibitively costly (77 FR 67480). As we move 
toward developing a clinical measure, we have determined that the 
survey results are more reliable if there are at least 30 surveys 
submitted per facility. Therefore, we proposed that for PY 2016 and 
future payment years, facilities that treat fewer than 30 qualifying 
cases (defined as adult in-center hemodialysis patients) during the 
performance period will be excluded from this measure. We further 
proposed that we will consider a facility to have met the 30-patient 
threshold unless it affirmatively attests in CROWNWeb by January 31 of 
the year prior to the year in which payment reductions will be made 
(for example, January 31, 2015, for the PY 2016 ESRD QIP) that it 
treated 29 or fewer adult in-center hemodialysis patients during the 
performance period.
    For the same reasons described in the CY 2013 ESRD PPS final rule 
(77 FR 67510 through 67512), for PY 2016 and future payment years, we 
proposed 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 
solicited public comment on these proposals.
    For the PY 2016 ESRD QIP and future payment years, we also proposed 
to continue to begin counting the number of months or quarters, as 
applicable, for which a facility is open on the first day of the month 
after the facility's CCN open date. With the exception of the ICH CAHPS 
expanded reporting measure, we proposed that only facilities with a CCN 
open date before July 1, 2014, be scored on the proposed reporting 
measures. Under the specifications for the proposed ICH CAHPS reporting 
measure, facilities would need to administer the survey (via a CMS-
approved, third-party vendor) during the performance period. Because 
arranging such an agreement takes time, we proposed that only 
facilities with a CCN open date before January 1 of the performance 
period to be scored on this measure. Additionally, we proposed 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 proposed to collect 12 months of data on this clinical 
measure because infection rates vary through different seasons of the 
year.
    As discussed above, we proposed that a facility will not receive a 
TPS unless it receives a score on at least one clinical and one 
reporting measure. We noted that finalizing this proposal would result 
in facilities not being eligible for a payment reduction for the PY 
2016 ESRD QIP and future payment years if they have a CCN open date on 
or after July 1 of the performance period (CY 2014 for the PY 2016 ESRD 
QIP).
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters supported the proposed performance 
standards for the reporting measures, including the 30-case minimum for 
the ICH CAHPS reporting measure.
    Response: We thank the commenters for their support.
    Comment: Several commenters did not support the proposed reporting 
threshold of 97 and 99 percent for the Mineral Metabolism and Anemia 
Management reporting measures. These commenters stated that the 
threshold will unduly penalize small facilities. The commenters did not 
believe that that this possibility is mitigated by the alternative 
threshold of the 50th percentile of facility reporting in CY 2013, or 
by the requirement for facilities with fewer than 11 patients to report 
for all but one patient.
    Response: We disagree that the proposed reporting threshold for the 
mineral metabolism and anemia management reporting measures unduly 
penalizes small facilities. In proposing that facilities with between 
10 and 2 eligible patients must report monthly serum phosphorus and 
hemoglobin/hematocrit levels for all but one patient, we effectively 
created a reporting threshold of 90 percent for facilities with 10 
patients, and a reporting threshold of less than 90 percent for 
facilities with 9 or fewer patients. Because facilities with fewer than 
11 patients must meet lower reporting thresholds than facilities with 
more than 11 patients, we believe that this provision adequately 
addresses the possibility that a small facility will not be able to 
report data for certain patients for reasons that are beyond the 
facility's control.
    Comment: Several commenters recommended applying a consistent case 
minimum (of either 11 or 26) to all ESRD QIP measures.
    Response: We disagree that it is appropriate to establish a 
consistent case minimum for all of the ESRD QIP measures. As stated in 
the CY 2014 ESRD PPS proposed rule (78 FR 40871), we proposed 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.'' Additionally, due to the considerations about the reliability 
of ICH CAHPS data discussed above, we decided that 30 was the 
appropriate case minimum for the ICH CAHPS reporting measure. We 
therefore do not believe that an 11- or 26-case minimum is appropriate 
for any of the reporting measures.
    As stated in the CY 2013 ESRD PPS final rule (77 FR 67510 through 
67511), we adopted an 11-case minimum for the clinical measures based 
on the minimum number of cases needed to protect patient privacy, which 
could be compromised by the public reporting of data for small 
facilities. Given our goal to encourage quality improvement, we want to 
ensure the full participation of as many facilities as possible in the 
program. We therefore do not believe that a 26 case minimum is 
appropriate for the clinical measures.
    Comment: One commenter expressed concerns that the 11-case minimum 
for the clinical measures excludes virtually all of the pediatric 
dialysis facilities from participation in the ESRD QIP. The commenter 
recognizes the this case minimum is important for the purposes of 
protecting patient confidentiality, but the commenter remained 
concerned that

[[Page 72222]]

pediatric facilities will not have an opportunity to use the ESRD QIP 
to improve performance.
    Response: We are cognizant of the issues relating to inclusion of 
pediatric dialysis facilities in the ESRD QIP and continue to consider 
pathways to ensure that they are not excluded from participation. We 
appreciate the commenter's concerns and will continue to consider new 
pathways for incorporating pediatric dialysis facilities in the ESRD 
QIP.
    Comment: Some commenters did not support the proposal to use the 
small-facility adjuster for facilities with 11 to 26 patients. These 
commenters stated that (1) the volatility associated with small sample 
sizes may create unintended and harmful consequences for facilities; 
(2) the methodology to adjust results for small samples sizes is 
complex and opaque; and (3) very small differences in both sample size 
and SE (xi) can cause the achievement score to ``jump'' from 
10 to 0 points (or vice versa).
    Response: We do not agree that the small-facility adjuster will 
create harmful consequences for facilities, or that small differences 
in sample size and SE (xi) can result in significant 
disparities in measure scores. While we recognize that the adjustment 
methodology is complex, we disagree that it is opaque. First, as 
illustrated below, the proposed small facility adjuster could only 
improve a facility's individual component score and will not create 
unintended and harmful consequences for small facilities (or facilities 
of any size). Second, the adjuster is transparent and straightforward, 
in that the adjustment explicitly depends on a facility's size (number 
of patients eligible for the measure), the unadjusted measure rate, and 
the standard error for that measure at the facility, which quantifies 
the amount of uncertainty in the unadjusted measure rate. Thirdly, even 
with small differences in both sample size and SE (xi), the 
adjustment will still be applied in favor of the facility, and it is 
impossible for a facility's measure score to be reduced as a result of 
the application of the adjuster. The following example illustrates how 
the small facility adjustment impacts the achievement score for the AV 
fistula measure.
[GRAPHIC] [TIFF OMITTED] TR02DE13.007

    In the example above, the small-facility adjustment increased the 
AV fistula performance rate from 55 percent to 69 percent and the 
achievement score from 2 to 7.
    For these reasons, we are finalizing as proposed the minimum data 
requirements for scoring measures for the PY 2016 ESRD QIP and future 
payment years.
11. Payment Reductions for the PY 2016 ESRD QIP and Future Payment 
Years
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities,

[[Page 72223]]

such that facilities achieving the lowest TPSs receive the largest 
payment reductions. For PY 2016, we proposed that a facility would not 
receive a payment reduction if it achieves a minimum TPS that is equal 
to or greater than the total of the points it would have received if: 
(i) it performed at the performance standard for each clinical measure; 
(ii) it received zero points for each clinical measure that did not 
have a numerical value for the performance standard published with the 
PY 2016 final rule; and (iii) it received five points for each 
reporting measure. We requested comments on these proposals.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. For 
PY 2016 and future payment years, we proposed that the payment 
reduction scale be the same as the PY 2015 ESRD QIP (77 FR 67514 
through 67516). We proposed that, for every 10 points a facility falls 
below the minimum TPS, the facility would receive an additional 0.5 
percent reduction on its ESRD PPS payments for PY 2016 and future 
payment years, with a maximum reduction of 2.0 percent. As we stated in 
the CY 2012 ESRD PPS final rule, we believe that such a sliding scale 
will incentivize facilities to meet the performance standards 
established and continue to improve their performance; even if a 
facility fails to achieve the minimum TPS, such a facility will still 
be incentivized to strive for and attain better performance rates in 
order to reduce the percentage of its payment reduction (76 FR 70281).
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters supported the payment reduction scale. 
However, these commenters remained concerned that ``when a facility has 
a small number of patients, its TPS can be quickly reduced, causing 
financial harm to the facility.''
    Response: We are aware that small facilities are more susceptible 
to the effects of outliers, due to their small sample sizes, and that 
this creates a real potential for them to be unfairly scored on 
measures in the ESRD QIP. It is for this reason that the ESRD QIP 
includes a small facility adjustment on the clinical measures for 
facilities that treat between 11 and 25 patients. We continue to 
believe that this adjustment provides a fairer and more precise way to 
account for the effects of outliers that could otherwise impact a small 
facility's TPS.
    For the reasons stated above, we are finalizing our proposals for 
calculating payment reductions for PY 2016 and future payment years. 
Based on this approach, the minimum TPS for PY 2016 is 54 points. 
Facilities failing to meet this minimum will receive payment reductions 
in the amounts indicated in Table 10 below.

  Table 10--Finalized Payment Reduction Scale for PY 2016 Based on the
                    Most Recently Available Data \20\
------------------------------------------------------------------------
                                                              Reduction
                  Total performance score                     (percent)
------------------------------------------------------------------------
100-54.....................................................            0
53-44......................................................          0.5
43-34......................................................          1.0
33-24......................................................          1.5
23-0.......................................................          2.0
------------------------------------------------------------------------

12. Data Validation
---------------------------------------------------------------------------

    \20\ Medicare claims data from 2012 were used to calculate the 
achievement threshold, benchmark, and performance standard for the 
Hemoglobin > 12 g/dL, Dialysis Adequacy, and Vascular Access Type 
clinical measures. CROWNWeb data from May 2012 through December 2012 
were used to estimate the percentiles for the Hypercalcemia clinical 
measure.
---------------------------------------------------------------------------

    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. We began a pilot data-validation program in CY 2013 for the 
ESRD QIP, and we are now in the process of procuring the services of a 
data-validation contractor, who will be tasked with validating a 
national sample of facilities' records as they report CY 2013 data to 
CROWNWeb. The first priority will be to develop a methodology for 
validating data submitted to CROWNWeb under the pilot data-validation 
program; once this methodology has been developed, CMS will publicize 
it through a CROWN Memo and solicit public comment. As part of the CY 
2013 ESRD QIP PPS final rule (77 FR 67522 through 67523), we finalized 
a requirement to sample approximately 10 records from 750 randomly 
selected facilities; these facilities will have 60 days to comply once 
they receive requests for records. We proposed to extend this pilot 
data-validation program to include analysis of data submitted to 
CROWNWeb during CY 2014. For the PY 2016 ESRD QIP, sampled facilities 
will be reimbursed by our validation contractor for the costs 
associated with copying and mailing the requested records. 
Additionally, we proposed to reduce the annual random sample size from 
750 to 300. We believe that this smaller sample size will still yield a 
sufficiently precise estimate of ESRD QIP reliability while imposing a 
smaller burden on ESRD QIP-eligible facilities and CMS alike. We 
proposed to extend our policy that no facility will receive a payment 
reduction resulting from the validation process for CY 2014 during PY 
2016. Once we have gathered additional information based on these 
initial validation efforts, we will propose further procedures for 
validating data submitted in future years of the ESRD QIP. These 
procedures may include a method for scoring facilities based on the 
accuracy of the data they submit to CROWNWeb, and a method to assign 
penalties for submitting inaccurate data. We solicited comments on 
these proposals.
    We are also considering a feasibility study for validating data 
reported to CDC's NHSN Dialysis Event Module. Although this is still in 
the early stages of development, we anticipate that this study may 
incorporate the methodology used by CMS's Hospital Inpatient Quality 
Reporting Program (77 FR 53539 through 53553), as well as additional 
input from CDC. The feasibility study will likely: (i) Estimate the 
burden and associated costs to ESRD QIP-eligible facilities for 
participating in an NHSN validation program; (ii) assess the costs to 
CMS to implement an NHSN validation program on a statistically relevant 
scale; and (iii) develop and test a protocol to validate NHSN data in 
nine ESRD QIP-eligible facilities. Facilities would be selected on a 
voluntary basis. Based on the results of this study, we intend to 
propose more detailed requirements for validating NHSN data used in the 
ESRD QIP in the future.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: Several commenters urged CMS to validate NHSN data and to 
publish the processes that will be used for data validation.
    Response: As noted above, we are considering a feasibility study 
for validating NHSN data submitted by facilities. If we proceed with 
the study, then we will publish the process used to validate NHSN data 
before the study is conducted.
    Comment: Several commenters supported the proposal to extend the 
data-validation pilot, to reduce the sample size from 750 to 300 
facilities, and to not penalize facilities for submitting invalid data 
(particularly until CROWNWeb is fully functional). These commenters 
also appreciated the opportunity to comment on future validations 
methodologies. However, some commenters urged CMS to reimburse 
facilities for staff time, as

[[Page 72224]]

well as for costs associated with copying and mailing patient records.
    Response: We thank the commenter for the support. Additionally, we 
note that CMS has not historically reimbursed provider staff or 
contractors for staff time spent in connection with copying and mailing 
patient records, and we believe these costs are minimal in comparison 
with the value of validating data used in the ESRD QIP.
    For the reasons stated above, we are finalizing our proposal to 
extend the data validation pilot as proposed, and we will post the 
methodology, procedures and results of the PY 2016 pilot on http://www.dialysisreports.org.
13. Scoring Facilities Whose Ownership Has Changed
    During PY 2012 (our first implementation year for the ESRD QIP), 
facilities requested guidance regarding how a change in ownership 
affects any applicable ESRD QIP payment reductions. Starting with the 
implementation of the PY 2015 ESRD QIP (the performance period of which 
is CY 2013), the application of an ESRD QIP payment reduction depended 
on whether the facility retained its CCN after the ownership transfer. 
If the facility's CCN remained the same after the facility was 
transferred, then we considered the facility to be the same facility 
(despite the change in ownership) for the purposes of the ESRD QIP, and 
we applied any ESRD QIP payment reductions that would have applied to 
the transferor to the transferee. Likewise, as long as the facility 
retained the same CCN, we calculated the measure scores using the data 
submitted during the applicable period, regardless of whether the 
ownership changed during one of these periods. If, however, a facility 
received a new CCN as a result of a change in ownership, then we 
treated the facility as a new facility for purposes of the ESRD QIP 
based on the new facility's CCN open date. We believe that these 
policies are the most operationally efficient, and will allow 
facilities the greatest amount of certainty when they change ownership. 
We proposed to continue applying these rules during the PY 2016 ESRD 
QIP and future years of the program, and we requested public comments 
on this proposal.
    We did not receive any comments on this proposal. Therefore, we are 
finalizing our proposals for scoring facilities whose ownership has 
changed for the PY 2016 ESRD QIP and for future payment years.
14. Public Reporting Requirements
    Section 1881(h)(6)(A) of the Act requires the Secretary to 
establish procedures for making information available to the public 
about facility performance under the ESRD QIP, including information on 
the TPS (along with appropriate comparisons of facilities to the 
national average with respect to such scores) and scores for individual 
measures achieved by each facility. Section 1881(h)(6)(B) of the Act 
further requires that a facility have an opportunity to review the 
information to be made public with respect to that facility prior to 
publication. In addition, section 1881(h)(6)(C) of the Act requires the 
Secretary to provide each facility with a certificate containing its 
TPS to post in patient areas within the facility. Finally, section 
1881(h)(6)(D) of the Act requires the Secretary to post a list of 
facilities and performance-score data on a CMS Web site.
    In the PY 2012 ESRD QIP final rule, we adopted uniform requirements 
based on sections 1881(h)(6)(A) through 1881(h)(6)(D) of the Act, 
thereby establishing procedures for facilities to review the 
information to be made public and for informing the public through 
facility-posted certificates. We proposed to maintain the public 
reporting requirements as finalized in the CY 2013 ESRD PPS final rule, 
except regarding the timing of when facilities must post their 
certificates.
    For PYs prior to PY 2014, we required facilities to post 
certificates within 5 business days of us making these certificates 
available for download from dialysisreports.org in accordance with 
section 1881(h)(6)(C) of the Act. (77 FR 67516 and 76 FR 637) In the CY 
2013 ESRD PPS final rule, we noted that many individuals responsible 
for posting the certificates were away on holiday during the December 
time period when certificates typically become available, and finalized 
that, beginning in PY 2014, a facility must post copies of its 
certificates by the first business day after January 1 of the payment 
year. (77 FR 67517) We also noted that certificates are typically 
available for download on or around December 15 of each year, and 
stated that we believe that this two week time period is enough to 
allow facilities to post them.
    Since the CY 2013 ESRD PPS final rule was finalized, we have noted 
that a posting deadline of the first business day after January 1 could 
create difficulties for facilities if it were ever the case that 
certificates were not available for download in the typical timeframe. 
We want to ensure that facilities have adequate time to post 
certificates as required in this circumstance, and that the required 
timing accommodates the December holidays. Therefore, we proposed that, 
beginning in CY 2014, facilities must post certificates within fifteen 
business days of CMS making these certificates available for download 
from dialysisreports.org in accordance with section 1881(h)(6)(C) of 
the Act.
    The comments we received on these proposals and our response are 
set forth below.
    Comment: Several commenters supported the public-reporting proposal 
to require facilities to post performance score certificates fifteen 
business days after they are made available.
    Response: We thank the commenters for the support.
    For this reason, we are finalizing the public reporting 
requirements as proposed for the PY 2016 ESRD QIP and for future 
payment years.

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

A. Background

1. Background for DME
    Title XVIII of the Social Security Act (the Act) governs the 
administration of the Medicare program. The statute provides coverage 
for broad categories of benefits, including, but not limited to, 
inpatient and outpatient hospital care, skilled nursing facility care, 
home health care, physician services, and DME. ``Medical and other 
health services,'' which is defined under section 1861(s)(6) of the Act 
to include DME, is a separate Medicare Part B benefit for which payment 
is authorized by section 1832 of the Act. In accordance with section 
1861(n) of the Act, the term ``durable medical equipment'' includes 
iron lungs, oxygen tents, hospital beds, and wheelchairs used in the 
beneficiary's home, including an institution used as his or her home 
other than an institution that meets the requirements of section 
1861(e)(1) or section 1819(a)(1) of the Act.
    Section 1834(a) of the Act, as added by section 4062 of the Omnibus 
Budget Reconciliation Act of 1987 (OBRA 87), Public Law 100-203, sets 
forth the payment rules for DME furnished on or after January 1, 1989. 
The Medicare payment amount for a DME item is generally equal to 80 
percent of the lesser of the actual charge or the fee schedule amount 
for the item, less any unmet Part B deductible. The beneficiary's 
coinsurance for such items is generally equal to 20 percent of the

[[Page 72225]]

lesser of the actual charge or the fee schedule amount for the item 
once the deductible is met. The fee schedule amounts are generally 
calculated using average allowed charges from a base period and then 
increased by annual update factors. Sections 1834(a)(2) through (a)(7) 
of the Act set forth separate classes of DME and separate payment rules 
for each class. The six classes of items are: inexpensive and other 
routinely purchased DME; items requiring frequent and substantial 
servicing; customized items; oxygen and oxygen equipment; other covered 
items (other than DME); and other items of DME, also referred to as 
capped rental items. The class for inexpensive and other routinely 
purchased DME also includes accessories used in conjunction with 
nebulizers, aspirators, continuous positive airway pressure devices and 
respiratory assist devices. Items of DME fall under the class for other 
items of DME (capped rental items) if they do not meet the definitions 
established in the statute and regulations for the other classes of 
DME.
2. Medicare Guidance and Rulemaking Regarding Definition of Routinely 
Purchased DME
    On July 14, 1988, CMS issued a program memorandum containing 
guidance for carriers to follow in developing a data base that would be 
used in identifying other routinely purchased DME for the purpose of 
implementing section 1834(a)(2)(A)(ii) of the Act. For the purpose of 
identifying routinely purchased items, the carriers were instructed via 
the program memorandum to ``compute the unduplicated count of 
beneficiaries who purchased the item, by Health Care Financing 
Administration (HCFA) Common Procedure Coding System (HCPCS) code (now 
the Healthcare Common Procedure Coding System), and a count of those 
who only rented the item during the 7/1/86-6/30/87 period.'' The 
carriers were instructed to include purchase of new and used items and 
beneficiaries who purchased an item that was initially rented in the 
count of beneficiaries who purchased the item. The carriers made 
determinations regarding whether DME furnished during this period would 
be rented (non-capped) or purchased based on which payment method was 
more economical.
    In November 1988, CMS revised Part 3 (Claims Process) of the 
Medicare Carriers Manual (HCFA Pub. 14-3) via transmittal number 1279, 
by adding section 5102 and detailed instructions for implementation of 
the fee schedules and payment classes for DME mandated by section 4062 
of OBRA 87. The new implementing instructions were effective for 
services furnished on or after January 1, 1989. Section 5102.1.A.2 
indicated that carriers would be provided with a listing of the 
equipment in the routinely purchased DME category. The initial 
classifications were implemented on January 1, 1989, in accordance with 
the program instructions, and included a listing of HCPCS codes for 
base equipment such as canes and walkers, as well as HCPCS codes for 
replacement accessories such as cane tips, walker leg extensions, and 
power wheelchair batteries for use with medically necessary, patient-
owned base equipment (canes, walkers, and power wheelchairs). In the 
case of expensive accessories that were not routinely purchased during 
July 1986 through June 1987, such as a wheelchair attachment to convert 
any wheelchair to one arm drive, these items fell under the listing of 
HCPCS codes for capped rental items. Medicare payment for DME extends 
to payment for replacement of essential accessories used with patient-
owned equipment or accessories, attachments, or options that modify 
base equipment, such as the addition of elevating leg rests to a manual 
wheelchair.
    The Medicare definition of routinely purchased equipment under 42 
CFR Sec.  414.220(a)(2) specifies that routinely purchased equipment 
means ``equipment that was acquired by purchase on a national basis at 
least 75 percent of the time during the period July 1986 through June 
1987. This definition was promulgated via an interim final rule (IFC) 
on December 7, 1992 (57 FR 57675), remaining consistent with Medicare 
program guidance in effect beginning in 1988 and discussed above, and 
finalized on July 10, 1995 (60 FR 35492). In the preamble of the 1992 
IFC (57 FR 57679), we discussed how items were classified as routinely 
purchased DME based on data from July 1986 through June 1987, ``in the 
absence of a statutory directive that defines the period for 
determining which items are routinely purchased.'' CMS indicated that 
it ``selected the period July 1, 1986 through June 30, 1987, because it 
is the same 12-month period required by section 1834(a)(2)(B)(i) of the 
Act for calculating the base fee schedule amount for routinely 
purchased equipment.'' (57 FR 57679) This period was therefore 
established as the period from which data was used for identifying the 
items that had been acquired on a purchase basis 75 percent of the time 
or more under the Medicare rent/purchase program.
3. Payment for Inexpensive or Routinely Purchased Items and Capped 
Rental Items
    Under Sec.  414.220(b), payment for inexpensive or routinely 
purchased DME is made on a purchase or rental basis, with total 
payments being limited to the purchase fee schedule amount for the 
item. If an item is initially rented and then purchased, the allowed 
purchase charge is based on the lower of the actual charge or fee 
schedule amount for purchase of the item minus the cumulative allowed 
charge for previously paid rental claims. Under Sec.  414.229(f), 
payment for capped rental items is made on a monthly rental basis for 
up to 13 months of continuous use. The supplier must transfer title to 
the equipment to the beneficiary on the first day following the 13th 
month of continuous use.

B. Current Issues

    Concerns have been raised about the application of the definition 
of and payment for routinely purchased DME, as it applies to expensive 
DME accessories. For example, recently one manufacturer of a new, 
expensive wheelchair accessory, included under a HCPCS code that would 
result in a corresponding Medicare fee schedule amount of approximately 
$3,000, if purchased, questioned why the HCPCS code describing their 
product was classified as capped rental DME. They pointed out that 
codes added to the HCPCS in recent years for other similar and more 
expensive wheelchair accessories costing $4,000 to $10,000 were 
classified as routinely purchased DME even though the items were not 
purchased under Medicare during the period specified in Sec.  
414.220(b). As a result, we began a review of expensive items that have 
been classified as routinely purchased equipment since 1989, that is, 
new codes added to the HCPCS after 1989 for items costing more than 
$150, to address this apparent inconsistency.
    As a result of this review, we found some codes that are not 
classified consistent with the regulatory definition of routinely 
purchased equipment at section Sec.  414.220(a)(2). We found that HCPCS 
codes added after 1989 for expensive, durable accessories used with 
base equipment, such as wheelchairs, have been classified as routinely 
purchased equipment. While section 1834(a)(2)(A)(iii) of the Act and 42 
CFR Sec.  414.220(a)(3) of the regulations allow payment for the 
purchase of accessories used in conjunction with

[[Page 72226]]

nebulizers, aspirators, continuous positive airway pressure devices 
(CPAP), other items covered under the DME benefit, including DME other 
than nebulizers, aspirators, CPAP devices, respiratory assist devices 
and accessories used in conjunction with those items, are paid for in 
accordance with the rules at section 1834(a) of the Act and are 
classified under sections 1834(a)(3) thru (7) of the Act as inexpensive 
and other routinely purchased DME, items requiring frequent and 
substantial servicing, certain customized items, oxygen and oxygen 
equipment, other covered items other than DME, or other covered items 
of DME.
    Additionally, we found that in some cases, expensive items of DME 
were classified as routinely purchased based on information suggesting 
that payers other than Medicare were routinely making payment for the 
items on a purchase basis. We believe that classifying an item as 
routinely purchased equipment based on data and information from other 
payers for the purposes of implementing Sec.  414.220(b) is 
inappropriate because other payers do not operate under the same 
payment rules as Medicare. Other payers may decide to purchase 
expensive items for reasons other than achieving a more economical 
alternative to rental, the basis Medicare contractors used in deciding 
whether to purchase items during July 1986 through June 1987. In other 
cases, expensive items of DME were classified as routinely purchased 
equipment based on requests from manufacturers of equipment primarily 
used by Medicaid beneficiaries. We do not believe we should classify an 
item as routinely purchased equipment for the purposes of implementing 
Sec.  414.220(b) of the Medicare regulations based on how this might 
affect other payers such as Medicaid state agencies because such 
classifications are not consistent with the regulations. After 
reviewing this issue, we do not think the regulation supports the 
classification of expensive DME as routinely purchased equipment based 
on whether other payers routinely pay for the item on a purchase basis 
or how manufacturers would prefer that other payers pay for the item. 
The classification of HCPCS codes for expensive equipment added after 
1989 as routinely purchased equipment based on this kind of information 
does not comply with the Medicare definition of routinely purchased 
equipment and defeats a fundamental purpose of the capped rental 
payment methodology to avoid paying the full purchase price of costly 
equipment when used only a short time.
    DME and accessories used in conjunction with DME are paid for under 
the DME benefit and in accordance with the rules at section 1834(a) of 
the Act. In the proposed rule (78 FR 40874), we proposed to clarify the 
existing definition of routinely purchased equipment at Sec.  
414.220(a)(2) and provide notice that certain HCPCS codes for DME and 
DME accessories added to the HCPCS after 1989 that are currently 
classified as routinely purchased equipment would be reclassified as 
capped rental items (see Table 11 below). Under our proposal, this 
would apply to all expensive items for which Medicare claims data from 
July 1986 through June 1987 does not exist or does not indicate that 
the item was acquired by purchase on a national basis at least 75 
percent of the time. In the case of expensive accessories that are 
furnished for use with complex rehabilitative power wheelchairs, we 
proposed that the purchase option for complex rehabilitative power 
wheelchairs at section 1834(a)(7)(A)(iii) of the Act would also apply 
to these accessories. For any wheelchair accessory classified as a 
capped rental item and furnished for use with a complex rehabilitative 
power wheelchair (that is, furnished to be used as part of the complex 
rehabilitative power wheelchair), the supplier must give the 
beneficiary the option of purchasing these accessories at the time they 
are furnished. These items would be considered as part of the complex 
rehabilitative power wheelchair and associated purchase option set 
forth at Sec.  414.229(a)(5).
    We also solicited 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. (78 FR 40874) Given that some 
items (HCPCS codes) may be included in the Round 2 and/or Round 1 
Recompete phases of the competitive bidding program (CBP), we indicated 
we do not believe we could change the classification for items 
furnished under these programs until the contracts awarded based on 
these competitions expire on July 1, 2016, and January 1, 2017, 
respectively, regardless of whether the item is provided in an area 
subject to competitive bidding or not. We proposed that the 
reclassification of items previously classified as routinely purchased 
equipment to the capped rental payment class be effective January 1, 
2014, for all items that are not included in either a Round 2 or Round 
1 Recompete CBP established in accordance with Sec.  414.400. For any 
item currently under a Round 2 CBP, instead of a January 1, 2014, 
effective date we proposed July 1, 2016, for these reclassifications, 
which would apply to all items furnished in all areas of the country, 
with the exception of items furnished in a Round 1 Recompete CBP. For 
items furnished in a Round 1 Recompete CBP, we proposed an effective 
date of January 1, 2017, which would only apply to items furnished in 
the nine Round 1 Recompete areas. Therefore, we proposed to generally 
base the effective dates on when the CBPs end. To summarize, the 
proposed effective dates for the reclassifications of these items from 
the routinely purchased DME class to the capped rental DME class would 
be:
     January 1, 2014, for items furnished in all areas of the 
country if the item is not included in Round 2 or Round 1 Recompete 
CBP;
     July 1, 2016, for items furnished in all areas of the 
country if the item is included in a Round 2 CBP and not a Round 1 
Recompete CBP and for items included in a Round 1 Recompete CBP but 
furnished in an area other than one of the 9 Round 1 Recompete areas; 
and
     January 1, 2017, for items included in a Round 1 Recompete 
CBP and furnished in one of the nine Round 1 Recompete areas.
    We noted that this implementation strategy would allow the item to 
be moved to the payment class for capped rental items at the same time 
in all areas of the country without disrupting CBPs currently underway. 
For Round 1 Recompete items furnished in nine areas of the country for 
the six-month period from July 1, 2016, thru December 31, 2016, 
Medicare payment would be on a capped rental basis in all parts of the 
country other than these nine areas.
    Alternatively, we noted the effective date for the 
reclassifications could be January 1, 2014, for all items paid under 
the fee schedule (78 FR 40875). In other words, the reclassification 
would not affect payments for items furnished under the Round 2 or 
Round 1 Recompete CBPs in the respective competitive bidding areas 
(CBAs) until the contract entered into under these programs expire on 
July 1, 2016, and January 1, 2017, respectively. However, such an 
alternative would result in an extensive two and a half year period 
from January 2014 through June 2016, where Medicare payment would be on 
a capped rental basis for the items in half of the country (non-CBAs) 
and on a purchase basis in the other half of the country (109 Round 2 
and/or Round 1 Recompete CBAs). We believed that this

[[Page 72227]]

bifurcation in payment classifications would create confusion and would 
be difficult to implement, but we solicited comments on this 
alternative implementation strategy.
    For this final rule, we have identified 78 HCPCS codes that will 
require reclassification from the inexpensive or routinely purchased 
DME payment class to the capped rental DME payment class (78 FR 40875 
through 40876). The codes are shown in Table 11 below. As shown in 
Table 11, Column A of the table shows the type of DME, Columns B and C 
indicate the HCPCS level II codes and the short descriptor. The long 
descriptor for each code is available at http://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.html.
    As shown in Column A, the majority of codes relate to manual 
wheelchairs and wheelchair accessories. In the case of accessories used 
with complex rehabilitative power wheelchairs, the purchase option for 
complex rehabilitative power wheelchairs applies to these accessories 
because they are part of the complex rehabilitative power wheelchair.

    Table 11--Routinely Purchased Items Reclassified to Capped Rental
------------------------------------------------------------------------
         Group category               HCPCS             Descriptor
------------------------------------------------------------------------
Automatic External               K0607            Repl battery for AED.
 Defibrillator.
Canes/Crutches.................  E0117            Underarm spring assist
                                                   crutch.
Glucose Monitor................  E0620            Capillary blood skin
                                                   piercing device
                                                   laser.
High Frequency Chest Wall        A7025            Replace chest compress
 Oscillation Device (HFCWO).                       vest.
Hospital Beds/Accessories......  E0300            Enclosed ped crib hosp
                                                   grade.
Misc. DMEPOS...................  A4639            Infrared ht sys
                                                   replacement pad.
                                 E0762            Trans elec jt stim dev
                                                   sys.
                                 E1700            Jaw motion rehab
                                                   system.
Nebulizers & Related Drugs.....  K0730            Ctrl dose inh drug
                                                   deliv system.
 
                              * * * * * * *
Other Neuromuscular Stimulators  E0740            Incontinence treatment
                                                   system.
                                 E0764            Functional
                                                   neuromuscular
                                                   stimulation.
Pneumatic Compression Device...  E0656            Segmental pneumatic
                                                   trunk.
                                 E0657            Segmental pneumatic
                                                   chest.
Power Operated Vehicles (POV)..  E0984            Add pwr tiller.
 
                              * * * * * * *
Speech Generating Devices......  E2500            SGD digitized pre-rec
                                                   8 min
                                                   20 min
                                                    40
                                                   min.
                                 E2508            SGD spelling phys
                                                   contact.
                                 E2510            SGD w multi methods
                                                   messg/access.
Support Surfaces...............  E0197 *          Air pressure pad for
                                                   mattress.
                                 E0198            Water pressure pad for
                                                   mattress.
Traction Equipment.............  E0849            Cervical pneum
                                                   traction equip.
                                 E0855            Cervical traction
                                                   equipment.
                                 E0856            Cervical collar w air
                                                   bladder.
Walkers........................  E0140 *          Walker w trunk
                                                   support.
                                 E0144            Enclosed walker w rear
                                                   seat.
                                 E0149 *          Heavy duty wheeled
                                                   walker.
Wheelchairs Manual.............  E1161            Manual adult wc w
                                                   tiltinspac.
                                 E1232            Folding ped wc tilt-in-
                                                   space.
                                 E1233            Rig ped wc tltnspc w/o
                                                   seat.
                                 E1234            Fld ped wc tltnspc w/o
                                                   seat.
                                 E1235            Rigid ped wc
                                                   adjustable.
                                 E1236            Folding ped wc
                                                   adjustable.
                                 E1237            Rgd ped wc adjstabl w/
                                                   o seat.
                                 E1238            Fld ped wc adjstabl w/
                                                   o seat.
Wheelchairs Options/Accessories
                                 E0985 *          W/c seat lift
                                                   mechanism.
                                 E0986            Man w/c push-rim pow
                                                   assist.
                                 E1002 [caret]    Pwr seat tilt.
                                 E1003 [caret]    Pwr seat recline.
                                 E1004 [caret]    Pwr seat recline mech.
                                 E1005 [caret]    Pwr seat recline pwr.
                                 E1006 [caret]    Pwr seat combo w/o
                                                   shear.
                                 E1007 [caret]    Pwr seat combo w/
                                                   shear.
                                 E1008 [caret]    Pwr seat combo pwr
                                                   shear.
                                 E1010 [caret]    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 [caret]    W/c vent tray
                                                   gimbaled.
                                 E2227            Gear reduction drive
                                                   wheel.
                                 E2228 *          Mwc acc, wheelchair
                                                   brake.
                                 E2310 [caret]    Electro connect btw
                                                   control.
                                 E2311 [caret]    Electro connect btw 2
                                                   sys.

[[Page 72228]]

 
                                 E2312 [caret]    Mini-prop remote
                                                   joystick.
                                 E2313 [caret]    PWC harness, expand
                                                   control.
                                 E2321 [caret]    Hand interface
                                                   joystick.
                                 E2322 [caret]    Mult mech switches.
                                 E2325 [caret]    Sip and puff
                                                   interface.
                                 E2326 [caret]    Breath tube kit.
                                 E2327 [caret]    Head control interface
                                                   mech.
                                 E2328 [caret]    Head/extremity control
                                                   interface.
                                 E2329 [caret]    Head control interface
                                                   nonproportional.
                                 E2330 [caret]    Head control proximity
                                                   switch.
                                 E2351 [caret]    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 [caret]    Hand/chin ctrl spec
                                                   joystick.
                                 E2374 [caret]    Hand/chin ctrl std
                                                   joystick.
                                 E2375 *          Non-expandable
                                                   controller.
                                 E2376 [caret]    Expandable controller,
                                                   replace.
                                 E2377 [caret]    Expandable controller,
                                                   initial.
                                 E2378            Pw actuator
                                                   replacement.
                                 K0015 *          Detach non-adjus hght
                                                   armrst.
                                 K0070 *          Rear whl complete
                                                   pneum tire.
Wheelchairs Seating............  E0955 *          Cushioned headrest.
------------------------------------------------------------------------
* Effective July 1, 2016. If the item is furnished in CBAs in accordance
  with contracts entered into as part of the Round 1 Recompete of DMEPOS
  CBP, then effective January 1, 2017.
[caret] Item billable with Complex Rehabilitative Power Wheelchair codes
  K0835--K0864.
** Code E0760 not included in final list based on comments received on
  proposed list.
*** Code E0457 not included in final list as code has been made invalid
  for Medicare effective January 1, 2014.

    In summary, we provided notice that certain HCPCS codes we proposed 
would be reclassified as capped rental items. We invited comments on 
this section.

C. Responses to Comments on the Clarification of the Definition of 
Routinely Purchased Durable Medical Equipment (DME)

    We received approximately 172 comments regarding the clarification 
of the definition of Routinely Purchased DME. CMS received comments 
from DME suppliers, manufacturers, professional, state and national 
trade associations, physicians, physical therapists (PTs), speech 
pathologists, occupational therapists (OTs), beneficiaries and their 
caregivers, the Veterans Administration (VA), and a state government 
representative. The comments and our responses are summarized below.
    Comment: Several commenters noted the clarification of the 
definition of routinely purchased durable medical equipment relies on 
1986/87 as the base year and instead suggested using 2010/11 as a base 
year for determining new items classified under routinely purchased 
category.
    Response: We do not agree with this comment. In this final rule, we 
are not revising the definition given our longstanding interpretation 
regarding section 1834(a)(2) of the Act. Although there have been 
numerous amendments to section 1834(a) over the years to address 
payment of certain DME, there have been no amendments to revise the 
definition of routinely purchased DME. Payment on a capped rental basis 
avoids lump sum purchases of expensive equipment that is only needed on 
a short term basis and is more economical than purchase. If the 
equipment is needed on a long term basis, beneficiaries will take over 
ownership following 13 months of continuous use. In addition, we did 
not propose to revise the base period in the definition for routinely 
purchased DME at 42 CFR Sec.  414.220(a)(2). We are therefore not 
adopting this suggestion to revise the base period for the definition 
of routinely purchased DME equipment under 42 CFR Sec.  414.220(a)(2).
    Comment: Many commenters contended that reclassifying certain codes 
from the routinely purchased DME category to capped rental DME would 
result in additional administrative burden for suppliers. Commenters 
reacted unfavorably to repeated billings for monthly rental claims for 
as long as the item is medically necessary up until title transfers at 
the end of the 13th month rental period.
    Response: While we understand certain billing procedures for capped 
rental items differ from and may be more administratively burdensome 
than billing procedures for routinely purchased items, this does not 
negate the fact that items must be classified in accordance with the 
rules of the statute and regulations.
    Comment: One commenter requested a delay in the implementation of 
the reclassification of the list of codes in our table from routinely 
purchased DME to capped rental DME. The commenter stated that more time 
is needed to educate practitioners and patients along with receipt of 
adequate program guidance. Another comment from a manufacturer 
requested a substantial delay in implementation of the capped rental 
system for Speech Generating Devices (SGDs).
    Response: Items that are not in compliance with the existing 
definition of routinely purchased DME will be classified as capped 
rental items and paid for in accordance with the rules set forth in 42 
CFR 414.229 for items not currently included in a CBP that are 
furnished on or after April 1, 2014. The dates for re-classification of 
items affected by this rule that are currently included in a CBP will 
be discussed later in the preamble. We do not agree with the comment 
that a substantial delay in implementation of the reclassification of 
SGDs is necessary. Suppliers and practitioners will have more than 
three months to become familiar with payment rules and billing 
procedures related to capped rental

[[Page 72229]]

items and to prepare for this change in classification. In addition, 
this change in classification only affects payments for these items on 
or after April 1, 2014. We recognize that consumers, occupational and 
physical therapists and disability advocacy groups have expressed 
concerns with these changes to acquisition policy for some durable 
medical equipment which persons with disabilities rely upon, including 
specialized wheelchairs and speech generating devices. Although we do 
not anticipate disruptions resulting from the transition from purchase 
to a capped rental, we understand the important role that this 
technology plays in maximizing the independence of persons with 
disabilities and their ability to direct their own care. Accordingly, 
CMS is committed to carefully monitoring beneficiary access using real-
time claims data to ensure that there isn't an adverse impact.
    Comment: Several commenters noted some of the codes proposed for 
reclassification include the term ``replacement only'', such as code 
E2376 Expandable controller, replacement and K0607 Automatic external 
defibrillator part; thus, the codes are most likely submitted for 
payment for beneficiary owned DME instead of DME owned by the supplier 
during a 13-month capped rental period. Commenters felt it was 
unrealistic to expect a supplier to rent these items and disable the 
patient owned equipment should the beneficiary become ineligible for 
Medicare payment. Another commenter mentioned that some of the 
transitioning codes are not covered or have lower utilization under 
Medicare.
    Response: We do not agree with these comments. The statute does not 
differentiate between items paid for under the DME benefit that are 
base equipment versus items paid for under the DME benefit that are 
replacement parts for base equipment. With the exception of drugs, 
which are paid in accordance with a separate payment methodology, all 
items covered under the DME benefit category are subject to the payment 
rules mandated by section 1834(a) of the Act. An item is not classified 
based on utilization, and, under our regulation at 42 CFR 414.229(f), 
if the beneficiary needs the item for 13 continuous months, title to 
the item is transferred to the beneficiary after 13 months. Lastly, our 
review of the codes for reclassification from routinely purchased DME 
to capped rental indicates coverage under Medicare although the extent 
of coverage differs by item.
    Comment: One commenter noted several of the listed codes have 
limited coverage under Medicare and so continuing to pay on a lump sum 
purchase basis for these items will have a minimal impact on Medicare 
expenditures.
    Response: The statute does not provide direction or discretion to 
classify items under section 1834(a)(2) thru (7) of the Act based on 
magnitude of expenditures.
    Comment: Numerous commenters opposed reclassifying the HCPCS codes 
for pediatric manual wheelchairs (codes E1232-E1238) and manual tilt in 
space wheelchairs (code E1161) from the payment class for inexpensive 
or routinely purchased items to the payment class for capped rental 
items. Some commenters stated many adult tilt in space wheelchair users 
require customization of equipment and require adjustment to reflect 
their unique postural and mobility needs. The commenters stated a 
concern that payment on a rental basis for these items will increase 
the risk for orthopedic deformities due to improper support, increase 
the risk of pressure sores from poorly managed skin integrity, and will 
contribute to overall costs of medical care. Many commenters stated 
these items are used for chronic conditions or permanent disabilities, 
such as quadriplegia, paraplegia, multiple sclerosis, head and spinal 
injuries, requiring wheelchairs and wheelchair accessories that are 
constructed of components that are not mass produced which reduces the 
profit margin compared to the furnishing of power mobility and acute 
adult manual wheelchairs.
    Response: Claims for ``youth'' or ``pediatric'' wheelchairs were 
submitted using HCPCS code E1091 (Youth Wheelchair, Any Type) from July 
1986 through June 1987, and this equipment was paid on a purchase basis 
25 percent of the time during this time. This is well below the 75 
percent threshold established in the statute; and therefore, 
classification of pediatric or youth wheelchairs (HCPCS codes E1232-
E1238) as capped rental items is required by the regulations. The data 
from July 1986 through June 1987 also indicates that only 30 percent of 
all manual wheelchairs were purchased for Medicare beneficiaries during 
this time. As Medicare claims data from July 1986 through June 1987 
does not exist for adult tilt in space wheelchairs (HCPCS code E1161), 
the data required by the regulation to classify these items as 
routinely purchased equipment does not exist and these items will 
therefore be classified as capped rental items in accordance with this 
rule. We agree that some items may have a higher cost because they are 
not mass produced; however, such costs are accounted for in the fee 
schedule amounts that have been set based on supplier charges or price 
lists. We note that the fee schedule amounts for the pediatric and 
adult tilt in space manual wheelchairs are more than double, and in 
some cases triple, the fee schedule amounts established for other 
manual wheelchairs. We recognize that commenters have expressed 
concerns with these changes to payment policy for some durable medical 
equipment which persons with disabilities rely upon, including 
specialized wheelchairs. Although we do not anticipate disruptions 
resulting from the transition from purchase to a capped rental, we 
understand the important role that this equipment plays in maximizing 
the independence of persons with disabilities and their ability to 
direct their own care. Accordingly, CMS is committed to carefully 
monitoring beneficiary access using real-time claims data to ensure 
that there isn't an adverse impact.
    Comment: One commenter raised concern that suppliers spend multiple 
hours on supplies, labor and parts to customize a wheelchair; 
therefore, if patients become temporarily institutionalized, regress 
and need new customized parts, or pass away so that the wheelchair is 
returned to the supplier, the supplier would have a need to readjust 
and customize the chair to fit the needs of the next patient.
    Response: This rule has no impact on items that meet the definition 
of customized items at 42 CFR 414.224. For items that are affected by 
this rule, we agree that some items may have a higher cost because they 
are not mass produced; however, such costs are accounted for in the fee 
schedule amounts that have been set based on supplier charges or price 
lists. We appreciate hearing about the concerns with these changes to 
payment policy for some durable medical equipment which persons with 
disabilities rely upon, including specialized wheelchairs. Although we 
do not anticipate disruptions resulting from the transition from 
purchase to a capped rental, we understand the important role that this 
technology plays in maximizing the independence of persons with 
disabilities and their ability to direct their own care. Accordingly, 
CMS is committed to carefully monitoring beneficiary access using real-
time claims data to ensure that there isn't an adverse impact.
    Comment: There were concerns raised by many commenters regarding 
reclassification of wheelchair options and accessories added to 
individually

[[Page 72230]]

configure wheelchairs to meet long-term mobility needs.
    Response: In this final rule, an exception is established so that 
wheelchair options and accessories furnished for use with purchased 
complex rehabilitative power wheelchairs can be paid under a routinely 
purchased basis consistent with 42 CFR 414.229(a)(5). Other expensive 
wheelchair options and accessories that are paid separate from the 
rental payments for the wheelchair base and were not routinely 
purchased from July 1986 through June 1987 fall under the payment 
category for capped rental items. Payment will therefore be made on a 
capped rental basis for the options and accessories furnished for use 
with the rented wheelchair base. As a result, when payment for less 
than 13 months of continuous use is made for the wheelchair and 
associated options and accessories, the supplier can furnish the 
equipment to other patients and receive additional payment for the 
equipment. If payment is made for 13 months of continuous use of the 
wheelchair, then title to the wheelchair and all options and 
accessories will transfer to the beneficiary.
    Comment: One commenter recommended CMS should establish that all 
manual wheelchairs should remain in the routinely purchased category 
and that options and accessories provided with/for a ``routinely 
purchased'' wheelchair base should be considered ``routinely 
purchased'' as well.
    Response: With the exception of ultralightweight manual 
wheelchairs, manual wheelchairs were not routinely purchased under the 
Medicare program from July 1986 through June 1987. The data from July 
1986 through June 1987 indicates that only 30 percent of manual 
wheelchairs and 55 percent of power wheelchairs were purchased for 
Medicare beneficiaries during this time. These percentages are well 
below the 75 percent threshold established in the statute. As discussed 
above. an exception is established so that wheelchair options and 
accessories furnished for use with purchased complex rehabilitative 
power wheelchairs can be paid under a routinely purchased basis 
consistent with 42 CFR 414.229(a)(5). Wheelchair options and 
accessories falling under the payment category for capped rental items 
will be paid for on a rental basis when they are furnished with other 
wheelchair bases, with title to the equipment transferring to the 
beneficiary after 13 months of continuous use.
    Comment: Many commenters complained that a capped rental payment 
method will result in a significant financial burden for suppliers who 
may face challenges securing capital/lines of credit in the current 
economic environment.
    Response: We do not agree with this comment. The capped rental 
payment method allows suppliers to reclaim capital equipment that is 
not needed for 13 months of continuous use. While Medicare payments may 
total 105 percent of the historic purchase price over 13 months of 
continuous use by a single beneficiary, the item could be rented for 
significantly more than 13 monthly payments and significantly more than 
105 percent of the historic purchase price if it is used by multiple 
beneficiaries who do not need the item for the full 13 months.
    Comment: Commenters stated that the proposed change in payment 
rules will be adopted by payers other than Medicare and therefore 
should not be adopted.
    Response: Speculation about how other payers will pay for items 
that are also paid for by Medicare is beyond the scope of this rule and 
we have not taken such things into consideration when finalizing our 
policies. We must comply with the requirements of section 1834(a)(2) 
through (7) of the Act regarding how we classify and pay for DME items.
    Comment: Various commenters argued that since the ultralightweight 
wheelchair (HCPCS code K0005) is classified as routinely purchased 
equipment, other complex rehabilitative manual wheelchairs (HCPCS codes 
E1161 and E1232 through E1238) should similarly be classified as 
routinely purchased equipment.
    Response: The ultralightweight wheelchair was classified as 
routinely purchased equipment based on the regulatory standard (that 
is, it was acquired for purchase on a national basis at least 75 
percent of the time from July 1986 through June 1987). Other manual 
wheelchairs have not been routinely purchased under the Medicare 
program. Claims for ``youth'' or ``pediatric'' wheelchairs were 
submitted using HCPCS code E1091 (Youth Wheelchair, Any Type) from July 
1986 through June 1987, and this equipment was paid on a purchase basis 
25 percent of the time during this time. This is well below the 75 
percent threshold established in the statute; and therefore, 
classification of pediatric or youth wheelchairs (HCPCS codes E1232--
E1238) as capped rental items is required by the regulations. The data 
from July 1986 through June 1987 also indicates that only 30 percent of 
all manual wheelchairs were purchased for Medicare beneficiaries during 
this time. As Medicare claims data from July 1986 through June 1987 
does not exist for adult tilt in space wheelchairs (HCPCS code E1161), 
these items will be classified as capped rental items in accordance 
with this rule, and this is consistent with the classification of youth 
or pediatric wheelchairs and for manual wheelchairs in general based on 
Medicare claims data from July 1986 through June 1987.
    Comment: One commenter concurred with our proposal by indicating it 
is a waste for patients at end stage of life to purchase complex 
wheelchairs which they then would not use for more than 1-2 years, due 
to various life ending diseases or due to regression in function, or at 
an older terminal age. The commenter noted it is advisable to have a 
system of rental and return, so that the same equipment can be 
modified, then rented to someone else. This will greatly reduce waste 
in this area of assistive technology/wheelchair supply and demand.
    Response: We appreciate this comment.
    Comment: Several commenters supported our proposal permitting a 
supplier to give the beneficiary the option of purchasing a wheelchair 
accessory classified as a capped rental item and furnished for use with 
a complex rehabilitative power wheelchair (that is, furnished to be 
used as part of the complex rehabilitative power wheelchair) at the 
time the accessory is furnished. These wheelchair accessory items would 
be considered as part of the complex rehabilitative power wheelchair 
and associated purchase option set forth at Sec.  414.229(a)(5).
    Response: We appreciate this comment.
    Comment: Several commenters urged CMS to extend our proposal to 
permit a supplier to give the beneficiary the option of purchasing a 
wheelchair accessory classified as a capped rental item and furnished 
for use with a complex rehabilitative power wheelchair (that is, 
furnished to be used as part of the complex rehabilitative power 
wheelchair) to accessories furnished for use with standard power 
wheelchairs.
    Response: We disagree with this comment. The statute does not 
provide a purchase option for standard power wheelchairs. Section 
1834(a)(7)(A)(iii) provides the purchase agreement option only for 
complex, rehabilitative, power-driven wheelchairs.

[[Page 72231]]

    Comment: Some commenters were concerned that Part B coverage and 
payment for rented DME is no longer allowed when a beneficiary enters a 
hospital, so the beneficiary will be billed for equipment during the 
time the beneficiary is in the hospital because the provider would not 
be able to remove a tilt mechanism from their wheelchair without 
rendering their chair non-functional.
    Response: The Part B benefit for DME and the payment rules at 
section 1834(a) of the Act do not extend to DME items furnished for use 
in hospitals. Classification of items under the payment classes 
established in sections 1834(a)(2) through (7) is not affected by 
whether or not the item will later be available for use in a hospital. 
Medicare benefit payments for items used in hospitals may be available 
under other parts of the program other than the Part B benefit for DME. 
In addition, suppliers are responsible for submitting claims for 
payment under the Medicare Part B DMEPOS fee schedule in compliance 
with our regulations and program instructions, such as those in the 
Medicare Claims Processing Manual (Pub 100.04), chapter 20, section 
30.5.4 which address such temporary interruptions
    Comment: Several commenters argued that the estimated program 
savings are not accurate primarily because the 8 month average use 
assumed for the items moved from routinely purchased to capped rental 
is in error because the 8 month average use was established for 
existing capped rental items, not routinely purchased.
    Response: We believe that Medicare data on the average number of 
monthly rental claims paid for items currently classified as capped 
rental items is a reasonable proxy for the average number of monthly 
rental claims that will be paid for items reclassified as a result of 
this rule and provides an accurate estimate of the impact of this 
rulemaking on Medicare part B expenditures for DME. Most of the items 
being reclassified are either wheelchairs or wheelchair accessories. In 
reviewing the data used to determine that an average of 8 monthly 
rental payments are made for items currently classified as capped 
rental items, the average number of paid monthly rental claims per 
beneficiary drops to 7 when only wheelchairs and wheelchair accessories 
currently classified as capped rental item are considered. Our goal is 
to create a reasonable model by which to estimate the fiscal impact of 
the policy. The method used to calculate the savings is as follows:
     Sum the 2011 allowed charges for the HCPCS that are 
affected
     Increase the allowed charges by Medicare Advantage add-on
     Apply the annual increases for fee-for-service Medicare 
Part B population and for fee update to the total expenditures through 
the year 2023
     Based on claims data, the average duration of use of 
capped rental equipment is approximately 8 months, which is 2/3 of 
purchase price.
     So it is assumed that moving an item from routinely 
purchased to capped rental will on average save 33 percent of the 
purchased price, which is the factor applied to allowed charges to 
generate the savings indicated in the proposed rule.
    Comment: Several commenters argued that the estimated savings in 
the rule does not consider the cost of possible increased institutional 
care.
    Response: We do not believe the policy described in this final rule 
would increase the use of institutional care. We are not reducing the 
number of items that would be covered or reducing payment for certain 
DME items such that more institutional care may be needed.
    Comment: Some commenters recommended classifying equipment as 
routinely purchased equipment if any of the following conditions are 
met: 1) the item is routinely needed for a period exceeding 13 months; 
2) the item is intended for use by people with permanent disabilities; 
3) the item is designed, manufactured, or assembled for a single 
individual (not intended to be used by multiple individuals); 4) the 
item was previously classified as routinely purchased equipment; and 5) 
other payers routinely pay for the item on a purchase basis.
    Response: We disagree with this suggestion. We have interpreted the 
statutory definition of routinely purchased equipment, as set forth in 
the regulations, as ``equipment that was acquired by purchase on a 
national basis at least 75 percent of the time during the period July 
1986 through June 1987.'' The statute does not contemplate use of 
additional factors in making determinations regarding whether equipment 
is routinely purchased, such as the ones raised by the commenters,. 
Also, we see no reason to revise the longstanding definition of 
routinely purchased equipment, but we may reconsider the issue in the 
future if necessary.
    Comment: One commenter noted the United States Supreme Court held 
in Olmstead v. L.C. (527 US 581 (1991)) that unjustified segregation of 
persons with disabilities constitutes discrimination in violation of 
title II of the Americans with Disabilities Act. As noted by the 
commenter, the Court held that public entities must provide community-
based services to persons with disabilities to support them to live 
independently in the community. The commenter asserts a change in the 
terms of usage of assistive devices jeopardizes the spirit of the 
decision made in the Olmstead case. A person can be in a position of 
not having these devices at time of need.
    Response: We do not concur that changing the payment classification 
of certain codes from routinely purchased DME to capped rental DME 
jeopardizes the spirit of the decision made in the Olmstead case. Our 
proposal is not designed to undermine payment of the items; rather it 
is clarifying the definition of routinely purchased equipment set forth 
at section Sec.  414.220(a)(2) and reclassifying some codes that are 
not presently classified consistent with the regulatory definition. In 
addition, the proposal is not designed to have any impact on coverage 
of items and services under the Medicare Part B benefit for DME. Such 
items and services would continue to be available consistent with the 
statute and regulations. This rule is designed to clarify the payment 
provisions applicable to accessories used in conjunction with items 
paid for under section 1834(a) of the Act.
    Comment: Some commenters stated that speech generating devices 
(SGDs) (HCPCS codes E2500-E2510) should not be covered as DME but 
instead as prosthetic devices.
    Response: These comments are outside the scope of the proposed 
rule, and therefore are not addressed in this final rule. The process 
for reviewing coverage/benefit category for an item is not addressed in 
this rule. Information on the process can be found at the Web site 
http://www.cms.gov/Medicare/Coverage/DeterminationProcess/index.html
    Comment: Several commenters stated that certain patients may 
benefit from renting SGDs. One commenter wrote once an individual has 
the initial assessment, there is often a trial period with one or more 
devices. The average time for trials is 90 days. One commenter stated a 
rental may be appropriate for short-term use such as a temporary loss 
of natural speech due to a surgical procedure or when waiting to 
purchase one. Another commenter indicated patients may benefit from 
renting a device for up to 1 year. Furthermore, one commenter supported 
implementation of a rental payment basis for certain DME to prevent 
abuse

[[Page 72232]]

of the purchase basis system and to help keep co-insurance costs lower 
when extended over the number of rental months.
    Response: We thank the commenters for their helpful comments and 
agree about the potential benefits of our capped rental policy. We are 
aware that some manufacturers make their SGC products available on a 
rental basis so that patients can try out the products to figure out 
which one best meets their needs. Under the capped rental payment 
system, the patient will have the ability to obtain a new physician 
order and change equipment during the rental period to equipment that 
better meets their medical needs while Medicare rental payments 
continue up to the point where title to the equipment transfers to the 
beneficiary after 13 months of continuous use.
    Comment: Numerous commenters opposed reclassification of SGDs, 
indicating that these devices are individually programmed based on each 
patient's need and access method (that is, eye-gaze, touch screen, 
switch) and language skills. The commenters stated that these devices 
are not similar to wheelchairs which are primarily generic in their 
design and can be used by a wide variety of individuals without 
significant modifications. Also, the commenters reviewed that patients' 
caregivers may be accustomed to specific devices used by their 
patients. One commenter suggested that a SGD is more appropriately 
analyzed as a complex rehabilitation tool, and as part of that 
analysis, the importance of integration and customization with the 
other rehab tools and medical needs of the patient must be considered. 
Other commenters reiterated that SGDs assist with communication that is 
essential for an individual's independence and functional living. 
Another commenter described an analysis of the diagnoses of the 
patients using SGDs, which shows that an estimate of eight months for a 
rental is unrealistic given that many SGD patients have a long term 
need for the device.
    Response: We recognize that patients may use long term DME such as 
SGDs because of chronic conditions or permanent disabilities; however, 
we believe assigning the appropriate payment category in accordance 
with the statute and regulations ensures appropriate payment, supplier 
responsibilities, and beneficiary safeguards. Our final policy is not 
designed to interfere with patient care or a practitioner's efforts to 
program SGDs.
    Comment: Many commenters claimed that reclassifying SGDs from 
routinely purchased DME to capped rental DME would cause suppliers to 
limit the amount of time and attention given to furnishing quality 
SGDs. Several commenters are concerned suppliers will require patients 
to switch devices and the devices would be taken away from patients who 
need them when the patient has reached maximum rental fees. Another 
commenter raised concerns that suppliers will not furnish SGDs that 
adequately serves patients who move from one location to another.
    Response: The HCPCS codes for SGDs and other DME describe different 
categories of items. The supplier must furnish the item ordered by the 
physician to meet the patient's medical needs as required by 42 CFR 
424.57(c)(4). Suppliers that are found not in compliance with the 
DMEPOS supplier standards are not allowed to possess a supplier number 
and receive Medicare payment for DME in accordance with section 1834(j) 
of the Act. These standards and requirements are not affected by the 
methodology used to pay for the item. In addition, regulations at 42 
CFR 414.229(g) require that suppliers furnishing capped rental items 
continue to furnish the item for the full 13-month capped rental period 
with very limited exceptions and are prohibited from switching the 
patient's equipment unless the physician orders different equipment, 
the beneficiary chooses to obtain a newer technology item or an 
upgraded item, or the equipment is replaced because of loss, theft, or 
irreparable damage or wear. If the device is used for 13 continuous 
months, then the supplier is required to transfer title to the 
equipment to the beneficiary. Regarding patients who relocate near the 
end of the capped rental period and need to find a new supplier, CMS 
has been able to work with suppliers of capped rental items in the past 
to ensure beneficiary access in these situations.
    Comment: Numerous comments were concerned that a rental payment 
method would impact access to SGDs in certain settings such as a 
hospital or nursing facility. As a result, commenters were concerned 
because the patient should not need to worry that the device will be 
taken away when circumstances require the patient to communicate to 
practitioners in the facilities. Commenters explained the patient may 
be forced to accept an inappropriate device because the right one for 
them is not available while in a facility resulting in practitioners 
and caregivers having difficulty in understanding the patient.
    Response: In accordance with the statute, we do not establish 
payment rules for DME based on how the item is furnished in 
institutional settings, especially in light of the definition of DME in 
section 1861(n) of the Act, which defines DME as equipment used in a 
patient's home.
    Comment: One commenter expressed concern that our proposal did not 
include codes for Accessory for Speech Generating Device, Not Otherwise 
Classified (HCPCS code E2599) and Accessory for Speech Generating 
Device, Mounting System (HCPCS code E2512).
    Response: We appreciate this comment, but we are not including 
codes E2599 and E2512 in our list of codes for reclassification at this 
time because fee schedule amounts for these codes have not been 
established. When fee schedules are developed, we will review the data 
for these accessory codes to ensure compliance with the Medicare 
definition of routinely purchased equipment set forth at 42 CFR Sec.  
414.220(a). If a change in payment category is required in the future, 
CMS expects to provide notice via program instructions.
    Comment: Some commenters recommended that the low volume of 
services for SGDs should exempt these codes from our proposal for 
reclassification from routinely purchased to capped rental. One 
commenter stated the proposal from CMS reports $20,170,612 in payments 
for SGDs in 2012 at an average cost of $7,356 for 2,742 services. The 
commenter also stated this represents .000008 of the United States 
population utilizing data from the census bureau.
    Response: The payment rules at section 1834(a) of the Act do not 
classify items under the payment classes based on volume of services. 
As discussed above, the Medicare definition of routinely purchased 
equipment is set forth at 42 CFR Sec.  414.220(a)(2) and specifies that 
routinely purchased equipment means equipment that was acquired by 
purchase on a national basis at least 75 percent of the time during the 
period July 1986 through June 1987. As a result of clarifying and 
reaffirming this definition, equipment for which claims data did not 
exist during the 1986/87 period cannot be classified as routinely 
purchased equipment. This results in such codes being reclassified as 
capped rental items if they do not fall under any of the other DME 
payment classes.
    Comment: One commenter stated that the pneumatic compression trunk 
appliance (HCPCS code E0656) and the pneumatic compression chest 
appliance (HCPCS code E0657), both used in conjunction with pneumatic 
compression pumps for treatment of lymphedema, are considered routinely

[[Page 72233]]

purchased because the common diagnosis that allows reimbursement is 
lymphedema. The commenter states lymphedema is not curable and can only 
be managed. When a person has been diagnosed with lymphedema and a 
pneumatic compression pump has been prescribed, it is never for short 
term use. Thus, the items should not be reclassified from routinely 
purchased to capped rental payment method.
    Response: The payment rules at section 1834(a) of the Act do not 
classify items under the payment classes based on diagnosis and 
intended use. As discussed above, the Medicare definition of routinely 
purchased equipment is set forth at 42 CFR Sec.  414.220(a)(2) and 
specifies that routinely purchased equipment means equipment that was 
acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987. In this final rule, 
we are reclassifying DME that was not acquired during the period July 
1986 through June 1987 or was not acquired by purchase on a national 
basis at least 75 percent of the time during the period July 1986 
through June 1987, and therefore cannot be classified as routinely 
purchased DME under 42 CFR 414.220(a). This results in certain codes 
receiving reclassification to capped rental DME if the codes do not 
fall under any of the other DME payment classes. We do note that only 
some of the codes in use during July 1986 through June 1987 that 
describe pneumatic compression appliances for the arm and leg met the 
definition of routinely purchased equipment. However, the appliances 
that were not routinely purchased met the definition of inexpensive 
equipment under Sec.  414.220(a)(1). The codes for pneumatic 
compression appliances for the trunk and chest are considerable more 
expensive than the pneumatic compression appliances for the arm and leg 
and were not acquired on a purchase basis at least 75 percent of the 
time during July 1986 through June 1987. Payment will therefore made on 
a capped rental basis for pneumatic compression appliances for the 
trunk and chest furnished for use with pneumatic compression pumps. 
Thus, under the capped rental category whether the pneumatic 
compression chest appliance device is used short term or long term, 
payment is made in alignment with the number of months for which the 
equipment was in use, until the beneficiary no longer needs the device 
or the rental period has ended.
    Comment: One commenter requested reclassification of code K0730 
controlled dose inhalation drug delivery system from the routinely 
purchased to the frequently serviced payment category. The commenter 
also requested CMS reclassify code E0574, which also describes a 
nebulizer item, to the frequently serviced payment category.
    Response: We are not adopting this suggestion to reclassify codes 
K0730 and E0574 to the frequently serviced payment category. Section 
13543 of the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) 
removed nebulizers from the statutory list of items classified under 
the frequent and substantial servicing payment class effective with 
respect to items furnished on or after January 1, 1994. In accordance 
with these provisions, we continue to believe that these devices should 
not be classified as items under the payment category for items 
requiring frequent and substantial servicing under Sec.  1834(a)(3)(A) 
of the Act. As such, we are implementing our proposal to reclassify 
these codes to the capped rental payment category.
    Comment: One commenter opposed reclassification of code E0762 
transcutaneous electrical joint stimulation system from the routinely 
purchased to the capped rental payment category because while 
significant relief is provided by the system within a short period of 
time, more significant results are achieved with increased use of the 
device.
    Response: We continue to believe it is appropriate to reclassify 
code E0762 from the routinely purchased to the capped rental payment 
category. As discussed above, the Medicare definition of routinely 
purchased equipment is set forth 42 CFR Sec.  414.220(a)(2) and 
specifies that routinely purchased equipment means equipment that was 
acquired by purchase on a national basis at least 75 percent of the 
time during the period July 1986 through June 1987. Therefore, DME, 
including code E0762, for which claims data did not exist during the 
1986/87 period cannot be classified as routinely purchased equipment. 
This results in such codes being reclassified as capped rental items if 
they do not fall under any of the other DME payment classes. 
Furthermore, under the capped rental payment method, the supplier owns 
the equipment during the rental period and title to the equipment 
transfers to the beneficiary at the end of a 13th month rental period. 
Thus, whether the device is used short term or long term, payment is 
made in alignment with the number of months until the beneficiary no 
longer needs the device or the rental period has ended.
    Comment: One commenter stated jaw motion rehabilitation system from 
Dynasplint (HCPCS code E1700) should not remain routinely purchased 
because it was previously billed under a capped rental miscellaneous 
code and it was assigned by the Medicare Pricing, Data Analysis and 
Coding (PDAC) contractor to code E1700 which contains other less 
expensive items.
    Response: Since HCPCS code assignment is outside the scope of the 
proposed rule which only concerns the reclassification of code E1700 
from the routinely purchased payment category to the capped rental 
payment category, and we are not addressing this comment in this final 
rule.
    Comment: Some commenters stated that code E0760 for Osteogenesis 
Ultrasound Stimulator is not DME but is a therapeutic intervention 
similar to a drug treatment.
    Response: These comments are outside the scope of the proposed 
rule, and therefore are not addressed in this final rule. The process 
for reviewing coverage/benefit category for an item is not addressed in 
this rule. Information on the process can be found at the Web site 
http://www.cms.gov/Medicare/Coverage/DeterminationProcess/index.html
    Comment: Many commenters raised concerns that code E0760 for 
Osteogenesis Ultrasound Stimulator remains comparable to electric bone 
growth stimulators (codes E0747 and E0748) that also treat established 
nonunion of fractures of long bones and as adjunctive therapy to spinal 
fusion to improve fusion success rates, which are assigned to the 
routinely purchased category in accordance with the existing regulatory 
definition of routinely purchased items. Commenters pointed out the 
code used to describe osteogenesis stimulators in 1986 through 1987 did 
not specify the type of stimulator Medicare purchased. Also, commenters 
noted that code E0760 was initially classified as capped rental DME and 
reclassified by Medicare to routinely purchased DME based on data from 
other payers and claims submitted to Medicare.
    Response: We recognize the commenters' concerns and in this final 
rule, we will revise the list of codes by removing code E0760 from the 
final list of codes for reclassification to the capped rental DME. We 
agree that HCPCS codes used to routinely pay for the purchase of 
osteogenesis stimulators in 1986 and 1987 did not differentiate between 
types of osteogenesis stimulators and therefore, believe that the 
general category of osteogenesis stimulator are correctly classified as 
routinely purchase equipment in

[[Page 72234]]

accordance with current regulations Sec.  414.220(a)(2).
    Comment: Commenters noted that the proposed list of HCPCS codes 
that would be reclassified as capped rental items includes HCPCS codes 
that describe products cleared by the FDA for single patient use. 
Commenters stated that reclassifying these devices as capped rental 
items goes against their labeling as single patient use devices by the 
FDA and that some of these devices cannot be cleaned or refurbished for 
another patient's use. A commenter noted that a change in payment 
category could affect various levels of market availability including 
FDA clearance, product marketing or the company's business model. 
Commenters stated a significant investment of resources and time is 
required to seek a new FDA label to allow these items to be rented to 
multiple patients. One commenter objected that reclassification would 
essentially force devices currently labeled for single patient use to 
be used off-label as rental equipment. Additionally, one commenter 
recommended that we amend our regulation to provide that all devices 
cleared by the FDA as class III devices under the Federal Food, Drug, 
and Cosmetic Act are classified as routinely purchased equipment.
    Response: The payment rules under section 1834(a) of the Act do not 
classify items under the payment classes based on how they are cleared 
by the FDA. As discussed above, the Medicare definition of routinely 
purchased equipment under Sec.  414.220(a)(2) specifies that routinely 
purchased equipment means equipment that was acquired by purchase on a 
national basis at least 75 percent of the time during the period July 
1986 through June 1987. As a result of our clarification of this 
definition, equipment that was not acquired at all during the period 
July 1986 through June 1987, was not acquired by purchase on a national 
basis at least 75 percent of the time during the period July 1986 
through June 1987, and therefore, cannot be classified as routinely 
purchased equipment. This results in such codes being reclassified as 
capped rental items if they do not fall under any of the other DME 
payment classes. We agree that manufacturers and suppliers of products 
should be in compliance with FDA requirements, but we do not believe 
that FDA requirements dictate how items should be classified under 
sections 1834(a)(2) through (7) of the Act.
    After consideration of comments received on the proposed rule and 
for the reasons we discussed above and in the proposed rule, we are 
finalizing our proposals and reclassifying certain items identified in 
this final rule with the exception of code E0760 which will remain 
classified as routinely purchased equipment. We did not receive 
comments regarding the effective dates for the reclassifications of 
these items from the routinely purchased DME category to capped rental 
DME. For the reasons discussed in the proposed rule (78 FR 40875), we 
are finalizing the effective dates for the changes of this section in 
compliance with the required regulatory process as follows:
     April 1, 2014, for items furnished in all areas of the 
country if the item is not included in Round 2 or Round 1 Recompete 
CBP;
     July 1, 2016, for items furnished in all areas of the 
country if the item is included in a Round 2 CBP and not a Round 1 
Recompete CBP and for items included in a Round 1 Recompete CBP but 
furnished in an area other than one of the 9 Round 1 Recompete areas; 
and
     January 1, 2017, for items included in a Round 1 Recompete 
CBP and furnished in one of the nine Round 1 Recompete areas.
    The April 1, 2014, effective date was selected in order to ensure 
that these changes do not occur sooner than 60 days after publication 
of the final rule for claims processing purposes.

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

    DME is covered by Medicare based, in part, upon section 1832(a) of 
the Act, which describes the scope of benefits under the supplementary 
medical insurance program (Medicare Part B), to include ``medical and 
other health services,'' which is further defined under section 
1861(s)(6) of the Act to include DME. In addition, section 1861(m)(5) 
of the Act specifically includes DME in the definition of the term 
``home health services.'' In accordance with section 1861(n) of the 
Act, the term ``durable medical equipment'' includes iron lungs, oxygen 
tents, hospital beds, and wheelchairs used in the patient's home 
whether furnished on a rental basis or purchased. The patient's home 
includes an institution used as his or her home other than an 
institution that meets the requirements of section 1861(e)(1) or 
section 1819(a)(1) of the Act. Besides being subject to this provision, 
the coverage of DME must meet the requirements of section 1862(a)(1)(A) 
of the Act, which in general excludes from payment any items or 
services that are not reasonable and necessary for the diagnosis or 
treatment of illness or injury or to improve the functioning of a 
malformed body member, and section 1862(a)(6) of the Act, which (except 
for certain specified exceptions) precludes payment for personal 
comfort items.
    Section 414.202 defines DME as equipment furnished by a supplier or 
a home health agency that meets the following conditions: (1) Can 
withstand repeated use; (2) effective with respect to items classified 
as DME after January 1, 2012, has an expected life of at least 3 years; 
(3) is primarily and customarily used to serve a medical purpose; (4) 
generally is not useful to an individual in the absence of an illness 
or injury; and is appropriate for use in the home. Prior to 2012, the 
definition for DME did not contain a 3-year minimum lifetime 
requirement (MLR) although Section 110.1 of chapter 15 of the Medicare 
Benefit Policy Manual (CMS-Pub. 100-02) provided further guidance with 
regard to the definition of DME and durability of an item that is when 
an item is considered durable.

A. Current Issues

    On November 10, 2011, CMS issued a final rule in which it revised 
the definition of DME at Sec.  414.200 by adding a 3-year MLR effective 
January 1, 2012, that must be met by an item or device in order to be 
considered durable for the purpose of classifying the item under the 
Medicare benefit category for DME (76 FR 70228 (November 10, 2011)). 
Specifically, an additional condition under Sec.  414.200 is that DME 
must be equipment furnished by a supplier or a home health agency that, 
effective with respect to items classified as DME after January 1, 
2012, has an expected life of at least 3 years. The change to the 
regulation was designed to further clarify the meaning of the term 
``durable'' and provide an interpretation of the statute generally 
consistent with the DME payment and coverage provisions, including, 
Medicare program guidance at section 280.1 of chapter 1, part 4 of the 
Medicare National Coverage Determinations Manual (Pub. 100-03) which 
specifies that an item can withstand repeated use means that the item 
could normally be rented and used by successive patients. The 3-year 
MLR is intended to specify that durable equipment is equipment that can 
withstand repeated use over an extended period of time. Since the vast 
majority of items covered under the DME benefit over the years last for 
3 or more years, the MLR is intended to clarify the scope of the DME 
benefit primarily for new items coming on the market or in the process 
of being developed. The standard set forth in regulations gives 
manufacturers and the public a clear understanding of how long an item 
would need to withstand

[[Page 72235]]

repeated use in order the meet the durability requirement for DME. The 
rule also provides clear guidance to CMS and other stakeholders for 
making consistent informal benefit category determinations (BCDs) and 
national coverage determinations (NCDs) for DME.
    The 3-year MLR is designed to represent a minimum threshold for a 
determination of durability for a piece of equipment. The 3-year MLR is 
not an indication of the typical or average lifespan of DME, which in 
many cases is far longer than 3 years. The 3-year MLR does not apply to 
disposable supplies or accessories covered for use with DME such as 
masks, tubing, and blood glucose test strips. The 3-year MLR is 
prospective only and does not apply to equipment classified as DME 
before the regulation was effective, that is, January 1, 2012.
    We also determined that the 3-year MLR should not apply to 
equipment classified as DME before the effective date to allow for 
continued coverage of such equipment that healthcare industry and 
beneficiaries have come to rely on, regardless of whether those items 
met the 3-year MLR set forth at 42 CFR 414.202 (76 FR70288). Given that 
reliance, we indicated we did not intend to reopen those prior 
decisions and reclassify the equipment in light of the 3-year standard. 
We believe that continuing Medicare coverage for items that qualified 
as DME prior to the effective date helps avoid disrupting the 
continuity of care for the beneficiaries that received such items for 
medical treatment prior to January 1, 2012.
    Beneficiaries have been relying on these items for their treatment 
to the extent that the items have been covered as DME under Medicare. 
Furthermore, we believed that a vast majority of the categories of 
items that were classified as DME before January 1, 2012, did function 
for 3 or more years. We also noted that the 3-year durability rule 
would only apply to new products, and, to the extent that a modified 
product is not a new product, the 3-year MLR would not be applicable.
    In response to the public comments that requested further 
clarification on the application of the grandfathering provision for 
the 3-year MLR, we noted that we would consider issuing additional 
guidance to provide further clarification, if necessary (76 FR 70290). 
For purposes of providing additional guidance on the scope of the 
grandfathered items under the provision, we invited public comments on 
this issue.

B. Scope of the 3-Year MLR for DME

    Under Sec.  414.202, effective with respect to items classified as 
DME after January 1, 2012, an item is not considered durable unless it 
has an expected life of at least 3 years. Therefore, the 3-year MLR 
applies to new items after January 1, 2012, and does not apply to items 
covered under the DME benefit on or prior to January 1, 2012. Items 
classified as DME on or before January 1, 2012, are considered 
``grandfathered items'' for the purpose of this requirement, regardless 
of whether they meet the 3-year rule.
    For the purpose of providing further guidance on the scope of the 
3-year MLR, in the proposed rule (78 FR 40877), we provided 
clarification about how we would regard grandfathered items covered as 
DME prior to the effective date and we requested comments on that 
clarification. We proposed that if the product is modified (upgraded, 
refined, reengineered, etc.) after January 1, 2012, the item would 
still be classified as DME as a grandfathered item unless the modified 
product now has an expected life that is shorter than the expected 
lifetime for the item covered as DME prior to January 1, 2012. In this 
case, we would consider the item, as modified, to be a new item that is 
subject to the 3-year MLR. For example, equipment covered prior to 
January 1, 2012, and described by code X has a life of at least 2 
years. If, after January 1, 2012, that item is modified such that it is 
less durable, such that it no longer lasts for the 2 year period, that 
modification would render the item ``new'' and it would be subject to 
the 3-year MLR. Therefore, since the new (modified) product does not 
last 3 years, it would not meet the definition of DME under the 
regulation and could not be covered or be billed using the code that 
described the item before it was modified.
    We sought comments on this proposed clarification.

C. Response to Comments on the 3-Year MLR for DME

    We received approximately 13 comments on the proposed regulation 
(78FR 40876-40877) regarding clarification of the grandfathering 
provision of the 3-year MLR for DME. Commenters included medical device 
manufacturers, suppliers, advocacy groups and coalitions.
    Comment: Most commenters acknowledged and appreciated that CMS 
proposed the clarification of the grandfathering provision of the 3-
year MLR for DME.
    Response: We thank the commenters for their input and support. We 
note that the clarification regarding grandfathered items that are 
modified relates to the durability of the item under the definition, 
and in particular, whether the modified item has a shorter useful life 
than the expected lifetime for the items covered prior to January 1, 
2012.
    Comment: Two commenters supported our clarification in the proposed 
rule of the grandfathering provision of the 3-year MLR for DME. The 
commenters believed that the proposed clarification to continue to 
cover grandfathered items if modified as long as the modification did 
not shorten its useful life was reasonable and encouraged CMS to adopt 
it.
    Response: We thank the commenters for their support. However, we 
wish to clarify that the proposed rule addressed how we would regard 
grandfathered items covered as DME prior to the effective date. We 
proposed that if a grandfathered product is modified (upgraded, 
refined, reengineered, etc.), the item would still be classified as a 
grandfathered item unless the product has been modified to be less 
durable, such that it now has an expected life that is shorter than the 
expected lifetime for the item covered as DME prior to January 1, 2012. 
In this case, we would consider the item, as modified, to lose its 
grandfathered status and thus it would be treated as a new item that is 
subject to the 3-year MLR.
    Comment: Several commenters indicated that the proposed rule still 
leaves great uncertainty regarding which modifications will result in 
products that continue to be, or are no longer, grandfathered. Without 
specific vignettes or parameters that illustrate how CMS will address 
these matters when certain new products come onto the market, the 
guidance in the proposed rule will not resolve the questions that 
remain. Specifically,
    1. If application of new technology renders a product more 
effective but reduces its minimum lifetime; will the 3-year requirement 
be applied?
    2. It does not provide further details regarding the extent of 
changes that could be made to an existing DME product such that it 
would still be subject to grandfathering provision.
    3. Must a modified item fall within the same HCPCS code and/or DME 
product category as a grandfathered item in order for it to also fall 
within the grandfathering provision and not be considered a new item?
    4. If a modification of an existing product results in the 
designation of another HCPCS code; will this trigger the 3-year 
requirement?

[[Page 72236]]

    Response: We thank the commenters for their input. As noted in the 
final rule (76 FR 70289, 70290 (November 10, 2011)), the 3-year MLR for 
DME is applied on a prospective basis. That is, the 3-year MLR only 
applies to new items, meaning items that were not covered as DME on or 
prior to January 1, 2012. We clarified in the proposed rule (78 FR 
40877) that items paid for as DME on or before January 1, 2012, are 
considered ``grandfathered items'' for the purpose of the 3-year MLR 
for DME, regardless of whether they meet the 3-year rule. If a 
grandfathered item is modified (upgraded, refined, reengineered, etc.) 
after January 1, 2012, the item would still be considered a 
grandfathered item unless the item has been modified to be less 
durable, such that it now has an expected life that is shorter than the 
lifetime for the grandfathered item, which was covered as DME on or 
prior to January 1, 2012. Therefore, if application of new technology 
renders a product more effective but reduces its durability; then the 
product would lose its grandfathered status and the 3-year requirement 
would apply.
    The change we made to the regulation to establish a 3-year MLR for 
DME was designed to further clarify the meaning of the term 
``durable.'' Based on our experience with the Medicare program, the 
vast majority of items covered as DME last for 3 years or longer; 
however, the purpose of the grandfathering provision is to ensure 
continued coverage for the items that were paid as DME before the 
effective date of the MLR requirement and, to avoid disruption of the 
continuity of care for the beneficiaries using such equipment. . . . In 
response to the specific concerns of the commenters, the parameters of 
the grandfathering provision are:
    1. An item paid for as DME on or before January 1, 2012, is 
considered a grandfathered item for the purpose of the 3-year MLR for 
DME, regardless of whether they meet the 3-year rule; and
    2. A grandfathered item that is modified (upgraded, refined, 
reengineered, etc.), is still considered a grandfathered item rather 
than a new item unless the item is less durable, such that it now has 
an expected life that is shorter than the expected lifetime for the 
item covered as DME on or prior to January 1, 2012.
    Making individual determinations about whether a modified version 
of an item that was paid as DME on or prior to January 1, 2012, lasts 
as long as the item that was paid as DME on or prior to January 1, 
2012, involves a case-by-case review of the relevant facts. Therefore, 
specific vignettes or parameters that illustrate how CMS will make 
these individual determinations could be misleading since it is not 
possible to illustrate every possible scenario addressing various items 
paid for as DME in the past and how they could be modified in the 
future. With regard to comments regarding HCPCS codes, there are a 
variety of coding changes. A code could be added for a completely new 
category of items that have never been paid for by Medicare and 
therefore these items would be subject to the 3-year MLR. 
Alternatively, a new code could be the result of a coding action 
whereby existing codes are revised to form a new code or codes. In 
these cases, the determination regarding whether an item is a 
grandfathered item not subject to the 3-year MLR will depend on whether 
the item was paid for as DME on or prior to January 1, 2012, under 
codes in effect on or prior to January 1, 2012.
    Comment: Some commenters stated that the proposed rule does not 
provide clarity on what is a completely ``new product'' that would 
never be subject to the grandfathering provision.
    Response: A new product is a product that was not paid for as DME 
on or prior to January 1, 2012, or a grandfathered item that loses its 
grandfathered status.
    Comment: Some commenters indicated that it is unclear what would be 
considered a modified product that would be subject to the 
grandfathering provision provided that the modifications do not result 
in a reduced minimum lifetime of the product. Would a premarket 
approval product approved after January 1, 2012, that is similar in 
structure and function to grandfathered products be considered a 
modified version of the grandfathered products? Is newly cleared 510(k) 
product considered to be a modified version of the predicate device? It 
is unclear whether a new product cleared by the FDA through the 
Premarket Approval (PMA) process as opposed to a PMA supplement 
approved after January 1, 2012, can be considered to be a modification 
of a grandfathered product or whether a new product cleared by the FDA 
through the 510(k) process as substantially equivalent to other, 
previously cleared, predicate products is considered to be a 
modification of a predicate device.
    Response: A grandfathered product is a specific product (make, 
manufacturer, model, model number, etc.) that was covered and paid for 
as DME on or prior to January 1, 2012. Any product that is not a 
grandfathered product or a grandfathered product that is modified so 
that it is less durable, such that it now has an expected lifetime that 
is shorter than the expected lifetime of the product covered as DME on 
or prior to January 1, 2012, is subject to the 3-year MLR. CMS will 
continue to consider these issues and provide additional guidance if 
necessary.
    Comment: Several commenters voiced concerns that the final rule 
will serve as a major deterrent to future investments in new 
technologies. There may be desirable innovations made to a 
grandfathered product that would reduce the minimum lifetime of the 
product. If changes to a product that result in a different HCPCS code 
assignment or DME product category by definition do not fall within the 
grandfathering provision then manufacturers do not have the incentive 
to research and develop a grandfathered product's safety and 
effectiveness in treating. By eliminating reimbursement under Medicare 
DME benefit for modified grandfathered products containing innovations 
that are clinically beneficial to the patients but may reduce the 
minimum lifetime of those products, the proposed clarification 
discourages innovation of existing technologies.
    Response: We believe that the 3-year MLR to clarify the term 
durable and the grandfathering provision are reasonable given the 5 
year reasonable lifetime requirement, general DME payment rules and 
industry standards which support the fact that DME items should be able 
to withstand repeated use. We do not believe the rule is a deterrent. 
The rule is designed to clarify the grandfathering provision and ensure 
that such products are not modified to be less durable.
    Based upon our experience with the Medicare program, the vast 
majority of items covered as DME last for 3 years or longer. The 
purpose of the grandfathering provision is to continue the Medicare 
coverage for the items that were paid as DME on or prior to the 
effective date, in order to avoid disruption of the continuity of care 
for the beneficiaries that had received items for medical treatment on 
or prior to January 1, 2012.
    Comment: A few commenters suggested that instead of using the MLR 
to determine whether modified DME is a ``new'' device, CMS should focus 
on whether the modified device has the same clinical application as the 
grandfathered DME. This criterion would be a better measure of whether 
the device is ``new'' than whether it meets what a few commenters 
characterized as an arbitrary MLR rule. CMS should instead establish 
reasonable parameters under which products should be considered

[[Page 72237]]

comparable to existing DME products in order to be subject to the 
grandfathering provision-any modification, upgrade, redesign, 
improvement or new indication of an existing DME product that maintains 
the product's core clinical technology or mechanism of action should be 
eligible for reimbursement under the DME benefit category.
    Response: We thank the commenters for their input. However, our 
proposal regarding the 3-year MLR with regard to the definition of DME 
was to clarify the issue of durability as it relates to grandfathering 
status. Our proposal centered on the lifetime of the product as a 
result modification (upgraded, refined, reengineered, etc.). We do not 
believe that issues such as core clinical technology or clinical 
application to determine whether a modified grandfathered item is a new 
DME as suggested by the commenters, speaks to the issue of durability 
with regard to our interpretation of the statutory DME provisions.
    Comment: A few commenters expressed concerns that the proposed rule 
will require manufacturers to undertake expensive testing to 
demonstrate that their equipment continues to qualify under the 
grandfathering provision. They questioned whether there is a benchmark 
for deciding whether the modified device has an MLR that is shorter 
than the grandfathered device (e.g., is it an MLR that is a year 
shorter, 90 days shorter, or a day shorter than that of the 
grandfathered DME?). Commenters believe that, instead of providing 
clarity, CMS has injected even more subjectivity and ambiguity into the 
Medicare coverage and coding process and provides virtually no guidance 
when the minimum lifetime of a modified device does not conclusively 
meet the 3-year threshold. Commenters stated that, in the past, CMS has 
stated that it will base these decisions on a review of existing data, 
but the outcome in these cases ultimately will hinge on subjective 
interpretation of the data. The commenters note that this type of 
analysis will be useless in assessing new technologies, which typically 
are not included in independent comparative studies of the type CMS has 
said it plans to consult.
    Response: We thank the commenters for their input but do not 
believe that the proposed regulation injects subjectivity and ambiguity 
into the Medicare coverage and coding process. We are not proposing a 
new process to determine whether a modified device has an expected life 
that is shorter than the original grandfathered device; therefore, no 
new types of tests are needed to make determinations regarding the 
expected lifetime of products. As discussed previously, we will 
continue to follow the current BCD process to determine on an 
individual consideration basis if a modified grandfathered item falls 
within the grandfathering provision. We will review information and 
evidence, which a supplier/manufacturer may submit, consistent with the 
current BCD process to determine the expected life of the equipment. As 
discussed previously, the BCD process typically involves reviewing 
information from various sources including but not limited to 
information related to FDA pre-market clearance, product manuals, 
operating guides, warranty documents, and standardized test results. 
The NCD process is available at http://www.cms.gov/DeterminationProcess/Downloads/FR09262003.pdf. See also, 68 FR 55638 
(September 23, 2003). Additionally, we routinely collect information 
regarding durability of new products as part of the HCPCS editorial 
process in order to identify categories of new DME subject to the 
procedures established in accordance with the mandate of section 531(b) 
of the Medicare, Medicaid and SCHIP Benefit Improvement and Protection 
Act of 2000 (BIPA 2000), Public Law 106-554. Based on our experience 
with the program, this information has been readily available from the 
manufacturers of these items and other entities submitting requests for 
changes to the HCPCS. Information on the HCPCS Level II coding process 
is available at: http://www.cms.gov/MedHCPCSGenInfo/Downloads/2013_HCPCS_Application.pdf and http://www.cms.gov/MedHCPCSGenInfo/08_HCPCSPublicMeetings.asp#TopOfPage.
    Comment: Some commenters argued that in this case, CMS' original 
concern about disrupting patient care continues to hold true. 
Commenters claim that the proposal to modify the grandfathering 
provision of Sec.  414.202 will disrupt the care of beneficiaries using 
the grandfathered DME. Beneficiaries who have been using the 
grandfathered DME will no longer have Medicare coverage for the 
medically necessary device they depend on. Physicians and other 
practitioners will be unable to order devices that have been proven 
therapeutically effective for the patients they treat. For these 
beneficiaries and providers, it will almost certainly be true that they 
will be left without an equally effective alternative for continuing 
their care.
    Response: We thank the commenters for their input, but we do not 
agree with the above comment. We note that the proposed rule was 
designed to clarify the grandfathering provision. The proposed 
clarification of the grandfathering provision is designed to address 
how grandfathered products could be modified without losing their 
grandfathered status. The commenters concerns that beneficiaries who 
have been using the grandfathered DME will no longer have Medicare 
coverage for the medically necessary device they depend on or that 
physicians will be unable to order devices that have been proven 
therapeutically effective for the patients are inaccurate. On the 
contrary, the purpose of the grandfathering provision for the 3-year 
MLR was to continue Medicare coverage for items that were classified as 
DME on or prior to the effective date, in order to avoid disruption of 
the continuity of care for the beneficiaries that had already received 
these items for medical treatment. For the reasons stated above, we do 
not believe that the clarification of the grandfathering provision will 
disrupt the continuing care for beneficiaries that are using the 
grandfathered DME.
    Comment: Some commenters urged CMS to convene a study panel to 
allow stakeholders to collaborate with the agency to examine a few 
central questions such as whether a modified item must fall within the 
same HCPCS code and/or DME product category as a grandfathered item in 
order for it to also fall within the grandfathering provision. 
Commenters asked CMS to consider convening a stakeholder meeting to 
solicit views from patients, healthcare providers, DME manufacturers 
and other health policy experts.
    Response: We appreciate the comment. We established the 3-year MLR 
effective with respect to items classified as DME on or after January 
1, 2012, via notice and comment rulemaking. We are clarifying the 
grandfathering provision for the 3-year MLR via notice and comment 
rulemaking. In addition, we will continue to follow the current 
processes including BCD, NCD, Local Coverage Determinations (LCD), and 
HCPCS codes to implement the 3-year MLR and the grandfathering 
provision. These processes include meetings with manufacturers in 
addition to the public where we seek input from the stakeholders. We 
will continue to receive input from stakeholders consistent with the 
BCD and NCD process when applying the 3-year MLR and the grandfathering 
provision. See 68 FR 55634 (September 26, 2003); and http://
www.Cms.gov/DeterminationProcess/Downloads/

[[Page 72238]]

FR09262003.pdf. See also, information on the HCPCS Level II coding 
process at: http://www.cms.gov/MedHCPCSGenInfo/Downloads/2013_HCPCS_Application.pdf. http://www.cms.gov/MedHCPCSGenInfo/08_HCPCSPublicMeetings.asp#TopOfPage.
    Comment: Some commenters stated that as other payers follow 
Medicare guidelines, it is important to revise ill-conceived Medicare 
policy now before regulations that harm people with disabilities and 
chronic conditions are replicated at the State level.
    Response: This comment is outside the scope of the proposed rule.
    Comment: One commenter stated that CMS proposes to clarify the 
scope and application of the MLR ``grandfathering'' provision by 
stipulating that products will lose the grandfather status if the 
modified product will have an expected life that is shorter than three 
years. In other words, the commenter believes the proposed rule would 
result in non-coverage of any grandfathered item that is modified.
    Response: We thank the commenter for the input. However, the 
statement in the above comment that a modified product that has an 
expected life that is shorter than three years will no longer be 
grandfathered and therefore, lose coverage status is inaccurate. We 
proposed that a product covered as DME prior to 2012 that is modified 
would still be grandfathered as long as the expected lifetime of the 
product is equal to or greater than the lifetime of the product covered 
prior to 2012. Under this proposal, if the product lost grandfathered 
status (because the modification reduced the expected lifetime of the 
product covered prior to 2012), the product would be subject to the 3-
year MLR. The application of 3-year MLR would determine whether product 
would be otherwise covered under the definition. For grandfathered 
items that have a lifetime shorter than 3-years, modifications that 
reduce such lifetime generally would result in the product no longer 
meeting the definition given the application of the 3-year MLR (because 
the grandfathered status was lost). However, for grandfathered products 
that have a lifetime greater than 3 years, modifications that shorten 
such lifetime may or may not result in non-coverage under the 
definition when the 3-year MLR is applied. For example, if a 
grandfathered product covered as DME prior to 2012 with a lifetime of 
four years is modified, resulting in a product with a lifetime of two 
and a half years (and thereby losing grandfathering status), the 
product would no longer meet the definition of DME, because the 3-year 
MLR is not met given that the lifetime of the modified product is less 
than three years. In the same example, if the modification resulted in 
a reduced lifetime of the product to 3.5 years, the product, even 
though it lost grandfathering status, would satisfy the 3-year rule, 
and continue meet the definition of DME.
    After consideration of comments received on the proposed rule, we 
are finalizing the clarification of the grandfathering provision of the 
3-year MLR for DME. The 3-year MLR applies, effective January 1, 2012, 
but does not apply to items covered under the DME benefit on or prior 
to January 1, 2012 (``grandfathered items''). However, effective April 
1, 2014, if the grandfathered item is modified (upgraded, refined, 
reengineered, etc.), and the modified item now has an expected life 
that is shorter than the expected lifetime for the item covered as DME 
prior to January 1, 2012, the modified item will lose grandfathered 
status. In this case, we would consider the item, as modified, to be a 
new item that is subject to the 3-year MLR.

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

A. Background

1. Payment Under Reasonable Charges
    Payment for most items and services furnished under Part B of the 
Medicare program is made through contractors known as Medicare 
Administrative Contractors (MACs). These contractors were previously 
referred to as carriers. Prior to 1988, in accordance with section 
1842(b) of the Act, payment for most of these items and services was 
made on a reasonable charge basis by these contractors, with the 
criteria for determining reasonable charges set forth at 42 CFR part 
405, subpart E of our regulations.
    Under this general methodology, several factors or ``charge 
screens'' were developed for determining the reasonable charge for an 
item or service. In accordance with Sec.  405.503, each supplier's 
``customary charge'' for an item or service, or the 50th percentile of 
charges for an item or service over a 12-month period, was one factor 
used in determining the reasonable charge. In accordance with Sec.  
405.504, the ``prevailing charge'' in a local area, or the 75th 
percentile of suppliers' customary charges for the item in the 
locality, was also used in determining the reasonable charge. For the 
purpose of calculating prevailing charges, a ``locality'' is defined at 
Sec.  405.505 of our regulations and ``may be a State (including the 
District of Columbia, a territory, or a Commonwealth), a political or 
economic subdivision of a State, or a group of States.'' The regulation 
further specifies that the locality ``should include a cross section of 
the population with respect to economic and other characteristics.'' In 
accordance with Sec.  405.506, for certain items, such as parenteral 
and enteral nutrients, supplies, and equipment, an additional factor 
referred to as the ``lowest charge level'' was used in determining the 
reasonable charge for an item or service. In accordance with section 
5025 of the Medicare Carriers Manual (HCFA Pub. 14-3) and Sec.  405.509 
of our regulations, effective for items furnished on or after October 
1, 1985, an additional factor, the ``inflation-indexed charge (IIC),'' 
was added to the factors taken into consideration in determining the 
reasonable charge for certain items and services. The IIC is defined in 
Sec.  405.509(a) as the lowest of the fee screens used to determine 
reasonable charges for items and services, including supplies, and 
equipment reimbursed on a reasonable charge basis (excluding 
physicians' services) that is in effect on December 31 of the previous 
fee screen year, updated by the inflation adjustment factor. The 
inflation adjustment factor is based on the current percentage increase 
in the consumer price index for all urban consumers (United States city 
average) (CPI-U) for the 12-month period ending June 30. The reasonable 
charge is generally set based on the lowest of the actual charge for 
the item or service or the factors described above.
2. Payment Under Fee Schedules
    Specific provisions have been added to the Act mandating 
replacement of the reasonable charge payment methodology with fee 
schedules for most items and services furnished under Part B of the 
Medicare program. The phase in of fee schedules to replace reasonable 
charges for Medicare payment purposes began with the fee schedule for 
clinical diagnostic laboratory tests in 1988. As of 1997, very few 
items and services were still paid on a reasonable charge basis, which 
is a very time consuming and laborious process. Contractors must 
collect new charge data each year, perform the various calculations, 
and maintain pricing files and claims processing edits for the various 
charge screens. For each item that is paid on a reasonable charge 
basis, administrative funding must be provided to contractors for the 
purpose of performing these

[[Page 72239]]

calculations and maintaining these pricing files. Therefore, replacing 
reasonable charge payments with fee schedules eliminates the need to 
fund these efforts and saves money that can be used to implement other 
parts of the program. Section 4315 of the Balanced Budget Act of 1997 
(BBA) amended the Act at section 1842 by adding a new subsection (s). 
Section 1842(s) of the Act provides authority for implementing 
statewide or other area wide fee schedules to be used for payment of 
the following services that were previously on a reasonable charge 
basis:
     Medical supplies.
     Home dialysis supplies and equipment (as defined in 
section 1881(b)(8) of the Act).
     Therapeutic shoes.
     Parenteral and enteral nutrients, equipment, and supplies 
(PEN).
     Electromyogram devices.
     Salivation devices.
     Blood products.
     Transfusion medicine.
    For Medicare payment purposes, we interpret the category ``medical 
supplies'' under section 1842(s) of the Act to include all other items 
paid on a reasonable charge basis as of 1997 that do not fall under any 
of the other categories listed in section 1842(s) of the Act. We 
believe that section 1842(s) of the Act is intended to provide 
authority for establishing fee schedules for all of the remaining, and 
relatively small number of items and services still paid for on a 
reasonable charge basis at the time of enactment in 1997. In light of 
this provision, we generally consider ``intraocular lenses'' to be paid 
as ``medical supplies.'' Therefore, in addition to including splints 
and casts under this category, we also proposed to include intraocular 
lenses inserted in a physician's office for the purpose of implementing 
this specific section. Although we recognize the terms ``intraocular 
lenses'' and ``medical supplies'' are separately identified under Sec.  
414.202, we note that such terms are listed for purposes of defining 
what constitutes orthotic and prosthetic devices (that is, these terms 
are excluded from such definition), and not intended to suggest these 
are mutually exclusive things. Accordingly, we do not believe we are 
precluded from establishing fee schedules for IOLs under the category 
of medical supplies under section 1842(s) of the Act.
    Section 1842(s)(1) of the Act provides that the fee schedules for 
the services listed above are to be updated on an annual basis by the 
percentage increase in the CPI-U (United States city average) for the 
12-month period ending with June of the preceding year, reduced by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. Total payments for the initial year of the fee schedules must 
be budget-neutral, or approximately equal to the estimated total 
payments that would have been made under the reasonable charge payment 
methodology. As explained below, we used this authority to establish 
fee schedules for parental and enteral nutrition (PEN) items and 
services for use in paying claims with dates of service on or after 
January 1, 2002.
    On July 27, 1999, we published a notice of proposed rulemaking (64 
FR 40534) to establish fee schedules for PEN items and services, 
splints and casts, intraocular lenses (IOLs) inserted in a physician's 
office, and various other items and services for which section 1842(s) 
of the Act provided authority for replacing the reasonable charge 
payment methodology with fee schedules. After reviewing public comments 
on the proposed rule, we decided to move ahead with a final rule 
establishing fee schedules for the Parenteral and Enteral Nutrition 
(PEN) items and services, but not the other items and services, 
primarily related to concerns regarding data used for calculating fee 
schedule amounts for items and service that are no longer paid on a 
reasonable charge basis. The final rule for implementing the fee 
schedules for PEN items and services was published on August 28, 2001 
(66 FR 45173). For splints and casts, national reasonable charge 
amounts, updated on an annual basis by the IIC, have been used to pay 
for the splint and cast materials. Converting these amounts to national 
fee schedule amounts that are updated by the same index factor used in 
updating the reasonable charge amounts would result in no change in 
payment, or 100 percent budget-neutrality. Currently, very few IOLs are 
inserted in a physician's office nationally. In 2011, total allowed 
charges for 437 IOLs furnished to 287 beneficiaries equaled $75,914. 
Since IOLs are considerably low volume items furnished by very few 
suppliers nationally, there are some states where none of these items 
are furnished; therefore, charge data for use in calculating prevailing 
charges, even at the state level, are not available and budget-
neutrality is not an issue. If the national average allowed amount for 
these items were used as the fee schedule amount for the few IOLs that 
are still inserted in a physician's office, we did not believe that 
total allowed charges in the first year of the fee schedule would be 
significantly different than what would otherwise be paid nationally 
under the current reasonable charge payment methodology. For 2011, the 
national average allowed charge for covered claims for the 287 
beneficiaries receiving IOLs inserted in a physician's office was $174 
($75,914 / 437). In some cases, the allowed charge for specific claims 
in 2011 was less than $174 and in other cases the allowed charge was 
more than $174. However, given the low volume of items furnished 
nationally, the budget impact of paying all of the approximately 437 
claims based on the national average allowed amount would be 
negligible. We believe establishing budget-neutral fee schedule amounts 
for splints and casts, and IOLs inserted in a physician's office would 
save government resources in calculating the reasonable charge payment 
for the low volume items. Therefore, in the proposed rule (78 FR 40878 
through 40879), we proposed to establish fee schedules for these items 
effective for paying claims with dates of service on or after January 
1, 2014.

B. Summary of the Proposed Provisions and Responses to Comments on the 
Implementation of Budget Neutral Fee Schedules for Splints, Casts and 
IOLs

    For the reasons we articulated above, we proposed (78 FR 40879), 
under section 1842(s) of the Act, to implement fee schedules for 
splints and casts, and IOLs inserted in a physician's office falling 
under the category of medical supplies. In addendum C of the proposed 
rule (78 FR 40879), which can be found on http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/Downloads/CMS-1526-P-Addendum-C.pdf, we inserted the current 2013 reasonable charge amounts 
for splints, casts and IOLs inserted in a physician's office. The 2013 
reasonable charge amounts for splints and casts are gap-filled 
reasonable charges updated by the CPI-U factor ending with June of the 
preceding year, in this case June 2012. The 2013 reasonable charge 
amounts for IOLs inserted in a physician's office that are described by 
HCPCS code V2632 are estimates of the 2012 average allowed charges for 
these items and services. With regard to other HCPCS codes for IOLs 
inserted in a physician's office, Medicare payment was made for one 
claim for code V2631 over the past ten years and ten claims for code 
V2630 over the past 6 years. We indicated in Appendix C of the proposed 
rule that we would gap-fill the fee schedule amounts for HCPCS codes 
V2630 and V2631. In the case of fee schedule amounts for other 
prosthetic devices

[[Page 72240]]

paid for in accordance with the rules at section 1834(h) of the Act, 
the fee schedule amounts are gap-filled using fee schedule amounts for 
comparable items or supplier price lists in accordance with program 
instructions related to gap-filling fee schedule amounts for DMEPOS 
items and services located at section 60.3 of chapter 23 of the 
Medicare Claims Processing Manual (Pub. 100-04). 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 stated we would use 
the estimate of the 2012 average allowed charge including the 
percentage increase in the CPI-U for the 24-month period ending with 
June of 2012, which is 1.7 percent, and June of 2013, which is 1.8 
percent, to update the fee-schedule amounts for splints and casts (78 
FR 40879). Specifically, we proposed to amend 42 CFR Sec.  414.106 and 
Sec.  414.100 to include the general rule for updating the fee 
schedules for splints, casts and IOLs inserted in a physician's office. 
We also proposed to add Sec.  414.106 and Sec.  414.108 to set forth 
the fee schedule methodology and updates as explained above for 
splints, casts, and IOLs inserted in a physician's office. Subject to 
coinsurance and deductible rules, Medicare payment for these services 
is to be equal to the lower of the actual charge for the item or the 
amount determined under the applicable fee schedule payment 
methodology.
    For splints and casts, we proposed national fee schedule amounts 
for items furnished from January 1, 2014, thru December 31, 2014, based 
on 2013 reasonable charges updated by the percentage increase in the 
consumer price index for all urban consumers (United States city 
average) for the 12-month period ending with June 2013 (78 FR 40879). 
For subsequent years, we proposed that the fee schedule amounts would 
be updated by the percentage increase in the consumer price index for 
all urban consumers (United States city average) for the 12-month 
period ending with June of the preceding year, reduced by the 
productivity adjustment as described in section 1886(b)(3)(B)(xi)(II) 
of the Act (78 FR 40879).
    For IOLs inserted in a physician's office, we proposed national fee 
schedule amounts for items furnished from January 1, 2014, thru 
December 31, 2014, based on the national average allowed charge for the 
item from January 1, 2012 through December 31, 2012, updated by the 
percentage increase in the consumer price index for all urban consumers 
(United States city average) for the 24-month period ending with June 
2013. For subsequent years, the fee schedule amounts would be updated 
by the percentage increase in the consumer price index for all urban 
consumers (United States city average) for the 12-month period ending 
with June of the preceding year, reduced by the productivity adjustment 
as described in section 1886(b)(3)(B)(xi)(II) of the Act.
    We received one comment on the proposal to implement budget-neutral 
fee schedules for splints, casts and IOLs inserted in a physician's 
office from an advocacy group representing doctors of optometry. The 
issues raised in the comment were specifically in regard to IOLs. We 
received no comments on the topic of splints and casts.
    Comment: The commenter indicated that the statute does not provide 
specific authority for implementing fee schedules for IOLs as part of 
the authority for implementing fee schedules for the general category 
of ``medical supplies'' listed under section 1842(s) of the Act. The 
commenter indicates that under 42 CFR 414.202, the list of items not 
considered prosthetics or orthotics separately identifies ``medical 
supplies'' and ``intraocular lenses,'' and that if intraocular lenses 
were considered ``medical supplies,'' they would not need to be 
separately listed in Sec.  414.202.
    Response: We disagree with this comment. The terms ``medical 
supplies'' and ``intraocular lenses'' are listed in 42 CFR 414.202 for 
the purpose of implementing section 1834(h)(4)(C) of the Act. The 
regulation clearly states that the definitions in 42 CFR 414.202 are 
for the purposes of Subpart D--Payment for Durable Medical Equipment 
and Prosthetic and Orthotic Devices. The term ``medical supplies'' 
referred to in section 1834(h)(4)(C) of the Act include catheters, 
catheter supplies, ostomy bags, and supplies related to ostomy care 
that are specifically furnished by a home health agency. As a result, 
we implemented Sec.  414.202 consistent with the payment rules under 
section 1834(h) of the Act, which identifies a different group of items 
of ``medical supplies'' than those addressed under section 1842(s) of 
the Act. As we stated in the proposed rule (78 FR 40878), although the 
terms ``intraocular lenses'' and ``medical supplies'' are separately 
identified under Sec.  414.202 for purposes of defining what 
constitutes orthotic and prosthetic devices, the regulation is not 
intended to suggest these are mutually exclusive items. Indeed, under 
the Medicare statute and regulations, items and services are identified 
specifically and generally, as part of larger categories.
    We believe our interpretation of this statutory authority is 
reasonable and that we have been consistent in our interpretation of 
section 1842(s) of the Act in the past. As we noted above, we proposed 
to adopt fee schedules for IOLs under this authority in 1999, though we 
declined to finalize this proposal (64 FR 40534 (July 27, 1999). We 
continue to interpret the category ``medical supplies'' to include 
IOLs, splints and casts, and other items paid for on a reasonable 
charge basis that are not specifically listed as separate categories 
under section 1842(s). We believe that the intent of section 1842(s) is 
to provide authority for phasing out reasonable charge payments for 
those few items and services still paid in accordance with these old 
payment rules, and therefore, we generally consider ``intraocular 
lenses'' to be paid as ``medical supplies.'' Accordingly, we do not 
believe we are precluded from establishing fee schedules for IOLs under 
the category of medical supplies under section 1842(s) of the Act.
    Comment: The commenter also suggested that if we continue with 
converting the IOLs to fee schedule amounts, then we should delay 
implementation of the fee schedule amounts so that suppliers of IOLs 
have more time to learn about and prepare for the change in payment.
    Response: We disagree that extra time is needed to prepare for 
implementation of fee schedule amounts that the statute specifies must 
be initially budget neutral. Our review of CY 2012 submitted charge 
data indicates that there is little variation in the charges submitted 
for the items that have enough claims data information to implement the 
fee schedule amounts.
    Comment: The commenter agreed with us that fee schedule amounts 
should be a national amount rather than local because several states 
have no suppliers of IOLs.
    Response: We appreciate this comment and have made the fee 
schedules of IOLs a national fee schedule amount.
    After careful review of the comment received and for the reasons we 
discussed previously, we are finalizing the implementation of budget-
neutral fee schedules for splints, casts and IOLs inserted in a 
physician's office. Part 414, Subpart C of the regulations at 42 CFR 
are being revised to indicate that the fee schedule amounts for payment 
for splints and casts furnished in 2014, effective April 1, 2014, is 
the reasonable

[[Page 72241]]

charge amount for 2013, updated by the percentage increase in the CPI-U 
for the 12-month period ending with June of 2013. We will start paying 
the national fee schedule amounts specified in Table 11 below for these 
items on April 1, 2014. Part 414, Subpart C of the regulations at 42 
CFR are being revised to indicate that the fee schedule amounts for 
payment for splints and casts furnished on April 1, 2014, is the 
reasonable charge amount for 2013, updated by the percentage increase 
in the CPI-U for the 12-month period ending with June of 2013, and that 
the fee schedule amounts for payment for IOL inserted in a physician's 
office on April 1, 2014, is the national average allowed charge for the 
IOL furnished in calendar year 2012, updated by the percentage increase 
in the CPI-U for the 24-month period ending with June of 2013. For each 
year subsequent to 2014 for splints and casts, and IOLs inserted in a 
physician's office, the fee schedule amounts of the preceding year are 
updated by the percentage increase in the CPI-U for the 12-month period 
ending with June of the preceding year, reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

                                              Table 11--Final Fee Schedule Amounts Effective April 1, 2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     2014 Fee Schedule Amounts for Splints and Casts
--------------------------------------------------------------------------------------------------------------------------------------------------------
A4565..............................      $8.41   Q4013.................     $15.40   Q4026................    $115.34   Q4039................      $8.05
Q4001..............................      47.85   Q4014.................      25.97   Q4027................      18.48   Q4040................      20.13
Q4002..............................     180.82   Q4015.................       7.71   Q4028................      57.69   Q4041................      19.55
Q4003..............................      34.36   Q4016.................      12.98   Q4029................      28.25   Q4042................      33.37
Q4004..............................     118.96   Q4017.................       8.91   Q4030................      74.36   Q4043................       9.78
Q4005..............................      12.67   Q4018.................      14.19   Q4031................      14.12   Q4044................      16.69
Q4006..............................      28.55   Q4019.................       4.46   Q4032................      37.18   Q4045................      11.35
Q4007..............................       6.34   Q4020.................       7.11   Q4033................      26.35   Q4046................      18.25
Q4008..............................      14.27   Q4021.................       6.59   Q4034................      65.54   Q4047................       5.66
Q4009..............................       8.46   Q4022.................      11.89   Q4035................      13.17   Q4048................       9.13
Q4010..............................      19.04   Q4023.................       3.31   Q4036................      32.78   Q4049................       2.07
Q4011..............................       4.22   Q4024.................       5.95   Q4037................      16.07   .....................  .........
Q4012..............................       9.53   Q4025.................      36.94   Q4038................      40.27   .....................  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                   2014 Fee Schedule Amounts for Intraocular Lenses Implanted in a Physician's Office
--------------------------------------------------------------------------------------------------------------------------------------------------------
V2630..............................        ***   V2631.................        ***   V2632................     111.81   .....................  .........
--------------------------------------------------------------------------------------------------------------------------------------------------------
*** No claims submitted in 2012
Note: These fee schedule amounts are effective April 1, 2014.

VII. DMEPOS Technical Amendments and a Correction

A. Background

    Medicare pays for various DMEPOS items and services based on 
payment rules that are set forth in section 1834 of the Act and 42 CFR 
Part 414, Subpart D. We proposed to make three minor, conforming 
technical amendments to the existing DMEPOS payment regulations (the 
title of Subpart D and 42 CFR Sec.  414.200 and Sec.  414.226) (78 FR 
40879 through 40880).

B. Summary of the Proposed Provisions and Responses to Comments on the 
Proposed Technical Amendments and a Correction

    We proposed to make three minor, conforming technical amendments 
and a correction to the existing DMEPOS payment regulations as follows 
(78 FR 40879 through 40880):
     We proposed to modify the title of ``Subpart D--Payment 
for Durable Medical Equipment, Prosthetic and Orthotic Devices'' to 
read ``Subpart D--Payment for Durable Medical Equipment, Prosthetic and 
Orthotic Devices, and Surgical Dressings'' to reflect that payment for 
surgical dressings is addressed under this subpart at Sec.  414.220(g).
     In subpart Sec.  414.200, we proposed to modify the phrase 
``This subpart implements sections 1834 (a) and (h) of the Act by 
specifying how payments are made for the purchase or rental of new and 
used durable medical equipment and prosthetic and orthotic devices for 
Medicare beneficiaries.'' as follows: ``This subpart implements 
sections 1834 (a), (h), and (i) of the Act by specifying how payments 
are made for the purchase or rental of new and used durable medical 
equipment, prosthetic and orthotic devices, and surgical dressings for 
Medicare beneficiaries.'' The Omnibus Budget Reconciliation Act of 1993 
amended section 1834 of the Act by adding subsection (i), mandating 
payment on a fee schedule basis for surgical dressings. Although Sec.  
414.220(g) addresses this requirement, the regulation at Sec.  414.200 
was not updated to indicate that this subpart implements section 
1834(i) in addition to sections 1834(a) and (h) of the Act.
     Section 1834(a)(9)(D) of the Act provides authority for 
creating separate classes of oxygen and oxygen equipment. Section 
1834(a)(9)(D)(ii) of the Act prohibits CMS from creating separate 
classes of oxygen and oxygen equipment that result in expenditures for 
any year that are more or less than expenditures which would have been 
made if the separate classes had not been created. In other words, the 
new classes and payment amounts for oxygen and oxygen equipment must be 
established so that creating the new classes is annually budget-
neutral. In November 2006, we published a final rule (CMS-1304-F) 
establishing separate classes for oxygen and oxygen equipment and 
included a methodology for meeting the requirements of section 
1834(a)(9)(D)(ii) of the Act by applying annual reductions to the 
monthly fee schedule amounts for the stationary oxygen equipment class 
at Sec.  414.226(c)(1)(i) in order to establish budget neutrality for 
total oxygen and oxygen expenditures for all oxygen classes. Increases 
in expenditures for oxygen and oxygen equipment that are attributed to 
higher payment amounts established for new classes of oxygen and oxygen 
equipment are offset by reducing the monthly payment amount for 
stationary oxygen equipment. Due to a drafting error in the regulation 
text portion of the November 2006 final rule, CMS-1304-F (71 FR 65933), 
42 CFR Sec.  414.226(c)(6) needs to be corrected. The regulation text 
at Sec.  414.226(c)(6) mistakenly states that budget neutrality should 
be achieved by adjusting all

[[Page 72242]]

oxygen class rates. Section 414.226(c)(6) should read that only the 
stationary oxygen equipment rate should be adjusted to achieve budget 
neutrality. Therefore, we proposed to revise Sec.  414.226(c)(6) to 
read as follows: ``Beginning in 2008, CMS makes an annual adjustment to 
the national limited monthly payment rate for items described in 
paragraph (c)(1)(i) of this section to ensure that such payment rates 
do not result in expenditures for any year that are more or less than 
the expenditures that would have been made if such classes had not been 
established.''
     We also proposed a technical correction to existing 42 CFR 
Sec.  414.102(c) to conform the regulation governing parenteral and 
enteral (PEN) nutrients, equipment and supplies covered item fee 
schedule update with the statute. Although section 1842(s)(1)(B)(ii) of 
the Act is self-implementing, the PEN nutrients, equipment and supplies 
payment regulations at 42 CFR 414 Subpart C were not updated to reflect 
the application of the multifactor productivity adjustment to the CPI-U 
update factor for 2011 and subsequent calendar years. Therefore, we are 
revising Sec.  414.102(c) of our regulations to specify that for years 
2003 through 2010, the PEN items and services fee schedule amounts of 
the preceding year are updated by the percentage increase in the CPI-U 
for the 12-month period ending with June of the preceding year. For 
each year subsequent to 2010, the PEN items and services fee schedule 
amounts of the preceding year are updated by the percentage increase in 
the CPI-U for the 12-month period ending with June of the preceding 
year, reduced by the productivity adjustment describe in section 
1886(b)(3)(B)(xi)(II) of the Act.
    We received no public comments on the DMEPOS proposals for 
technical amendments and a correction. Therefore, for the reasons we 
previously explained, we are finalizing our proposed modifications to 
the above regulations.

VIII. Waiver of Delayed Effective Date

    In the absence of an appropriation for FY 2014 or a Continuing 
Resolution, the federal government funding lapsed on October 1, 2013. 
During the funding lapse, which lasted from October 1, 2013 through 
October 16, 2013, only excepted operations continued, which largely 
excluded work on this final rule. Accordingly, most of the work on this 
final rule was not completed in accordance with our usual schedule for 
final CY payment rules, which aims for an issuance date of November 1 
followed by an effective date of January 1 to ensure that the policies 
are effective at the start of the calendar year to which they apply.
    We ordinarily provide a 60-day delay in the effective date of final 
rules after the date they are issued. The 60-day delay in effective 
date can be waived, however, if the agency finds for good cause that 
the delay is impracticable, unnecessary, or contrary to the public 
interest, and the agency incorporates a statement of the findings and 
its reasons in the rule issued. We believe it would be contrary to the 
public interest to delay the effective date of the ESRD PPS and ESRD 
QIP portions of this final rule. The ESRD PPS is a calendar-year 
payment system, and we typically issue the final rule by November 1 of 
each year to ensure that the payment policies for the system are 
effective on January 1, the first day of the calendar year to which the 
policies are intended to apply. CMS also includes in the ESRD PPS final 
rule its policies for the ESRD QIP because the performance of dialysis 
facilities under the ESRD QIP has a direct effect on that facility's 
payment under the ESRD PPS. A dialysis facility's ESRD PPS payment in 
2016 will be based, in part, on the policies finalized in this final 
rule, including the requirement that the facility report certain 
quality measures beginning January 1, 2014. If the effective date of 
this final rule is delayed by 60 days, the ESRD PPS and the ESRD QIP 
policies adopted in this final rule will not be effective until after 
January 1, 2014. This would be contrary to the public's interest in 
ensuring that dialysis facilities receive appropriate payments in a 
timely manner, and that their payments in 2016 properly and completely 
reflect their performance on quality measures in 2014. In addition, in 
the case of the ESRD PPS, section 1881(b)(14)(I) of the Act, as added 
by section 632(a) of the ATRA, requires that, for services furnished on 
or after January 1, 2014, the Secretary shall make reductions to the 
single payment for renal dialysis services to reflect the Secretary's 
estimate of the change in utilization of ESRD-related drugs and 
biologicals (excluding oral-only ESRD-related drugs) by comparing per 
patient utilization data from 2007 with such data from 2012. We are 
finalizing the drug utilization adjustment in this final rule, and in 
order to adhere to the statutory requirement that the adjustment apply 
to services furnished on or after January 1, 2014, this final rule must 
be effective on that date. We note that our waiver of the delayed 
effective date only applies to the ESRD PPS and ESRD QIP policies that 
are adopted in this final rule. The delayed effective date for the 
DMEPOS policies is not waived and these policies will be effective on 
April 1, 2014, for provisions that clarify the grandfathering provision 
related to the 3-year MLR for DME, the clarification of the definition 
of routinely purchased DME, fee schedules for splints and casts, and 
IOLs inserted in a physician's office, and technical amendments and 
corrections to existing regulations related to payment for DMEPOS items 
and services. For the items that we identified that will be 
reclassified as capped rental items and paid for in accordance with the 
rules set forth in 42 CFR 414.229, such reclassifications will be 
effective in three phases beginning on or after April 1, 2014. Items 
will be reclassified as capped rental items effective April 1, 2014, in 
all areas of the country if the item is not included in a Round 2 or 
Round 1 Recompete DMEPOS CBP. Items will be reclassified as capped 
rental items effective July 1, 2016, in all areas of the country if the 
item is included in a Round 2 CBP and not a Round 1 Recompete CBP. 
Items will be classified as capped rental items effective July 1, 2016, 
when it is furnished in any area of the country that is not in one of 
the 9 Round 1 Recompete areas if the item is included in a Round 1 
Recompete CBP. Finally, items will be classified as capped rental items 
effective January 1, 2017, when it is furnished in one of the 9 Round 1 
Recompete areas if the item is included in a Round 1 Recompete CBP.

IX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection requirement 
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork 
Reduction Act of 1995 requires that we solicit comment on the following 
issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.

[[Page 72243]]

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

B. Requirements in Regulation Text

    In section II.D. of this final rule, we changed the regulatory text 
for the ESRD PPS in CY 2014. However, the changes that are being made 
do not impose any new information collection requirements.

C. Additional Information Collection Requirements

    This final rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
final rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP
a. Expanded ICH CAHPS Reporting Measure for PY 2016 and Future Payment 
Years of the ESRD QIP
    As stated above in section III.C.2.a of this final rule, we 
proposed to include in the PY 2016 ESRD QIP an expanded ICH CAHPS 
reporting measure, which assesses facility usage of the ICH CAHPS 
survey. Unlike the ICH CAHPS reporting measure finalized in the CY 2013 
ESRD PPS final rule (77 FR 67480 through 67481), the proposed expanded 
ICH CAHPS reporting measure would require facilities to report (via a 
CMS-approved vendor) survey data to CMS once for PY 2016, and, for PY 
2017 and beyond, to administer (via a CMS-approved vendor) a second ICH 
CAHPS survey and report the second set of survey data to CMS. 
Therefore, for PY 2016, we estimated the burden associated with this 
requirement to be the time and effort necessary for facilities to 
submit (via a CMS-approved vendor) survey results to CMS. For PY 2017 
and future payment years, we estimated 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 estimated that approximately 5,506 facilities will treat adult, 
in-center hemodialysis patients in PY 2016 and, therefore, will be 
eligible to receive a score on this measure. We further estimated that 
all 5,506 facilities will report (via a CMS-approved vendor) survey 
results to CMS, and that it will take each vendor approximately 5 
minutes to do so. Therefore, the estimated total annual burden 
associated with meeting the measure requirements in PY 2016 is 459 
hours [(5/60) hours x 5,506 facilities). According to the Bureau of 
Labor Statistics, the mean hourly wage of a registered nurse is $32.66/
hour. Since we anticipate nurses (or administrative staff who would be 
paid at a lower hourly wage) will submit this data to CMS, we estimated 
that the aggregate cost of this requirement for PY 2016 will be $14,991 
(459 hours x $32.66/hour).
    We estimated that approximately 5,693 facilities will treat adult, 
in-center hemodialysis patients in PY 2017 and, therefore, will be 
eligible to receive a score on this measure. We estimated that all 
5,693 facilities will administer the ICH CAHPS survey through a third-
party vendor and arrange for the vendor to submit the data to CMS. We 
estimated that it would take each patient 30 minutes to complete the 
survey (to account for variability in education levels) and that 
approximately 103 surveys per year would be taken per facility. 
Interviewers from each vendor would therefore spend a total of 
approximately 52 hours per year with patients completing these surveys 
(0.5 hours * 103 surveys) or $1,698 (52 hours x $32.66) for an 
estimated annual burden of $9,666,714 ($1,698 per facility x 5,693 
facilities). We previously estimated that the aggregate cost of 
submitting survey data to CMS is $14,991. Therefore, we estimated that 
the total annual burden for ESRD facilities to comply with the 
collection of information requirements associated with the proposed 
expanded ICH CAHPS measure for PY 2017 and future payment years would 
be approximately $9,681,705 ($9,666,714 + $14,991) across all ESRD 
facilities.
    We requested comments on these proposals. The comments we received 
on these proposals and our responses are set forth below.
    Comment: One commenter asked CMS to take a global look at the 
burden placed on dialysis facilities for all aspects of the ESRD QIP.
    Response: We appreciate the commenter's suggestion and we clarify 
that we take an overarching view of provider burden each year during 
the rulemaking process when we conduct analyses associated with the 
Collection of Information Requirements.
    Comment: One commenter stated that the aggregate costs associated 
with the collection of information requirements are accurate, but that 
the costs are too high for facilities and amount to an unfunded 
mandate.
    Response: Although we recognize that the ESRD QIP imposes 
significant costs to providers, we disagree that those costs are too 
high or amount to an unfunded mandate. We continue to believe that the 
ESRD QIP drives improvements in the quality of care for patients with 
ESRD. We also believe that the benefits for patients far outweigh the 
costs for providers, and that the ESRD QIP does not amount to an 
unfunded mandate because it is tied to the reimbursements providers 
receive through the ESRD Prospective Payment System.
    Comment: A few commenters did not agree with the cost estimates in 
the collection of information requirements because it does not account 
for the burdens associated with entering data into CROWNWeb, as 
CROWNWeb is not fully functional.
    Response: We understand that members of the ESRD community have 
reported difficulties accessing and using the CROWNWeb system. As 
stated above, we are working to address known defects in CROWNWeb, and 
we look forward to continuing to work with facilities to minimize the 
burden of entering data into CROWNWeb. We note that entering data in 
CROWNWeb is a Condition for Coverage for dialysis facilities (Sec.  
494.180(h)), and that CROWNWeb supports the 1995 Paperwork Reduction 
Act. We will take the commenters' suggestions under advisement in the 
future when estimating burdens associated with collection of 
information requirements
    Comment: Several commenters did not agree with the cost estimates 
for the collection of information requirements for the ICH CAHPS 
measure. These commenters stated that the cost estimates do not 
accurately capture the cost of using a third party vendor, and that 
these costs can vary significantly.
    Response: We agree that the cost estimates for the ICH CAHPS 
measure did not include the costs associated with contracting a third-
party vendor to conduct the survey. As noted above (see Section 
III.C.2.a), the costs of these contracts vary significantly. Therefore, 
we assumed that third party vendors would employ registered nurses to 
administer the survey. We recognize the estimation method may not be 
entirely accurate, but we believe it is the most reliable way to 
generate a single cost estimate.
b. Data Validation Requirements for the PY 2016 ESRD QIP
    Section III.C.13 of the proposed rule outlines our data validation 
proposals. We proposed to randomly sample records from 300 facilities; 
each

[[Page 72244]]

sampled facility would be required to produce up to 10 records; and the 
sampled facilities will be reimbursed by our validation contractor for 
the costs associated with copying and mailing the requested records. 
The burden associated with this validation requirement is the time and 
effort necessary to submit validation data to a CMS contractor. We 
estimate that it will take each facility approximately 2.5 hours to 
comply with these requirements. If 300 facilities are tasked with 
providing the required documentation, the estimated annual burden for 
these facilities across all facilities would be 750 hours (300 
facilities x 2.5 hours) at a total of $24,495 (750 hours x $32.66/hour) 
or $81.65 ($24,495/300 facilities) per facility in the sample.
    We requested comments on this proposal. We did not receive any 
comments on this proposal.
    2. The clarification of the definition of routinely purchased DME 
does not contain any new information collection requirements.
    3. The clarification of the 3-year MLR for DME does not contain any 
new information collection requirements.
    4. The implementation of Budget-Neutral Fee Schedules for Splints, 
Casts and IOLs does not contain any new information collection 
requirements.

X. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We examined the impacts of this final rule as required by Executive 
Order 12866 (September 30, 1993, Regulatory Planning and Review) and 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011). Executive Orders 12866 and 13563 direct agencies to 
assess all costs and benefits of available regulatory alternatives and, 
if regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. Even though this rule has been designated non-
economically significant under section 3(f)(1) of Executive Order 
12866, it 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 final rule.
2. Statement of Need
    This rule finalizes a number of routine updates for renal dialysis 
services in CY 2014, implements the fourth year of the ESRD PPS 
transition, and makes several policy changes to the ESRD PPS. These 
include updates and changes to the ESRD PPS base rate, the wage index 
values, the wage index budget-neutrality adjustment factor, the home 
dialysis training add-on payment, and the outlier payment policy. This 
rule will also implement section 1881(b)(14)(I), which requires the 
Secretary, by comparing per patient utilization from 2007 with such 
data from 2012, to reduce the single payment amount to reflect the 
Secretary's estimate of the change in the utilization of ESRD-related 
drugs and biologicals. Failure to publish this final rule would result 
in ESRD facilities not receiving appropriate payments in CY 2014.
    This rule finalizes to implement the ESRD QIP for PY 2016 and 
beyond by finalizing proposals to adopt measures, scoring, and payment 
reductions to incentivize improvements in dialysis care as directed by 
section 1881(h) of the Act. Failure to finalize requirements for the PY 
2016 ESRD QIP would prevent continuation of the ESRD QIP beyond PY 
2015.
    In addition, this final rule clarifies the grandfathering provision 
related to the 3-year MLR for DME, provides clarification of the 
definition of routinely purchased DME and reclassifies certain items of 
DMEPOS, and implements budget-neutral fee schedules for splints and 
casts, and IOLs inserted in a physician's office. Finally, this final 
rule makes a few technical amendments and corrections to existing 
regulations related to payment for DMEPOS items and services.
3. Overall Impact
    We estimate that the revisions to the ESRD PPS will result in no 
increase in payments to ESRD facilities in CY 2014. This includes the 
amount associated with the increase in the ESRDB market basket reduced 
by the productivity adjustment, updates to outlier threshold amounts, 
the inclusion of the Pacific Rim ESRD facilities, updates to the wage 
index, the change from payments based on 25 percent composite rate 
system and 75 percent ESRD PPS to 100 percent ESRD PPS for those 
facilities that opted to be paid under the blend, and the drug 
utilization adjustment required by section 1881(b)(14)(I), as added by 
section 632(a) of ATRA.
    For PY 2016, we estimate that the requirements related to the ESRD 
QIP will cost approximately $39,486 ($14,991 for ICH CAHPS measure 
reporting + $24,495 data validation requirements) and the predicted 
payment reductions will equal about $15.1 million to result in a total 
impact from the ESRD QIP requirements of approximately $15.2 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 changes for implementing the fee schedule 
amounts from reasonable charge payments will be budget neutral and will 
have no impact to DMEPOS providers of splints, casts and IOLs inserted 
in a physician's office.
    We estimate that our clarification of the definition of routinely 
purchased DME and re-classification of certain items as cap rental 
items would impact certain DMEPOS providers. The estimated overall 
impact on payments to suppliers is furnished in table 17 below. In 
addition, suppliers will incur additional expenses in submitting 
monthly claims for payment on a rental basis versus a single claim for 
payment on a purchase basis. Suppliers will be positively impacted by 
this change because they will not have to replace equipment in their 
inventory as often since they retain title to rented items that are not 
used on a continuous basis for 13 months by Medicare beneficiaries. We 
estimate that the clarification of the 3-year MLR for DME would have no 
impact on DMEPOS suppliers.

B. Detailed Economic Analysis

1. CY 2014 End-Stage Renal Disease Prospective Payment System
a. Effects on ESRD Facilities
    To understand the impact of the changes affecting payments to 
different categories of ESRD facilities, it is necessary to compare 
estimated payments in CY 2013 to estimated payments in CY 2014. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2013 and CY 2014 
contain similar inputs. Therefore, we simulated payments only for those 
ESRD facilities for which we are able to calculate both current 
payments and new payments.
    For this final rule, we used the June 2013 update of CY 2012 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2012 claims 
to 2013 and 2014 using various

[[Page 72245]]

updates. The updates to the ESRD PPS base rate are described in section 
II.C of this final rule. For those providers that opted to be paid a 
blended payment amount during the transition, we used the price growth 
between the established 2013 and 2012 composite rate, drug add-on and 
part D add-on amounts. In addition we used the CY 2010 amounts as the 
CY 2013 amounts for Supplies and Other Services, since this category 
primarily includes the $0.50 administration fee for separately billable 
Part B drugs and this fee is not increased. Since some ESRD facilities 
received blended payments during the transition and received payment 
for ESRD drugs and biologicals based on their average sales price plus 
6 percent (ASP+6), we used price growth for the top twelve drugs and 
biologicals based on ASP+6 percent thru the fourth quarter of 2013. 
Since the top twelve drugs account for over 99 percent of total former 
separately billable Part B drug payments, we used a weighted average 
growth of the top twelve drugs, for the remainder. We updated payments 
for laboratory tests paid through the laboratory fee schedule to 2013 
using the statutory required update. Table 12 shows the impact of the 
estimated CY 2014 ESRD payments compared to estimated payments to ESRD 
facilities in CY 2013.

                             Table 12--Impact of Changes in Payments to ESRD Facilities for the CY 2014 ESRD PPS Final Rule
                                 [Percent change in total payments to ESRD facilities (both program and beneficiaries)]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 Effect of
                                                                            Effect of    Effect of    Effect of     Effect of       2014
                                                               Number of       2014         2014         2014     2014 changes   changes in   Effect of
                                                  Number of    treatments   changes in   changes in   changes in    in market    base rate    total 2014
                 Facility type                    facilities      (in        outlier        wage       blend of   basket minus  due to drug    changes
                                                               millions)    policy \4\    Indexes      payments   productivity   utilzation   (percent)
                                                                            (percent)    (percent)    (percent)      update         \5\
                                                                                                                    (percent)    (percent)
                                                           A            B            C            D            E             F            G            H
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities.................................        5,873         42.7          0.4          0.0          0.2           2.8         -3.3          0.0
Type:
    Freestanding...............................        5,362         39.6          0.4          0.0          0.1           2.8         -3.3          0.0
    Hospital based.............................          511          3.1          0.3          0.1          0.9           2.8         -3.2          0.8
Ownership Type:
    Large dialysis organization................        4,023         29.7          0.5          0.0          0.0           2.8         -3.3         -0.1
    Regional chain.............................          813          6.2          0.4          0.1          0.4           2.8         -3.3          0.2
    Independent................................          601          4.2          0.2          0.1          0.7           2.8         -3.3          0.4
    Hospital based \1\.........................          424          2.6          0.3          0.1          0.9           2.8         -3.2          0.7
    Unknown....................................           12          0.1          0.4         -0.1          0.2           2.8         -3.3         -0.1
Geographic Location:
    Rural......................................        1,283          7.0          0.4         -0.1          0.2           2.8         -3.3         -0.1
    Urban......................................        4,590         35.7          0.4          0.0          0.2           2.8         -3.3          0.0
Census Region:
    East North Central.........................          962          6.4          0.5         -0.1          0.2           2.8         -3.3         -0.1
    East South Central.........................          487          3.2          0.5         -0.2          0.0           2.8         -3.3         -0.2
    Middle Atlantic............................          651          5.1          0.4          0.4          0.3           2.8         -3.3          0.6
    Mountain...................................          346          2.0          0.3         -0.1          0.2           2.8         -3.3         -0.1
    New England................................          172          1.4          0.4          0.1          0.1           2.8         -3.3          0.0
    Pacific \2\................................          692          5.9          0.2          0.6          0.1           2.8         -3.3          0.3
    Puerto Rico and Virgin Islands.............           43          0.3          0.4         -2.3          0.4           2.8         -3.3         -2.1
    South Atlantic.............................        1,307          9.9          0.5         -0.3          0.2           2.8         -3.3         -0.2
    West North Central.........................          426          2.2          0.4         -0.2          0.4           2.8         -3.3          0.0
    West South Central.........................          787          6.2          0.5         -0.2          0.2           2.8         -3.3         -0.2
Facility Size:
    Less than 4,000 treatments \3\.............        1,090          3.1          0.4         -0.1          0.3           2.8         -3.3          0.1
    4,000 to 9,999 treatments..................        2,167         11.1          0.4         -0.1          0.2           2.8         -3.3         -0.1
    10,000 or more treatments..................        2,431         27.5          0.4          0.0          0.2           2.8         -3.3          0.0
    Unknown....................................          185          1.0          0.6         -0.2          0.3           2.8         -3.3          0.0
Percentage of Pediatric Patients:
    Less than 2%...............................        5,759         42.3          0.4          0.0          0.2           2.8         -3.3          0.0
    Between 2% and 19%.........................           47          0.4          0.3          0.1          0.5           2.8         -3.3          0.4
    Between 20% and 49%........................            7          0.0          0.1         -0.2          0.3           2.8         -3.3         -0.4
    More than 50%..............................           60          0.1          0.1          0.0          0.0           2.8         -3.3         -0.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership.
2. Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands.
3. Of the 1,088 ESRD facilities with less than 4,000 treatments, only 362 qualify for the low-volume payment adjustment. The low-volume payment
  adjustment is mandated by Congress, and is not applied to pediatric dialysis treatments. The impact to these low-volume ESRD facilities is a 0.4%
  increase in payments.
4. Includes the effect of including the Pacific Rim ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands into the ESRD PPS.
5. Includes the effect of adjusting the training add-on payment to $50.16, and the effect of an $8.16 decrease in the base rate due to the drop in drug
  utilization.
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the changes 
to the outlier payment policy described in section II.B.6. of this 
final rule is shown in column C. For CY 2014, the impact on all 
facilities as a result of the changes to the outlier payment policy 
would be a 0.4 percent increase in estimated payments. The estimated 
impact of the changes to outlier payment policy ranges from a 0.1 
percent to a 0.6 percent increase. All ESRD facility types are 
anticipated to experience a positive effect in their estimated CY 2014 
payments as a result of the outlier policy changes.
    Column D shows the effect of the wage index on ESRD facilities and 
reflects the CY 2014 wage index values for the ESRD PPS payments. ESRD 
facilities located in the census region of Puerto Rico and the Virgin 
Islands would receive a 2.3 percent decrease in estimated payments in 
CY 2014. Since most of the facilities in this category are located in 
Puerto Rico, the decrease is

[[Page 72246]]

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 0.6 percent increase 
due to the update of the wage index.
    Column E shows the effect of the change in the blended payment 
percentage from 25 percent of payments based on the composite rate 
system and 75 percent based on the ESRD PPS in CY 2013, to 100 percent 
based on the ESRD PPS in CY 2014, for those facilities that choose to 
be paid under the transition. The impact on all facilities would be a 
0.2 percent increase in estimated payments. The estimated impacts of 
the change in the blend ranges from a 0.0 percent to 0.9 percent 
increase.
    Column F shows the effect of the ESRDB market basket increase minus 
productivity adjustment. The impact on all facilities would be a 2.8 
percent increase.
    Column G shows the effect of the drug utilization adjustment 
required by section 1881(b)(14)(I) of the Act. For CY 2014, the impact 
on all facilities as a result of the $8.16 decrease to the base rate, 
as described in section II.B.2.a, would be a 3.3 percent decrease in 
estimated payments. The estimated impact ranges from 3.2 percent to 3.3 
percent decrease.
    Column H reflects the overall impact (that is, the effects of the 
outlier policy changes, the wage index, the effect of the blended 
payment percentage change, the effect of the ESRDB market basket 
increase minus productivity adjustment, and the effect of the drug 
utilization adjustment required by section 1881(b)(14)(I)). We expect 
that overall ESRD facilities will experience a 0.0 percent increase in 
estimated payments in 2014. ESRD facilities in Puerto Rico and the 
Virgin Islands are expected to receive a 2.1 percent decrease in their 
estimated payments in CY 2014. This larger decrease is primarily due to 
the negative impact of the wage index. The other categories of types of 
facilities in the impact table show impacts ranging from a decrease of 
0.5 percent to an increase 0.8 percent in their 2014 estimated 
payments.
b. Effects on Other Providers
    Under the ESRD PPS, ESRD facilities are paid directly for the renal 
dialysis bundle and other provider types such as laboratories, DME 
suppliers, and pharmacies, may no longer bill Medicare directly for 
renal dialysis services. Rather, effective January 1, 2011, such other 
providers can only furnish renal dialysis services under arrangements 
with ESRD facilities and must seek payment from ESRD facilities rather 
than Medicare. Under the ESRD PPS, Medicare pays ESRD facilities one 
payment for renal dialysis services, which may have been separately 
paid to suppliers by Medicare prior to the implementation of the ESRD 
PPS. Therefore, in CY 2014, the fourth year of the ESRD PPS, we 
estimate that the ESRD PPS will have zero impact on these other 
providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2014 will be approximately $8.8 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 3.1 percent in 
CY 2014.
d. Effects on Medicare Beneficiaries
    Under the ESRD PPS, beneficiaries are responsible for paying 20 
percent of the ESRD PPS payment amount. As a result of the projected 
0.0 percent overall increase in the final ESRD PPS payment amounts in 
CY 2014, we estimate that there will be an increase in beneficiary co-
insurance payments of 0.0 percent in CY 2014, which translates to 
approximately $0 million.
e. Alternatives Considered
    For this final rule, we considered implementing the full drug 
utilization adjustment amount in CY 2014. In particular, we could have 
implemented a one-time reduction of $29.93 to the CY 2014 ESRD PPS base 
rate. We also considered several transition options. For example, we 
considered equal reductions over a 3 or 4 year period. We chose to 
implement the drug utilization adjustment by offsetting the payment 
update, that is the ESRDB market basket minus productivity increase 
factor, and other impacts (such as, changes to the outlier thresholds) 
by a portion of the drug utilization adjustment amount necessary to 
create an overall impact of zero percent for ESRD facilities from the 
previous year's payments for CY 2014 and CY 2015. We believe that this 
approach will minimize disruption in the delivery of critical ESRD 
services.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2016 ESRD QIP
    The ESRD QIP provisions are intended to prevent possible reductions 
in the quality of ESRD dialysis facility services provided to 
beneficiaries as a result of payment changes under the ESRD PPS by 
implementing a ESRD QIP that reduces ESRD PPS payments by up to 2 
percent for dialysis facilities that fail to meet or exceed a TPS with 
respect to performance standards established by the Secretary with 
respect to certain specified measures. The methodology that we proposed 
to determine a facility's TPS is described in section III.D.9 of this 
final rule. Any reductions in ESRD PPS payments as a result of a 
facility's performance under the PY 2016 ESRD QIP would begin with 
services furnished on January 1, 2016.
    As a result, based on the ESRD QIP outlined in this final rule, we 
estimate that, of the total number of dialysis facilities (including 
those not receiving an ESRD QIP TPS), approximately 24 percent or 1,390 
of the facilities would likely receive a payment reduction in PY 2016. 
Facilities that do not receive a TPS are not eligible for a payment 
reduction.
    The ESRD QIP impact assessment assumes an initial count of 5,771 
dialysis facilities paid through the PPS. Table 13 shows the overall 
estimated distribution of payment reductions resulting from the PY 2016 
ESRD QIP.

 Table 13--Estimated Distribution of PY 2016 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                              Percent of
               Payment reduction                 Number of    facilities
                                                 facilities   (percent)
------------------------------------------------------------------------
0.0%..........................................        4,483         76.3
0.5%..........................................          957         16.3
1.0%..........................................          305          5.2
1.5%..........................................           70          1.2
2.0%..........................................           58          1.0
------------------------------------------------------------------------
Note: This table excludes 285 facilities that did not receive a score
  because they did not have enough data to receive a Total Performance
  Score.

    To estimate whether or not a facility would receive a payment 
reduction under the proposed approach, we scored each facility on 
achievement and improvement on several measures we have previously 
finalized and for which there were available data from CROWNWeb and 
Medicare claims. Measures used for the simulation are shown in Table 
14.

[[Page 72247]]

                                           Table 14--Data Used To Estimate PY 2016 ESRD QIP Payment Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           Period of time used to calculate
                                                achievement thresholds,
                 Measure                        performance standards,                                    Performance period
                                              benchmarks, and improvement
                                                      thresholds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hemoglobin Greater Than 12 g/dL..........  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
Vascular Access Type:
  % Fistula..............................  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
  % Catheter.............................  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
Kt/V:
  Adult HD...............................  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
  Adult PD...............................  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
  Pediatric HD...........................  Jan 2012-Dec 2012...............  Jan 2013-Aug 2013.
Hypercalcemia............................  July 2012-Dec 2011..............  Jan 2013-June 2013.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Clinical measures with less than 11 cases for a facility were not 
included in that facility's TPS. Each facility's TPS was compared to 
the estimated minimum TPS and the payment reduction table found in 
section III.C.11 of this proposed rule. Facilities were required to 
have a score on at least one clinical measure to receive a TPS. For 
these simulations, the NHSN Bloodstream Infection in Hemodialysis 
Outpatients and the reporting measures were not included due to lack of 
data availability. Therefore, the simulated facility TPSs were 
calculated using only some of the clinical measure scores. 
Additionally, since data for the reporting measures were not available, 
facilities were scored at the median, or 5, for each of the three 
reporting measures.
    To estimate the total payment reductions in PY 2016 for each 
facility resulting from this final rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
January 2012 and December 2012 by the facility's estimated payment 
reduction percentage expected under the ESRD QIP, yielding a total 
payment reduction amount for each facility: (Total ESRD payment in 
January 2012 through December 2012 times the estimated payment 
reduction percentage). For PY 2016 the total payment reduction for all 
of the 1,390 facilities expected to receive a reduction is 
approximately $15.1 million ($15,137,161). Further, we estimate that 
the total costs associated with the collection of information 
requirements for PY 2016 described in section IX.C.1 of this final rule 
would be approximately $39.5 thousand for all ESRD facilities. As a 
result, we estimate that ESRD facilities will experience an aggregate 
impact of $15.2 million ($39,486 + $15,137,161 = $15,176,647) in PY 
2016, as a result of the PY 2016 ESRD QIP.
    Table 15 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2016. The table 
details the distribution of ESRD facilities by facility size (both 
among facilities considered to be small entities and by number of 
treatments per facility), geography (both urban/rural and by region), 
and by facility type (hospital based/freestanding facilities). Given 
that the time periods used for these calculations will differ from 
those we propose to use for the PY 2016 ESRD QIP, the actual impact of 
the PY 2016 ESRD QIP may vary significantly from the values provided 
here.

               Table 15--Impact of Finalized QIP Payment Reductions to ESRD Facilities for PY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of        Payment
                                                     Number of                      facilities       reduction
                                     Number of      treatments       Number of      expected to      (percent
                                    facilities       2012 (in       facilities       receive a       change in
                                                     millions)    with QIP score      payment       total ESRD
                                                                                     reduction       payments)
----------------------------------------------------------------------------------------------------------------
All Facilities..................           5,873            42.7           5,645           1,390           -0.17
Facility Type:
  Freestanding..................           5,362            39.6           5,248           1,259           -0.16
  Hospital-based................             511             3.1             397             131           -0.32
Ownership Type:
  Large Dialysis................           4,023            29.7           3,963             966           -0.16
  Regional Chain................             813             6.2             789             149           -0.13
  Independent...................             601             4.2             563             161           -0.23
  Hospital-based (non-chain)....             424             2.6             323             112           -0.34
  Unknown.......................              12             0.1               7               2           -0.28
Facility Size:
  Large Entities................           4,836            35.9           4,752           1,115           -0.15
  Small Entities \1\............           1,025             6.7             886             273           -0.27
  Unknown.......................              12             0.1               7               2           -0.28
Rural Status:
    (1) Yes.....................           1,283             7.0           1,233             288           -0.16
    (2) No......................           4,590            35.7           4,412           1,102           -0.18
Census Region:
    Northeast...................             806             6.5             772             201           -0.20
    Midwest.....................           1,359             8.6           1,286             391           -0.21
    South.......................           2,544            19.2           2,490             570           -0.15
    West........................           1,020             7.9             992             186           -0.14

[[Page 72248]]

 
    U.S. Territories \2\........             144             0.5             105              42           -0.33
Census Division:
  East North Central............             962             6.4             904             310           -0.24
  East South Central............             487             3.2             476             102           -0.13
  Middle Atlantic...............             651             5.1             615             165           -0.20
  Mountain......................             346             2.0             331              65           -0.16
  New England...................             172             1.4             164              39           -0.20
  Pacific.......................             692             5.9             674             126           -0.13
  South Atlantic................           1,307             9.9           1,269             321           -0.17
  West North Central............             426             2.2             402              85           -0.15
  West South Central............             787             6.2             769             152           -0.13
U.S. Territories \2\............              43             0.3              41              25           -0.50
Facility Size (# of total
 treatments)
    Less than 4,000 treatments..           1,090             3.1             938             277           -0.26
    4,000-9,999 treatments......           2,167            11.1           2,147             440           -0.13
    Over 10,000 treatments......           2,431            27.5           2,422             629           -0.17
    Unknown.....................             185             1.0             138              44           -0.24
----------------------------------------------------------------------------------------------------------------
\1\ Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-
  reported status.
\2\ Includes Puerto Rico and Virgin Islands.
\3\ Based on claims data through December 2012.

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

[[Page 72249]]

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

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

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

  Table 17--Impact of Items Reclassified to Capped Rental DME Category
------------------------------------------------------------------------
                                                           Impact to the
                                                              federal
                           FY                               government)
                                                               (in $
                                                             millions)
------------------------------------------------------------------------
2014....................................................             -10
2015....................................................             -20
2016....................................................             -20
2017....................................................             -30
2018....................................................             -40
------------------------------------------------------------------------

    The decrease in expenditures is expected because the changes would 
eliminate the lump sum purchase method for the certain items, and 
instead payment would be made under the monthly rental method resulting 
in lower aggregate payments because many beneficiaries do not rent 
items for as long as 13 months. In order to prepare our impact on the 
Medicare program, we reviewed claims data and utilization for all items 
currently classified as capped rental items from 2009 through 2011 and 
determined that the weighted average number of allowed monthly rental 
services for beneficiaries

[[Page 72250]]

receiving capped rental items during that period was 8 months. We 
therefore used 8 months as the estimated number of months beneficiaries 
would rent items in Table 11 of section IV of the preamble of this 
final rule that would not have a purchase option. All anticipated 
savings include the price growth for the covered item fee schedule 
update factors for DME mandated by section 1834(a)(14) of the Act. In 
addition, our estimate takes into account projected changes in DME 
beneficiary enrollment. Furthermore, we reflected the savings for these 
items that are currently included under any existing competitive 
bidding program and which will be reclassified from routinely purchased 
to capped rental effective July 1, 2016.
    Approximately $100 million in allowed charges in 2011 are for items 
that would no longer be eligible for purchase. Under the capped rental 
payment rules, these items would be rented for up to 13-continuous 
months, following which title to the equipment would transfer from the 
supplier to the beneficiary.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 18 below, we 
have prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
final rule.

  Table 18--Accounting Statement: Classification of Estimated Transfers
                            and Costs/Savings
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
                          ESRD PPS for CY 2014
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $0 million.
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Increased Beneficiary Co-insurance       $0 million.
 Payments.
From Whom to Whom......................  Beneficiaries to ESRD
                                          providers.
------------------------------------------------------------------------
                          ESRD QIP for PY 2016
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$15.1 million.*
From Whom to Whom......................  Federal government to ESRD
                                          providers.
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $39.5 thousand.**
 Costs.
------------------------------------------------------------------------

                                    DME Definition of Routinely Purchased DME
----------------------------------------------------------------------------------------------------------------
             Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfer       -$23.1 million.......................         2013           7%    2014-2018
 Payments.
                                    -$23.6 million.......................         2013           3%    2014-2018
                                   -----------------------------------------------------------------------------
From Whom to Whom.................  Federal government to Medicare providers.
----------------------------------------------------------------------------------------------------------------
* It is the reduced payment to the ESRD facilities, which fall below the quality standards as stated in section
  III.C.11 of this final rule.
** It is the cost associated with the collection of information requirements for all ESRD facilities.

XI. Regulatory Flexibility Act Analysis **

    The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) 
(RFA) requires agencies to analyze options for regulatory relief of 
small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Approximately 17 percent of ESRD dialysis 
facilities are considered small entities according to the Small 
Business Administration's (SBA) size standards, which classifies small 
businesses as those dialysis facilities having total revenues of less 
than $35.5 million in any 1 year. Individuals and States are not 
included in the definitions of a small entity. For more information on 
SBA's size standards, see the Small Business Administration's Web site 
at http://www.sba.gov/content/small-business-size-standards (Kidney 
Dialysis Centers are listed as 621492 with a size standard of $35.5 
million).
    We do not believe ESRD facilities are operated by small government 
entities such as counties or towns with populations of 50,000 or less, 
and therefore, they are not enumerated or included in this estimated 
RFA analysis. Individuals and States are not included in the definition 
of a small entity.
    For purposes of the RFA, we estimate that approximately 17 percent 
of ESRD facilities are small entities as that term is used in the RFA 
(which includes small businesses, nonprofit organizations, and small 
governmental jurisdictions). This amount is based on the number of ESRD 
facilities shown in the ownership category in Table 12. Using the 
definitions in this ownership category, we consider the 601 facilities 
that are independent and the 424 facilities that are shown as hospital-
based to be small entities. The ESRD facilities that are owned and 
operated by LDOs and regional chains would have total revenues of more 
than $35.5 million in any year when the total revenues for all 
locations are combined for each business (individual LDO or regional 
chain), and are not, therefore, included as small entities.
    For the ESRD PPS updates in this rule, a hospital-based ESRD 
facility (as

[[Page 72251]]

defined by ownership type) is estimated to receive a 0.4 percent 
increase in payments for CY 2014. An independent facility (as defined 
by ownership type) is estimated to receive a 0.7 percent increase in 
payments for CY 2014.
    We solicited comment on the RFA analysis provided. The comments 
received and our responses are as follows.
    Comment: A few commenters requested that CMS improve the impact 
analysis for small entities. One association requested that we improve 
transparency for ESRD facilities and that we update our description of 
small entities. The association provided a study that identified all 
the ESRD facilities that have $35.5 million in revenues, consistent 
with the RFA definition of a small entity. The Small Business 
Administration, Office of Advocacy commented that the rule's 
transparency would be improved if CMS: 1) improved its description of 
small entities likely to be impacted by the rule; 2) provided further 
details on the rule's impacts on affected small ESRD facilities; and 3) 
entertained reasonable alternatives to the provisions of the proposed 
rule pursuant to RFA section 603(c). Such alternatives might include 
adoption of a transition or phase-in period on which CMS solicited 
comments in the proposed rule. The commenter suggested that CMS provide 
an impact table tailored to the size standards utilized in the RFA to 
enable small entities to better anticipate and comment on the impacts 
of this rule and that we include a margin analysis in the RFA.
    Response: We thank the commenters for their suggestions to enhance 
the RFA analysis. We will take these suggestions into consideration for 
future rulemaking. We note that CMS publishes a provider level impact 
table each year. The CY 2014 Final ESRD PPS Facility Level Impact File 
may be viewed at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ESRDpayment/End-Stage-Renal-Disease-ESRD-Payment-Regulations-and-Notices.html. We believe that this file for allows adequate 
transparency and identification for all ESRD facilities. For example, 
Medicare certified ESRD facilities are identified by provider number, 
Medicare payments, number of furnished treatments, as well as, rural or 
urban status.
    In section II.C.2.a.v. of this final rule we discuss the 
implementation of the drug utilization adjustment. Specifically, for 
CYs 2014 and 2015, we are implementing a transition of the drug 
utilization adjustment by offsetting the payment update, that is the 
ESRDB market basket minus productivity increase factor and other 
impacts (such as, changes to the outlier thresholds), by a portion of 
the reduction amount necessary to create an overall impact of zero 
percent for ESRD facilities from the previous year's payments. For CY 
2016, we will evaluate how to apply the balance of the reduction when 
we conduct an analysis of the case-mix adjustments as required by 
section 632(c) of ATRA and implement the inclusion of oral-only ESRD-
related drugs and biologicals as permitted by section 632(b) of ATRA. 
Following this evaluation, we will determine whether we should apply 
the balance of the reduction in CY 2016 or provide one additional 
transition year so that the full amount of the drug utilization 
adjustment will have been applied to the base rate over a 4-year 
transition period ending in CY 2017.
    Based on the finalized QIP payment reduction impacts to ESRD 
facilities for PY 2016, we estimate that of the 1,390 ESRD facilities 
expected to receive a payment reduction, 273 ESRD small entity 
facilities would experience a payment reduction (ranging from 0.5 
percent up to 2.0 of total payments), as presented in Table 13 
(``Estimated Distribution of PY 2016 ESRD QIP Payment Reductions'') and 
Table 15 (``Impact of Proposed QIP Payment Reductions to ESRD 
Facilities for PY 2016'') above. We anticipate the payment reductions 
to average approximately $10,890 per facility among the 1,390 
facilities receiving a payment reduction, with an average of $12,011 
per small entity facilities receiving a payment reduction. Using our 
projections of facility performance, we then estimated the impact of 
anticipated payment reductions on ESRD small entities, by comparing the 
total payment reductions for the 273 small entities expected to receive 
a payment reduction, with the aggregate ESRD payments to all small 
entities. We estimate that there are a total of 1,025 small entity 
facilities. For this entire group of 1,025 ESRD small entity 
facilities, a decrease of 0.27 percent in aggregate ESRD payments is 
observed.
    Splints and casts, and IOLs affected by this rule are generally 
furnished by physicians. Approximately 95 percent of physicians are 
considered to be small entities for the purposes of the RFA. 
Individuals and states are not included in the definition of a small 
entity. The reasonable charge payment amounts for splints and casts are 
based on national reasonable charge amounts increased each year by the 
12-month percentage change in the CPI-U ending June of the previous 
year. These national inflation-indexed charges can easily be converted 
to fee schedule amounts with no impact on the national Medicare payment 
amounts for these items. Therefore, the fee schedule amounts that will 
take effect on April 1, 2014, for splints and casts would be the same 
as the reasonable charge amounts that will take effect on April 1, 
2014, for these items. This final rule will have no impact on small 
businesses that furnish these items. Given that Medicare pays for very 
few IOLs inserted in a physician's office, these entities do not rely 
on Medicare payment for these items to support their businesses. 
Because the fee schedule amounts that would take effect on April 1, 
2014, for IOLs inserted in a physician's office would be based on the 
national average allowed charge for the item, the payment amounts these 
entities would receive under the fee schedule will be, on average, the 
same amounts they are currently paid for these items when considering 
the small national volume of claims as a whole. For example, in 2011, 
the average allowed charge for an IOL inserted in a physician's office 
was $174 for just 287 cases nationwide. If a particular physician 
office is a small business that charges less than $174 per IOL, a 
national fee schedule amount of $174 could increase payment for this 
small business for this item. Alternatively, if a particular physician 
office is a small business that charges more than $174 per IOL, a 
national fee schedule amount of $174 could decrease payment for this 
small business for this item. However, with only 287 cases nationwide, 
implementing a national fee of $174 would not have a significant impact 
on any physician office that is a small business because the volume of 
claims indicates that the small businesses are not relying on payment 
for these items to fund their businesses (physician practices) as a 
whole. Therefore, we expect that the overall impact of this rule on 
small businesses that are physician offices that insert IOLs covered by 
Medicare would be minimal. Approximately 85 percent of suppliers of 
DMEPOS in general are considered to be small entities for the purposes 
of the RFA.
    We expect that the impact of moving certain expensive DME items 
from the routinely purchased payment class to the capped rental payment 
class on small business will be minimal since the suppliers would still 
receive 105 percent of the purchase fee for items that are rented for 
the full 13-month capped rental period. In addition, the supplier would 
retain ownership of

[[Page 72252]]

equipment that is not used for 13 months and can furnish the equipment 
to another beneficiary, beginning a new, separate 13-month capped 
rental period for the same item.
    Therefore, the Secretary has determined that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 604 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this final rule will have a significant impact on operations of 
a substantial number of small rural hospitals because most dialysis 
facilities are freestanding. While there are 162 rural hospital-based 
dialysis facilities, we do not know how many of them are based at 
hospitals with fewer than 100 beds. However, overall, the 162 rural 
hospital-based dialysis facilities will experience an estimated 0.2 
percent increase in payments. As a result, this final rule is not 
estimated to have a significant impact on small rural hospitals. 
Therefore, the Secretary has determined that this final rule will not 
have a significant impact on the operations of a substantial number of 
small rural hospitals.

XII. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. 104-4) also requires that agencies assess anticipated costs 
and benefits before issuing any rule whose mandates require spending in 
any 1 year $100 million in 1995 dollars, updated annually for 
inflation. In 2013, that threshold is approximately $141 million. This 
final rule does not include any mandates that would impose spending 
costs on State, local, or Tribal governments in the aggregate, or by 
the private sector, of $141 million.

XIII. Federalism Analysis

    Executive Order 13132 on Federalism (August 4, 1999) establishes 
certain requirements that an agency must meet when it promulgates a 
proposed rule (and subsequent final rule) that imposes substantial 
direct requirement costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. We have reviewed this 
final rule under the threshold criteria of Executive Order 13132, 
Federalism, and have determined that it will not have substantial 
direct effects on the rights, roles, and responsibilities of States, 
local or Tribal governments.

XIV. Congressional Review Act

    This final 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 
final rule. Beginning in CY 2012, the Addenda for the annual ESRD PPS 
proposed and final rulemakings will no longer appear in the Federal 
Register. Instead, the Addenda will be available only through the 
Internet. We will continue to post the Addenda through the Internet.
    Readers who experience any problems accessing the Addenda that are 
posted on the CMS Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp, should contact Michelle Cruse at (410) 786-7540.

List of Subjects

42 CFR Part 413

    Health facilities, Kidney diseases, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 414

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as follows:

PART 413--PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT FOR 
END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY DETERMINED 
PAYMENT RATES FOR SKILLED NURSING FACILITIES

0
1. The authority citation for part 413 is revised to read as follows:

    Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and 
(n), 1861(v), 1871, 1881, 1883 and 1886 of the Social Security Act 
(42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), (i), and (n), 
1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of 
Pub.L. 106-113 (113 Stat. 1501A-332), sec. 3201 of Pub.L. 112-96 
(126 Stat. 156), and sec. 632 of Pub. L. 112-240 (126 Stat. 2354)

Sec.  413.174  [Amended]

0
2. Section 413.174 (f)(6) (as added on August 12, 2010 at 75 FR 49198, 
and effective on January 1, 2014) is amended by removing ``January 1, 
2014'' and by adding in its place ``January 1, 2016''.

Sec.  413.237  [Amended]

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

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

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

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

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

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

* * * * *

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

Sec.  414.100  Purpose.

    This subpart implements fee schedules for PEN items and services, 
splints and casts, and IOLs inserted in a physician's office as 
authorized by section 1842(s) of the Act.

0
7. Section 414.102 is amended by revising paragraphs (a) introductory 
text, (a)(2), (b)(1), and (c) to read as follows:

Sec.  414.102  General payment rules.

    (a) General rule. For PEN items and services furnished on or after 
January 1, 2002, and for splints and casts and IOLs inserted in a 
physician's office on or after April 1, 2014, Medicare pays for the 
items and services as described in paragraph (b) of this section on the 
basis of 80 percent of the lesser of---
* * * * *
    (2) The fee schedule amount for the item or service, as determined 
in accordance with Sec. Sec.  414.104 thru 414.108.

[[Page 72253]]

    (b) * * *
    (1) CMS or the carrier determines fee schedules for parenteral and 
enteral nutrition (PEN) nutrients, equipment, and supplies, splints and 
casts, and IOLs inserted in a physician's office, as specified in 
Sec. Sec.  414.104 thru 414.108.
* * * * *
    (c) Updating the fee schedule amounts. For the years 2003 through 
2010 for PEN items and services, the fee schedule amounts of the 
preceding year are updated by the percentage increase in the CPI-U for 
the 12-month period ending with June of the preceding year. For each 
year subsequent to 2010 for PEN items and services and for each year 
subsequent to 2014 for splints and casts, and IOLs inserted in a 
physician's office, the fee schedule amounts of the preceding year are 
updated by the percentage increase in the CPI-U for the 12-month period 
ending with June of the preceding year, reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act.

0
8. Section 414.106 is added to read as follows:

Sec.  414.106  Splints and casts.

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

0
9. Section 414.108 is added to read as follows:

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

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

0
10. Revise the heading to Subpart D to read as follows:

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

* * * * *

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

Sec.  414.200  Purpose

    This subpart implements sections 1834(a), (h) and (i) of the Act by 
specifying how payments are made for the purchase or rental of new and 
used durable medical equipment, prosthetic and orthotic devices, and 
surgical dressings for Medicare beneficiaries.

0
12. Section 414.226 is amended by revising paragraph (c)(6) to read as 
follows:

Sec.  414.226  Oxygen and oxygen equipment

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

    Dated: November 20, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: November 21, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-28451 Filed 11-22-13; 4:15 pm]
BILLING CODE 4120-01-P
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