```

[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Proposed Rules]
[Pages 40207-40315]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15840]

[[Page 40207]]

Vol. 79

Friday,

No. 133

July 11, 2014

Part II

 Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 405, 411, 413, et al.

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

Federal Register / Vol. 79 , No. 133 / Friday, July 11, 2014 / 
Proposed Rules

[[Page 40208]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 411, 413 and 414

[CMS-1614-P]
RIN 0938-AS13

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

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

ACTION: Proposed rule.

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SUMMARY: This rule proposes to update and make revisions to the End-
Stage Renal Disease (ESRD) prospective payment system (PPS) for 
calendar year (CY) 2015. This rule also proposes to set forth 
requirements for the ESRD quality incentive program (QIP), including 
payment years (PYs) 2017 and 2018. This rule also proposes to make a 
technical correction to remove outdated terms and definitions. In 
addition, this rule proposes to set forth the methodology for adjusting 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) fee schedule payment amounts using information from the 
Medicare DMEPOS Competitive Bidding Program (CBP); make alternative 
payment rules for DME and enteral nutrition under the Medicare DMEPOS 
CBP; clarify the statutory Medicare hearing aid coverage exclusion and 
specify devices not subject to the hearing aid exclusion; update the 
definition of minimal self-adjustment regarding what specialized 
training is needed by suppliers to provide custom fitting services if 
they are not certified orthotists; clarify the Change of Ownership 
(CHOW) and provides for an exception to the current requirements; 
revise the appeal provisions for termination of a contract and 
notification to beneficiaries under the Medicare DMEPOS CBP, and add a 
technical change related to submitting bids for infusion drugs under 
the Medicare DMEPOS CBP.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. E.S.T. on September 
2, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1614-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1614-P, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1614-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period: a. For delivery in Washington, DC--
Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Stephanie Frilling, (410) 786-4507, 
for issues related to the ESRD PPS, the ESRD PPS CY 2015 Base Rate and 
Payment for Frequent Hemodialysis.
    Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS 
and the Low Volume Payment Adjustment.
    Karen Reinhardt, (410) 786-0189, for issues related to the ESRD PPS 
and the Outlier Payment Policy.
    Wendy Tucker, (410) 786-3004, for issues related to the ESRD PPS 
and Wage Index.
    Heidi Oumarou, (410) 786-7342, for issues related to the ESRD PPS 
Market Basket Update.
    Anita Segar, (410) 786-4614, for issues related to the ESRD QIP.
    Christopher Molling (410) 786-6399 and Hafsa Vahora (410) 786-7899 
for issues related to the methodology for making national price 
adjustments based upon information gathered from the DMEPOS CBP.
    Sandhya Gilkerson, (410) 786-4085, for issues related to the 
alternative payment methodologies under the CBP.
    Sandhya Gilkerson, (410) 786-4085 and Michelle Peterman, 410-786-
2581 for issues related to the clarification of the statutory Medicare 
hearing aid coverage exclusion.
    Michelle Peterman, (410) 786-2591 for issues related to the 
definition of minimal self-adjustment at 414.402.
    Janae James (410) 786-0801 for issues related to CHOW and breach of 
contract appeals.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S.

[[Page 40209]]

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 Stephanie Frilling at 410-786-4507.

Table of Contents

    To assist readers in referencing sections contained in this 
preamble, we are providing a Table of Contents. Some of the issues 
discussed in this preamble affect the payment policies, but do not 
require changes to the regulations in the Code of Federal Regulations 
(CFR).
I. Executive Summary
    A. Purpose
    1. End-Stage Renal Disease (ESRD) Prospective Payment System 
(PPS)
    2. End-Stage Renal Disease (ESRD) Quality Incentive Program 
(QIP)
    3. Durable Medical Equipment, Prosthetics, Orthotics, and 
Supplies (DMEPOS)
    B. Summary of the Major Provisions
    1. ESRD PPS
    2. ESRD QIP
    3. DMEPOS
    C. Summary of Costs and Benefits
    1. Impacts of the Proposed ESRD PPS
    2. Impacts for ESRD QIP
    3. Impacts for DMEPOS
II. Calendar Year (CY) 2015 End-Stage Renal Disease (ESRD) 
Prospective Payment System (PPS)
    A. Background on the End-Stage Renal Disease (ESRD) Prospective 
Payment System (PPS)
    B. Routine Updates and Proposed Policy Changes to the CY 2015 
ESRD PPS
    1. ESRD PPS Base Rate
    a. Changes to the Drug Utilization Adjustment
    i. The Drug Utilization Adjustment Finalized in CY 2014 ESRD PPS 
Final Rule
    ii. PAMA Changes to the Drug Utilization Adjustment
    b. Payment Rate Update for CY 2015
    c. CY 2015 ESRD PPS Wage Index Budget Neutrality Adjustment
    d. Labor-Related Share
    2. ESRD Bundled Market Basket and Labor-Related Share
    a. Background
    b. Rebasing and Revision the ESRD Bundled Market Basket
    i. Cost Category Weights
    ii. Proposed Price Proxies for the CY 2012 ESRDB Market Basket
    iii. Proposed Market Basket Estimate for the CY 2015 ESRDB PPS 
Update
    c. Proposed Productivity Adjustment
    d. Calculation of the Proposed ESRDB Market Basket Update, 
Adjusted for Multifactor Productivity for CY 2015
    e. Labor-Related Share
    3. The Proposed CY 2015 ESRD PPS Wage Indices
    a. Background
    b. Proposed Implementation of New Labor Market Delineations
    c. Transition Period
    4. Proposed Revisions to the Outlier Policy
    a. Proposed Changes to the Outlier Services MAP Amounts and 
Fixed Dollar Loss Amounts
    b. Outlier Policy Percentage
    C. Restatement of Policy Regarding Reporting and Payment for 
More than Three Dialysis Treatments per Week -
    1. Reporting More than Three Dialysis Treatments per Week on 
Claims
    2. Medical Necessity for More Than Three Treatments per Week
    D. Delay of Payment for Oral-Only Drugs under the ESRD PPS
    E. ESRD Drug Categories Included in the ESRD PPS Base Rate
    F. Low-Volume Payment Adjustment (LVPA)
    1 . Background
    2. The United States Government Accountability Office Study on 
the LVPA
    a. The GAO's Main Findings
    b. The GAO's Recommendations
    3. Clarification of the LVPA Policy
    a. Hospital-Based ESRD Facilities
    b. Cost Reporting Periods Used for Eligibility
    G. Continued Use of ICD-9-CM Codes and Corrections to the ICD-
10-CM Codes Eligible for the Comorbidity Payment Adjustment
III. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    A. Background
    B. Considerations in Updating and Expanding Quality Measures 
under the ESRD QIP
    C. Web sites for Measure Specifications
    D. Updating the NHSN Bloodstream Infection in Hemodialysis 
Outpatients Clinical Measure for the PY 2016 ESRD QIP and Future 
Payment Years
    E. Oral-Only Drugs Measures in the ESRD QIP
    F. Proposed Requirements for the PY 2017 ESRD QIP
    1. Proposed Revision to the Expanded ICH CAHPS Reporting Measure
    2. Proposed Measures for the PY 2017 ESRD QIP
    a. PY 2016 Measures Continuing in PY 2017 and Future Payment 
Years
    b. Proposal to Determine when a Measure is ``Topped-Out'' in the 
ESRD QIP, and Proposal to Remove a Topped-Out Measure from the ESRD 
QIP, Beginning with PY 2017
    c. New Measures Proposed for PY 2017 and Future Payment Years
    i. Proposed Standardized Readmission Ratio (SRR) Clinical 
Measure
    3. Proposed Performance Period for the PY 2017 ESRD QIP
    4. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2017 ESRD QIP
    a. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2017 ESRD QIP
    b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2017 ESRD 
QIP
    c. Proposed Performance Standards for the PY 2017 Reporting 
Measures
    5. Proposal for Scoring the PY 2017 ESRD QIP Measures
    a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    6. Weighting the Total Performance Score
    7. Proposed Minimum Data for Scoring Measures for the PY 2017 
ESRD QIP and Proposal for Changing Attestation Process for Patient 
Minimums
    8. Proposed Payment Reductions for the PY 2017 ESRD QIP
    9. Proposal for Data Validation
    10. Proposal to Monitor Access to Dialysis Facilities
    11. Proposed Extraordinary Circumstances Exception
    G. Proposed Requirements for the PY 2018 ESRD QIP Beginning in 
PY 2018
    1. Proposal to Modify the Mineral Metabolism Reporting Measure
    2. Proposed New Measures for the PY 2018 ESRD QIP and Future 
Payment Years
    a. Proposed Standardized Transfusion Ratio (STrR) Clinical 
Measure
    b. Proposal to Adopt the Pediatric Peritoneal Dialysis Adequacy 
Clinical Measure and Add the Proposed Measure to the Dialysis 
Adequacy Measure Topic
    c. Proposed ICH CAHPS Clinical Measure
    d. Proposed Screening for Clinical Depression and Follow-Up 
Reporting Measure
    e. Proposed Pain Assessment and Follow-Up Reporting Measure
    f. Proposed NHSN Healthcare Personnel Influenza Vaccination 
Reporting Measure
    2. Proposed Performance Period for the PY 2018 ESRD QIP
    3. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2018 ESRD QIP
    a. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2018 ESRD QIP
    b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2018 ESRD 
QIP
    c. Proposed Performance Standards for the PY 2018 Reporting 
Measures

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    4. Proposal for Scoring the PY 2018 ESRD QIP Measures
    a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    c. Proposal for Scoring the ICH CAHPS Clinical Measure
    d. Proposals for Calculating Facility Performance on Reporting 
Measures
    5. Proposed Minimum Data for Scoring Measures for the PY 2018 
ESRD QIP
    6. Proposal for Calculating the Clinical Measure Domain Score
    7. Proposal for Calculating the Reporting Measure Domain Score, 
the Reporting Measure Adjuster, and the TPS for the PY 2018 ESRD QIP
    8. Example of the Proposed PY 2018 ESRD QIP Scoring Methodology
    H. Future Considerations for Stratifying ESRD QIP Measures for 
Dual-Eligible Beneficiaries
IV. Technical Corrections for 42 Part 405
V. Methodology for Adjusting DMEPOS Payment Amounts using 
Information from Competitive Bidding Programs
    A. Background
    1. Payment Basis for Certain DMEPOS
    2. Fee Schedule Payment Methodologies
    3. Regional Fee Schedule Payment Methodology for P&O
    4. DMEPOS Competitive Bidding Programs Payment Rules
    5. Adjusting Payment Amounts using Information from the DMEPOS 
Competitive Bidding Program
    6. Diversity of Costs
    7. Advanced Notice of Proposed Rulemaking
    B. Proposed Provisions
    1. Proposed Regional Adjustments Limited by National Parameters
    a. Regional Payment Adjustments
    1. P&O Regional Fee Weights--CMS Region 1 (Boston) (Weighted by 
Total Paid Claims for Dates of Service from July 1, 1991, thru June 
30, 1992)
    b. National Parameters
    c. Rural and Frontier State Adjustments
    d. Areas Outside the Contiguous United States
    2. Methodology for Items and Services Included in Limited Number 
of Competitive Bidding Programs
    3. Adjusted Payment Amounts for Accessories used with Different 
Types of Base Equipment
    4. Adjustments to Single Payment Amounts that Result from 
Unbalanced Bidding
    5. National Mail Order Program--Northern Mariana Islands
    6. Updating Adjusted Payment Amounts
    7. Summary of Proposed Methodologies
VI. Proposed Payment Methodologies and Payment Rules for Durable 
Medical
    Equipment and Enteral Nutrition Furnished under the Competitive 
Bidding Program
    A. Background
    B. Proposed Provisions
    1. Payment on a continuous rental basis for select items
    a. Enteral nutrition
    b. Oxygen and oxygen equipment
    c. Standard manual wheelchairs
    d. Standard power wheelchairs
    e. CPAP and respiratory assist devices
    f. Hospital beds
    g. Transition rules
    h. Beneficiary-owned equipment
    2. Responsibility for repair of beneficiary-owned power 
wheelchairs furnished under CBPs
    3. Phasing in the proposed payment rules in CBAs
    4. Submitting bids for items paid on a continuous rental basis
VII. Scope of Hearing Aid Coverage Exclusion
    A. Background
    B. Current Issues
    C. Proposed Provisions
VIII. Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding
    A. Background
    B. Current Issues
    C. Proposed Provisions
IX. Revision to Change of Ownership Rules to Allow Contract 
Suppliers to Sell Specific Lines of Business
    A. Background
    B. Proposed Provisions
X. Proposed Changes to the Appeals Process for Termination of 
Competitive Bidding Contract
XI. Technical Change Related to Submitting Bids for Infusion Drugs 
under the DMEPOS Competitive Bidding Program
XII. Accelerating Health Information Exchange
XIII. Collection of Information Requirements
XIV. Response to Comments
XV. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impact
    B. Detailed Economic Analysis
    1. CY 2015 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
    3. DMEPOS Provisions
    C. Accounting Statement
XVI. Regulatory Flexibility Act Analysis
XVII. Unfunded Mandates Reform Act Analysis
XVIII. Federalism Analysis
XIX. Congressional Review Act
XX. 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
ANOVA--Analysis of Variance
ANPRM--Advanced Notice of Proposed Rulemaking
ARM--Adjusted Ranking Metric
ASP--Average Sales Price
ATRA--The American Taxpayer Relief Act of 2012
BEA--Bureau of Economic Analysis
BLS--Bureau of Labor Statistics
BMI--Body Mass Index
CBA--Competitive Bidding Area
CBP--Competitive Bidding Program
CBSA--Core based statistical area
CCN--CMS Certification Number
CDC--Centers for Disease Control and Prevention
CfC--Conditions for Coverage
CHOW--Change of Ownership
CKD--Chronic Kidney Disease
CPAP--Continuous positive airway pressure
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
HCP--Healthcare Personnel
HD--Hemodialysis
HAIs--Healthcare-Acquired Infections
HCPCS--Healthcare Common Procedure Coding System
HCFA--Health Care Financing Administration
HLM--Hierarchical Logistic Modeling
HHS--Department of Health and Human Services
ICD--International Classification of Diseases
ICD-9-CM--International Classification of Disease, 9th Revision, 
Clinical Modification
ICD-10-CM--International Classification of Disease, 10th Revision, 
Clinical Modification
ICH CAHPS--In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Systems
IGI--IHS Global Insight
IIC--Inflation-indexed charge
IOLs--Intraocular Lenses
IPPS--Inpatient Prospective Payment System
ICH CAHPS--In-Center Hemodialysis Consumer Assessment of Healthcare 
Providers and Services
IUR--Inter-unit reliability
MAC--Medicare Administrative Contractor
MAP--Medicare Allowable Payment
MFP--Multifactor Productivity
MIPPA--Medicare Improvements for Patients and Providers Act of 2008
MLR--Minimum Lifetime Requirement
MSA--Metropolitan statistical areas
NAMES--National Association of Medical Equipment Suppliers
NHSN--National Health Safety Network
NQF--National Quality Forum
NQS--National Quality Strategy
OBRA--Omnibus Budget Reconciliation Act
OMB--Office of Management and Budget
P&O--Prosthetics and orthotics
PAMA--Protecting Access to Medicare Act of 2014
PC--Product category
PD--Peritoneal Dialysis

[[Page 40211]]

PEN--Parenteral and enteral nutrition
PFS--Physician Fee Schedule
QIP--Quality Incentive Program
RMA--Reporting Measure Adjuster
RSPA--Regional single payment amounts
RUL--Reasonable useful lifetime
SAF--Standard Analysis File
SHR--Standardized Hospitalization Ratio Admissions
SMR--Standardized Mortality Ratio
SPA--Single payment amount
STrR--Standardized Transfusion Ratio
TENS--Transcutaneous electrical nerve stimulation
TEP--Technical Expert Panel
TPS--Total Performance Score
VBP--Value Based Purchasing

I. Executive Summary

A. Purpose

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
    On January 1, 2011, we implemented the ESRD PPS, a case-mix 
adjusted bundled prospective payment system for renal dialysis services 
furnished by ESRD facilities. This rule proposes to update and make 
revisions to the End-Stage Renal Disease (ESRD) prospective payment 
system (PPS) for calendar year (CY) 2015. Section 1881(b)(14) of the 
Social Security Act (the Act), as added by section 153(b) of the 
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 
(Pub. L. 110-275), 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 (Pub. L. 111-148), established that beginning CY 
2012, and each subsequent year, the Secretary shall annually increase 
payment amounts by an ESRD market basket increase factor, reduced by 
the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
of the Act.
    Section 632 of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) included several provisions that apply to the ESRD 
PPS. Section 632(a) of ATRA added section 1881(b)(14)(I) to the Act, 
which required the Secretary, by comparing per patient utilization data 
from 2007 with such data from 2011, to reduce the single payment amount 
to reflect the Secretary's utilization of ESRD-related drugs and 
biologicals. We finalized the amount of the drug utilization adjustment 
pursuant to this section in the CY 2014 ESRD PPS final rule with a 3- 
to 4-year transition (78 FR 72161 through 72170). Section 632(b) of 
ATRA prohibited the Secretary from paying for oral-only ESRD-related 
drugs and biologicals under the ESRD PPS before January 1, 2016. And 
finally, section 632(c) of ATRA requires the Secretary, by no later 
than January 1, 2016, to analyze the case mix payment adjustments under 
section 1881(b)(14)(D)(i) of the Act and make appropriate revisions to 
those adjustments.
    On April 1, 2014, the Congress enacted the Protecting Access to 
Medicare Act of 2014 (PAMA) (Pub. L. 113-93). PAMA section 217 includes 
several provisions that apply to the ESRD PPS. Specifically, sections 
217(b)(1) and (2) of PAMA amend sections 1881(b)(14)(F) and (I) of the 
Act. We interpret the amendments to sections 1881(b)(14)(F) and (I) as 
replacing the drug utilization adjustment that was finalized in the CY 
2014 ESRD PPS final rule with specific provisions that dictate what the 
market basket update will be for CY 2015 (0.0 percent) and how it will 
be reduced in CYs 2016 through 2018. Section 217(a)(1) of PAMA amends 
section 632(b)(1) of ATRA, which now provides that the Secretary may 
not pay for oral-only drugs and biologicals used for the treatment of 
ESRD under the ESRD PPS prior to January 1, 2024. Section 217(a)(2) 
further amends section 632(b)(1) of ATRA by adding a sentence that 
provides: ``Notwithstanding section 1881(b)(14)(A)(ii) of the Social 
Security Act (42 U.S.C. 1395rr(b)(14)(A)(ii)), implementation of the 
policy described in the previous sentence shall be based on data from 
the most recent year available.'' Finally, PAMA section 217(c) provides 
that, as part of the CY 2016 ESRD PPS rulemaking, the Sectary shall 
establish a process for (1) determining when a product is no longer an 
oral-only drug; and (2) including new injectable and intravenous 
products into the ESRD PPS bundled payment.
    As discussed further below, section 212 of PAMA provides that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. HHS has 
announced that it intends to issue an interim final rule that will 
require use of ICD-10 beginning October 1, 2015 and will require the 
continued use of ICD-9-CM through September 30, 2015. Therefore, the 
ESRD PPS will continue to use ICD-9 through September 30, 2015 and will 
require use of ICD-10 beginning October 1, 2015 for purposes of the 
comorbidity payment adjustment.
2. End-Stage Renal Disease (ESRD) Quality Incentive Program (QIP)
    This rule also proposes to set forth requirements for the ESRD 
Quality Incentive Program (QIP), including for payment years (PYs) 2017 
and 2018. The program is authorized under section 1881(h) of 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 or exceed performance standards established 
by CMS.
3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS)
    This proposed rule proposes a methodology for making national price 
adjustments to payments for Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) paid under fee schedules based upon 
information gathered from the DMEPOS competitive bidding programs 
(CBPs) and proposes to phase in special payment rules in a limited 
number of competitive bidding areas (CBAs) under the CBP for certain, 
specified DME and enteral nutrition. This rule proposes to clarify the 
statutory Medicare hearing aid coverage exclusion under section 
1862(a)(7) of the Act and the regulation at 42 CFR 411.15(d) to further 
specify the scope of this exclusion and to note certain devices 
excepted from the hearing aid exclusion. In addition, this rule 
proposes to update the definition of minimal self-adjustment at Sec.  
414.402 to note the specialized training that is needed by suppliers to 
provide custom fitting services if they are not certified orthotists. 
Finally, this rule proposes a revision to the Change of Ownership 
(CHOW) policy in the current regulations to allow a product category to 
be severed from a competitive bidding contract and transferred to a new 
contract when a contract supplier sells a distinct line of business to 
a qualified successor entity.

B. Summary of the Major Provisions

1. ESRD PPS
     Update to the ESRD PPS base rate for CY 2015: For CY 2015, 
we are proposing an ESRD PPS base rate of $239.33. This amount reflects 
a 0.0 percent update to the payment rate as required by section 
1881(b)(14)(F)(i) of the Act, as amended by section 217(b)(2) of PAMA, 
and the application of the proposed wage index budget-neutrality 
adjustment factor of 1.001306 to the CY 2014 ESRD PPS base rate of 
$239.02.
     Rebasing and revision of the ESRD bundled (ESRDB) market 
basket: For CY 2015, we are proposing to rebase and revise the ESRDB 
market basket so the cost weights and price proxies would reflect the 
mix of goods and services that underlie ESRD bundled operating and 
capital costs for CY 2012. We note that if PAMA had not been enacted 
the proposed 2012-based ESRDB market basket update less productivity 
for CY

[[Page 40212]]

2015 would have been 1.6 percent, or (2.0 percent less 0.4 percentage 
point).
     Update to the labor-related share: Because the cost 
distributions would change significantly as a result of the proposed 
ESRDB market basket revision, the proposed labor-related share would be 
50.673 percent compared to the current labor-related share of 41.737 
percent. The change to the labor-related share would have a significant 
impact on payments for certain ESRD facilities, specifically those ESRD 
facilities that have low wage index values. Therefore, for CY 2015 we 
are proposing a 2-year transition, in which the CY 2015 payment would 
be based on a 50/50 blended labor-related share that would apply to all 
ESRD facilities. ESRD facilities would receive 50 percent of their 
current labor-related share and 50 percent of their revised labor-
related share. Specifically, we would apply a labor-related share of 
46.205 ((41.737+50.673)/2 = 46.205). For CY 2016, the labor-related 
share would be based on 100 percent of the revised labor-related share.
     Update to the wage index and wage index floor: We adjust 
wage indices on an annual basis using the most current hospital wage 
data to account for differing wage levels in areas in which ESRD 
facilities are located. In CY 2015, we are not proposing any changes to 
the application of the wage index budget-neutrality adjustment factor 
and will continue to apply the budget-neutrality adjustment to the base 
rate for the ESRD PPS. We will continue our policy for the gradual 
phase-out of the wage index floor and reduce the wage index floor 
values to 0.40, as finalized in the CY 2014 ESRD PPS final rule (78 FR 
72173-72174).
     Update to the Core-Based Statistical Areas (CBSA): For CY 
2015, we are proposing to implement the new CBSA delineations as 
described in the February 28, 2013 OMB Bulletin No. 13-01, beginning 
with the CY 2015 ESRD PPS wage index. In addition, we are proposing to 
implement a 2-year transition, under which a 50/50 blended wage index 
would apply to all ESRD facilities for CY 2015. Specifically, 
facilities would receive 50 percent of their CY 2015 wage index based 
on the CBSA delineations for CY 2014 and 50 percent of their CY 2015 
wage index based on the proposed new CBSA delineations. In CY 2016, 
facilities' wage index values would be based 100 percent on the new 
CBSA delineations.
     Update to the outlier policy: We are updating the outlier 
services fixed dollar loss amounts for adult and pediatric patients and 
Medicare Allowable Payments (MAPs) for adult patients for CY 2015 using 
2013 claims data. Based on the use of more current data, the fixed-
dollar loss amount for pediatric beneficiaries would increase from 
$54.01 to $56.30 and the MAP amount would increase from $37.29 to 
$40.05, as compared to CY 2014 values. For adult beneficiaries, the 
fixed-dollar loss amount would decrease from $98.67 to $85.24 and the 
MAP amount would increase from $51.97 to $52.61. The 1 percent target 
for outlier payments was not achieved in CY 2013. We believe using CY 
2013 claims data to update the outlier MAP and fixed dollar loss 
amounts for CY 2015 will increase payments for ESRD beneficiaries 
requiring higher resource utilization in accordance with a 1 percent 
outlier percentage.
     Clarification for the low-volume payment adjustment 
(LVPA): We are clarifying two policies regarding MAC verification and 
proposing conforming changes to the LVPA regulation. The first 
clarification explains that MACs can consider supporting data from 
hospital-based ESRD facilities to verify the facility's total treatment 
count. The second clarification explains that MACs can add or prorate 
treatment counts from non-standard cost reporting periods (those that 
are not 12-month periods) where there is a change in ownership that 
does not result in a new Provider Transaction Access Number.
     Continued use of ICD-9-CM codes and corrections to the 
ICD-10-CM codes eligible for the comorbidity payment adjustment: 
Section 212 of PAMA provides that the Secretary may not adopt ICD-10 
prior to October 1, 2015. HHS has announced that it intends to issue an 
interim final rule that will require use of ICD-10 beginning October 1, 
2015 and will require the continued use of ICD-9-CM through September 
30, 2015. Therefore, the ESRD PPS will continue to use ICD-9 through 
September 30, 2015 and will require use of ICD-10 beginning October 1, 
2015 for purposes of the comorbidity payment adjustment. For CY 2015, 
we are correcting several typographical errors and omissions in the 
Tables that appeared in the CY 2014 ESRD PPS final rule.
2. ESRD QIP
    This rule proposes to implement requirements for the ESRD QIP, 
including measure sets for PYs 2017 and 2018.
     PY 2017 Measure Set: For PY 2017, we are proposing to 
remove one measure from the ESRD QIP, the Hemoglobin Greater than 12 g/
dL clinical measure, on the grounds that it is ``topped out''. We are 
also proposing to adopt the Standardized Readmission Ratio (SRR) 
clinical measure, which evaluates care coordination.
     PY 2018 Measure Set: For PY 2018, we are proposing to 
adopt two new clinical measures--the Standardized Transfusion Ratio 
(STrR) and Pediatric Peritoneal Dialysis Adequacy--and three new 
reporting measures: (1) Pain Assessment and Follow-Up; (2) Clinical 
Depression Screening and Follow-Up; and (3) National Healthcare Safety 
Network (NHSN) Healthcare Personnel Influenza Vaccination. We are also 
proposing to transition the In-Center Hemodialysis Consumer Assessment 
of Healthcare Providers and Systems (ICH CAHPS) survey reporting 
measure to a clinical measure.
     Revision to the ICH CAHPS Reporting Measure: Beginning 
with the PY 2017 program year, we are proposing to revise the ICH CAHPS 
reporting measure to determine facility eligibility for the measure 
based on the number of survey-eligible patients treated during the 
``eligibility period'', which we propose to define as the Calendar Year 
(CY) that immediately precedes the performance period. Survey-eligible 
patients are defined in the ICH CAHPS measure specifications available 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html and https://ichcahps.org.
     Revision to the NHSN Bloodstream Infection in Hemodialysis 
Outpatients Clinical Measure: Beginning with the PY 2016 program year, 
we are proposing to revise the NHSN Bloodstream Infection in 
Hemodialysis Outpatients clinical measure to calculate facility 
performance using the Adjusted Ranking Metric (ARM).
     Revision to the Mineral Metabolism Reporting Measure: 
Beginning with the PY 2018 program year, we are proposing to revise the 
Mineral Metabolism reporting measure to allow facilities to submit both 
serum phosphorus and plasma phosphorus measurements.
     Extraordinary Circumstances Exemption: Beginning with the 
PY 2017 ESRD QIP, we are proposing to exempt dialysis facilities from 
all requirements of the ESRD QIP clinical and reporting measures during 
the months in which they are forced to close due to a natural disaster 
or other extraordinary circumstances.
     New Scoring Methodology for PY 2018: For PY 2018, we are 
proposing to use a new scoring methodology for the ESRD QIP. This 
proposed scoring methodology would assign facility Total Performance 
Scores (TPS) on the basis of two domains, the Clinical Measure

[[Page 40213]]

Domain and the Reporting Measure Domain. Facility scores on clinical 
measures in the Clinical Measure Domain would be divided into 
subdomains that align with National Quality Strategy (NQS) domains and 
weighted according to the number of measures in a subdomain, facility 
experience with the measure, and the measure's alignment with CMS 
priorities for quality improvement. These weighted scores would be 
summed to produce a facility's Clinical Measure Domain score. Facility 
scores on reporting measures in the Reporting Measure Domain would be 
summed and calculated to produce a facility's Reporting Measure 
Adjuster, which would be subtracted from the facility's Clinical 
Measure Domain score to produce a facility's TPS.
3. DMEPOS
     The methodology for making national price adjustments 
based upon information gathered from the DMEPOS CBPs: As required by 
the MIPPA, this rule proposes methodologies for using information from 
the DMEPOS CBP to adjust the fee schedule amounts for DME in areas 
where CBPs are not implemented. The rule proposes to use the same 
methodologies to adjust the fee schedule amounts for enteral nutrition 
and off-the shelf (OTS) orthotics in areas where CBPs are not 
implemented.
     Phase in of special payment rules in a limited number of 
CBAs under the CBP for certain, specified DME and enteral nutrition. 
This rule proposes to phase-in special payment rules for certain DME 
and enteral nutrition under the DMEPOS CBP in a limited number of CBAs.
     Medicare hearing aid coverage exclusion under section 
1862(a)(7) of the Act: This rule proposes to modify the regulation at 
Sec.  411.15 to address the scope of the statutory hearing aid 
exclusion and note the types of devices that are not subject to the 
hearing aid exclusion.
     Definition of minimal self-adjustment at Sec.  414.402: 
This rule proposes to update the regulation to indicate what 
specialized training is needed to provide custom fitting services if 
suppliers are not certified orthotists.
     Change of Ownership Rules to Allow Contract Suppliers to 
Sell Specific Lines of Business: This proposed rule proposes to 
establish an exception under the CHOW rules to allow CMS to sever a 
product category from a contract, incorporate the product category into 
a new contract, and transfer the new contract to a qualified new owner 
under certain specific circumstances.
     Termination of a Competitive Bidding Contract: This rule 
proposes to clarify the effective date for terminations of competitive 
bidding contracts, which impacts the deadline for which contract 
suppliers must notify its beneficiaries of the termination.

C. Summary of Costs and Benefits

    In section XII.B of this proposed rule, we set forth a detailed 
analysis of the impacts that the proposed changes would have on 
affected entities and beneficiaries. The impacts include the following:
1. Impacts of the Proposed ESRD PPS
    The impact chart in section XII.B.1.a of this proposed rule 
displays the estimated change in payments to ESRD facilities in CY 2015 
compared to estimated payments in CY 2014. The overall impact of the CY 
2015 changes is projected to be a 0.3 percent increase in payments. 
Hospital-based ESRD facilities have an estimated 0.5 percent increase 
in payments compared with freestanding facilities with an estimated 0.3 
percent increase.
    We estimate that the aggregate ESRD PPS expenditures would increase 
by approximately $30 million from CY 2014 to CY 2015. This reflects a 
$0 million change from the payment rate update and a $30 million 
increase due to the updates to the outlier threshold amounts. As a 
result of the projected 0.3 percent overall payment increase, we 
estimate that there will be an increase in beneficiary co-insurance 
payments of 0.3 percent in CY 2015, which translates to approximately 
$10 million.
2. Impacts for ESRD QIP
    The overall economic impact of the ESRD QIP is an estimated $11.9 
million in PY 2017 and $7.2 million in PY 2018. In PY 2017, we expect 
the total payment reductions to be approximately $11.9 million, and the 
costs associated with the collection of information requirements for 
the validation of NHSN data feasibility study to be approximately $27 
thousand for all ESRD facilities. In PY 2018, we expect the total 
payment reductions to be approximately $7 million, and the costs 
associated with the collection of information requirements for the NHSN 
Healthcare Personnel Influenza Vaccination reporting measure to be 
approximately $248 thousand for all ESRD facilities.
    The ESRD QIP will continue to incentivize facilities to provide 
high-quality care to beneficiaries.
3. Impacts for DMEPOS
a. Proposed methodology for making national price adjustments to DMEPOS 
fee schedule amounts based upon information gathered from the DMEPOS 
competitive bidding programs
    The proposed regulation proposes to adjust Medicare fee schedule 
amounts for items subject to DMEPOS CBPs beginning January 1, 2016, 
using information from the DMEPOS CBPs to be applied to items in non-
competitive bidding areas. It is estimated that these adjustments would 
save over $7 billion for the 5-year period beginning January 1, 2016, 
and ending December 30, 2020. The estimated savings are primarily 
derived from price reductions for items. It is expected that most of 
the economic impact would result from reduced payment amounts. The 
ability of suppliers to furnish items is not expected to be impacted.
b. Proposed phase in of special payment rules under the competitive 
bidding program for certain DME and enteral nutrition
    We believe that the proposed special payment rules for certain DME 
and enteral nutrition under the DMEPOS CBPs would not have a 
significant impact on beneficiaries and suppliers. Contract suppliers 
are responsible for furnishing items and services needed by the 
beneficiary, and the cost to suppliers for furnishing these items and 
services does not change based on whether or not the equipment and 
related items and services are paid for separately under a capped 
rental payment method. Because the supplier's bids would reflect the 
cost of furnishing items in accordance with the new payment rules, we 
expect the overall savings to generally be the same as they are under 
the current payment rules.
    Furthermore, the proposed special payment rules would be phased 
under a limited number of areas first to evaluate their impact on the 
program, beneficiaries, and suppliers, including costs, quality, and 
access. Expanded use of the special payment rules in other areas or for 
other items would be addressed in future rulemaking.
c. Proposed clarification of the statutory Medicare hearing aid 
coverage exclusion stipulated at section 1862(a)(7) of the Act
    This proposed rule proposes to clarify the scope of the Medicare 
coverage exclusion for hearing aids and withdraw coverage of bone 
anchored hearing aids. This proposal would not have a significant 
fiscal impact on the Medicare program, because the

[[Page 40214]]

Medicare program expenditures for bone anchored hearing aids during the 
period CY2005 through CY 2013 are less than $9,000,000. This proposed 
rule, if finalized, would provide further guidance about coverage of 
DME with regard to the statutory hearing aid exclusion. The proposed 
rule, if finalized, would leave unchanged coverage of cochlear implants 
and brain stem implants, which are not considered hearing aids.
d. Proposed update of the definition of minimal self-adjustment at 42 
CFR 414.402
    The proposed rule proposes to update the definition of minimal 
self-adjustment to make clear that minimal self-adjustment means an 
adjustment that the beneficiary, caretaker for the beneficiary, or 
supplier of the device can perform and does not require the services of 
a certified orthotist (that is, an individual certified by either the 
American Board for Certification in Orthotics and Prosthetics, Inc., or 
the Board for Orthotist/Prosthetist Certification) or a physician as 
defined in section 1861(r) of the Act, a treating practitioner means a 
physician assistant, nurse practitioner, or clinical nurse specialist 
as defined in section 1861(aa)(5) of the Act, an occupational therapist 
as defined in 42 CFR 484.4, or physical therapist as defined in 42 CFR 
484.4 in compliance with all applicable Federal and State licensure and 
regulatory requirements. If finalized, this revised definition would 
impact suppliers furnishing custom fitted orthotics that do not have 
this expertise. These suppliers would be required to hire an individual 
with expertise. For example, according to the Bureau of Labor 
Statistics Occupational Employment Statistics May 2013 the median pay 
for a certified orthotist is $30.27 an hour. The impact will vary 
according to the caseload of custom fitted orthotics provided by an 
individual supplier.
e. Change of Ownership Rules to Allow Contract Suppliers to Sell 
Specific Lines of Business
    This rule proposes to clarify the CHOW rules in order to limit 
disruption to the normal course of business for DME suppliers. This 
rule proposes to establish an exception under the current CHOW rules to 
allow CMS to sever a product category from a contract, incorporate the 
product category into a new contract, and transfer the new contract to 
a qualified new owner under certain specific circumstances. This 
proposed clarification would impact businesses in a positive way by 
allowing them to conduct everyday transactions with less disruption 
from our rules and regulations.

II. Calendar Year (CY) 2015 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) in which we implemented a case-mix 
adjusted bundled PPS for Medicare outpatient ESRD dialysis services 
beginning January 1, 2011, in accordance with section 1881(b)(14) of 
the Act, as added by section 153(b) of MIPPA. On November 10, 2011, we 
published in the Federal Register a final rule (76 FR 70228 through 
70316) in which 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) in which 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.
    On December 2, 2013, we published in the Federal Register a final 
rule (78 FR 72156 through 72253) titled, Medicare Program; End-Stage 
Renal Disease Prospective Payment System, Quality Incentive Program, 
and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies'' 
(hereinafter referred to as the CY 2014 ESRD PPS final rule). In that 
final rule, for the ESRD PPS, we made a number of routine updates for 
CY 2014, implemented the fourth and final year of the transition, 
implemented sections 632(a) and (b)(1) of ATRA, and made policy changes 
and clarifications. Specifically, in that rule, we finalized the 
following:
     Update to the ESRD PPS base rate for CY 2015. An ESRD PPS 
base rate of $239.02 per treatment for renal dialysis services. This 
amount reflected the CY 2014 ESRD bundled (ESRDB) market basket update 
of 3.2 percent minus a multifactor productivity adjustment of 0.4 
percent, that is, a 2.8 percent increase. This amount also reflected 
the application of the wage index budget-neutrality adjustment of 
1.000454, the home dialysis training add-on budget neutrality 
adjustment factor of 0.999912, and the portion of the drug utilization 
adjustment that was transitioned for CY 2014, or $8.16.
     Update to the wage index floor. A 0.05 reduction to the CY 
2014 and CY 2015 wage index floor values, which resulted in a wage 
index floor value of 0.45 for CY 2014 and a wage index floor value of 
0.40 for CY 2015 under the ESRD PPS.
     Update to the outlier policy. Using CY 2012 claims data to 
update the outlier Medicare Allowable Payments (MAPs) and fixed dollar 
loss amounts for CY 2014, which resulted in updated fixed dollar loss 
amounts for adult and pediatric patients and MAPs for adult patients. 
Specifically, for pediatric beneficiaries, we finalized a fixed-dollar 
loss amount of $54.01 and a MAP amount of $40.49. For adult 
beneficiaries, we finalized a fixed-dollar loss amount of $98.67 and a 
MAP amount of $50.25.
     The application of ICD-10-CM diagnosis codes to the 
comorbidity payment adjustment. We discussed and provided a crosswalk 
from ICD-9-CM to ICD-10-CM for codes that are subject to the 
comorbidity payment adjustment. We finalized a policy under which all 
ICD-10-CM codes to which ICD-9-CM codes that are eligible for the 
comorbidity payment adjustment crosswalk are eligible for the 
comorbidity payment adjustment beginning on October 1, 2014 with two 
exceptions. As discussed further below, however, section 212 of the 
Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) 
provides that the Secretary may not adopt ICD-10 prior to October 1, 
2015. HHS has announced that it intends to issue an interim final rule 
that will require use of ICD-10 beginning October 1, 2015 and will 
continue to require use of ICD-9-CM through September 30, 2015. 
Accordingly, we plan to continue to require facilities to utilize ICD-
9-CM codes to identify comorbidities eligible for the comorbidity 
payment adjustment through September 30, 2015, and then to use ICD-10-
CM codes beginning October 1, 2015.
     The self-dialysis and home dialysis training add-on 
adjustment. An increase to the self-dialysis and home dialysis training 
add-on adjustment from $33.44 to $50.16.
     The delay in payment for oral-only ESRD-related drugs and 
biologicals until January 1, 2016. We also delayed payment for oral-
only ESRD-related drugs under the ESRD PPS until January 1, 2016. As 
discussed further below, section 217(a)(1) of PAMA amended section 
632(b)(1) of ATRA to provide that the Secretary may not include oral-
only ESRD-related drugs for payment

[[Page 40215]]

under the ESRD PPS prior to January 1, 2024.

B. Routine Updates and Proposed Policy Changes to the CY 2015 ESRD PPS

1. 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 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.
a. Changes to the Drug Utilization Adjustment
i. The Drug Utilization Adjustment Finalized in the CY 2014 ESRD PPS 
Final Rule
    Section 1881(b)(14)(I) of the Act, as added by section 632(a) of 
the American Taxpayer Relief Act of 2012 (ATRA), required 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 required that in making 
the reductions, the Secretary take into account the most recently 
available data on Average Sales Prices (ASP) and changes in prices for 
drugs and biologicals reflected in the ESRD market basket percentage 
increase factor under section 1881(b)(14)(F). Consistent with these 
requirements, in CY 2014, we finalized a payment adjustment to the CY 
2014 ESRD PPS base rate that reflected the change in utilization of 
ESRD-related drugs and biologicals from CY 2007 to CY 2012.
    Specifically, we finalized the drug utilization adjustment amount 
of $29.93 per treatment, and finalized a policy to implement this 
amount over a 3- to 4-year transition period. For CYs 2014 and 2015, we 
stated that we would implement the transition by offsetting the payment 
update by a portion of the reduction amount necessary to create an 
overall impact of a zero percent for facilities from the previous 
year's payments. For example, in CY 2014 we finalized a per treatment 
drug utilization adjustment amount for the first transition year of 
$8.16 or 3.3 percent, which represented the CY 2014 ESRDB market basket 
update minus productivity and other impacts to create an overall impact 
of zero percent. For a complete discussion of the methodology for 
computing the drug adjustment please see the CY 2014 ESRD PPS final 
rule (78 FR 72161 through 72170).
ii. PAMA Changes to the Drug Utilization Adjustment
    On April 1, 2014, Congress enacted PAMA. Section 217(b), titled 
Mitigation of the Application of Adjustment to ESRD Bundled Payment 
Rate to Account for Changes in the Utilization of Certain Drugs and 
Biologicals, amends section 1881(b)(14)(I) of the Act by inserting 
``and before January 1, 2015'' after January 1, 2014. This amendment 
effectively eliminates the remaining years of the drug utilization 
adjustment transition. In its place, the PAMA amendments to section 
1881(b)(14)(F)(i) dictate what the market basket increase factor will 
be for 2015 and how it will be reduced in 2016 through 2018. In 
particular, PAMA section 217(b)(2)(C) amended section 1881(b)(14)(F)(i) 
by adding subclause (III), which provides that ``[n]otwithstanding 
subclauses (I) and (II), in order to accomplish the purposes of 
subparagraph (I) with respect to 2015, the increase factor described in 
subclause (I) for 2015 shall be 0.0 percent.'' We interpret subclause 
(III) to mean that the market basket increase factor less the 
productivity adjustment for 2015 is 0.0 percent. The PAMA amendments 
also provide for a payment reduction in lieu of the drug utilization 
adjustment in 2016 through 2018. In particular, PAMA section 
217(b)(2)(ii) further amends section 1881(b)(14)(i)(I) by adding at the 
end the following new sentence, `` In order to accomplish the purpose 
of subparagraph (I) with respect to 2016, 2017, and 2018, after 
determining the increase factor described in the preceding sentence for 
each of 2016, 2017, and 2018, the Secretary shall reduce such increase 
factor by 1.25 percentage points for each of 2016 and 2017 and by 1 
percentage point for 2018.'' We interpret this provision as requiring 
us to reduce the market basket increase factor for 2016 through 2018 by 
the percentages prescribed in the statute.
b. Payment Rate Update for CY 2015
    As discussed in section II.B.2 of this proposed 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) of the Act. If PAMA had not stipulated a 0.0 
percent payment update for CY 2015, we would have proposed a payment 
update of 1.6 percent, (a 2.0 percent ESRDB market basket update less a 
0.4 percent productivity adjustment). In accordance with section 
1881(b)(14)(F)(i)(III) of the Act, as added by PAMA section 
217(b)(2)(C), however, we propose a 0.0 percent update to the CY 2014 
ESRD PPS base rate of $239.02 for CY 2015.
c. CY 2015 ESRD PPS Wage Index Budget Neutrality Adjustment
    For CY 2015 we propose to apply the wage index budget-neutrality 
adjustment factor of 1.001306 to the unadjusted CY 2014 and CY 2015 
ESRD PPS base rate (that is, $239.02), yielding a proposed CY 2015 ESRD 
PPS wage-index budget-neutrality adjusted base rate of $239.33 ($239.02 
x 1.001306 = $239.33).
d. Labor-Related Share
    As discussed in section II.2.e, as part of the proposed ESRDB 
market basket rebasing and revision, we are proposing to update the 
labor-related share value from 41.737 percent to 50.673 percent. We 
note that some ESRD facilities are adversely affected by this proposal. 
For example, rural facilities and facilities located in CBSA areas with 
wage indexes below 1 will experience reduced payments due to an 
increase in the labor-related share, while other facilities located in 
CBSA area where wage indices are above 1 will experience increased 
payments. While we are proposing the new labor-related share under the 
ESRD PPS payment system computed at 50.673 percent, we propose to 
implement this value using a 2-year 50/50 blend transition.

[[Page 40216]]

Therefore, for CY 2015 we propose to apply 50 percent of the value of 
the current labor-related share under the ESRD PPS (41.737) and 50 
percent of the value of the new labor-related share, (50.673), add the 
values together and divide by two, for a CY 2015 labor-related value of 
46.205 ((41.737 + 50.673)/2 = 46.205). Beginning in CY 2016 we propose 
to apply 100 percent of the proposed labor-related share value of 
50.673 percent. We propose to continue to apply a labor-related share 
value of 50.673 percent until such time in the future the ESRDB market 
basket is again rebased in computing a wage index-adjusted base rate 
for ESRD facilities. We believe that this approach is similar to the 
50/50 blend transition proposed for the CY 2015 wage indexes and 
discussed in section II.3.c of this rule and that a 2- year transition 
is necessary to allow ESRD facilities time to adjust to the new labor 
related-share value.
    We note that we considered implementing the computed labor related 
share value of 50.673 for CY 2015, but that would have increased the CY 
2015 proposed wage index budget neutrality factor to 1.002081. This 
increase would have resulted in a decrease in CY 2015 Medicare payments 
to rural facilities of 1.3 percent, and an increase to urban facilities 
0.5 percent. When we apply the transition labor-related share value of 
46.205, the disparity in impacts for rural and urban facilities is 
reduced to less than 1.0 percent. Specifically, rural facilities would 
experience a decrease in payments of 0.5 percent and urban facilities 
would experience an increase in payments of 0.4 percent. (For more 
information of the CY 2015 Impact of Proposed Changes in Payments to 
ESRD Facilities for CY 2015 ESRD proposed rule, see section XV of this 
rule). Therefore, we believe a 2-year transition strikes an appropriate 
balance between ensuring that ESRD PPS payments are as accurate and 
stable as possible while giving facilities time to adjust to the new 
labor-related share factor.
    In summary, we propose a CY 2015 ESRD PPS base rate update of 
$239.33. This reflects a 0.0 percent payment update consistent with 
section 1881(b)(14)(F)(i)(III), as added by section 217(b)(2) of PAMA. 
This base rate reflects the CY 2015 proposed wage index budget 
neutrality factor of 1.001306, and a labor-related share value of 
46.205.
2. ESRD Bundled Market Basket and Labor-Related Share
a. Background
    In accordance with section 1881(b)(14)(F)(i) of the 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 in section 1886(b)(3)(B)(xi)(II) of the Act. 
The application of the productivity adjustment 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.
    In the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162), we 
established an ESRD Bundled market basket using CY 2008 as the base 
year. This market basket was used to annually update the ESRD base rate 
payments for CY 2012, CY 2013, and CY 2014. In this CY 2015 ESRD PPS 
proposed rule, we are proposing to revise and rebase the ESRDB market 
basket to a base year of CY 2012. We note that PAMA dictates a market 
basket update for CY 2015 of 0.0 percent and a reduction to the market 
basket updates in CYs 2016 through 2018 (by 1.25 percentage points for 
each of 2016 and 2017 and by 1 percentage point for 2018).
    The term ``market basket'' refers to the mix of goods and services 
needed to produce ESRD care, and is also commonly used to denote the 
input price index that includes both weights (mix of goods and 
services) and price factors. The term ``ESRDB market basket'' as used 
in this proposed rule refers to the ESRDB input price index.
    The proposed CY 2012-based ESRDB market basket represents the costs 
of operating and capital-related costs. The percentage change in the 
ESRDB market basket reflects the average change in the price of a fixed 
set of goods (both operating and capital) and services purchased by 
ESRD facilities in providing renal dialysis services. For further 
background information, see the CY 2011 final rule with comment period 
(75 FR 49151 through 49162).
    For purposes of the ESRDB PPS, the ESRDB market basket is a fixed-
weight (Laspeyres-type) price index. A Laspeyres-type index compares 
the cost of purchasing a specified mix of goods and services in a 
selected base period to the cost of purchasing that same group of goods 
and services at current prices. The effects on total expenditures 
resulting from changes in the quantity or mix of goods and services 
purchased subsequent or prior to the base period are, by design, not 
considered.
    We construct the market basket in three steps. The first step is to 
select a base period and estimate total base period expenditure shares 
for mutually exclusive and exhaustive spending categories. We use total 
costs for operating and capital expenses. These shares are called 
``cost'' or ``expenditure'' weights. The second step is to match each 
expenditure category to a price/wage variable, called a price proxy. We 
draw these price proxy variables from publicly available statistical 
series published on a consistent schedule, preferably at least 
quarterly. The final step involves multiplying the price series for 
each spending category by the cost weight for that category. The sum of 
these products (that is, weights multiplied by proxy index levels) for 
all cost categories yields the composite index level of the market 
basket for a given quarter or year. Repeating the third step for other 
quarters and years produces a time series of market basket index 
levels, from which we can calculate rates of growth.
    The market basket represents a fixed-weight index because it 
answers the question of how much more or less it would cost, at a later 
time, to purchase the same mix of goods and services that was purchased 
in the base period.
    We are proposing to use CY 2012 as the base year for the proposed 
rebased and revised ESRDB market basket cost weights. The cost weights 
for this proposed ESRDB market basket are based on the cost report data 
for independent ESRD facilities. We refer to the market basket as a CY 
market basket because the base period for all price proxies and weights 
are set to CY 2012 = 100. Source data included CY 2012 Medicare cost 
reports (Form CMS-265-11), supplemented with 2012 data from the U.S. 
Census Bureau's Services Annual Survey (SAS). Medicare cost reports 
from hospital-based ESRD providers were not used to construct the 
proposed ESRDB market basket because data from independent ESRD 
facilities tend to better reflect the actual cost structure faced by 
the ESRD facility itself, and are not influenced by the allocation of 
overhead over the entire institution, as can be the case with hospital-
based providers. This approach is consistent with our standard 
methodology used in the development of other market baskets.
    Consistent with our discussion in the CY 2011 final rule with 
comment period

[[Page 40217]]

(75 FR 49153), and as further discussed below, to implement section 
1881(b)(14)(F)(i) of the Act we propose to revise and rebase the market 
basket so the cost weights and price proxies reflect the mix of goods 
and services that underlie ESRD bundled operating and capital costs for 
CY 2012.
b. Rebasing and Revision of the ESRD Bundled Market Basket
    The terms ``rebasing'' and ``revising'', while often used 
interchangeably, actually denote different activities. Rebasing means 
shifting the base year for the structure of costs of the input price 
index (for example, for this proposed rule, we propose to shift the 
base year cost structure from CY 2008 to CY 2012). Revising means 
changing data sources, cost categories, price proxies, and/or 
methodology used in developing the input price index. We are proposing 
both to rebase and revise the ESRDB market basket to reflect CY 2012 
total cost data.
    We selected CY 2012 as the new base year because 2012 is the most 
recent year for which relatively complete Medicare cost report (MCR) 
data are available. In developing the proposed market basket, we 
reviewed ESRD expenditure data from ESRD MCRs (CMS Form 265-11) for CY 
2012 for each freestanding ESRD facility that reported expenses and 
payments. The CY 2012 cost reports are those with cost reporting 
periods beginning on or after January 1, 2012 and before December 31, 
2012. We propose to maintain our policy of using data from freestanding 
ESRD facilities because freestanding ESRD data reflect the actual cost 
structure faced by the ESRD facility itself. In contrast, expense data 
for a hospital-based ESRD reflect the allocation of overhead over the 
entire institution. Due to this method of allocation, the expenses of 
each hospital-based component may be skewed.
    We developed cost category weights for the proposed CY 2012-based 
ESRDB market basket in two stages. First, we derived base weights for 
nine major categories (Wages and Salaries, Employee Benefits, Medical 
Supplies, Lab Services, Housekeeping & Operations, Pharmaceuticals, 
Administrative and General, Capital-Related Building & Fixed Equipment, 
and Capital-Related Machinery) from the ESRD MCRs. Second, we are 
proposing to divide the Administrative & General cost category into 
further detail using 2012 U.S. Census Bureau Services Annual Survey 
(SAS) Data for the industry Kidney Dialysis Centers (NAICS 621492). We 
apply the 2012 distributions from the SAS data to the 2012 
``Administrative & General'' cost weight to yield the more detailed 
2012 cost weights. This is similar to the methodology we used to break 
the 2008-based Administrative & General Costs into more detail for the 
ESRDB market basket as detailed in the CY 2011 ESRD final rule (75 FR 
49154 through 49159). The main difference is that in the 2008-based 
market basket we relied on data from the U.S. Census Bureau Business 
Expenses Survey (BES). The BES data was the predecessor to the SAS. The 
Census Bureau SAS data are published annually, with the most recent 
data available being 2012. For more information on the SAS data, see 
http://www.census.gov/services/sas/about_the_surveys.html.
    We are proposing to include a total of 20 detailed cost categories 
for the proposed CY 2012-based ESRDB market basket, which is four more 
cost categories than the CY 2008-based ESRDB market basket. In 
addition, we are proposing to further decompose both the Wages and 
Salaries and Employee Benefits cost categories into four more detailed 
cost categories reflecting the occupational mix of full time 
equivalents (FTEs) at ESRD facilities. The four detailed occupational 
categories that will underlie both Wages and Salaries and Employee 
Benefits are: (1) Health-related workers; (2) Management workers; (3) 
Administrative workers; and (4) Service workers. Having more detailed 
cost categories for these compensation costs enables them to be proxied 
more precisely. We are also proposing to collapse the Professional Fees 
and All Other Services cost categories into single categories rather 
than splitting those categories into Labor-Related and Non-Labor-
Related Services. We will continue to assume that 87 percent of 
Professional Fees are labor-related costs and will be included in the 
proposed labor-related share. In addition, we are proposing to revise 
our labels for All Other Materials to Medical Materials and Supplies, 
Laboratories to Lab Services, and All Other Labor-Related/Non Labor-
Related to All Other Goods and Services. A more thorough discussion of 
our proposals is provided below.
i. Cost Category Weights
    Using Worksheets A and B from the CY 2012 Medicare cost reports, we 
first computed cost shares for nine major expenditure categories: Wages 
and Salaries, Employee Benefits, Pharmaceuticals, Supplies, Lab 
Services, Administrative and General (A&G), Housekeeping and 
Operations, Capital-Related Building & Equipment, and Capital-Related 
Machinery. Edits were applied to include only cost reports that had 
total costs greater than zero. In order to reduce potential distortions 
from outliers in the calculation of the cost weights for the major 
expenditure categories, cost values for each category less than the 5th 
percentile or greater than the 95th percentile were excluded from the 
computations. The resulting data set included information from 
approximately 4,700 independent ESRD facilities' cost reports from an 
available pool of 5,333 cost reports. Expenditures for the nine cost 
categories as a proportion of total expenditures are shown in Table 1.
    Table 1 presents the proposed CY 2012-based ESRDB and CY 2008-based 
ESRDB market basket major cost weights as derived directly from the MCR 
data. Following the table, we describe the sources of the major 
category weights and their subcategories in the proposed CY 2012-based 
ESRDB market basket.

                     Table 1--Proposed CY 2012-Based ESRDB Market Basket Major Cost Weights
----------------------------------------------------------------------------------------------------------------
                                                      Proposed CY 2012-based ESRDB   CY 2008-based ESRDB  market
                    Cost category                             market basket                    basket
----------------------------------------------------------------------------------------------------------------
Wages and Salaries..................................                       31.839%                       26.338%
Employee Benefits...................................                        6.570%                        5.163%
Pharmaceuticals.....................................                       16.510%                       26.358%
Supplies............................................                       10.097%                        9.726%
Lab Services........................................                        1.532%                        0.356%
Housekeeping & Operations...........................                        3.785%                        3.604%
Administrative & General (residual).................                       17.419%                       17.594%
Capital-related Building & Fixed Equipment..........                        8.378%                        7.910%

[[Page 40218]]

 
Capital-related Machinery...........................                        3.870%                        2.951%
----------------------------------------------------------------------------------------------------------------
Note: Totals may not sum to 100.000% due to rounding.

    Some costs are reported on the Medicare cost report but are not 
included in the ESRD bundled payment. For example, we removed the 
expenses related to vaccine costs from total expenditures since these 
are excluded from the ESRD bundled payment, but reported on the 
Medicare cost report.
    We are proposing to expand the expenditure categories developed 
from the Medicare cost reports to allow for more detailed expenditure 
decomposition. To expand these cost categories, SAS data were used 
because the Medicare cost reports do not collect detailed information 
on the items of interest. Those categories include: benefits for all 
employees, professional fees, telephone, utilities, and all other goods 
and services. We chose to separately break out these categories to more 
accurately reflect ESRD facility costs. We describe below how the 
initially computed categories and weights from the cost reports were 
modified to yield the final 2012 ESRDB market basket expenditure 
categories and weights presented in this proposed rule.
Wages and Salaries
    The weight for wages and salaries for direct patient care for 2012 
was initially derived from Worksheet B of the Medicare cost report. 
However, because the cost center for direct patient care salaries does 
not include all other wage and salary costs for non-health workers and 
physicians, it was necessary to derive a methodology to include all 
salaries, not just direct patient care salaries, in order to calculate 
the appropriate market basket cost weight. This was accomplished in the 
following steps.
    (1) From the trial balance of the cost report (Worksheet A), we 
computed the ratio of salaries to total costs in each of the following 
cost centers: housekeeping and operations, employee benefits for direct 
patient care, Administrative & General, Supplies, Laboratories, and 
Pharmaceuticals.
    (2) We then multiplied the ratios computed in step 1 by the total 
costs for each corresponding cost center from Worksheet B. This 
provided us with an estimate of salaries other than direct-patient care 
for each cost center.
    (3) The estimated salaries for each of the cost centers on 
Worksheet B estimated in step 2 were subsequently summed and added to 
the direct patient care salary figure (resulting in a new total 
salaries figure).
    (4) The estimated non-direct patient care salaries (see step 2) 
were then subtracted from their respective cost categories to avoid 
double-counting their values in the total costs.
    As a result of this process, we moved from an estimated Wages and 
Salaries cost weight of 23.242 percent (as estimated using only direct 
patient care salaries as a percent of total costs) to a weight of 
31.839 percent (capturing both direct patient care salaries and all 
other salary costs and, again, dividing that by total costs found on 
the Medicare cost report), as seen in Table 2.
    The final adjustment made to this category is to include contract 
labor costs. These costs appear on the Medicare cost report; however, 
they are embedded in the Administrative and General category and cannot 
be disentangled using the Medicare cost reports alone. To move the 
appropriate expenses from the A&G category to Wages and Salaries, we 
used data from the 2012 SAS, which reported 2.3 of total expenses were 
spent on contract labor costs. We allocated 80 percent of that figure 
to Wages and Salaries. At the same time, we subtracted that same amount 
from A&G, where the contract labor expenses would be reported on the 
cost report. The 80 percent figure that was used was determined by 
taking salaries as a percentage of total compensation (excluding 
contract labor) from the 2012 MCR data. The resulting cost weight for 
Wages and Salaries increases to 33.650 percent.

           Table 2--ESRD Wages & Salaries Share Determination
------------------------------------------------------------------------
                                                            Cost share
                       Components                               (%)
------------------------------------------------------------------------
08 MCR Salaries Direct Patient Care (DPC)...............          22.297
08 MCR Additional Salaries Weight (other than DPC)......           4.041
08 Wage & Salary Weight normalized after adding                   -1.373
 separately billable services into the bundle...........
08 Contract Labor (wages) (80% of BES CL share).........           1.790
08 Final Wage & Salary Weight...........................          26.755
12 MCR Salaries Direct Patient Care (DPC)...............          23.242
12 MCR Additional Salaries Weight (other than DPC)......           8.597
12 Contract Labor (80% of SAS CL share).................           1.811
12 Final Wage & Salary Weight...........................          33.650
------------------------------------------------------------------------

Benefits
    The Benefits weight was derived from the MCR data for employee 
benefits for direct patient care and supplemented with data from the 
2012 SAS to account for non-direct patient care benefits. The cost 
report only reflects health-related benefit costs associated with 
direct patient care; that is, it does not reflect retirement benefits. 
In order to include the benefits related to non-direct patient care, we 
estimated this marginal increase from the SAS Benefits weight. Unlike 
the MCR, data the SAS benefits share includes expenses related to the 
retirement and pension benefits. In order to be consistent with the 
cost report definitions we do not want to include the costs associated 
with retirement and pension benefits in the cost share weights. These 
costs are relatively small compared to the costs for the health related 
benefits, accounting for only 2.7 percent of the total benefits costs 
as reported on the SAS. Our method produced a Benefits

[[Page 40219]]

(both direct patient care and non-direct patient care) weight that was 
1.824 percentage points larger (8.394 vs. 6.570) than the Benefits 
weight for direct patient care calculated directly from the cost 
reports. To avoid double-counting and to ensure all of the market 
basket weights still totaled 100 percent, we removed this additional 
1.824 percentage point for Benefits from the residual category.
    The final adjustment made to this category is to include contract 
labor costs. Once again, these costs appear on the Medicare cost 
report; however, they are embedded in the Administrative and General 
category and cannot be disentangled using the Medicare cost report 
alone. We applied 20 percent of total contract labor costs, as 
estimated using the SAS, to the Benefits cost weight calculated from 
the cost reports. The resulting cost weight for Benefits increases to 
8.847 percent.
    The Table 3 compares the 2008-based Benefits cost share derivation 
as detailed in the CY 2011 ESRD final rule (75 FR 49155-49156) to the 
proposed 2012-based Benefits cost share derivation as explained above.

                Table 3--ESRD Benefit Share Determination
------------------------------------------------------------------------
                                                            Cost share
                       Components                            (percent)
------------------------------------------------------------------------
08 MCR Benefits.........................................           5.163
08 BES Additional Benefits Weight (Health only).........           1.143
08 Contract Labor (20% of BES benefits share)...........           0.448
08 Final Benefit Weight.................................           6.754
12 MCR Benefits.........................................           6.570
12 SAS Additional Benefits Weight (Health only).........           1.824
12 Contract Labor (20% of SAS benefits share)...........           0.453
12 Final Benefit Weight.................................           8.847
------------------------------------------------------------------------

Utilities
    We developed a weight for Utility expenses using the 2012 SAS data, 
as utilities are not separately identified on the Medicare cost report. 
The SAS data reports the percentage of expenses for `purchased fuels 
(except motor fuels)', `purchased electricity', and `water, sewer, 
refuse, and other utilities.' We applied these ratios to the 
administrative and general cost share (net of contract labor and 
additional benefits). The resulting Electricity, Fuel (Natural Gas), 
and Water and Sewerage weights in the proposed 2012 ESRDB market basket 
are 0.973, 0.101, and 0.765 percent, respectively; together these 
categories yield a combined Utilities cost weight of 1.838 percent.
Pharmaceuticals
    The proposed ESRDB market basket includes expenditures for all 
drugs, including formerly separately billable drugs and ESRD-related 
drugs that were covered under Medicare Part D before the ESRD PPS was 
implemented. We were able to calculate an expenditure weight for 
pharmaceuticals directly from the following cost centers on Worksheet 
B: columns 11 `Drugs Included in Composite Rate'; 12 `ESAs'; 13 `ESRD-
Related Drugs; and drug expenses reported on line 5 column 10, `Non-
ESRD related drugs.' The Non-ESRD related drugs would include drugs and 
biologicals, administered during dialysis for non-ESRD related 
conditions as well as oral-only drugs. Since these are costs to the 
facility for providing ESRD treatment to the patient we propose to 
include them in the drug cost share weight. Vaccine expenditures, which 
are mandated as separately reimbursable, were excluded when calculating 
this cost weight. Section 1842(o)(1)(A)(iv) of the Act requires that 
influenza, pneumococcal, and hepatitis B vaccines described in 
subparagraph (A) or (B) of section 1861(s)(10) of the Act be paid based 
on 95 percent of average wholesale price (AWP) of the drug. Since these 
drugs are excluded from other prospective payment systems, we exclude 
them from the proposed ESRDB market basket, as well.
    Finally, to avoid double-counting, the weight for the 
Pharmaceuticals category was reduced to exclude the estimated share of 
non-direct patient care salaries and benefits associated with the 
applicable drug cost centers referenced above. This resulted in a 
proposed ESRDB market basket weight for Pharmaceuticals of 16.510 
percent. ESA expenditures accounted for 12.383 percentage points of the 
Pharmaceuticals weight, and all other drugs accounted for the remaining 
4.127 percentage points (.438 percent for Drugs Included in Composite 
Rate, 3.534 percent for ESRD-Related Drugs, and 0.155 percent for Non-
ESRD related drugs).
    The 9-percentage point decrease in the pharmaceutical share between 
2008 and 2012 (25.052 percent to 16.510 percent) is due largely to the 
drop in drug utilization. The drug percentage of the base rate used in 
2011 was about 31 percent; however, the analysis conducted for the drug 
utilization adjustment showed that the drug portion of the base rate in 
2014 would have fallen to only be 22 percent of the base rate had it 
been fully implemented. The cost report data corroborate the drop in 
drug costs for facilities over the same time frame.
Supplies
    We calculated the weight for Supplies included in the bundled rate 
using the costs reported in the Supplies cost center (column 7 on 
Worksheet B) of the Medicare cost report. This total was divided by 
total expenses to derive a weight for the Supplies component in the 
ESRDB market basket. Finally, to avoid double-counting, the weight for 
the Supplies category was reduced to exclude the estimated share of 
non-direct patient care salaries and benefits associated with this cost 
center. The resulting proposed 2012-based ESRDB market basket weight 
for Supplies is 10.097 percent.
Lab Services
    We calculated the weight for Lab Services included in the bundled 
rate using the costs reported in the Laboratory cost center (column 8 
on Worksheet B) of the Medicare cost report. This total was divided by 
total expenses to derive a weight for the Lab component in the ESRDB 
market basket. Finally, to avoid double-counting, the weight for the 
Lab services category was reduced to exclude the estimated share of 
non-direct patient care salaries and benefits associated with this cost 
center. The resulting proposed 2012-based ESRDB market basket weight 
for Lab Services is 1.532 percent.
    The cost weight for lab services is substantially lower than the 
2008 ESRDB market basket lab weight of 5.497 percent. This is due to 
the change in the method used to determine lab costs. In 2008, we 
relied on MCR data for the cost share weight; however, the majority of 
lab services were performed by labs outside of the dialysis facility 
and those costs were not reported on the MCR. Therefore, in the 2008 
ESRDB market basket we inflated the expenses reported for labs in ESRD 
facilities to reflect the use from other provider types. This 
adjustment factor was estimated based on the lab payment to dialysis 
facilities relative to the lab fee payment to other providers. For the 
rebased ESRDB market basket, the 2012 cost report data represents the 
expenses under the bundled payment system, and all of the expenses 
related to lab fees (whether in house or contracted through an outside 
lab) are reported in the MCR data.
Housekeeping & Operations
    We calculated the weight for Housekeeping and Operations included 
in the bundled rate using the costs reported on worksheet A, column 8,

[[Page 40220]]

lines 3 & 4 of the Medicare Cost Report. This total was divided by 
total expenses to derive a weight for the Housekeeping and Operations 
component in the ESRDB market basket. Finally, to avoid double-
counting, the weight for the Housekeeping & Operations category was 
reduced to exclude the estimated share of non-direct patient care 
salaries and benefits associated with this cost center. The resulting 
proposed 2012-based ESRDB market basket weight for Housekeeping and 
Operations is 3.785 percent.
Administrative and General (A&G)
    We computed the proportion of total A&G expenditures using the A&G 
cost center data from Worksheet B (column 9) of the Medicare cost 
reports. As described above, we exclude contract labor from this cost 
category and apportion these costs to the salary and benefits cost 
weights. Similar to other expenditure category adjustments, we then 
reduced the computed weight to exclude salaries and benefits associated 
with the A&G cost center and the additional benefits for non-direct 
patient care. The resulting A&G cost weight is 13.331 percent. This A&G 
cost weight is then fully apportioned to derive detailed cost weights 
for Utilities, Telephone, Professional Fees, and All Other Goods and 
Services.
Professional Fees
    A separate weight for Professional Fees was developed using the 
2012 SAS data. Professional fees include fees associated with the 
following: purchased professional & technical services (such as 
accounting, bookkeeping, legal, management, consulting, and other 
professional services fees) and purchased advertising & promotional 
services. To estimate professional fees, we first calculated the ratio 
of SAS professional fees to SAS expenses that match the A&G expenses 
from the cost reports. We then applied this ratio to the A&G total cost 
weight to estimate the proportion of ESRD facility professional fees. 
The resulting weight for the proposed 2012-based ESRDB market basket is 
0.617 percent. An estimated 87 percent of the expenses are considered 
labor-related and subsequently included in the proposed labor-related 
share, which is described in more detail below.
Telephone
    Because telephone service expenses are not separately identified on 
the Medicare cost report, we developed a Telephone Services weight 
using the 2012 SAS expenses. We estimated a ratio of telephone services 
expenses to total administrative and general expenses from SAS. We 
applied this ratio to the total A&G cost weight from the cost reports 
to estimate the proportion of ESRD facility telephone expenses. The 
resulting proposed 2012-based ESRDB market basket cost weight for 
Telephone Services is 0.468 percent.
All Other Goods and Services
    A separate weight for All Other Goods and Services was developed 
using the 2012 SAS data. All other Goods and Services include expenses 
for purchased software, professional liability insurance, data 
processing and other purchased computer services, and all other 
operating expenses not otherwise captured. We estimated a ratio of All 
Other Goods and Services expenses to Total Administrative and General 
expenses from SAS. We then applied this ratio to the total A&G cost 
weight from the cost reports to estimate the cost weight for ESRD 
facility All Other Goods and Services. The resulting proposed 2012-
based ESRDB market basket cost weight for All Other Goods and Services 
is 10.407 percent.
Capital
    We developed a market basket weight for the Capital category using 
data from Worksheet B of the Medicare cost reports. Capital-related 
costs include depreciation and lease expense for buildings, fixtures, 
movable equipment, property taxes, insurance, the costs of capital 
improvements, and maintenance expense for buildings, fixtures, and 
machinery. Because housekeeping as well as operation & maintenance 
costs are included in the Worksheet B cost center for Capital-Related 
costs (Worksheet B, column 2), we excluded the costs for these two 
categories and developed a separate expenditure category for 
housekeeping & operations, as detailed above. Similar to the 
methodology used for other market basket cost categories with a 
salaries component, we computed a share for non-direct patient care 
salaries and benefits associated with the Capital-related Machinery 
cost center. We used Worksheet B to develop two capital-related cost 
categories, one for Buildings and Equipment (based on worksheet B 
column 2 less housekeeping & operations), and one for Machinery (based 
on worksheet B column 4). We reasoned this delineation was particularly 
important given the critical role played by dialysis machines. 
Likewise, because price changes associated with Buildings and Equipment 
could move differently than those associated with Machinery, we felt 
that separate price proxies would be more appropriate. The resulting 
proposed 2012-based ESRDB market basket weights for Capital-related 
Buildings and Equipment and Capital-related Machinery are 8.378 and 
3.870 percent, respectively.
    Table 4 lists all of the cost categories and cost weights in the 
proposed CY 2012 ESRDB market basket compared to the cost categories 
and cost weights in the CY 2008 ESRDB market basket.

     Table 4--Comparison of the Proposed CY 2012-Based ESRDB Market Basket Cost Categories & Weights and the CY 2008-Based ESRDB Market Basket Cost
                                                                  Categories & Weights.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                2008 Cost     Proposed 2012
             2008 Cost category                  weight        cost weight                           Proposed 2012 cost category
                                                (percent)       (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total......................................         100.000         100.000  Total.
    Compensation...........................          33.509          42.497  Compensation.
        Wages and Salaries.................          26.755          33.650  Wages and Salaries.
        Employee Benefits..................           6.754           8.847  Employee Benefits.
    Utilities..............................           1.264           1.839  Utilities.
        Electricity........................           0.621           0.973  Electricity.
        Natural Gas........................           0.127           0.101  Natural Gas.
        Water and Sewerage.................           0.516           0.765  Water and Sewerage.
    All Other Materials....................          39.765          28.139  Medical Materials and Supplies.
        Pharmaceuticals....................          25.052          16.510  Pharmaceuticals.
        Supplies...........................           9.216          10.097  Supplies.

[[Page 40221]]

 
        Lab Services.......................           5.497           1.532  Lab Services.
    All Other Services.....................          15.929          15.277  All Other Goods and Services.
        Telephone..........................           0.597           0.468  Telephone Service.
        Housekeeping and Operations........           2.029           3.785  Housekeeping and Operations.
        Labor-Related Services.............           2.768
        Prof. Fees: Labor-related..........           1.549           0.617  Professional Fees (Labor-related and NonLabor-related services).
        All Other Labor-related............           1.219
        NonLabor-Related Services..........          10.535          10.407  All Other Goods and Services.
        Prof. Fees: Nonlabor-related.......           0.224
        All Other Nonlabor-related.........          10.311
    Capital Costs..........................           9.533          12.248  Capital Costs.
        Capital Related-Building and                  7.459           8.378  Capital Related-Building and Equipment.
         Equipment.
        Capital Related-Machinery..........           2.074           3.870  Capital Related-Machinery.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Totals may not sum to 100.000 percent due to rounding.

ii. Proposed Price Proxies for the CY 2012 ESRDB Market Basket
    After developing the cost weights for the proposed CY 2012-based 
ESRDB market basket, we selected the most appropriate wage and price 
proxies currently available to represent the rate of price change for 
each expenditure category. We base the price proxies on Bureau of Labor 
Statistics (BLS) data and group them into one of the following BLS 
categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change in wage rates and employee 
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) 
as price proxies for input price indexes because they are not affected 
by shifts in occupation or industry mix, and because they measure pure 
price change and are available by both occupational group and by 
industry. The industry ECIs are based on the North American 
Classification System (NAICS) and the occupational ECIs are based on 
the Standard Occupational Classification System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPIs were available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied. 
The CPIs, PPIs, and ECIs that we have selected to propose in this 
regulation meet these criteria. Therefore, we believe that they 
continue to be the best measure of price changes for the cost 
categories to which they would be applied.
    Table 7 lists all price proxies for the proposed revised and 
rebased ESRDB market basket. Below is a detailed explanation of the 
price proxies used for each cost category weight.
Wages and Salaries
    We will continue using an ECI blend for wages and salaries in the 
proposed 2012-based ESRDB market basket. However, we are proposing to 
expand the number of occupation categories and associated ECIs from two 
to four based on FTE data from ESRD Medicare Cost Reports and the 
availability of ECIs from BLS. We calculated weights for the Wages and 
Salaries sub-categories using 2012 FTE data and associated 2012 Average 
Mean Wage data from the Bureau of Labor Statistics' Occupational 
Employment Statistics.
Wages and Salaries--Health Related
    We are proposing to continue using the ECI for Wages & Salaries for 
Hospitals (All Civilian) (BLS series code CIU1026220000000I). 
Of the two health-related ECIs that we considered (``Hospitals'' and 
``Health Care and Social Assistance''), the wage distribution within 
the Hospital NAICS sector (622) is more closely related to the wage 
distribution of ESRD facilities than it is to the wage distribution of 
the

[[Page 40222]]

Health Care and Social Assistance NAICS sector (62).
    The Wages and Salaries--Health Related subcategory weight within 
the Wages and Salaries cost category is 80percent. The ESRD Medicare 
Cost Report FTE categories used to define the Wages and Salaries--
Health Related subcategory include ``Physicians,'' ``Registered 
Nurses,'' ``Licensed Practical Nurses,'' ``Nurses' Aides,'' 
``Technicians,'' and ``Dieticians.''
    The current 2008-based ESRD Market Basket uses the ECI for Wages & 
Salaries for Hospitals (All Civilian) for 50 percent of Wages and 
Salaries.
Wages and Salaries--Management
    We propose using the ECI for Wages & Salaries for Management, 
Business, and Financial (Private Industry) (BLS series code 
CIU2020000110000I). We feel this ECI is the most appropriate 
price proxy to measure the price growth of management functions at ESRD 
facilities. Furthermore, we regularly use this ECI-wages for 
management, business, and financial in our other market baskets, such 
as the MEI.
    The Wages and Salaries--Management subcategory weight within the 
Wages and Salaries cost category is 8 percent. The ESRD Medicare Cost 
Report FTE category used to define the Wages and Salaries--Management 
subcategory is ``Management.''
Wages and Salaries--Administrative
    We propose using the ECI for Wages & Salaries for Office and 
Administrative Support (Private Industry) (BLS series code 
CIU2020000220000I). We feel this ECI is the most appropriate 
price proxy to measure the price growth of administrative support at 
ESRD facilities. Furthermore, we regularly use this ECI for 
administrative wages in our other market baskets, such as the MEI.
    The Wages and Salaries--Administrative subcategory weight within 
the Wages and Salaries cost category is 7 percent. The ESRD Medicare 
Cost Report FTE category used to define the Wages and Salaries--
Administrative subcategory is ``Administrative.''
Wages and Salaries--Services
    We propose using the ECI for Wages & Salaries for Service 
Occupations (Private Industry) (BLS series code 
CIU2020000300000I). We feel this ECI is the most appropriate 
price proxy to measure the price growth of all other non-health 
related, non-management, and non-administrative service support at ESRD 
facilities. Furthermore, we regularly use this ECI for all other 
service wages in our other market baskets, such as the MEI.
    The Wages and Salaries--Services subcategory weight within the 
Wages and Salaries cost category is 6 percent. The ESRD Medicare Cost 
Report FTE categories used to define the Wages and Salaries--Services 
subcategory are ``Social Workers'' and ``Other.''
    Table 5 lists the four ECI series and the corresponding weights 
used to construct the proposed ECI blend for wages and salaries. We 
feel this new ECI blend is the most appropriate price proxy to measure 
the growth of wages and salaries faced by ESRD facilities.

  Table 5--ECI Blend for Wages and Salaries in the Proposed 2012 Based
                           ESRDB Market Basket
------------------------------------------------------------------------
         Cost category                ECI Series           Weight (%)
------------------------------------------------------------------------
Wages and Salaries--Health      ECI--Wages &                          80
 Related.                        Salaries--Hospital
                                 (All Civilian).
Wages and Salaries--Management  ECI--Wages &                           7
                                 Salaries--Management
                                 , Business, and
                                 Financial (Private
                                 Industry).
Wages and Salaries--            ECI--Wages &                           7
 Administrative.                 Salaries--Office and
                                 Administrative
                                 Support (Private
                                 Industry).
Wages and Salaries--Services..  ECI--Wages &                           6
                                 Salaries--Service
                                 Occupations (Private
                                 Industry).
------------------------------------------------------------------------

    The current 2008-based ESRDB market basket uses a 50 percent/50 
percent blend of the ``ECI--Wages & Salaries--Hospital (All Civilian)'' 
and the ``ECI--Wages and Salaries--Healthcare and Social Assistance'' 
for the wages and salaries ECI blend.
Benefits
    We will continue using an ECI blend for Benefits in the proposed 
2012-based ESRDB market basket; however, we are proposing to expand the 
number of occupation categories and associated ECIs from two to four 
based on the components of the proposed Wage and Salaries ECI blend.
Benefits--Health Related
    We are proposing to continue using the ECI for Benefits for 
Hospitals (All Civilian) to measure price growth of this subcategory. 
The ECI for Benefits for Hospitals is calculated using the ECI for 
Total Compensation for Hospitals (BLS series code  
CIU1016220000000I) and the relative importance of wages and salaries 
within total compensation. We believe this constructed ECI series is 
technically appropriate for the reason stated above in the wages and 
salaries price proxy section.
Benefits--Management
    We propose using the ECI for Benefits for Management, Business, and 
Financial (Private Industry) to measure price growth of this 
subcategory. The ECI for Benefits for Management, Business, and 
Financial is calculated using the ECI for Total Compensation for 
Management, Business, and Financial (BLS series code  
CIU2010000110000I) and the relative importance of wages and salaries 
within total compensation. We believe this constructed ECI series is 
technically appropriate for the reason stated above in the wages and 
salaries price proxy section.
Benefits--Administrative
    We propose using the ECI for Benefits for Office and Administrative 
Support (Private Industry) to measure price growth of this subcategory. 
The ECI for Benefits for Office and Administrative Support is 
calculated using the ECI for Total Compensation for Office and 
Administrative Support (BLS series code  CIU2010000220000I) 
and the relative importance of wages and salaries within total 
compensation. We believe this constructed ECI series is technically 
appropriate for the reason stated above in the wages and salaries price 
proxy section.
Benefits--Services
    We propose using the ECI for Benefits for Service Occupations 
(Private Industry) to measure price growth of this subcategory. The ECI 
for Benefits for Service Occupations is calculated using the ECI for 
Total Compensation for Service Occupations (BLS series code  
CIU2030000300000I) and the relative importance of wages and salaries 
within total compensation. We believe this constructed ECI series is 
technically appropriate for the reason stated above in the wages and 
salaries price proxy section.
    We feel the new benefits ECI blend is the most appropriate price 
proxy to measure the growth of prices faced by

[[Page 40223]]

ESRD facilities. Table 6 lists the four ECI series and the 
corresponding weights used to construct the proposed benefits ECI 
blend.

  Table 6--Benefites ECI Blend in the Proposed 2012-Based ESRDB Market
                                 Basket
------------------------------------------------------------------------
         Cost category                ECI Series           Weight (%)
------------------------------------------------------------------------
Benefits--Health Related......  ECI--Benefits--Hospit                 80
                                 al (All Civilian).
Benefits--Management..........  ECI--Benefits--Manage                  7
                                 ment, Business, and
                                 Financial (Private
                                 Industry).
Benefits--Administrative......  ECI--Benefits--Office                  7
                                 and Administrative
                                 Support (Private
                                 Industry).
Benefits--Services............  ECI--Benefits--Servic                  6
                                 e Occupations
                                 (Private Industry).
------------------------------------------------------------------------

    The current 2008-based ESRDB market basket uses a 50 percent/50 
percent blend of the ``ECI--Benefits--Hospital (All Civilian)'' and the 
``ECI--Benefits--Healthcare and Social Assistance'' for the benefits 
ECI blend.
Electricity
    We propose to continue using the PPI for Commercial Electric Power 
(BLS series code WPU0542) to measure the price growth of this 
cost category. This is the same proxy used in the current 2008-based 
ESRDB market basket.
Natural Gas
    We propose to continue using the PPI for Commercial Natural Gas 
(BLS series code WPU0552) to measure the price growth of this 
cost category. This is the same proxy used in the current 2008-based 
ESRDB market basket.
Water and Sewerage
    We propose to continue using the CPI for Water and Sewerage 
Maintenance (BLS series code CUUR0000SEHG01) to measure the 
price growth of this cost category. This is the same proxy used in the 
current 2008-based ESRDB market basket.
Pharmaceuticals
    We propose to change the price proxy used for the pharmaceuticals 
cost category. A recent Health and Human Services Office of the 
Inspector General (OIG) report titled ``Update: Medicare Payment for 
End Stage Renal Disease Drugs'' recommended that CMS consider updating 
the ESRD payment bundle using a factor that takes into account drug 
acquisition costs. CMS had responded to this recommendation by stating 
that we would consider these findings in the continual evaluation of 
the ESRD market basket, particularly during the next rebasing and 
revising of the market basket index.\1\
---------------------------------------------------------------------------

    \1\ http://oig.hhs.gov/oei/reports/oei-03-12-00550.asp.
---------------------------------------------------------------------------

    Drug acquisition cost data is neither publicly available nor the 
methods used to determine it transparent, and, therefore, wouldn't meet 
our price proxy criteria of relevance, reliability, transparency, and 
public availability. However, after considering several viable options 
that do meet the criteria we are proposing to use the PPI: Vitamin, 
Nutrient, and Hematinic Preparations (BLS series code 
WPU063807). This index includes drugs that are most similar to 
ESAs and other drugs used in the ESRD setting, such as iron 
supplements. The definition of a hematinic is a medicine that increases 
the hemoglobin content of the blood, and these types of drugs are used 
to treat iron-deficiency anemia essential for normal erythropoiesis.
    We believe the PPI: Vitamin, Nutrient, and Hematinic Preparations 
to be the most technically appropriate index available to measure the 
price growth of the pharmaceuticals cost category in the proposed 2012-
based ESRDB market basket. The current 2008-based ESRDB market basket 
uses the PPI: Pharmaceuticals for Human Use.
Supplies
    We propose using the PPI for Surgical and Medical Instruments (BLS 
series code WPU1562) since it excludes orthopedic, prosthetic, 
ophthalmic, and dental type medical equipment and devices, which are 
not likely to be used extensively in the ESRD setting. The types of 
equipment under Surgical and Medical Instruments, particularly blood 
transfusion and IV equipment, seem most similar to the medical 
equipment and supplies that would be used in the ESRD setting. The 
current 2008-based ESRDB market basket uses the PPI for Medical, 
Surgical, and Personal Aid Devices.
Lab Services
    We propose to continue using the PPI for Medical Laboratories (BLS 
series code PCU621511621511) to measure the price growth of 
this cost category. This is the same proxy used in the current 2008-
based ESRDB market basket.
Telephone Service
    We propose to continue using the CPI for Telephone Services (BLS 
series code CUUR0000SEED) to measure the price growth of this 
cost category. This is the same proxy used in the current 2008-based 
ESRDB market basket.
Housekeeping and Operations
    We propose to continue using the PPI for Cleaning and Building 
Maintenance Services (BLS series code WPU49) to measure the 
price growth of this cost category. This is the same proxy used in the 
current 2008-based ESRDB market basket.
Professional Fees
    We propose to continue using the ECI (Compensation) for 
Professional and Related Occupations (Private Industry) (BLS series 
code  CIU2010000120000I) to measure the price growth of this 
cost category. This is the same proxy used in the current 2008-based 
ESRDB market basket.
All Other Goods and Services
    We propose using the PPI for Finished Goods less Foods and Energy 
(BLS series code WPUFD4131) as the price proxy for the All 
Other Goods and Services cost category. This PPI series is used in most 
of CMS' other market baskets to measure the expenses for the residual 
category of all other goods and services. It is more consistent with 
the purchase of items at a wholesale rather than a consumer level. The 
current 2008-based ESRDB market basket (specifically, the ``All Other 
Non Labor-Related Services'' cost category) uses the CPI-U, All Items 
less Foods and Energy.
Capital-Related Building and Equipment
    We propose using the PPI for Lessors of Nonresidential Buildings 
(BLS series code PCU531120531120) as it represents the types 
of fixed capital expenses most likely faced by ESRD facilities. We also 
use this proxy in the MEI as the fixed capital proxy for physicians. We 
believe the PPI for Lessors of Nonresidential Buildings is more 
appropriate as fixed capital expenses in both the ESRD and physician 
office setting should be more congruent with trends in business office 
space costs rather than residential costs. The current 2008-based ESRDB 
market

[[Page 40224]]

basket uses the CPI for Owners' Equivalent Rent of Residences.
Capital Related Machinery
    We propose to continue using the PPI for Electrical Machinery and 
Equipment (BLS series code WPU117) to measure the price growth 
of this cost category. This is the same proxy used in the current 2008-
based ESRDB market basket.
    Table 7 shows all the proposed price proxies for the proposed CY 
2012-based ESRDB Market Basket.

   Table 7--Proposed Price Proxies for the CY 2012-Based ESRDB Market
                                 Basket
------------------------------------------------------------------------
         Cost category               Price proxy         Cost weight %
------------------------------------------------------------------------
Compensation                    .....................             42.497
    Wages and Salaries........  .....................             33.650
        Health-related Wages..  ECI--Wages &                      26.920
                                 Salaries--Hospital
                                 (Civilian).
        Management Wages......  ECI--Wages &                       2.356
                                 Salaries--Management
                                 , Business, and
                                 Financial (Private).
        Administrative Wages..  ECI--Wages &                       2.356
                                 Salaries--Office and
                                 Administrative
                                 Support (Private).
        Service Wages.........  ECI--Wages &                       2.019
                                 Salaries--Service
                                 Occupations
                                 (Private).
    Employee Benefits.........  .....................              8.847
        Health-related          ECI--Benefits--Hospit              7.078
         Benefits.               al (Civilian).
        Management Benefits...  ECI--Benefits--Manage              0.619
                                 ment, Business, and
                                 Financial (Private).
        Administrative          ECI--Benefits--Office              0.619
         Benefits.               and Administrative
                                 Support (Private).
        Service Benefits......  ECI--Benefits--Servic              0.531
                                 e Occupations
                                 (Private).
Utilities                       .....................              1.839
    Electricity...............  PPI--Commercial                    0.973
                                 Electric Power.
    Natural Gas...............  PPI--Commercial                    0.101
                                 Natural Gas.
    Water and Sewerage........  CPI--Water and                     0.765
                                 Sewerage Maintenance.
Medical Materials and Supplies  .....................             28.139
    Pharmaceuticals...........  PPI--Vitamin,                     16.510
                                 Nutrient, and
                                 Hematinic
                                 Preparations.
    Supplies..................  PPI--Surgical and                 10.097
                                 Medical Instruments.
    Lab Services..............  PPI--Medical                       1.532
                                 Laboratories.
All Other Goods and Services    .....................             15.277
    Telephone Service.........  CPI--Telephone                     0.468
                                 Services.
    Housekeeping and            PPI--Cleaning and                  3.785
     Operations.                 Building Maintenance
                                 Services.
    Professional Fees.........  ECI--Compensation--Pr              0.617
                                 ofessional and
                                 Related Occupations
                                 (Private).
    All Other Goods and         PPI--Finished Goods               10.407
     Services.                   less Foods and
                                 Energy.
Capital Costs                   .....................             12.248
    Capital Related Building    PPI--Lessors of                    8.378
     and Equipment.              Nonresidential
                                 Buildings.
    Capital Related Machinery.  PPI--Electrical                    3.870
                                 Machinery and
                                 Equipment.
        Total.................  .....................            100.000
------------------------------------------------------------------------
Note: Totals may not sum to 100.000% due to rounding.

iii. Proposed Market Basket Estimate for the CY 2015 ESRDB PPS Update
    As discussed previously in this proposed rule, beginning with the 
CY 2015 ESRD PPS update, we are proposing to adopt the CY 2012-based 
ESRDB market basket as the appropriate market basket of goods and 
services for the ESRD PPS.
    Based on the IHS Global Insight, Inc. (IGI) first quarter 2014 
forecast with history through the fourth quarter of 2013, the most 
recent estimate of the proposed CY 2012-based ESRDB market basket for 
CY 2015 is 2.0 percent. IGI is a nationally recognized economic and 
financial forecasting firm that contracts with CMS to forecast the 
components of the CMS market baskets. Based on IGI's first quarter 2014 
forecast with history through the fourth quarter of 2013, the estimate 
of the current CY 2008-based ESRDB market basket for CY 2015 is 2.7 
percent.
    Table 8 compares the proposed CY 2012-based ESRDB market basket and 
the CY 2008-based ESRDB market basket percent changes. For the 
historical period between CY 2011 and CY 2013, the average difference 
between the two market baskets is -1.8 percentage points. This is 
primarily the result of the lower pharmaceutical cost share combined 
with the proposed revised price proxy for the pharmaceutical cost 
category. For the CY 2014 and CY 2015 forecasts, the difference in the 
market basket forecasts are mainly driven by the same factors as in the 
historical period; however, it is important to note that the 
differences between the two market baskets are projected to be smaller 
as the growth in the price proxy for the pharmaceutical category are 
projected to grow at more similar growth rates in the projected period 
than the growth rates in the recent historical period.

Table 8--Proposed CY 2012-Based ESRDB Market Basket and CY 2008 Based ESRDB Market Basket, Percent Changes: 2011-
                                                      2015
----------------------------------------------------------------------------------------------------------------
                                                        Proposed Rebased CY 2012-    CY 2008-Based ESRDB  Market
                 Calendar Year (CY)                     based ESRDB Market Basket              Basket
----------------------------------------------------------------------------------------------------------------
Historical data.....................................
    CY 2011.........................................                           1.2                           2.8
    CY 2012.........................................                           1.4                           3.4
    CY 2013.........................................                           1.1                           3.0
    Average CY 2011-2013............................                           1.3                           3.1
Forecast:
    CY 2014.........................................                           1.8                           2.3

[[Page 40225]]

 
    CY 2015.........................................                           2.0                           2.7
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc. 1st quarter 2014 forecast with historical data through 4th quarter 2013.

c. Proposed Productivity Adjustment
    Under section 1881(b)(14)(F)(i) of the Act, as amended by section 
3401(h) of the Affordable Care Act, for CY 2012 and each subsequent 
year, the ESRD market basket percentage increase factor shall be 
reduced by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity 
adjustment as equal to the 10-year moving average of changes in annual 
economy-wide private nonfarm business multifactor productivity (MFP) 
(as projected by the Secretary for the 10- year period ending with the 
applicable fiscal year, year, cost reporting period, or other annual 
period) (the ``MFP adjustment''). The Bureau of Labor Statistics (BLS) 
is the agency that publishes the official measure of private nonfarm 
business MFP. Please see http://www.bls.gov/mfp to obtain the BLS 
historical published MFP data. We note 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 2014 of the 10-year moving average of MFP, the CY 2015 
MFP factor we would have proposed is 0.4 percent. As discussed further 
below, however, section 1881(b)(F)(i)(III) of the Act, as added by 
section 217(b)(2) of PAMA, requires the Secretary to implement a 0.0 
percent payment update in CY 2015.
d. Calculation of the Proposed ESRDB Market Basket Update, Adjusted for 
Multifactor Productivity for CY 2015
    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. For CY 2015, section 1881(b)(14)(F)(i)(III) of the Act, as 
added by section 217(b)(2) of PAMA, requires the Secretary to implement 
a 0.0 percent ESRDB market basket increase to the ESRD PPS base rate. 
In addition, we interpret the reference to ``[n]otwithstanding 
subclause (III)'' that was added to amended section 
1881(b)(14)(F)(i)(III) as precluding the application of the multi-
factor productivity (MFP) adjustment in 2015. As a result of these 
provisions, the proposed CY 2015 ESRD market basket increase is 0.0 
percent. We note that if PAMA had not been enacted the proposed 2012-
based ESRDB market basket update less productivity for CY 2015 would 
have been 1.6 percent, or 2.0 percent less 0.4 percentage point.
e. Labor-Related Share
    We define the labor-related share (LRS) as those expenses that are 
labor-intensive and vary with, or are influenced by, the local labor 
market. The labor-related share of a market basket is determined by 
identifying the national average proportion of operating costs that are 
related to, influenced by, or vary with the local labor market. The 
labor-related share is typically the sum of Wages and Salaries, 
Benefits, Professional Fees, Labor-related Services, and a portion of 
the Capital share from a given market basket.
    We propose to use the proposed 2012-based ESRDB market basket costs 
to determine the proposed labor-related share for ESRD facilities of 
50.673 percent, as shown in Table 9 below. These figures represent the 
sum of Wages and Salaries, Benefits, Housekeeping and Operations, 87 
percent of the weight for Professional Fees (details discussed below), 
and 46 percent of the weight for Capital-related Building and Equipment 
expenses (details discussed below). We note that this is a similar 
methodology used to compute the labor-related share used from CY 2011 
through CY 2014.

               Table 9--Proposed CY 2015 Labor-Related Share and CY 2014 ESRDB Labor-Related Share
----------------------------------------------------------------------------------------------------------------
                                                      Proposed CY 2015 ESRDB labor- CY 2014 ESRDB  labor-related
                    Cost category                        related share (percent)           share (percent)
----------------------------------------------------------------------------------------------------------------
Wages...............................................                        33.650                        26.755
Benefits............................................                         8.847                         6.754
Housekeeping and operations.........................                         3.785                         2.029
Professional fees (labor-related)...................                         0.537                         2.768
Capital labor-related...............................                         3.854                         3.431
                                                     -----------------------------------------------------------
    Total...........................................                        50.673                        41.737
----------------------------------------------------------------------------------------------------------------

    The labor-related share for Professional Fees (87 percent) reflects 
the proportion of ESRD facilities' professional fees expenses that we 
believe vary with local labor market. We conducted a survey of ESRD 
facilities in 2008 to better understand the proportion of contracted 
professional services that ESRD facilities typically purchase outside 
of their local labor market. These purchased professional services 
include functions such as accounting and auditing, management 
consulting, engineering, and legal services. Based on the survey 
results, we determined that, on average, 87 percent of professional 
services are purchased from local firms and 13 percent are purchased 
from businesses located outside of the ESRD facility's local labor 
market. Thus, we are proposing to

[[Page 40226]]

include 87 percent of the cost weight for Professional Fees in the 
labor-related share, the same percentage as used in prior years.
    The labor-related share for capital-related expenses (46 percent of 
ESRD facilities' adjusted Capital-related Building and Equipment 
expenses) reflects the proportion of ESRD facilities' capital-related 
expenses that we believe varies with local labor market wages. Capital-
related expenses are affected in some proportion by variations in local 
labor market costs (such as construction worker wages) that are 
reflected in the price of the capital asset. However, many other inputs 
that determine capital costs are not related to local labor market 
costs, such as interest rates. The 46-percent figure is based on 
regressions run for the inpatient hospital capital PPS in 1991 (56 FR 
43375). We use a similar methodology to calculate capital-related 
expenses for the labor-related shares for rehabilitation facilities (70 
FR 30233), psychiatric facilities, long-term care facilities, and 
skilled nursing facilities (66 FR 39585).
3. The Proposed CY 2015 ESRD PPS Wage Indices
a. Background
    Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD 
PPS may include a geographic wage index payment adjustment, such as the 
index referred to in section 1881(b)(12)(D) of the Act. In the CY 2011 
ESRD PPS final rule (75 FR 49117), we finalized for the ESRD PPS the 
use of the Office of Management and Budget's (OMB) Core-Based 
Statistical Areas (CBSAs)-based geographic area designations described 
in OMB bulletin 03-04, issued June 6, 2003 as the basis for revising 
the urban and rural areas and their corresponding wage index values. 
This bulletin, as well as subsequent bulletins, is available online at 
http://www.whitehouse.gov/omb/bulletins_index2003-2005.
    We also finalized that we would use the urban and rural definitions 
used for the Medicare IPPS but without regard to geographic 
reclassification authorized under section 1886(d)(8) and (d)(10) of the 
Act. In the CY 2012 ESRD PPS final rule (76 FR 70239), we finalized 
that, under the ESRD PPS, we will continue to utilize the ESRD PPS wage 
index methodology, first established under the basic case-mix adjusted 
composite rate payment system, for updating the wage index values using 
the OMB's CBSA-based geographic area designations to define urban and 
rural areas.
b. Proposed Implementation of New Labor Market Delineations
    OMB publishes bulletins regarding CBSA changes, including changes 
to CBSA numbers and titles. In accordance with our established 
methodology, we have historically adopted via rulemaking CBSA changes 
that are published in the latest OMB bulletin. On February 28, 2013, 
OMB issued OMB Bulletin No. 13-01, which established revised 
delineations for Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas, and provided 
guidance on the use of the delineations of these statistical areas. A 
copy of this bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. According to OMB, 
``[t]his bulletin provides the delineations of all Metropolitan 
Statistical Areas, Metropolitan Divisions, Micropolitan Statistical 
Areas, Combined Statistical Areas, and New England City and Town Areas 
in the United States and Puerto Rico based on the standards published 
on June 28, 2010, in the Federal Register (75 FR 37246-37252) and 
Census Bureau data.'' In this CY 2015 ESRD PPS proposed rule, when 
referencing the new OMB geographic boundaries of statistical areas, we 
are using the term ``delineations'' rather than the term 
``definitions'' that we have used in the past, consistent with OMB's 
use of the terms (75 FR 37249). 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 needed to 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 and, thus, did not implement changes 
to the hospital wage index for FY 2014 based on these new CBSA 
delineations.
    Likewise, for the same reasons, the CY 2014 ESRD PPS wage index 
(based upon the pre-floor, pre-reclassified hospital wage data, which 
is unadjusted for occupational mix) also did not reflect the new CBSA 
delineations. In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed 
to implement the new CBSA delineations as described in the February 28, 
2013 OMB Bulletin No. 13-01, beginning with the FY 2015 IPPS wage index 
(79 FR 28054 through 28055).
    Similarly, in this CY 2015 ESRD PPS proposed rule, we are proposing 
to implement the new CBSA delineations as described in the February 28, 
2013 OMB Bulletin No. 13-01, beginning with the CY 2015 ESRD PPS wage 
index. We believe that the most current CBSA delineations accurately 
reflect the local economies and wage levels of the areas where 
facilities are located, and we believe that it is important for the 
ESRD PPS to use the latest CBSA delineations available in order to 
maintain an up-to-date payment system that accurately reflects the 
reality of populations shifts and labor market conditions. We have 
reviewed our findings and impacts relating to the new CBSA delineations 
using the most recent data available at the time of this proposed rule, 
and have concluded that there is no compelling reason to further delay 
the implementation of the CBSA delineations as set forth in OMB 
Bulletin 13-01.
    In order to implement these changes for the ESRD PPS, it is 
necessary to identify the new labor market area delineation for each 
county and facility in the country. For example, if we adopt the new 
CBSA delineations, there would be new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and existing 
CBSAs that would be split apart. Because the wage index of urban areas 
is typically higher than that of rural areas, ESRD facilities currently 
located in rural counties that would become urban if we adopt the new 
CBSA delineations would generally experience an increase in their wage 
index values. We have identified 105 counties and 113 facilities that 
would move from rural to urban status if we adopt the new CBSA 
delineations beginning in CY 2015. Table 10: (CY 2015 Proposed Rural to 
Urban CBSA Crosswalk) shows the CBSA delineations for CY 2014 and the 
rural wage index values proposed for CY 2015 based on those 
delineations, compared to the proposed CBSA delineations for CY 2015 
and the proposed urban wage index values for CY 2015 based on the new 
delineations, and the percentage change in these values for those 
counties that would change from rural to urban if we adopt the new CBSA 
delineations. If we adopt the new OMB delineations illustrated in Table 
10 below, approximately 100 facilities would experience an increase in 
their wage index values.

[[Page 40227]]

                                                Table 10--CY 2015 Proposed Rural to Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           ESRD PPS CY 2014 CBSA  delineations           Proposed ESRD PPS CY 2015 CBSA
                                                      --------------------------------------------                delineations
                                                                                                  -------------------------------------------  Change in
            County name                    State                                           Wage                                       Wage       value
                                                         CBSA          Urban/Rural         index     CBSA         Urban/Rural         index    (percent)
                                                                                           value                                      value
--------------------------------------------------------------------------------------------------------------------------------------------------------
BALDWIN............................  AL                      01  RURAL.................    0.6981     19300  URBAN................    0.7279        4.27
PICKENS............................  AL                      01  RURAL.................    0.6981     46220  URBAN................    0.8288       18.72
COCHISE............................  AZ                      03  RURAL.................    0.9159     43420  URBAN................    0.8970       -2.06
LITTLE RIVER.......................  AR                      04  RURAL.................    0.7265     45500  URBAN................    0.7390        1.72
WINDHAM............................  CT                      07  RURAL.................    1.1292     49340  URBAN................    1.1536        2.16
SUSSEX.............................  DE                      08  RURAL.................    1.0248     41540  URBAN................    0.9296       -9.29
CITRUS.............................  FL                      10  RURAL.................    0.8010     26140  URBAN................    0.7653       -4.46
GULF...............................  FL                      10  RURAL.................    0.8010     37460  URBAN................    0.7861       -1.86
HIGHLANDS..........................  FL                      10  RURAL.................    0.8010     42700  URBAN................    0.8011        0.01
SUMTER.............................  FL                      10  RURAL.................    0.8010     45540  URBAN................    0.8125        1.44
WALTON.............................  FL                      10  RURAL.................    0.8010     18880  URBAN................    0.8260        3.12
 LINCOLN...........................  GA                      11  RURAL.................    0.7425     12260  URBAN................    0.9213       24.08
MORGAN.............................  GA                      11  RURAL.................    0.7425     12060  URBAN................    0.9358       26.03
PEACH..............................  GA                      11  RURAL.................    0.7425     47580  URBAN................    0.7570        1.95
PULASKI............................  GA                      11  RURAL.................    0.7425     47580  URBAN................    0.7570        1.95
KALAWAO............................  HI                      12  RURAL.................    0.9953     27980  URBAN................    0.9510       -4.45
MAUI...............................  HI                      12  RURAL.................    0.9953     27980  URBAN................    0.9510       -4.45
BUTTE..............................  ID                      13  RURAL.................    0.7425     26820  URBAN................    0.8966       20.75
DE WITT............................  IL                      14  RURAL.................    0.8363     14010  URBAN................    0.8935        6.84
JACKSON............................  IL                      14  RURAL.................    0.8363     16060  URBAN................    0.8354       -0.11
WILLIAMSON.........................  IL                      14  RURAL.................    0.8363     16060  URBAN................    0.8354       -0.11
SCOTT..............................  IN                      15  RURAL.................    0.8454     31140  URBAN................    0.8319       -1.60
UNION..............................  IN                      15  RURAL.................    0.8454     17140  URBAN................    0.8942        5.77
PLYMOUTH...........................  IA                      16  RURAL.................    0.8483     43580  URBAN................    0.8948        5.48
KINGMAN............................  KS                      17  RURAL.................    0.7838     48620  URBAN................    0.8503        8.48
ALLEN..............................  KY                      18  RURAL.................    0.7770     14540  URBAN................    0.8403        8.15
BUTLER.............................  KY                      18  RURAL.................    0.7770     14540  URBAN................    0.8403        8.15
ACADIA.............................  LA                      19  RURAL.................    0.7608     29180  URBAN................    0.7896        3.79
IBERIA.............................  LA                      19  RURAL.................    0.7608     29180  URBAN................    0.7896        3.79
ST. JAMES..........................  LA                      19  RURAL.................    0.7608     35380  URBAN................    0.8778       15.38
TANGIPAHOA.........................  LA                      19  RURAL.................    0.7608     25220  URBAN................    0.9487       24.70
VERMILION..........................  LA                      19  RURAL.................    0.7608     29180  URBAN................    0.7896        3.79
WEBSTER............................  LA                      19  RURAL.................    0.7608     43340  URBAN................    0.8347        9.71
ST. MARYS..........................  MD                      21  RURAL.................    0.8586     15680  URBAN................    0.8625        0.45
WORCESTER..........................  MD                      21  RURAL.................    0.8586     41540  URBAN................    0.9296        8.27
MIDLAND............................  MI                      23  RURAL.................    0.8232     33220  URBAN................    0.7964       -3.26
MONTCALM...........................  MI                      23  RURAL.................    0.8232     24340  URBAN................    0.8832        7.29
FILLMORE...........................  MN                      24  RURAL.................    0.9057     40340  URBAN................    1.1384       25.69
LE SUEUR...........................  MN                      24  RURAL.................    0.9057     33460  URBAN................    1.1162       23.24
MILLE LACS.........................  MN                      24  RURAL.................    0.9057     33460  URBAN................    1.1162       23.24
SIBLEY.............................  MN                      24  RURAL.................    0.9057     33460  URBAN................    1.1162       23.24
BENTON.............................  MS                      25  RURAL.................    0.7603     32820  URBAN................    0.9069       19.28
YAZOO..............................  MS                      25  RURAL.................    0.7603     27140  URBAN................    0.7932        4.33
GOLDEN VALLEY......................  MT                      27  RURAL.................    0.9055     13740  URBAN................    0.8718       -3.72
HALL...............................  NE                      28  RURAL.................    0.8957     24260  URBAN................    0.9253        3.30
HAMILTON...........................  NE                      28  RURAL.................    0.8957     24260  URBAN................    0.9253        3.30
HOWARD.............................  NE                      28  RURAL.................    0.8957     24260  URBAN................    0.9253        3.30
MERRICK............................  NE                      28  RURAL.................    0.8957     24260  URBAN................    0.9253        3.30
JEFFERSON..........................  NY                      33  RURAL.................    0.8226     48060  URBAN................    0.8417        2.32
YATES..............................  NY                      33  RURAL.................    0.8226     40380  URBAN................    0.8783        6.77
CRAVEN.............................  NC                      34  RURAL.................    0.7963     35100  URBAN................    0.8547        7.33
DAVIDSON...........................  NC                      34  RURAL.................    0.7963     49180  URBAN................    0.8660        8.75
GATES..............................  NC                      34  RURAL.................    0.7963     47260  URBAN................    0.9156       14.98
IREDELL............................  NC                      34  RURAL.................    0.7963     16740  URBAN................    0.9123       14.57
JONES..............................  NC                      34  RURAL.................    0.7963     35100  URBAN................    0.8547        7.33
LINCOLN............................  NC                      34  RURAL.................    0.7963     16740  URBAN................    0.9123       14.57
PAMLICO............................  NC                      34  RURAL.................    0.7963     35100  URBAN................    0.8547        7.33
ROWAN..............................  NC                      34  RURAL.................    0.7963     16740  URBAN................    0.9123       14.57
OLIVER.............................  ND                      35  RURAL.................    0.7125     13900  URBAN................    0.7251        1.77
SIOUX..............................  ND                      35  RURAL.................    0.7125     13900  URBAN................    0.7251        1.77
HOCKING............................  OH                      36  RURAL.................    0.8315     18140  URBAN................    0.9499       14.24
PERRY..............................  OH                      36  RURAL.................    0.8315     18140  URBAN................    0.9499       14.24
COTTON.............................  OK                      37  RURAL.................    0.7824     30020  URBAN................    0.7948        1.58
JOSEPHINE..........................  OR                      38  RURAL.................    1.0120     24420  URBAN................    1.0123        0.03
LINN...............................  OR                      38  RURAL.................    1.0120     10540  URBAN................    1.0919        7.90
ADAMS..............................  PA                      39  RURAL.................    0.8730     23900  URBAN................    1.0142       16.17
COLUMBIA...........................  PA                      39  RURAL.................    0.8730     14100  URBAN................    0.9382        7.47
FRANKLIN...........................  PA                      39  RURAL.................    0.8730     16540  URBAN................    1.0997       25.97

[[Page 40228]]

 
MONROE.............................  PA                      39  RURAL.................    0.8730     20700  URBAN................    0.9406        7.74
MONTOUR............................  PA                      39  RURAL.................    0.8730     14100  URBAN................    0.9382        7.47
UTUADO.............................  PR                      40  RURAL.................    0.4000     10380  URBAN................    0.4000        0.00
BEAUFORT...........................  SC                      42  RURAL.................    0.8381     25940  URBAN................    0.8807        5.08
CHESTER............................  SC                      42  RURAL.................    0.8381     16740  URBAN................    0.9123        8.85
JASPER.............................  SC                      42  RURAL.................    0.8381     25940  URBAN................    0.8807        5.08
LANCASTER..........................  SC                      42  RURAL.................    0.8381     16740  URBAN................    0.9123        8.85
UNION..............................  SC                      42  RURAL.................    0.8381     43900  URBAN................    0.8275       -1.26
CUSTER.............................  SD                      43  RURAL.................    0.8343     39660  URBAN................    0.9075        8.77
CAMPBELL...........................  TN                      44  RURAL.................    0.7387     28940  URBAN................    0.7039       -4.71
CROCKETT...........................  TN                      44  RURAL.................    0.7387     27180  URBAN................    0.7775        5.25
MAURY..............................  TN                      44  RURAL.................    0.7387     34980  URBAN................    0.9053       22.55
MORGAN.............................  TN                      44  RURAL.................    0.7387     28940  URBAN................    0.7039       -4.71
ROANE..............................  TN                      44  RURAL.................    0.7387     28940  URBAN................    0.7039       -4.71
FALLS..............................  TX                      45  RURAL.................    0.7917     47380  URBAN................    0.8202        3.60
HOOD...............................  TX                      45  RURAL.................    0.7917     23104  URBAN................    0.9412       18.88
HUDSPETH...........................  TX                      45  RURAL.................    0.7917     21340  URBAN................    0.8356        5.55
LYNN...............................  TX                      45  RURAL.................    0.7917     31180  URBAN................    0.8870       12.04
MARTIN.............................  TX                      45  RURAL.................    0.7917     33260  URBAN................    0.8973       13.34
NEWTON.............................  TX                      45  RURAL.................    0.7917     13140  URBAN................    0.8541        7.88
OLDHAM.............................  TX                      45  RURAL.................    0.7917     11100  URBAN................    0.8308        4.94
SOMERVELL..........................  TX                      45  RURAL.................    0.7917     23104  URBAN................    0.9412       18.88
BOX ELDER..........................  UT                      46  RURAL.................    0.8877     36260  URBAN................    0.9259        4.30
AUGUSTA............................  VA                      49  RURAL.................    0.7694     44420  URBAN................    0.8357        8.62
BUCKINGHAM.........................  VA                      49  RURAL.................    0.7694     16820  URBAN................    0.9087       18.11
CULPEPER...........................  VA                      49  RURAL.................    0.7694     47894  URBAN................    1.0418       35.40
FLOYD..............................  VA                      49  RURAL.................    0.7694     13980  URBAN................    0.8504       10.53
RAPPAHANNOCK.......................  VA                      49  RURAL.................    0.7694     47894  URBAN................    1.0418       35.40
STAUNTON CITY......................  VA                      49  RURAL.................    0.7694     44420  URBAN................    0.8357        8.62
WAYNESBORO CITY....................  VA                      49  RURAL.................    0.7694     44420  URBAN................    0.8357        8.62
COLUMBIA...........................  WA                      50  RURAL.................    1.0932     47460  URBAN................    1.0974        0.38
PEND OREILLE.......................  WA                      50  RURAL.................    1.0932     44060  URBAN................    1.1467        4.89
STEVENS............................  WA                      50  RURAL.................    1.0932     44060  URBAN................    1.1467        4.89
WALLA WALLA........................  WA                      50  RURAL.................    1.0932     47460  URBAN................    1.0974        0.38
FAYETTE............................  WV                      51  RURAL.................    0.7391     13220  URBAN................    0.8037        8.74
RALEIGH............................  WV                      51  RURAL.................    0.7391     13220  URBAN................    0.8037        8.74
GREEN..............................  WI                      52  RURAL.................    0.9074     31540  URBAN................    1.1190       23.32
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The wage index values of rural areas are typically lower than that 
of urban areas. Therefore, ESRD facilities located in a county that is 
currently designated as urban under the ESRD PPS wage index that would 
become rural if we adopt the new CBSA delineations may experience a 
decrease in their wage index values. We have identified 39 counties and 
29 ESRD facilities that would move from urban to rural status if we 
adopt the new CBSA delineations beginning in CY 2015. Table 11: (CY 
2015 Proposed Urban to Rural CBSA Crosswalk) shows the CBSA 
delineations for CY 2014 and the proposed urban wage index values for 
CY 2015 based on those delineations, compared with the proposed CBSA 
delineations and wage index values for CY 2015 based on those 
delineations, and the percentage change in these values for those 
counties that would change from urban to rural if we adopt the new CBSA 
delineations. If we adopted the new CBSA delineations illustrated in 
Table 11 below, approximately 30 facilities would experience a decrease 
in their wage index values.

                                                Table 11--CY 2015 Proposed Urban to Rural CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              ESRD PPS CY 2014 CBSA  delineations          Proposed ESRD PPS CY 2015 CBSA
                                                          -------------------------------------------               delineations
                                                                                                     ------------------------------------------  Change
            County name                     State                                             Wage                                      Wage    in value
                                                             CBSA         Urban/Rural         index     CBSA         Urban/Rural        index      (%)
                                                                                              value                                     value
--------------------------------------------------------------------------------------------------------------------------------------------------------
GREENE............................  AL...................     46220  URBAN................    0.8336        01  RURAL...............    0.6930     -16.9
FRANKLIN..........................  AR...................     22900  URBAN................    0.7593        04  RURAL...............    0.7265      -4.3
POWER.............................  ID...................     38540  URBAN................    0.9707        13  RURAL...............    0.7425     -23.5
FRANKLIN..........................  IN...................     17140  URBAN................    0.8942        15  RURAL...............    0.8454      -5.5
GIBSON............................  IN...................     21780  URBAN................    0.8524        15  RURAL...............    0.8454      -0.8
GREENE............................  IN...................     14020  URBAN................    0.9096        15  RURAL...............    0.8454      -7.1
TIPTON............................  IN...................     29020  URBAN................    0.9023        15  RURAL...............    0.8454      -6.3

[[Page 40229]]

 
FRANKLIN..........................  KS...................     28140  URBAN................    0.9454        17  RURAL...............    0.7811     -17.4
GEARY.............................  KS...................     31740  URBAN................    0.7225        17  RURAL...............    0.7811       8.1
NELSON............................  KY...................     31140  URBAN................    0.8313        18  RURAL...............    0.7774      -6.5
WEBSTER...........................  KY...................     21780  URBAN................    0.8524        18  RURAL...............    0.7774      -8.8
FRANKLIN..........................  MA...................     44140  URBAN................    1.0309        22  RURAL...............    1.1596      12.5
IONIA.............................  MI...................     24340  URBAN................    0.8998        23  RURAL...............    0.8313      -7.6
NEWAYGO...........................  MI...................     24340  URBAN................    0.8998        23  RURAL...............    0.8313      -7.6
GEORGE............................  MS...................     37700  URBAN................    0.7423        25  RURAL...............    0.7584       2.2
STONE.............................  MS...................     25060  URBAN................    0.8209        25  RURAL...............    0.7584      -7.6
CRAWFORD..........................  MO...................     41180  URBAN................    0.9457        26  RURAL...............    0.7827     -17.2
HOWARD............................  MO...................     17860  URBAN................    0.8349        26  RURAL...............    0.7827      -6.3
WASHINGTON........................  MO...................     41180  URBAN................    0.9457        26  RURAL...............    0.7827     -17.2
ANSON.............................  NC...................     16740  URBAN................    0.9283        34  RURAL...............    0.7880     -15.1
GREENE............................  NC...................     24780  URBAN................    0.9405        34  RURAL...............    0.7880     -16.2
ERIE..............................  OH...................     41780  URBAN................    0.7792        36  RURAL...............    0.8338       7.0
OTTAWA............................  OH...................     45780  URBAN................    0.9152        36  RURAL...............    0.8338      -8.9
PREBLE............................  OH...................     19380  URBAN................    0.8918        36  RURAL...............    0.8338      -6.5
WASHINGTON........................  OH...................     37620  URBAN................    0.8167        36  RURAL...............    0.8338       2.1
STEWART...........................  TN...................     17300  URBAN................    0.7554        44  RURAL...............    0.7297      -3.4
CALHOUN...........................  TX...................     47020  URBAN................    0.8504        45  RURAL...............    0.7909      -7.0
DELTA.............................  TX...................     19124  URBAN................    0.9751        45  RURAL...............    0.7909     -18.9
SAN JACINTO.......................  TX...................     26420  URBAN................    0.9881        45  RURAL...............    0.7909     -20.0
SUMMIT............................  UT...................     41620  URBAN................    0.9548        46  RURAL...............    0.8993      -5.8
CUMBERLAND........................  VA...................     40060  URBAN................    0.9556        49  RURAL...............    0.7573     -20.8
DANVILLE CITY.....................  VA...................     19260  URBAN................    0.7985        49  RURAL...............    0.7573      -5.2
KING AND QUEEN....................  VA...................     40060  URBAN................    0.9556        49  RURAL...............    0.7573     -20.8
LOUISA............................  VA...................     40060  URBAN................    0.9556        49  RURAL...............    0.7573     -20.8
PITTSYLVANIA......................  VA...................     19260  URBAN................    0.7985        49  RURAL...............    0.7573      -5.2
SURRY.............................  VA...................     47260  URBAN................    0.9156        49  RURAL...............    0.7573     -17.3
MORGAN............................  WV...................     25180  URBAN................    0.9113        51  RURAL...............    0.7249     -20.5
PLEASANTS.........................  WV...................     37620  URBAN................    0.8167        51  RURAL...............    0.7249     -11.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We note that facilities in some urban CBSAs could experience a 
change in their wage index values even though they remain urban because 
an urban CBSA's boundaries and/or the counties included in that CBSA 
could change. Table 12 (CY 2015 Proposed Urban to a Different Urban 
CBSA Crosswalk) shows the CBSA delineations for CY 2014 and urban wage 
index values for CY 2015 based on those delineations, compared with the 
proposed CBSA delineations and urban wage index values for CY 2015 
based on those delineations, and the percentage change in these values 
for counties that would remain urban even though the CBSA boundaries 
and/or counties included in that CBSA would change.

                                          Table 12--CY 2015 Proposed Urban to a Different Urban CBSA Crosswalk
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          ESRD PPS CY 2014 CBSA  delineations             Proposed ESRD PPS CY 2015 CBSA
                                                     ---------------------------------------------                 delineations
                                                                                                  ---------------------------------------------  Change
             County name                   State                                           Wage                                         Wage    In value
                                                        CBSA          Urban/Rural          index     CBSA          Urban/Rural          index      (%)
                                                                                           value                                        value
--------------------------------------------------------------------------------------------------------------------------------------------------------
MARIN...............................  CA                 41884  URBAN..................    1.7049     42034  URBAN..................    1.7317       1.6
FLAGLER.............................  FL                 37380  URBAN..................    0.8494     19660  URBAN..................    0.8407      -1.0
DE KALB.............................  IL                 16974  URBAN..................    1.0368     20994  URBAN..................    1.0347      -0.2
KANE................................  IL                 16974  URBAN..................    1.0368     20994  URBAN..................    1.0347      -0.2
MADISON.............................  IN                 11300  URBAN..................    1.0115     26900  URBAN..................    1.0170       0.5
MEADE...............................  KY                 31140  URBAN..................    0.8313     21060  URBAN..................    0.7650      -8.0
ESSEX...............................  MA                 37764  URBAN..................    1.0808     15764  URBAN..................    1.1196       3.6
OTTAWA..............................  MI                 26100  URBAN..................    0.8167     24340  URBAN..................    0.8832       8.1
JACKSON.............................  MS                 37700  URBAN..................    0.7423     25060  URBAN..................    0.7927       6.8
BERGEN..............................  NJ                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
HUDSON..............................  NJ                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
MIDDLESEX...........................  NJ                 20764  URBAN..................    1.1085     35614  URBAN..................    1.2887      16.3
MONMOUTH............................  NJ                 20764  URBAN..................    1.1085     35614  URBAN..................    1.2887      16.3
OCEAN...............................  NJ                 20764  URBAN..................    1.1085     35614  URBAN..................    1.2887      16.3
PASSAIC.............................  NJ                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
SOMERSET............................  NJ                 20764  URBAN..................    1.1085     35084  URBAN..................    1.1520       3.9

[[Page 40230]]

 
BRONX...............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
DUTCHESS............................  NY                 39100  URBAN..................    1.1576     20524  URBAN..................    1.1387      -1.6
KINGS...............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
NEW YORK............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
ORANGE..............................  NY                 39100  URBAN..................    1.1576     35614  URBAN..................    1.2887      11.3
PUTNAM..............................  NY                 35644  URBAN..................    1.3136     20524  URBAN..................    1.1387     -13.3
QUEENS..............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
RICHMOND............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
ROCKLAND............................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
WESTCHESTER.........................  NY                 35644  URBAN..................    1.3136     35614  URBAN..................    1.2887      -1.9
BRUNSWICK...........................  NC                 48900  URBAN..................    0.8899     34820  URBAN..................    0.8641      -2.9
BUCKS...............................  PA                 37964  URBAN..................    1.0934     33874  URBAN..................    1.0236      -6.4
CHESTER.............................  PA                 37964  URBAN..................    1.0934     33874  URBAN..................    1.0236      -6.4
MONTGOMERY..........................  PA                 37964  URBAN..................    1.0934     33874  URBAN..................    1.0236      -6.4
ARECIBO.............................  PR                 41980  URBAN..................    0.4471     11640  URBAN..................    0.4229      -5.4
CAMUY...............................  PR                 41980  URBAN..................    0.4471     11640  URBAN..................    0.4229      -5.4
CEIBA...............................  PR                 21940  URBAN..................    0.4000     41980  URBAN..................    0.4460      11.5
FAJARDO.............................  PR                 21940  URBAN..................    0.4000     41980  URBAN..................    0.4460      11.5
GUANICA.............................  PR                 49500  URBAN..................    0.4000     38660  URBAN..................    0.4169       4.2
GUAYANILLA..........................  PR                 49500  URBAN..................    0.4000     38660  URBAN..................    0.4169       4.2
HATILLO.............................  PR                 41980  URBAN..................    0.4471     11640  URBAN..................    0.4229      -5.4
LUQUILLO............................  PR                 21940  URBAN..................    0.4000     41980  URBAN..................    0.4460      11.5
PENUELAS............................  PR                 49500  URBAN..................    0.4000     38660  URBAN..................    0.4169       4.2
QUEBRADILLAS........................  PR                 41980  URBAN..................    0.4471     11640  URBAN..................    0.4229      -5.4
YAUCO...............................  PR                 49500  URBAN..................    0.4000     38660  URBAN..................    0.4169       4.2
ANDERSON............................  SC                 11340  URBAN..................    0.8775     24860  URBAN..................    0.9025       2.8
GRAINGER............................  TN                 34100  URBAN..................    0.7002     28940  URBAN..................    0.7039       0.5
LINCOLN.............................  WV                 16620  URBAN..................    0.8017     26580  URBAN..................    0.8773       9.4
PUTNAM..............................  WV                 16620  URBAN..................    0.8017     26580  URBAN..................    0.8773       9.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Likewise, ESRD facilities currently located in a rural area may 
remain rural under the new CBSA delineations but experience a change in 
their rural wage index value due to implementation of the new CBSA 
delineations. Table 13 (CY 2015 Proposed Changes to the Statewide Rural 
Wage Index Crosswalk) shows the CBSA numbers for CY 2014 and the 
proposed rural statewide wage index values for CY 2015, compared with 
the proposed statewide rural wage index values for CY 2015, and the 
percentage change in these values.

                 Table 13--CY 2015 Proposed Changes to the Statewide Rural Wage Index Crosswalk
----------------------------------------------------------------------------------------------------------------
                              ESRD PPS CY 2014 CBSA  delineations     Proposed ESRD PPS CY 2015 CBSA
                             -------------------------------------             delineations
                                                                  -------------------------------------  Change
            State                                          Wage                                 Wage    in value
                                CBSA      Urban/Rural      index     CBSA      Urban/Rural      index      (%)
                                                           value                                value
----------------------------------------------------------------------------------------------------------------
AL..........................        01  RURAL..........    0.6981        01  RURAL..........    0.6930     -0.73
AZ..........................        03  RURAL..........    0.9159        03  RURAL..........    0.9253      1.03
CT..........................        07  RURAL..........    1.1292        07  RURAL..........    1.1337      0.40
FL..........................        10  RURAL..........    0.8010        10  RURAL..........    0.8394      4.79
GA..........................        11  RURAL..........    0.7425        11  RURAL..........    0.7439      0.19
HI..........................        12  RURAL..........    0.9953        12  RURAL..........    1.0276      3.25
IL..........................        14  RURAL..........    0.8363        14  RURAL..........    0.8365      0.02
KS..........................        17  RURAL..........    0.7838        17  RURAL..........    0.7811     -0.34
KY..........................        18  RURAL..........    0.7770        18  RURAL..........    0.7774      0.05
LA..........................        19  RURAL..........    0.7608        19  RURAL..........    0.7135     -6.22
MD..........................        21  RURAL..........    0.8586        21  RURAL..........    0.8778      2.24
MA..........................        22  RURAL..........    1.3971        22  RURAL..........    1.1596    -17.00
MI..........................        23  RURAL..........    0.8232        23  RURAL..........    0.8313      0.98
MS..........................        25  RURAL..........    0.7603        25  RURAL..........    0.7584     -0.25
NE..........................        28  RURAL..........    0.8957        28  RURAL..........    0.8909     -0.54
NY..........................        33  RURAL..........    0.8226        33  RURAL..........    0.8208     -0.22
NC..........................        34  RURAL..........    0.7963        34  RURAL..........    0.7880     -1.04
OH..........................        36  RURAL..........    0.8315        36  RURAL..........    0.8338      0.28
OR..........................        38  RURAL..........    1.0120        38  RURAL..........    0.9985     -1.33
PA..........................        39  RURAL..........    0.8730        39  RURAL..........    0.8079     -7.46

[[Page 40231]]

 
SC..........................        42  RURAL..........    0.8381        42  RURAL..........    0.8357     -0.29
TN..........................        44  RURAL..........    0.7387        44  RURAL..........    0.7297     -1.22
TX..........................        45  RURAL..........    0.7917        45  RURAL..........    0.7909     -0.10
UT..........................        46  RURAL..........    0.8877        46  RURAL..........    0.8993      1.31
VA..........................        49  RURAL..........    0.7694        49  RURAL..........    0.7573     -1.57
WA..........................        50  RURAL..........    1.0932        50  RURAL..........    1.0917     -0.14
WV..........................        51  RURAL..........    0.7391        51  RURAL..........    0.7249     -1.92
WI..........................        52  RURAL..........    0.9074        52  RURAL..........    0.9120      0.51
----------------------------------------------------------------------------------------------------------------

    While we believe that the new CBSA delineations would result in 
wage index values that are more representative of the actual costs of 
labor in a given area, we also recognize that use of the new CBSA 
delineations would result in reduced payments to some facilities. In 
particular, approximately 30 facilities would experience reduced 
payments if we adopt the new CBSA delineations. At the same time, use 
of the new CBSA delineations would result in increased payments for 
approximately 100 facilities, while the majority of facilities would 
experience no change in payments due to the implementation of the new 
CBSA delineations. We are proposing to implement the new CBSA 
delineations using a 2-year transition with a 50/50 blended wage index 
value for all facilities in CY 2015 and 100% of the wage index based on 
the new CBSA delineations in CY 2016.
c. Transition Period
    We considered having no transition period and fully implementing 
the proposed new CBSA delineations beginning in CY 2015, which would 
mean that all facilities would have payments based on the new 
delineations starting on January 1, 2015. However, because more 
facilities would have increased rather than decreased payments 
beginning in CY 2015, and because the overall amount of ESRD payments 
would increase slightly due to the new CBSA delineations, the wage 
index budget neutrality factor would be higher. This higher factor 
would reduce the ESRD PPS per treatment base rate for all facilities 
paid under the ESRD PPS, despite the fact that the majority of ESRD 
facilities are unaffected by the new CBSA delineations. Thus, we 
believe that it would be appropriate to provide for a transition period 
to mitigate any resulting short-term instability of a lower ESRD PPS 
base rate as well as any negative impacts to facilities that experience 
reduced payments. In addition, we note that for CY 2015, section 
1881(b)(14)(F)(i)(III), as added by section 217 of PAMA, requires a 0.0 
payment update (for further discussion on this update please see 
section II.B.1.a.ii of this rule), and thus, there is no possibility of 
offsetting any reduction, even a slight reduction, to the ESRD PPS base 
rate in CY 2015.
    Therefore, we are proposing a two-year transition blended wage 
index for all facilities. Facilities would receive 50 percent of their 
CY 2015 wage index value based on the CBSA delineations for CY 2014 and 
50 percent of their CY 2015 wage index value based on the proposed new 
CBSA delineations. This results in an average of the two values. We 
propose that facilities' CY 2016 wage index values would be based 100 
percent on the new CBSA delineations. We believe a two-year transition 
strikes an appropriate balance between ensuring that ESRD PPS payments 
are as accurate and stable as possible while giving facilities time to 
adjust to the new CBSA delineations.
    In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a 
policy to use the labor-related share of 41.737 percent for the ESRD 
PPS. For the CY 2015 ESRD PPS, we propose to use a labor-related share 
of 50.673 percent, which we propose to transition over a 2-year period 
with the labor-related share in CY 2015 based 50 percent on the old 
labor-related share and 50 percent on the new labor-related share, and 
the labor-related share in CY 2016 based 100 percent on the new labor-
related share. For a complete discussion of the proposed changes in the 
CY 2015 ESRD PPS market basket and labor-related share, as well as the 
transition of the labor-related share; please see sections II.B.2.e and 
XII.B.1.a of this proposed rule.
4. Proposed Revisions to the Outlier Policy
    Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS 
include a payment adjustment for high cost outliers due to unusual 
variations in the type or amount of medically necessary care, including 
variability in the amount of erythropoiesis stimulating agents (ESAs) 
necessary for anemia management. Our regulations at 42 CFR 
413.237(a)(1) provide that ESRD outlier services are the following 
items and services that are included in the ESRD PPS bundle: (i) ESRD-
related drugs and biologicals that were or would have been, prior to 
January 1, 2011, separately billable under Medicare Part B; (ii) ESRD-
related laboratory tests that were or would have been, prior to January 
1, 2011, separately billable under Medicare Part B; (iii) medical/
surgical supplies, including syringes, used to administer ESRD-related 
drugs, that were or would have been, prior to January 1, 2011, 
separately billable under Medicare Part B; and (iv) renal dialysis 
service drugs that were or would have been, prior to January 1, 2011, 
covered under Medicare Part D, excluding ESRD-related oral-only drugs.
    In the CY 2011 ESRD PPS final rule (75 FR 49142), we stated that 
for purposes of determining whether an ESRD facility would be eligible 
for an outlier payment, it would be necessary for the facility to 
identify the actual ESRD outlier services furnished to the patient by 
line item on the monthly claim. The ESRD-related drugs, laboratory 
tests, and medical/surgical supplies that we would recognize as outlier 
services were specified in Attachment 3 of Change Request 7064, 
Transmittal 2033 issued August 20, 2010, rescinded and replaced by 
Transmittal 2094, dated November 17, 2010. With respect to the outlier 
policy, Transmittal 2094 identified additional drugs and laboratory 
tests that may be eligible for ESRD outlier payment.

[[Page 40232]]

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. Information about these items and services and any updates 
to the list of renal dialysis items and services that qualify as 
outlier services are made through administrative issuances, if 
necessary.
    Our regulations at 42 CFR 413.237 specify the methodology used to 
calculate outlier payments. An ESRD facility is eligible for an outlier 
payment if its actual or imputed Medicare Allowable Payment (MAP) 
amount per treatment for ESRD outlier services exceeds a threshold. The 
MAP amount represents the average incurred amount per treatment for 
services that were or would have been considered separately billable 
services prior to January 1, 2011. The threshold is equal to the ESRD 
facility's predicted ESRD outlier services MAP amount per treatment 
(which is case-mix adjusted) plus the fixed dollar loss amount. In 
accordance with Sec.  413.237(c) of the regulations, facilities are 
paid 80 percent of the per treatment amount by which the imputed MAP 
amount for outlier services (that is, the actual incurred amount) 
exceeds this threshold. ESRD facilities are eligible to receive outlier 
payments for treating both adult and pediatric dialysis patients.
    In the CY 2011 ESRD PPS final rule, using 2007 data, we established 
the outlier percentage at 1.0 percent of total payments (75 FR 49142 
through 49143). We also established the fixed dollar loss amounts that 
are added to the predicted outlier services MAP amounts. The outlier 
services MAP amounts and fixed dollar loss amounts are different for 
adult and pediatric patients due to differences in the utilization of 
separately billable services among adult and pediatric patients (75 FR 
49140).
    As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 
49139), the predicted outlier services MAP amounts for a patient are 
determined by multiplying the adjusted average outlier services MAP 
amount by the product of the patient-specific case-mix adjusters 
applicable using the outlier services payment multipliers developed 
from the regression analysis to compute the payment adjustments. For CY 
2014, the outlier services MAP amounts and fixed dollar loss amounts 
were based on 2012 data (78FR 72180). Therefore, the outlier thresholds 
for CY 2014 were based on utilization of ESRD-related items and 
services furnished under the ESRD PPS. Because of the utilization of 
epoetin and other outlier services has continued to decline under the 
ESRD PPS, we lowered the MAP amounts and fixed dollar loss amounts for 
CYs 2013 and 2014 to allow for an increase in payments for ESRD 
beneficiaries requiring higher resources.
a. Proposed Changes to the Outlier Services MAP Amounts and Fixed 
Dollar Loss Amounts
    For CY 2015, we are not proposing any changes to the methodology 
used to compute the MAP or fixed dollar loss amounts. Rather, in this 
proposed rule, we are updating the outlier services MAP amounts and 
fixed dollar loss amounts to reflect the utilization of outlier 
services reported on the 2013 claims using the December 2013 claims 
file. The impact of this update is shown in Table 14, which compares 
the outlier services MAP amounts and fixed dollar loss amounts used for 
the outlier policy in CY 2014 with the updated estimates for this 
proposed rule. The estimates for the proposed outlier CY 2015 outlier 
policy, which are included in Column II of Table 14, were inflation-
adjusted to reflect projected 2015 prices for outlier services.

               Table 14--Outlierpolicy: Impact of Using Updated Data To Define the Outlier Policy
----------------------------------------------------------------------------------------------------------------
                                                  Column I  Final outlier policy    Column II  Proposed outlier
                                                    for CY 2014 (based on 2012     policy for CY 2015 (based on
                                                   data price  inflated to 2014)    2013 data price inflated to
                                                                 *                            2015) *
                                                 ---------------------------------------------------------------
                                                      Age =18         Age =18
----------------------------------------------------------------------------------------------------------------
Average outlier services MAP amount per                   $37.29          $51.97          $40.05          $52.61
 treatment \1\..................................
Adjustments.....................................
    Standardization for outlier services \2\....          1.1079          0.9866          1.1182          0.9899
    MIPPA reduction.............................            0.98            0.98            0.98            0.98
    Adjusted average outlier services MAP amount          $40.49          $50.25          $43.89          $51.04
     \3\........................................
Fixed dollar loss amount that is added to the             $54.01          $98.67          $56.30          $85.24
 predicted MAP to determine the outlier
 threshold \4\..................................
Patient months qualifying for outlier payment...            6.7%            5.3%            6.2%            6.3%
----------------------------------------------------------------------------------------------------------------
* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect updated
  prices for outlier services (that is, 2014 prices in Column I and projected 2015 prices in Column II).
\1\ Excludes patients for whom not all data were available to calculate projected payments. The outlier services
  MAP amounts are based on 2013 data. The medically unbelievable edits of 400,000 units for EPO and 1,200 mcg
  for Aranesp that are in place under the ESA claims monitoring policy were applied.
\2\ Applied to the average outlier MAP per treatment. Standardization for outlier services is based on existing
  case mix adjusters for adult and pediatric patient groups.
\3\ This is the amount to which the separately billable (SB) payment multipliers are applied to calculate the
  predicted outlier services MAP for each patient.
\4\ The fixed dollar loss amounts were calculated using 2013 data to yield total outlier payments that represent
  1% of total projected payments for the ESRD PPS.

    As seen in Table 14, the estimated fixed dollar loss amount that 
determines the CY 2015 outlier threshold amount for adults (Column II) 
is lower than that used for the CY 2014 outlier policy (Column I). The 
threshold is lower in

[[Page 40233]]

spite of the fact that the average outlier services MAP per treatment 
has increased. Between 2012 and 2013, the variation in outlier services 
across patients declined among adults. The net result is an increase in 
the percentage of patient-months qualifying for outlier payment (6.3 
percent based on 2013 data versus 5.3 percent based on 2012 data) but a 
decrease in the average outlier payment per case. The estimated fixed 
dollar loss amount that determines the CY 2015 outlier threshold amount 
for pediatric patients (Column II) is higher than that used for the CY 
2014 outlier policy (Column I).
    For pediatric patients, there was an increase in the overall 
average outlier service MAP amount between 2012 ($37.29 per treatment 
as shown in Column I) and 2013 ($40.05 per treatment, as shown in 
Column II). In addition, there was a continuing tendency in 2013 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 
2013 data compared to 2012 data (6.2 percent of pediatric patient 
months are expected to qualify for outlier payments rather than 6.7 
percent). These patterns led to the estimated fixed dollar loss amount 
for pediatric patients being higher for the outlier policy for CY 2015 
compared to the outlier policy for CY 2014. Generally, there is a 
relatively higher likelihood for pediatric patients that the outlier 
threshold may be adjusted to reflect changes in the distribution of 
outlier service MAP amounts. This is due to the much smaller overall 
number of pediatric patients compared to adult patients, and therefore 
to the fact that the outlier threshold for pediatric patients is 
calculated based on data for a much smaller number of pediatric 
patients compared to adult patients.
    We propose to update the fixed dollar loss amounts that are added 
to the predicted MAP amounts per treatment to determine the outlier 
thresholds for CY 2015 from $98.67 to $85.24 for adult patients and 
from $54.01 to $56.30 for pediatric patients compared with CY 2014 
amounts. We estimate that the percentage of patient months qualifying 
for outlier payments under the current policy will be 6.3 percent and 
6.2 percent for adult and pediatric patients, respectively, based on 
the 2013 data. The pediatric outlier MAP and fixed dollar loss amounts 
continue to be lower for pediatric patients than adults due to the 
continued lower use of outlier services (primarily reflecting lower use 
of epoetin and other injectable drugs).
b. Outlier Policy Percentage
    42 CFR 413.220(b)(4) stipulates that the per treatment base rate is 
reduced by 1 percent to account for the proportion of the estimated 
total payments under the ESRD PPS that are outlier payments. Based on 
the 2013 claims, outlier payments represented approximately 0.5 percent 
of total payments, again falling short of the 1 percent target due to 
further declines in the use of outlier services. Use of 2013 data to 
recalibrate the thresholds, which reflect lower utilization of EPO and 
other outlier services and reduced variation in outlier services among 
adults, is expected to result in aggregate outlier payments close to 
the 1 percent target in CY 2015. We believe the proposed update to the 
outlier MAP and fixed dollar loss amounts for CY 2015 will increase 
payments for ESRD beneficiaries requiring higher resource utilization 
and come closer to meeting our 1 percent outlier policy.
    We note that recalibration of the fixed dollar loss amounts in this 
proposed rule for CY 2015 outlier payments results in no change in 
payments to ESRD facilities for beneficiaries with renal dialysis items 
and services that are not eligible for outlier payments, but increases 
payments to providers for beneficiaries with renal dialysis items and 
services that are eligible for outlier payments. Therefore, beneficiary 
co-insurance obligations would also increase for renal dialysis 
services eligible for outlier payments.

C. Restatement of Policy Regarding Reporting and Payment for More Than 
Three Dialysis Treatments per Week

1. Reporting More Than Three Dialysis Treatments per Week on Claims
    Since the composite payment system was implemented in the 1980s, 
CMS has reimbursed ESRD facilities based upon three hemodialysis 
treatments per week and allowed for the payment of additional weekly 
dialysis treatments with medical justification. When a dialysis 
modality regimen requires more than three weekly dialysis treatments, 
such as with short, frequent hemodialysis (HD) and peritoneal dialysis 
(PD) modalities, we apply payment edits to ensure that Medicare payment 
on the monthly claim is consistent with the three times-weekly dialysis 
treatment payment limit, which translates to payment for 13 treatments 
for a 30-day month and 14 treatments for a 31-day month.
    Under section 1881(b)(14)(C) of the Act, the ESRD PPS may provide 
for payment on the basis of renal dialysis services furnished during a 
week, or month, or such other appropriate unit of payment as the 
Secretary specifies. In the CY 2011 ESRD PPS final rule (75 FR 49064), 
CMS finalized the per treatment basis of payment in which ESRD 
facilities are paid for up to three treatments per week, unless there 
is medical justification for more than three treatments per week. We 
codified the per-treatment unit of payment under the ESRD PPS at 42 CFR 
413.215(a). Also in the CY 2011 ESRD PPS final rule (75 FR 49078), we 
explained how we converted patient weeks to HD-equivalent sessions for 
PD patients. Specifically, we noted that one week of PD was considered 
equivalent to three HD treatments. For example, a patient on PD for 21 
days would have (21/7) x 3 or 9 HD-equivalent sessions. Our policy is 
that ESRD facilities treating patients on PD or home HD will be paid 
for up to three HD-equivalent sessions for each week of dialysis, 
unless there is medical justification for furnishing additional 
treatments.
    Increasingly, some ESRD facilities have begun to offer dialysis 
modalities where the standard treatment regimen is more than three 
treatments per week. Also, we have observed a payment variance among 
Medicare Administrative Contractors (MACs) in processing claims for 
dialysis treatments for modalities that require more frequent dialysis, 
resulting in payment of more than 14 treatments per month without 
medical justification. Lastly, CMS has received several requests for 
clarification regarding Medicare payment and billing policies for 
dialysis treatments for modalities requiring more than three treatments 
per week that are furnished in-facility or in the patient's home. 
Specifically, ESRD facilities, renal physician groups, and MACs have 
requested billing guidance regarding whether all of the dialysis 
treatments furnished to the patient during the billing month should be 
reported on the claim form, even though the Medicare benefit only 
provides for payment of three dialysis treatments per week.
    For these reasons, we are reiterating our policy with respect to 
payment for more than three dialysis treatments per week. We note that 
we are not changing our policy for reporting extra non-medically 
necessary dialysis sessions. ESRD facility claims should continue to 
include all dialysis treatments furnished during the month on claims, 
but payment is limited to three dialysis treatments per week through 
the payment edits of 13 treatments for a 30-

[[Page 40234]]

day month or 14 treatments for a 31-day month. For example, an ESRD 
facility that furnishes dialysis services to patients who dialyze using 
modalities requiring shorter, more frequent dialysis (for example, a 
dialysis regimen of 4, 5, 6 or 7 days a week in-facility or at home), 
should report all of the patient's dialysis treatments on the monthly 
claim. However, payment for these services will reflect existing claims 
processing system edits, and the monthly Medicare payment would mirror 
the Medicare ESRD benefit of three dialysis treatments per week.
2. Medical Necessity for More Than Three Treatments per Week
    Under the ESRD benefit, we have always recognized that some patient 
conditions benefit from more than three dialysis sessions per week and 
as such, the Medicare policy for medically necessary additional 
dialysis treatments was developed. Under this policy, the MACs 
determine whether additional treatments furnished during a month are 
medically necessary. While Medicare does not define specific patient 
conditions that meet the requirements of medical necessity, we do 
furnish instructions to MACs to consider appropriate patient conditions 
that would result in a patient's medical need for additional dialysis 
treatments (for example, excess fluid of five or more pounds). When 
such patient conditions are indicated with the claim requesting 
payment, we instruct MACs to consider medical justification and the 
appropriateness of payment for the additional sessions.
    In section 50.A of the Medicare Benefit Policy Manual (Pub. 100-
02), we explained our policy regarding payment for hemodialysis-
equivalent PD and payment for more than three dialysis treatments per 
week under the ESRD PPS. We restated that ESRD facilities are paid for 
a maximum of 13 treatments during a 30 day month and 14 treatments 
during a 31-day month unless there is medical justification for 
additional treatments. The only time facilities should seek payment for 
additional dialysis sessions, including payment for shorter, more 
frequent modalities, is when the patient has a medical need for 
additional dialysis and the facility has furnished supporting medical 
justification for the extra treatments. Modality choice does not 
constitute medical justification.

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

    As we discussed in the CY 2014 ESRD PPS final rule (78 FR 72185 
through 72186), 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 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) of section 1881(b)(14)(B)), but 
also all non-injectable oral drugs used for the treatment of ESRD 
furnished under title XVIII of the Act. 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) of 
section 1881(b)(14)(B). As such, CMS finalized and promulgated the 
payment policies for oral-only drugs used for the treatment of ESRD in 
the CY 2011 ESRD PPS final rule (75 FR 49038 through 49053), and we 
defined ``renal dialysis services'' at 42 CFR 413.171(3) as including, 
among other things ``other drugs and biologicals 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 ESRD-related oral-only drugs are included in the 
definition of renal dialysis services, in the CY 2011 ESRD PPS final 
rule (75 FR 49044), we also finalized a policy to delay payment for 
these drugs under the PPS until January 1, 2014. 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, in the CY 
2014 ESRD PPS final rule (78 FR 72185 through 72186), we delayed 
payment for ESRD-related oral-only drugs under the ESRD PPS until 
January 1, 2016, instead of on January 1, 2014, which is the original 
date we finalized for payment of ESRD-related oral-only drugs under the 
ESRD PPS. We implemented 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. In 
addition, we also changed the date when oral-only drugs would be 
eligible outlier services under the outlier policy described in 42 CFR 
413.237(a)(1)(iv) from January 1, 2014 to January 1, 2016.
    On April 1, 2014, PAMA was enacted. Section 217(a)(1) of PAMA 
amended section 632(b)(1) of ATRA, which now provides that the 
Secretary ``may not implement the policy under section 413.174(f)(6) of 
title 42, Code of Federal Regulations (relating to oral-only ESRD drugs 
in the ESRD prospective payment system), prior to January 1, 2024.'' 
Accordingly, payment for ESRD-related oral-only drugs will not be made 
under the ESRD PPS prior to January 1, 2024 instead of on January 1, 
2016, which is the date we finalized for payment of ESRD-related oral-
only drugs under the ESRD PPS in the CY 2014 ESRD PPS final rule (78 FR 
72186).
    We propose to implement this delay by modifying the effective date 
for providing payment for oral-only ESRD-related drugs and biologicals 
under the ESRD PPS at 42 CFR 413.174(f)(6) from January 1, 2016 to 
January 1, 2024. We also propose to change the date in 42 CFR 
413.237(a)(1)(iv) regarding outlier payments for oral-only ESRD-related 
drugs made under the ESRD PPS from January 1, 2016 to January 1, 2024. 
We continue to believe that oral-only drugs used for the treatment of 
ESRD are an essential part of the ESRD PPS payment bundle and should be 
paid for under the ESRD PPS as soon as possible, or beginning January 
1, 2024.
    In addition to the delay of payment for oral-only ESRD-related 
drugs, section 217(a)(2) of PAMA further amends section 632(b)(1) of 
ATRA by adding a new sentence that provides,

[[Page 40235]]

``[n]otwithstanding section 1881(b)(14)(A)(ii) of the Social Security 
Act (42 U.S.C. 1395rr(b)(14)(A)(ii)), implementation of the policy 
described in the previous sentence shall be based on data from the most 
recent year available.'' We interpret this provision to mean that we 
are not to use per patient utilization data from 2007, 2008, or 2009 
(whichever has the lowest per patient utilization) as we were required 
for the original ESRD PPS in implementing payment for oral-only ESRD 
drugs under the ESRD PPS. We will make proposals consistent with 
section 632(b)(1) of ATRA, as amended by section 217(a)(2) of PAMA, in 
future rulemaking.
    Section 217(c) of PAMA requires the Secretary, as part of the CY 
2016 ESRD PPS rulemaking, to establish a process for ``(1) determining 
when a product is no longer an oral-only drug; and (2) including new 
injectable and intravenous products into the bundled payment under such 
system.'' Consistent with this statutory requirement, we plan to 
propose a drug designation process in our CY 2016 rulemaking cycle and 
we are seeking industry and stakeholder comments on the components and 
elements of such a process for our consideration next year.

E. ESRD Drug Categories Included in the ESRD PPS Base Rate

    In the CY 2011 ESRD PPS final rule (75 FR 49050), we finalized 
Table 4, (Renal Dialysis Service ESRD Drug Categories Included in the 
Final ESRD PPS Base Rate), and have included Table 15 below for the 
purpose of this discussion. In that rule, we noted that the categories 
of drugs and biologicals used for access management, anemia management, 
anti-infectives, bone and mineral metabolism and cellular management 
would always be considered ESRD-related drugs when furnished to an ESRD 
patient, and that payment for such drugs would be included in the ESRD 
PPS payment bundle. As such, beginning January 1, 2011, Medicare no 
longer makes a separate payment when a drug or biological (except for 
oral-only ESRD-related drugs for which we are proposing to delay 
payment under the ESRD PPS until January 1, 2024) identified in the 
categories listed in the following table is furnished to a Medicare 
ESRD beneficiary.

  Table 15--Renal Dialysis Service ESRD Drug Categories Included in the
                        Final ESRD PPS Base Rate
------------------------------------------------------------------------
           Drug category                   Rationale for inclusion
------------------------------------------------------------------------
Access Management.................  Drugs used to ensure access by
                                     removing clots from grafts, reverse
                                     anticoagulation if too much
                                     medication is given, and provide
                                     anesthetic for access placement.
Anemia Management.................  Drugs used to stimulate red blood
                                     cell production and/or treat or
                                     prevent anemia. This category
                                     includes ESAs as well as iron.
Anti-infectives...................  Vancomycin and daptomycin used to
                                     treat access site infections.
Bone and Mineral Metabolism.......  Drugs used to prevent/treat bone
                                     disease secondary to dialysis. This
                                     category includes phosphate binders
                                     and calcimimetics.
Cellular Management...............  Drugs used for deficiencies of
                                     naturally occurring substances
                                     needed for cellular management.
                                     This category includes
                                     levocarnitine.
------------------------------------------------------------------------

    In the CY 2011 ESRD PPS final rule (75 FR 49050), we noted that we 
included the anti-infective drugs of vancomycin and daptomycin because 
these drugs were routinely furnished for the ESRD-related conditions of 
access site infections and peritonitis. However, in the CY 2012 ESRD 
PPS final rule (76 FR 70242 through 70243), we responded to public 
comments that noted that vancomycin is a common anti-infective drug 
appropriate for treating infections that are both ESRD- and non-ESRD-
related by modifying our policy to eliminate the payment restriction 
for vancomycin when it is furnished for non-ESRD related conditions. In 
addition, we finalized the use of CMS payment modifier AY (Item or 
service furnished to an End Stage Renal Disease (ESRD) patient that is 
not for the treatment of ESRD) and instructed facilities to append the 
modifier to the claim reporting vancomycin to indicate that the drug 
was furnished for reasons other than ESRD. The presence of the AY 
modifier on the claim allows the MAC to make a separate payment for the 
drug when it is furnished by the facility to a Medicare beneficiary for 
reasons other than ESRD.
    In the CY 2013 ESRD PPS final rule (77 FR 67461), we further 
amended this policy to allow ESRD facilities to bill separately for 
daptomycin when it is furnished to ESRD beneficiaries for reasons other 
than ESRD. Once again, we instructed facilities to append claims 
reporting daptomycin furnished for reasons other than ESRD with the AY 
modifier so that MACs would be able to make a separate payment.
    Because we have removed the payment limitation for both vancomycin 
and daptomycin, and because we believe that anti-infectives are a drug 
category that may be furnished for both ESRD- and non-ESRD-related 
reasons, we have updated the list of drug categories that are always 
considered ESRD-related under the ESRD PPS by removing the drug 
category for anti-infectives. We have included Table 16 (Renal Dialysis 
Service ESRD Drug Categories Included in the ESRD PPS Base Rate and Not 
Separately Payable) below to appropriately recognize the drug 
categories that are always considered ESRD-related and we confirm that 
the revised table reflects policy changes made in the CY 2012 and CY 
2013 ESRD PPS rulemaking cycles and does not constitute new policy.
    Over the past few years, we have received payment and billing 
inquiries requesting clarification for the payment for drugs 
represented by one of the drug categories included in the ESRD PPS, but 
not furnished for the treatment of ESRD. Therefore, we clarify that any 
drug included in the drug categories of access management, anemia 
management, bone and mineral metabolism and cellular management is not 
separately paid by Medicare regardless of why the drug is being 
furnished. In addition, the facility may not furnish a prescription for 
such drugs with the expectation that a Medicare Part D payment would be 
made, as the payment for the drug is included in the ESRD PPS payment 
bundle.

[[Page 40236]]

  Table 16--Renal Dialysis Service ESRD Drug Categories Included in the
              ESRD PPS Base Rate and Not Separately Payable
------------------------------------------------------------------------
           Drug category                   Rationale for inclusion
------------------------------------------------------------------------
Access Management.................  Drugs used to ensure access by
                                     removing clots from grafts, reverse
                                     anticoagulation if too much
                                     medication is given, and provide
                                     anesthetic for access placement.
Anemia Management.................  Drugs used to stimulate red blood
                                     cell production and/or treat or
                                     prevent anemia. This category
                                     includes ESAs as well as iron.
Bone and Mineral Metabolism.......  Drugs used to prevent/treat bone
                                     disease secondary to dialysis. This
                                     category includes phosphate binders
                                     and calcimimetics.
Cellular Management...............  Drugs used for deficiencies of
                                     naturally occurring substances
                                     needed for cellular management.
                                     This category includes
                                     levocarnitine.
------------------------------------------------------------------------

    The drug categories that may be separately paid by Medicare when 
furnished for non-ESRD patient conditions are included in Table 5 (ESRD 
Drug Categories Included in the ESRD PPS Base Rate But May be Used for 
Dialysis and non-Dialysis Purposes) (75 FR 49051). This table is 
included below for the purpose of this discussion. When any drug 
identified in the drug categories listed in Table 17 (antiemetic, anti-
infectives, antipruritic, anxiolytic, excess fluid management, fluid 
and electrolyte management or pain management), is furnished for the 
treatment of ESRD, payment for the drug is included in the ESRD PPS 
payment and may not be paid separately. If a drug represented by a drug 
category in Table 17 is furnished for reasons other than ESRD, a 
separate Medicare payment is permitted when the AY modifier is 
indicated on the claim line reporting the drug for payment.

Table 17--ESRD Drug Categories Included in the ESRD Base Rate but May Be
               Used for Dialysis and Non-Dialysis Purposes
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Antiemetic........................  Used to prevent or treat nausea and
                                     vomiting secondary to dialysis.
                                     Excludes antiemetics used in
                                     conjunction with chemotherapy as
                                     these are covered under a separate
                                     benefit category.
Anti-infectives...................  Used to treat infections. May
                                     include antibacterial and
                                     antifungal drugs.
Antipruritic......................  Drugs in this classification have
                                     multiple clinical indications and
                                     are included for their action to
                                     treat itching secondary to
                                     dialysis.
Anxiolytic........................  Drugs in this classification have
                                     multiple actions but are included
                                     for the treatment of restless leg
                                     syndrome secondary to dialysis.
Excess Fluid Management...........  Drug/fluids used to treat fluid
                                     excess/overload.
Fluid and Electrolyte Management    Intravenous drugs/fluids used to
 Including Volume Expanders.         treat fluid and electrolyte needs.
Pain Management...................  Drugs used to treat graft site pain
                                     and to treat pain medication
                                     overdose.
------------------------------------------------------------------------

F. Low-Volume Payment Adjustment

1. Background
    Section 1881(b)(14)(D)(iii) of the Act requires a payment 
adjustment that ``reflects the extent to which costs incurred by low-
volume facilities (as defined by the Secretary) in furnishing renal 
dialysis services exceed the costs incurred by other facilities in 
furnishing such services, and for payment for renal dialysis services 
furnished on or after January 1, 2011, and before January 1, 2014, such 
payment adjustment shall not be less than 10 percent.'' As a result of 
this provision and the regression analysis conducted for the ESRD PPS, 
effective January 1, 2011, the ESRD PPS provides a facility-level 
payment adjustment of 18.9 percent to ESRD facilities that meet the 
definition of a low-volume facility.
    Under 42 CFR 413.232(b), a low-volume facility is an ESRD facility 
that: (1) Furnished less than 4,000 treatments in each of the 3 cost 
reporting years (based on as-filed or final settled 12-consecutive 
month cost reports, whichever is most recent) preceding the payment 
year; and (2) Has not opened, closed, or received a new provider number 
due to a change in ownership in the 3 cost reporting years (based on 
as-filed or final settled 12-consecutive month cost reports, whichever 
is most recent) preceding the payment year. Under Sec.  413.232(c), for 
purposes of determining the number of treatments furnished by the ESRD 
facility, the number of treatments equals the aggregate number of 
treatments furnished by other ESRD facilities that are both under 
common ownership and 25 road miles or less from the ESRD facility in 
question. This geographic proximity criterion is only applicable to 
ESRD facilities that were Medicare certified on or after January 1, 
2011.
    For purposes of determining eligibility for the low-volume payment 
adjustment (LVPA), ``treatments'' means total hemodialysis (HD) 
equivalent treatments (Medicare and non-Medicare). For peritoneal 
dialysis (PD) patients, one week of PD is considered equivalent to 3 HD 
treatments. In the CY 2012 ESRD PPS final rule (76 FR 70236), we 
clarified that we base eligibility on the three years preceding the 
payment year and those years are based on cost reporting periods. We 
further clarified that the ESRD facility's cost reports for the cost 
reporting periods ending in the three years preceding the payment year 
must report costs for 12-consecutive months.
    In order to receive the LVPA under the ESRD PPS, an ESRD facility 
must submit a written attestation statement to its Medicare 
Administrative Contractor (MAC) that it qualifies as a low-volume ESRD 
facility and that it meets all of the requirements specified at 42 CFR 
413.232. In the CY 2012 ESRD PPS final rule (76 FR 70236), we finalized 
a yearly November 1 deadline for attestation submission and we revised 
the regulation at Sec.  413.232(f) to reflect this date. We noted that 
this timeframe provides 60 days for a MAC to verify that an ESRD 
facility meets the LVPA eligibility criteria. Further information 
regarding the administration of the LVPA is provided in CMS Pub. 100-
02, Medicare Benefit Policy Manual, chapter 11, section 60.B.1.

[[Page 40237]]

2. The United States Government Accountability Office Study on the LVPA
    The Medicare Improvements for Patients and Providers Act of 2008 
(MIPPA) required the United States Government Accountability Office 
(the GAO) to study the LVPA. The GAO examined (1) the extent to which 
the LVPA targeted low-volume, high-cost facilities that appeared 
necessary for ensuring access to care; and (2) CMS's implementation of 
the LVPA, including the extent to which CMS paid the 2011 LVPA to 
facilities eligible to receive the adjustment. To do this work, the GAO 
reviewed Medicare claims, facilities' annual cost reports, and data on 
dialysis facilities' locations to identify and compare facilities that 
were eligible for the LVPA with those that received the adjustment. The 
GAO published a report 13-287 on March 1, 2013, entitled, ``End-Stage 
Renal Disease: CMS Should Improve Design and Strengthen Monitoring of 
Low-Volume Adjustment''. The report found multiple discrepancies in the 
identification of low-volume facilities which are summarized below.
a. The GAO's Main Findings
    The GAO found that many of the facilities eligible for the LVPA 
were located near other facilities, indicating that they might not have 
been necessary for ensuring access to care. They also identified 
certain facilities with relatively low volume that were not eligible 
for the LVPA but had above-average costs and appeared to be necessary 
for ensuring access to care. Lastly, they stated the design of the LVPA 
provides facilities with an adverse incentive to restrict their service 
provision to avoid reaching the 4,000 treatment threshold. The GAO 
calculated that Medicare overpaid an estimated $5.3 million for the 
LVPA to dialysis facilities that did not meet the eligibility 
requirements established by CMS. They indicated in their report that 
the guidance that CMS issued for implementation of the regulatory 
requirements was sometimes unclear and not always available when 
needed, and the misunderstanding of LVPA eligibility likely was 
exacerbated because CMS conducted limited monitoring of the Medicare 
contractors' administration of LVPA payments.
b. The GAO's Recommendations
    In the conclusion of their study, the GAO provided Congress with 
the following recommendations: (1) To more effectively target 
facilities necessary for ensuring access to care, the Administrator of 
CMS should consider restricting the LVPA to low-volume facilities that 
are isolated; (2) To reduce the incentive for facilities to restrict 
their service provision to avoid reaching the LVPA treatment threshold, 
the Administrator of CMS should consider revisions such as changing the 
LVPA to a tiered adjustment; (3) To ensure that future LVPA payments 
are made only to eligible facilities and to rectify past overpayments, 
the Administrator of CMS should take the following four actions: 
Require Medicare contractors to promptly recoup 2011 LVPA payments that 
were made in error; investigate any errors that contributed to eligible 
facilities not consistently receiving the 2011 LVPA and ensure that 
such errors are corrected; take steps to ensure that CMS regulations 
and guidance regarding the LVPA are clear, timely, and effectively 
disseminated to both dialysis facilities and Medicare contractors; and 
improve the timeliness and efficacy of CMS's monitoring regarding the 
extent to which Medicare contractors are determining LVPA eligibility 
correctly and promptly redetermining eligibility when all necessary 
data become available.
    In response to the GAO's recommendations, we concurred with the 
need to ensure that the LVPA is targeted effectively at low-volume 
high-cost facilities in areas where beneficiaries may lack other 
dialysis care options. We also agreed to take action to ensure 
appropriate payment is made in the following ways: (1) Evaluating our 
policy guidance and contractor instructions to ensure appropriate 
application of the LVPA; (2) using multiple methods of communication to 
MACs and ESRD facilities to deliver clear and timely guidance; and (3) 
improving our monitoring of MACs and considering measures that provide 
specific expectations.
3. Clarification of the LVPA Policy
    For CY 2015, we are not proposing to make changes to the 
eligibility criteria for the adjustment or to the magnitude of the 
adjustment value. In accordance with section 632(c) of ATRA, for CY 
2016 we will assess and address other necessary LVPA policy changes 
when we use updated data and reevaluate all of the patient- and 
facility-level adjustments together in a regression analysis similar to 
the analysis that is discussed in the CY 2011 ESRD PPS final rule (75 
FR 49083). At this time, we are not proposing to change the criteria in 
such a way that the number of low-volume facilities would deviate 
substantially from the number of facilities originally modeled to 
receive the adjustment in the first year of implementation. This is 
because of the interaction of the LVPA with other payment adjustments 
under the ESRD PPS. As discussed in the CY 2011 ESRD PPS final rule (75 
FR 49081), we standardized the ESRD PPS base rate to account for the 
payment variables and it would not be appropriate to make changes to 
one variable in the regression when it could potentially affect the 
other adjustments or the standardization factor. However, there are two 
clarifications under the LVPA policy (discussed below) that we can 
address in this year's rulemaking that we believe are responsive to 
stakeholder's concerns and GAO's concern that the LVPA should 
effectively target low-volume, high cost-facilities.
a. Hospital-Based ESRD Facilities
    As stated above, for purposes of determining eligibility for the 
LVPA, ``treatments'' means total hemodialysis (HD) equivalent 
treatments (Medicare and non-Medicare) and for peritoneal dialysis (PD) 
patients, one week of PD is considered equivalent to 3 HD treatments. 
Once a MAC receives an attestation from an ESRD facility, it reviews 
the ESRD facility's cost reports to verify that the facility meets the 
low-volume criteria specified at 42 CFR 413.232(b). Specifically, the 
ESRD facility cost report is used to verify the total treatment count 
that an ESRD facility furnishes in its fiscal year, which includes 
Medicare and non-Medicare treatments. For independent ESRD facilities, 
this information is provided on Worksheet C of the Form CMS-265-11 form 
(previously Form CMS-265-94) and for hospital-based ESRD facilities, 
this information is on Worksheet I-4 of the Form CMS-2552-10.
    After the LVPA was implemented, we began hearing concerns from 
multiple stakeholders, including members of Congress and rural 
hospital-based ESRD facilities, about the MACs' LVPA eligibility 
determinations. The stakeholders indicated that because hospital-based 
ESRD facilities are financially integrated with a hospital, their costs 
and treatment data are aggregated in the I-series of the hospital's 
cost report. This means that if there is more than one ESRD facility 
that is affiliated with a hospital, the cost and treatment data for all 
facilities are aggregated on Worksheet I-4, typically causing the 
facilities' treatment counts to exceed the 4,000-treatment criterion.
    We have learned that some MACs accepted treatment counts from

[[Page 40238]]

hospital-based ESRD facilities other than those provided on the 
hospital's cost report and, as a result, certain hospital-based ESRD 
facilities received the LVPA. Other MACs solely used the aggregated 
treatment counts from the hospital's cost report to verify LVPA 
eligibility, which resulted in denials for many hospital-based 
facilities that would have qualified for the adjustment if the MACs had 
considered other supporting documentation.
    We agree with stakeholders that limiting the MAC review to the 
hospital cost reports for verification of LVPA eligibility for 
hospital-based ESRD facilities places these facilities at a 
disadvantage and does not comport with the intent of our policy. We 
believe it can be necessary for MACs to use other supporting data to 
verify the treatment counts for individual hospital-based facilities 
that would meet the eligibility criteria for the LVPA if their 
treatment counts had not been aggregated with one or more other 
facilities on their hospitals' cost reports. Because LVPA eligibility 
is based on cost report information and the individual hospital-based 
facility treatment counts is the source of the aggregated treatment 
counts reported in the cost report, however, we continue to believe 
that cost report data is an integral part of the process of verifying 
whether a hospital-based facility meets the LVPA eligibility criteria.
    For these reasons, we are clarifying that MACs may consider other 
supporting data, such as a hospital-based facility's total treatment 
count, along with the facility's cost reports and attestation, to 
verify it meets the low-volume eligibility criteria provided at 42 CFR 
413.232(b). The attestation should continue to be configured around the 
parent hospital's cost reports, that is, it should be for the same 
fiscal periods. The MAC can consider other supporting data in addition 
to the total treatments reported in each of the 12-consecutive month 
cost reports, such as the individual facility's total treatment counts, 
rather than the hospital's cost report alone, to verify the number of 
treatments that were furnished by the individual hospital-based 
facility that is seeking the adjustment. Consistent with this policy 
clarification, hospital-based ESRD facilities' eligibility for the LVPA 
should be determined at an individual facility level and their total 
treatment counts should not be aggregated with other ESRD facilities 
that are affiliated with the hospital unless the affiliated facilities 
are commonly owned and within 25 miles.
    MACs have discretion as to the format of the attestation and any 
supporting data, however, the facility must provide the total number of 
Medicare and non-Medicare treatments for the three cost reporting years 
preceding the payment year for all of the hospital-based facilities for 
which treatment counts appear on the hospital's cost report. This will 
allow MACs to determine which treatments on the cost report were 
furnished by the individual hospital-based facility that is seeking the 
LVPA and which treatments were furnished by other affiliated 
facilities. Finally, we propose to amend the regulation text by adding 
a new paragraph (h)(1) to Sec.  413.232 to reflect this clarification 
of current policy under which MACs can verify hospital-based ESRD 
facilities' eligibility for the LVPA using supporting data in addition 
to hospital cost reports. We are soliciting comment on the proposed 
changes at Sec.  413.232(h)(1).
b. Cost Reporting Periods Used for Eligibility
    In the CY 2012 ESRD PPS final rule (76 FR 70236), we clarified that 
for purposes of eligibility under 42 CFR 413.232(b), we base 
eligibility on the three years preceding the payment year and those 
years are based on cost reporting periods. We further clarified that 
the ESRD facility's cost reports for the cost reporting periods ending 
in the three years preceding the payment year must report costs for 12 
consecutive months.
    After the LVPA was implemented, we began hearing concerns from the 
industry that there is a conflict within our policy. Currently, our 
policy allows an ESRD facility to remain eligible for the LVPA when 
they have a change of ownership (CHOW) that does not result in a new 
Provider Transaction Access Number (PTAN). However, our regulations at 
42 CFR 413.232(b) suggest that MACs must verify treatment counts using 
cost reports for 12-consecutive month cost periods even though CHOWs 
often result in costs reports that are nonstandard, that is, longer or 
shorter than 12 months. In particular, the previous owner's final cost 
report may not coincide with the ESRD facility's cost report fiscal 
year end under its new ownership, resulting in two costs reports that 
are not 12-consecutive month cost reports. For example, where a CHOW 
occurs in the middle of the cost reporting period and the new owner 
wishes to retain the established cost report fiscal year end, the 
previous owner submits a final cost report covering their period of 
ownership and the new owner submits a cost report covering the 
remainder of the cost reporting period. Alternatively, a new owner 
could also choose not to retain the previous owner's established cost 
reporting fiscal year end, in which case the CHOW could result in a 
cost reports that exceed twelve months when combined. Further details 
regarding the policies for filing cost reports during a CHOW are 
available in the Provider Reimbursement Manual--Part 1, chapter 15, 
``Change of Ownership.''
    We agree with the industry that there is a conflict in the policies 
governing LVPA that may prevent an otherwise qualified ESRD facility 
from receiving the adjustment. We have always intended that if an ESRD 
facility has a CHOW where the new owner accepts the previous owner's 
assets and liabilities by retaining the facility's PTAN, they should 
continue to be eligible for the LVPA. However, some MACs used a strict 
reading of the regulatory language and denied these providers the LVPA. 
Other MACs added short cost reports together or prorated treatment 
counts for cost reporting periods spanning greater than 12 months.
    In order to ensure consistent verification of LVPA eligibility, we 
are restating our intention that when there is a CHOW that does not 
result in a new PTAN but creates two non-standard cost reporting 
periods (that is, periods that are shorter or longer than 12 months) 
the MAC is either to add the two non-standard cost reporting periods 
together where combined they would equal 12 consecutive months or 
prorate the data when they would exceed 12 consecutive months to 
determine the total treatments furnished for a full cost reporting 
period as if there had not been a CHOW.
    For example, prior to a CHOW, Facility A had a cost reporting 
period that spanned January 1 through December 31. Facility A had a 
CHOW mid-year that did not result in a new PTAN but caused a break in 
the cost reporting period. Consistent with the clarification of our 
policy, the MAC would add Facility A's cost report that spanned January 
1 through May 31 to its cost report that spanned June 1 through 
December 31 to verify the total treatment count.
    The other situation that could occur is when a CHOW results in a 
change of the original fiscal period. For example, prior to a CHOW, 
Facility B had a cost reporting period that spanned January 1 through 
December 31 and, based on its cost reports for 2012 and 2013, it met 
the LVPA eligibility criteria. Then, Facility B had a CHOW in the 
beginning of 2014 that did not result in a new PTAN, but changed its 
cost reporting period to that of its new owner, October

[[Page 40239]]

1, 2014 through September 30, 2015. This scenario would create a short 
and a long cost report that would not total 12 months that the MAC 
would need to review for verification. That is, Facility B would have a 
cost report that spanned January 1, 2014 through July 31, 2014 (7 
months) and a cost report that spanned August 1, 2014 through September 
30, 2015 (14 months).
    In this situation, the MAC should combine the two non-standard cost 
reporting periods that in combination may exceed 12-consecutive months 
and prorate the data to equal a full 12-consecutive month period. 
Finally, we propose to amend the regulation text by adding a new 
paragraph (h)(2) to Sec.  413.232 to clarify the verification process 
for ESRD facilities that experience a CHOW with no change in the PTAN. 
We are soliciting comments on the proposed changes at Sec.  
413.232(h)(2).
    Section 413.232(f) requires ESRD facilities to submit LVPA 
attestations by November 1 of each year. However, the changes we are 
proposing to the LVPA regulation text would not be finalized in enough 
time to give the ESRD facilities the opportunity to learn about the 
policy clarifications and provide an attestation to their MAC by 
November 1, 2014. For these reasons, we are proposing to amend Sec.  
413.232(f) to extend the deadline for CY 2015 LVPA attestations until 
December 31, 2014. This timeframe would allow ESRD facilities to 
reassess their eligibility and apply for the LVPA for CY 2015. It would 
also give MACs an opportunity to verify any new attestations and 
reassess LVPA eligibility verifications made since 2011. We will issue 
guidance with additional detail regarding this policy clarification, 
which will include details about the process ESRD facilities should 
follow to seek the LVPA for past years.

G. Continued Use of ICD-9-CM Codes and Corrections to the ICD-10-CM 
Codes Eligible for the Comorbidity Payment Adjustment

    Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS 
include a payment adjustment based upon 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. For a detailed discussion of 
our approach to developing the comorbidity payment adjustment, see the 
CY 2011 ESRD PPS final rule (75 FR 49094 through 49108).
    In the CY 2011 ESRD PPS final rule, we finalized six comorbidity 
categories that are eligible for a comorbidity payment adjustment, each 
with associated International Classification of Diseases, 9th Revision, 
Clinical Modification (ICD-9-CM) diagnosis codes (75 FR 49100). These 
categories include three acute, short-term diagnostic categories 
(pericarditis, bacterial pneumonia, and gastrointestinal tract bleeding 
with hemorrhage) and three chronic diagnostic categories (hereditary 
hemolytic 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 
the Comorbidity Payment Adjustment (75 FR 49211).
    In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that 
the ICD-9-CM codes eligible for the comorbidity payment adjustment are 
subject to the annual ICD-9-CM coding updates that occur in the 
hospital IPPS final rule and are effective October 1st 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.
    Together with the rest of the healthcare industry, CMS was 
scheduled to implement the 10th revision of the ICD coding scheme--ICD-
10--on October 1, 2014. Hence, in the CY 2014 ESRD PPS (78 FR 72175 
through 72179), we finalized a policy 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 
with two exceptions.
    On April 1, 2014, PAMA was enacted. Section 212 of PAMA, titled 
``Delay in Transition from ICD-9 to ICD-10 Code Sets,'' provides that 
``[t]he Secretary of Health and Human Services may not, prior to 
October 1, 2015, adopt ICD-10 code sets as the standard for code sets 
under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) 
and section 162.1002 of title 45, Code of Federal Regulations.'' On May 
1, 2014, the Secretary announced that HHS expects to issue an interim 
final rule that will require use of ICD-10 beginning October 1, 2015 
and continue to require use of ICD-9-CM through September 30, 2015. 
This announcement is available on the CMS Web site at http://cms.gov/Medicare/Coding/ICD10/index.html. Before the passage of PAMA, our 
policy required facilities to utilize ICD-10-CM codes to identify 
comorbidities eligible for the comorbidity payment adjustment beginning 
October 1, 2014. However, in light of section 212 of PAMA and the 
Secretary's announcement of the new compliance date for ICD-10, we are 
proposing to require use of ICD-10-CM to identify comorbidities 
beginning on October 1, 2015. Until that time, we will continue to 
require use of the ICD-9-CM codes to identify comorbidities eligible 
for the comorbidity payment adjustment. The ICD-9-CM codes that are 
eligible for the comorbidity payment adjustment are listed in the 
crosswalk tables below.
    Because facilities will begin using ICD-10 during the calendar year 
to which this rule applies, we are correcting several typographical 
errors and omissions in the Tables that appeared in the CY 2015 ESRD 
PPS final rule. First, we are correcting one ICD-9-CM diagnosis code 
that was incorrectly identified due to a typographical error in Table 
1--ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE (78 FR 72176). In 
Table 2--ONE ICD-9-CM CODE CROSSWALKS TO MULTIPLE ICD-10-CM CODES (78 
FR 72177), we are correcting two ICD-10-CM codes because of 
typographical errors and proposing two additional ICD-10-CM codes that 
were inadvertently omitted from the crosswalk. Lastly, in Table 3--
MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE (78 FR 72178), 
we are proposing to include 9 additional ICD-10-CM crosswalk codes for 
eligibility for the comorbidity payment adjustment. These codes were 
omitted in error from the CY 2014 ESRD PPS final rule, and we have 
furnished an updated Table 20 below reflecting the additional codes.
    We note that the ICD-10-CM codes that facilities will be required 
to use to identify eligible comorbidities when ICD-10 becomes the 
required medical data code set on October 1, 2015 are those that were 
finalized in the CY 2014 ESRD PPS final rule at 78 FR 72175 to 78 FR 
72179 with the corrections and proposed additions included below.
    Table 18-- ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE (78 
FR 72175 through 78 FR 72176).

[[Page 40240]]

    Table 18 lists all the instances in which one ICD-9-CM code 
crosswalks to one ICD-10-CM code. We finalized a policy in last year's 
rule that all identified ICD-10-CM codes would receive a comorbidity 
adjustment with the exception of K52.81 Eosinophilic gastritis or 
gastroenteritis. We have since discovered that under the section titled 
Myelodysplastic Syndrome, ICD-9-CM code 238.7 Essential thrombocythemia 
was inaccurately identified. The table below has been amended to 
accurately identify ICD-9-CM diagnostic code 238.71 Essential 
thrombocythemia.

      Table 18--One ICD-9-CM Code Crosswalks to One ICD-10-CM Code
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
530.21 Ulcer of esophagus with bleeding  K22.11 Ulcer of esophagus with
                                          bleeding.
535.71 Eosinophilic gastritis, with      K52.81 Eosinophilic gastritis
 hemorrhage.                              or gastroenteritis.
537.83 Angiodysplasia of stomach and     K31.811 Angiodysplasia of
 duodenum with hemorrhage.                stomach and duodenum with
                                          bleeding.
569.85 Angiodysplasia of intestine with  K55.21 Angiodysplasia of colon
 hemorrhage.                              with hemorrhage.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
003.22 Salmonella pneumonia............  A02.22 Salmonella pneumonia.
482.0 Pneumonia due to Klebsiella        J15.0 Pneumonia due to
 pneumonia.                               Klebsiella pneumoniae.
482.1 Pneumonia due to Pseudomonas.....  J15.1 Pneumonia due to
                                          Pseudomonas.
482.2 Pneumonia due to Hemophilus        J14 Pneumonia due to Hemophilus
 influenzae [H. influenzae].              influenzae.
482.32 Pneumonia due to Streptococcus,   J15.3 Pneumonia due to
 group B.                                 streptococcus, group B.
482.40 Pneumonia due to Staphylococcus,  J15.20 Pneumonia due to
 unspecified.                             staphylococcus, unspecified.
482.41 Methicillin susceptible           J15.211 Pneumonia due to
 pneumonia due to Staphylococcus aureus.  Methicillin susceptible
                                          Staphylococcus aureus.
482.42 Methicillin resistant pneumonia   J15.212 Pneumonia due to
 due to Staphylococcus aureus.            Methicillin resistant
                                          Staphylococcus aureus.
482.49 Other Staphylococcus pneumonia..  J15.29 Pneumonia due to other
                                          staphylococcus.
482.82 Pneumonia due to escherichia      J15.5 Pneumonia due to
 coli [E. coli].                          Escherichia coli.
482.83 Pneumonia due to other gram-      J15.6 Pneumonia due to other
 negative bacteria.                       aerobic Gram-negative
                                          bacteria.
482.84 Pneumonia due to Legionnaires'    A48.1 Legionnaires' disease.
 disease.
507.0 Pneumonitis due to inhalation of   J69.0 Pneumonitis due to
 food or vomitus.                         inhalation of food and vomit.
507.8 Pneumonitis due to other solids    J69.8 Pneumonitis due to
 and liquids.                             inhalation of other solids and
                                          liquids.
510.0 Empyema with fistula.............  J86.0 Pyothorax with fistula.
510.9 Empyema without mention of         J86.9 Pyothorax without
 fistula.                                 fistula.
------------------------------------------------------------------------
                              Pericarditis
------------------------------------------------------------------------
420.91 Acute idiopathic pericarditis...  I30.0 Acute nonspecific
                                          idiopathic pericarditis.
------------------------------------------------------------------------
               Hereditary Hemolytic and Sickle Cell Anemia
------------------------------------------------------------------------
282.0 Hereditary spherocytosis.........  D58.0 Hereditary spherocytosis.
282.1 Hereditary elliptocytosis........  D58.1 Hereditary
                                          elliptocytosis.
282.41 Sickle-cell thalassemia without   D57.40 Sickle-cell thalassemia
 crisis.                                  without crisis.
282.43 Alpha thalassemia...............  D56.0 Alpha thalassemia.
282.44 Beta thalassemia................  D56.1 Beta thalassemia.
282.45 Delta-beta thalassemia..........  D56.2 Delta-beta thalassemia.
282.46 Thalassemia minor...............  D56.3 Thalassemia minor.
282.47 Hemoglobin E-beta 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
 crisis.                                  without crisis.
282.68 Other sickle-cell disease         D57.80 Other sickle-cell
 without crisis.                          disorders without crisis.
------------------------------------------------------------------------
                        Myelodysplastic Syndrome
------------------------------------------------------------------------
238.71 Essential thrombocythemia.......  D47.3 Essential (hemorrhagic)
                                          thrombocythemia.
238.73 High grade myelodysplastic        D46.22 Refractory anemia with
 syndrome lesions.                        excess of blasts 2.
238.74 Myelodysplastic syndrome with 5q  D46.C Myelodysplastic syndrome
 deletion.                                with isolated del(5q)
                                          chromosomal abnormality.
238.76 Myelofibrosis with myeloid        D47.1 Chronic
 metaplasia.                              myeloproliferative disease.
------------------------------------------------------------------------

    Table 19--ONE ICD-9-CM CODE CROSSWALKS TO MULIPLE ICD-10-CM CODES 
(78 FR 72177 through 78 FR 72178).
    Table 19 lists all of the instances in which one ICD-9-CM code 
crosswalks to multiple ICD-10-CM codes. We finalized a policy in last 
year's rule that all identified ICD-10-CM codes would receive a 
comorbidity adjustment with the exception of D89.2 
Hypergammaglobulinemia, unspecified. Under the section titled 
Gastrointestinal Bleeding, ICD-9-CM code 562 Diverticulosis of small 
intestine with hemorrhage was inaccurately identified, as the complete 
code number is 562.02. The table below has been amended to accurately 
identify ICD-9-CM diagnostic code 562.02 Diverticulosis of small 
intestine with hemorrhage.

[[Page 40241]]

    Also under the section titled Gastrointestinal Bleeding, ICD-9-CM 
diagnostic code 562.13 Diverticulitis of colon with hemorrhage did not 
include a complete crosswalk to ICD-10-CM diagnostic codes. Therefore, 
we propose to include ICD-10-CM diagnostic codes K57.81 Diverticulitis 
of intestine, part unspecified, with perforation and abscess with 
bleeding and K57.93 Diverticulitis of intestine, part unspecified, 
without perforation or abscess with bleeding, in addition to the ICD-
10-CM diagnostic codes K57.21, K57.33, K57.41, and K57.53, as eligible 
for the comorbidity payment adjustment when the use of ICD-10-CM is 
required, on October 1, 2015.
    Under the section titled Pericarditis, ICD-10-CM code 130.1 
Infective pericarditis was inaccurately identified. The table below has 
been amended to accurately identify the ICD-10-CM diagnostic code I30.1 
Infective pericarditis as eligible for a comorbidity payment adjustment 
when the use of ICD-10-CM is required, on October 1, 2015.

   Table 19--One ICD-9-CM Code Crosswalks to Multiple ICD-10-CM Codes
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
562.02 Diverticulosis of small           K57.11 Diverticulosis of small
 intestine with hemorrhage.               intestine 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           K57.01 Diverticulitis of small
 intestine with hemorrhage.               intestine with perforation and
                                          abscess with bleeding.
                                         K57.13 Diverticulitis of small
                                          intestine without perforation
                                          or abscess with bleeding.
                                         K57.41 Diverticulitis of both
                                          small and large intestine with
                                          perforation and abscess with
                                          bleeding.
                                         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
 hemorrhage.                              intestine 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
 hemorrhage.                              intestine with perforation and
                                          abscess with bleeding.
                                         K57.33 Diverticulitis of large
                                          intestine without perforation
                                          or abscess with bleeding.
                                         K57.41 Diverticulitis of both
                                          small and large intestine with
                                          perforation and abscess with
                                          bleeding.
                                         K57.53 Diverticulitis of both
                                          small and large intestine
                                          without perforation or abscess
                                          with bleeding.
                                         K57.81 Diverticulitis of
                                          intestine, part unspecified,
                                          with perforation and abscess
                                          with bleeding.
 K57.93 Diverticulitis of intestine,
 part unspecified, without perforation
 or abscess with bleeding.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
513.0 Abscess of lung..................  J85.0 Gangrene and necrosis of
                                          lung.
                                         J85.1 Abscess of lung with
                                          pneumonia.
                                         J85.2 Abscess of lung without
                                          pneumonia.
------------------------------------------------------------------------
                              Pericarditis
------------------------------------------------------------------------
420.0 Acute pericarditis in 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.  I30.1 Infective pericarditis.
                                         I30.9 Acute pericarditis,
                                          unspecified.
420.99 Other acute pericarditis........  I30.8 Other forms of acute
                                          pericarditis.
                                         I30.9 Acute pericarditis,
                                          unspecified.
------------------------------------------------------------------------
               Hereditary Hemolytic and sickle cell anemia
------------------------------------------------------------------------
282.2 Anemias due to disorders of        D55.0 Anemia due to glucose-6-
 glutathione metabolism.                  phosphate dehydrogenase [G6PD]
                                          deficiency.
                                         D55.1 Anemia due to other
                                          disorders of glutathione
                                          metabolism.
282.3 Other hemolytic anemias due to     D55.2 Anemia due to disorders
 enzyme deficiency.                       of glycolytic 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      D57.411 Sickle-cell thalassemia
 crisis.                                  with acute chest syndrome.
                                         D57.412 Sickle-cell thalassemia
                                          with splenic sequestration.

[[Page 40242]]

 
                                         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     D57.211 Sickle-cell/Hb-C
 crisis.                                  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    D57.811 Other sickle-cell
 crisis.                                  disorders with acute chest
                                          syndrome.
                                         D57.812 Other sickle-cell
                                          disorders with splenic
                                          sequestration.
                                         D57.819 Other sickle-cell
                                          disorders with crisis,
                                          unspecified.
------------------------------------------------------------------------
                          Monoclonal Gammopathy
------------------------------------------------------------------------
273.1 Monoclonal paraproteinemia.......  D47.2 Monoclonal gammopathy.
                                         D89.2 Hypergammaglobulinemia,
                                          unspecified.
------------------------------------------------------------------------
                        Myelodysplastic Syndrome
------------------------------------------------------------------------
238.72 Low grade myelodysplastic         D46.0 Refractory anemia without
 syndrome lesions.                        ring sideroblasts, so stated.
                                         D46.1 Refractory anemia with
                                          ring sideroblasts.
                                         D46.20 Refractory anemia with
                                          excess of blasts, unspecified.
                                         D46.21 Refractory anemia with
                                          excess of blasts 1.
                                         D46.4 Refractory anemia,
                                          unspecified.
                                         D46.A Refractory cytopenia with
                                          multilineage dysplasia.
                                         D46.B Refractory cytopenia with
                                          multilineage dysplasia and
                                          ring sideroblasts.
238.75 Myelodysplastic syndrome,         D46.9 Myelodysplastic syndrome,
 unspecified.                             unspecified.
                                         D46.Z Other myelodysplastic
                                          syndromes.
------------------------------------------------------------------------

    Table 20--MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE 
(78 FR 72178).
    Table 20 displays the crosswalk where multiple ICD-9-CM codes 
crosswalk to one ICD-10-CM code. We finalized a policy in last year's 
rule that all of the ICD-10-CM codes listed in Table 3 would be 
eligible for the comorbidity payment adjustment. Under the section 
titled Gastrointestinal Bleeding, nine ICD-10-CM codes (K25.0 Acute 
gastric ulcer with hemorrhage, K25.2 Acute gastric ulcer with both 
hemorrhage and perforation, K25.4 Chronic or unspecified gastric ulcer 
with hemorrhage, K25.6 Chronic or unspecified gastric ulcer with both 
hemorrhage and perforation, K26.0 Acute duodenal ulcer with hemorrhage, 
K26.2 Acute duodenal ulcer with both hemorrhage and perforation, K26.4 
Chronic or unspecified duodenal ulcer with hemorrhage, K26.6 Chronic or 
unspecified duodenal ulcer with both hemorrhage and perforation, and 
K27.0 Acute peptic ulcer, site unspecified, with hemorrhage) and the 
corresponding ICD-9-CM codes were inadvertently omitted from the 
crosswalk. We propose that these ICD-10-CM diagnostic codes--K25.0, 
K25.2 K25.4, K25.6, K26.0, K26.2, K26.4, K26.6, K27.0--will be eligible 
for the comorbidity payment adjustment beginning October 1, 2015. We 
also propose that the corresponding ICD-9-CM codes will be eligible for 
the comorbidity adjustment through September 30, 2015.

    Table 20--Multiple ICD-9-CM Codes Crosswalk to One ICD-10-CM Code
------------------------------------------------------------------------
            ICD-9 Descriptor                    ICD-10 Descriptor
------------------------------------------------------------------------
                        Gastrointestinal Bleeding
------------------------------------------------------------------------
531.00 Acute gastric ulcer with          K25.0 Acute gastric ulcer with
 hemorrhage, without mention of           hemorrhage.
 obstruction.
531.01 Acute gastric ulcer with
 hemorrhage, with obstruction.
531.20 Acute gastric ulcer with          K25.2 Acute gastric ulcer with
 hemorrhage and perforation, without      both hemorrhage and
 mention of obstruction.                  perforation.
531.21 Acute gastric ulcer with
 hemorrhage and perforation, with
 obstruction.
531.40 Chronic or unspecified gastric    K25.4 Chronic or unspecified
 ulcer with hemorrhage, without mention   gastric ulcer with hemorrhage.
 of obstruction.
531.41 Chronic or unspecified gastric
 ulcer with hemorrhage, with
 obstruction.
531.60 Chronic or unspecified gastric    K25.6 Chronic or unspecified
 ulcer with hemorrhage and perforation,   gastric ulcer with both
 without mention of obstruction.          hemorrhage and perforation.
531.61 Chronic or unspecified gastric
 ulcer with hemorrhage and perforation,
 with obstruction.
532.00 Acute duodenal ulcer with         K26.0 Acute duodenal ulcer with
 hemorrhage, without mention of           hemorrhage.
 obstruction.
532.01 Acute duodenal ulcer with
 hemorrhage, with obstruction.
532.20 Acute duodenal ulcer with         K26.2 Acute duodenal ulcer with
 hemorrhage and perforation, without      both hemorrhage and
 mention of obstruction.                  perforation.

[[Page 40243]]

 
532.21 Acute duodenal ulcer with
 hemorrhage and perforation, with
 obstruction.
532.40 Chronic or unspecified duodenal   K26.4 Chronic or unspecified
 ulcer with hemorrhage, without mention   duodenal ulcer with
 of obstruction.                          hemorrhage.
532.41 Chronic or unspecified duodenal
 ulcer with hemorrhage, with
 obstruction.
532.60 Chronic or unspecified duodenal   K26.6 Chronic or unspecified
 ulcer with hemorrhage and perforation,   duodenal ulcer with both
 without mention of obstruction.          hemorrhage and perforation.
532.61 Chronic or unspecified duodenal
 ulcer with hemorrhage and perforation,
 with obstruction.
533.00 Acute peptic ulcer of             K27.0 Acute peptic ulcer, site
 unspecified site with hemorrhage,        unspecified, with hemorrhage.
 without mention of obstruction.
533.01 Acute peptic ulcer of
 unspecified site with hemorrhage, with
 obstruction.
533.20 Acute peptic ulcer of             K27.2 Acute peptic ulcer, site
 unspecified site with hemorrhage and     unspecified, with both
 perforation, without mention of          hemorrhage and perforation.
 obstruction.
533.21 Acute peptic ulcer of
 unspecified site with hemorrhage and
 perforation, with obstruction.
533.40 Chronic or unspecified peptic     K27.4 Chronic or unspecified
 ulcer of unspecified site with           peptic ulcer, site
 hemorrhage, without mention of           unspecified, with hemorrhage.
 obstruction.
533.41 Chronic or unspecified peptic
 ulcer of unspecified site with
 hemorrhage, with obstruction.
533.60 Chronic or unspecified peptic     K27.6 Chronic or unspecified
 ulcer of unspecified site with           peptic ulcer, site
 hemorrhage and perforation, without      unspecified, with both
 mention of obstruction.                  hemorrhage and perforation.
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
 hemorrhage, without mention of           with hemorrhage.
 obstruction.
534.01 Acute gastrojejunal ulcer, with
 hemorrhage, with obstruction.
534.20 Acute gastrojejunal ulcer with    K28.2 Acute gastrojejunal ulcer
 hemorrhage and perforation, without      with both hemorrhage and
 mention of obstruction.                  perforation.
534.21 Acute gastrojejunal ulcer with
 hemorrhage and perforation, with
 obstruction.
534.40 Chronic or unspecified            K28.4 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage,     gastrojejunal ulcer with
 without mention of obstruction.          hemorrhage.
534.41 Chronic or unspecified
 gastrojejunal ulcer, with hemorrhage,
 with obstruction.
534.60 Chronic or unspecified            K28.6 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage      gastrojejunal ulcer with both
 and perforation, without mention of      hemorrhage and perforation.
 obstruction.
534.61 Chronic or unspecified
 gastrojejunal ulcer with hemorrhage
 and perforation, with obstruction.
------------------------------------------------------------------------
                           Bacterial Pneumonia
------------------------------------------------------------------------
482.30 Pneumonia due to Streptococcus,   J15.4 Pneumonia due to other
 unspecified.                             streptococci.
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.
------------------------------------------------------------------------

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

A. Background

    For more than 30 years, monitoring the quality of care provided by 
dialysis facilities to patients with end-stage renal disease (ESRD) 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 the 
Medicare Improvements for Patients and Providers Act (MIPPA).
    Specifically, section 1881(h) requires the Secretary to establish 
an ESRD QIP by (i) selecting measures; (ii) establishing the 
performance standards that apply to the individual measures; (iii) 
specifying a performance period with respect to a year; (iv) developing 
a methodology for assessing the total performance of each facility 
based on the performance standards with respect to the measures for a 
performance period; and (v) applying an appropriate payment reduction 
to facilities that do not meet or exceed the established Total 
Performance Score (TPS). This proposed rule discusses each of these 
elements and our proposals for their application to the ESRD QIP, 
including for PYs 2017 and 2018.

B. Considerations in Updating and Expanding Quality Measures Under the 
ESRD QIP

    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 bases payments to providers and 
suppliers on the quality of services they furnish. By paying for the 
quality of care rather than simply the quantity of care, and by 
focusing on better care and lower costs through improvement, prevention 
and population health, expanded healthcare coverage, and enterprise 
excellence, we are strengthening the healthcare system

[[Page 40244]]

while also advancing the National Strategy for Quality Improvement in 
Health Care (that is, the National Quality Strategy (NQS)). We are also 
working to update a set of domains and specific quality measures for 
our VBP programs, and to link the aims of the NQS 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 
where necessary, 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 NQS to 
improve the overall quality of care, improve the health of the U.S. 
population, and reduce the cost of quality healthcare.\2\
---------------------------------------------------------------------------

    \2\ 2013 Annual Progress Report to Congress: National Strategy 
for Quality Improvement in Health Care, http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm.
---------------------------------------------------------------------------

    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 coordinated care. Our 
measure development and selection activities for the ESRD QIP take into 
account national priorities such as those established by the HHS 
Strategic Plan (http://www.hhs.gov/strategic-plan/priorities.html), the 
NQS (http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm), and 
the HHS National Action Plan to Prevent Healthcare Associated 
Infections (HAIs) (http://www.hhs.gov/ash/initiatives/hai/esrd.html). 
To the extent feasible and practicable, we have sought to adopt 
measures that have been endorsed by a national consensus organization; 
recommended by multi-stakeholder organizations; and developed with the 
input of providers, beneficiaries, health advocacy organizations, and 
other stakeholders.

C. Web Sites for Measure Specifications

    In an effort to ensure that facilities and the general public are 
able to continue accessing the specifications for the measures that are 
being proposed for and have been adopted in the ESRD QIP, we are now 
posting these measure specifications on a CMS Web site, instead of 
posting them on www.dialysisreports.org as we have in the past. Measure 
specifications from previous years, as well as those proposed for the 
PY 2017 and PY 2018 programs, can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.

D. Updating the NHSN Bloodstream Infection in Hemodialysis Outpatients 
Clinical Measure for the PY 2016 ESRD QIP and Future Payment Years

    The NHSN Bloodstream Infection in Hemodialysis Outpatients clinical 
measure (that is, NHSN Bloodstream Infection clinical measure) that we 
adopted beginning with the PY 2016 ESRD QIP is based on NQF 
1460. At the time we adopted it, the measure included a risk 
adjustment for patients' vascular access type but did not include any 
reliability adjustments to account for differences in the amount of 
exposure or opportunity for healthcare associated infections (HAIs) 
among patients. On April 4, 2014, in response to a measure update 
proposal submitted by CDC, NQF endorsed a reliability adjustment for 
volume of exposure and unmeasured variation across facilities to NQF 
1460. This reliability adjustment is called the Reliability-
Adjusted Standardized Infection Ratio or Adjusted Ranking Metric (ARM). 
As a result of this change to the NQF-endorsed measure specifications, 
a facility's performance on NQF 1460 will be adjusted towards 
the mean (that is, facilities with low exposure volume will be adjusted 
more than facilities with high exposure volume, and the performance 
rate will be adjusted up or down depending on the facility estimate and 
mean) to account for the differences in the reliability of the 
infection estimates based on the number of patient-months at a facility 
and any unmeasured variation across facilities. Because the adjustment 
is based on the volume of exposure, facility scores will be adjusted 
more if there are fewer patient-months in the denominator, and facility 
scores will be adjusted less if there are many patient-months in the 
denominator.
    We propose to adopt the same reliability adjustment for purposes of 
calculating facility performance on the NHSN Bloodstream Infection 
clinical measure, beginning with the PY 2016 ESRD QIP. We believe that 
the inclusion of this reliability adjustment, in addition to the risk 
factor adjustment, will enable us to better differentiate among 
facility performance on this measure, because it accounts not only for 
the variation in patient risk by vascular access type, but also for 
variation in the number of patients a facility treats in a given month. 
The ARM will be incorporated into the existing risk-adjustment 
methodology, which will also continue to include a risk adjustment for 
patient vascular access type. Further information about the reliability 
adjustment, and the NHSN Bloodstream Infection measure specifications 
can be found at http://www.cdc.gov/nhsn/PDFs/dialysis/NHSN-ARM.pdf, 
http://www.cdc.gov/nhsn/dialysis/dialysis-event.html, and http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.

E. Oral-Only Drugs Measures in the ESRD QIP

    Section 217(d) of the Protecting Access to Medicare Act of 2014 
(Pub. L. 113-93), enacted on April 1, 2014, amends section 1881(h)(2) 
of the Act to require the Secretary, for PY 2016 and subsequent years, 
to adopt measures (outcome-based, to the extent feasible) in the ESRD 
QIP that are specific to the conditions treated with oral-only drugs. 
We believe that the Hypercalcemia clinical measure adopted beginning 
with the PY 2016 program (78 FR 72200 through 72203) meets this new 
statutory requirement because hypercalcemia is a condition that is 
treated with oral-only drugs. The Hypercalcemia clinical measure is not 
an outcome-based measure, and we have considered the possibility of 
adopting outcomes-based measures that pertain to conditions treated 
with oral-only drugs. However, we have determined that it is not 
feasible to propose to adopt an outcome-based measure on this topic at 
this time because we are not aware of any outcome measures developed on 
this topic.

F. Proposed Requirements for the PY 2017 ESRD QIP

1. Proposed Revision to the Expanded ICH CAHPS Reporting Measure
    For the ICH CAHPS reporting measure, we are proposing one change to 
the reporting requirements finalized in the CY 2014 ESRD PPS Final Rule 
for PY 2017. In the CY 2014 ESRD PPS final rule, we finalized that 
facilities would be eligible to receive a score on the measure if they 
treated 30 or more survey-eligible patients during the performance 
period (78 FR 72220 through 72221). Subsequently, we were made aware 
that facilities may not know whether they will have enough survey-
eligible patients during the performance period to be eligible for the 
ICH CAHPS

[[Page 40245]]

measure when they are making decisions about whether or not they will 
contract with a vendor to administer the survey. We agree that it would 
be preferable if facilities knew at the beginning of the performance 
period if they will be eligible to receive a score on the ICH CAHPS 
measure, because this would allow facilities to make informed decisions 
about whether they should contract with a vendor to administer the 
survey. For this reason, we propose that beginning with the PY 2017 
program, facilities will be eligible to receive a score on the ICH 
CAHPS measure if they treat 30 or more survey-eligible patients during 
the ``eligibility period,'' which we define as the CY before the 
performance period. However, even if a facility is eligible to receive 
a score on the measure because it has treated at least 30 survey-
eligible patients according to the ICH CAHPS Survey measure 
specifications during the calendar year prior to the performance 
period, we are proposing that the facility will still not receive a 
score for performance during the performance period if it cannot 
collect 30 survey completes during the performance period. We believe 
that facilities should be able to determine quickly the number of 
survey-eligible patients that they treated during the eligibility 
period, and that reaching this determination should not impact 
facilities' ability to contract with a vender in time to meet the 
semiannual survey administration requirements. Technical specifications 
for the ICH CAHPS reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal.
2. Proposed Measures for the PY 2017 ESRD QIP
a. PY 2016 Measures Continuing in PY 2017 and Future Payment Years
    We previously finalized 11 measures in the CY 2014 ESRD PPS Final 
Rule for the PY 2016 ESRD QIP, and these measures are summarized in 
Table 21 below. In accordance with our policy to continue using 
measures unless we propose to remove or replace them (77 FR 67477), we 
will continue to use 10 of these 11 measures in the PY 2017 ESRD QIP. 
As we discuss in more detail below, we are proposing to remove one 
measure, Hemoglobin Greater than 12 g/dL, beginning with the PY 2017 
measure set (see Table 22 below).

     Table 21--PY 2016 ESRD QIP Measures Being Continued in PY 2017
------------------------------------------------------------------------
        NQF                 Measure title and description
------------------------------------------------------------------------
0249.........................  Hemodialysis Adequacy: Minimum delivered
                                hemodialysis dose.
                               Percent of hemodialysis patient-months
                                with spKt/V greater than or equal to
                                1.2.
0318.........................  Peritoneal Dialysis Adequacy: Delivered
                                dose above minimum.
                               Percent of peritoneal dialysis patient-
                                months with spKt/V greater than or equal
                                to 1.7 (dialytic + residual) during the
                                four month study period.
1423.........................  Pediatric Hemodialysis Adequacy: Minimum
                                spKt/V.
                               Percent of pediatric in-center
                                hemodialysis patient-months with spKt/V
                                greater than or equal to 1.2.
0257.........................  Vascular Access Type: 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)
                                Bloodstream Infection in Hemodialysis
                                Patients.
                               Number of hemodialysis outpatients with
                                positive blood cultures per 100
                                hemodialysis patient-months.\2\
1454.........................  Hypercalcemia.
                               Proportion of patient-months with 3-month
                                rolling average of total uncorrected
                                serum calcium greater than 10.2 mg/dL.
N/A \3\......................  In-Center Hemodialysis Consumer
                                Assessment of Healthcare Providers and
                                Systems (ICH CAHPS) Survey
                                Administration.
                               Facility administers, using a third-party
                                CMS-approved vendor, the ICH CAHPS
                                survey in accordance with survey
                                specifications and submits survey
                                results to CMS.
N/A \4\......................  Mineral Metabolism Reporting.
                               Number of months for which facility
                                reports serum 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 this measure is based on a current NQF-endorsed
  bloodstream infection measure (NQF1460).
\2\ We are proposing a new method of calculating performance on this
  measure using the ARM methodology. If we decide to finalize this
  proposal based on public comments, the NHSN Bloodstream Infection
  clinical measure description will be updated to read: ``ARM of
  Bloodstream Infection will be calculated among inpatients receiving
  hemodialysis at outpatient hemodialysis centers.''
\3\ We note that a related measure utilizing the results of this survey
  has been NQF-endorsed (0258). We are proposing to adopt NQF
  0258 in the PY 2018 program.
\4\ We note that this measure is based upon a current NQF-endorsed serum
  phosphorus measure (NQF 0255).

[[Page 40246]]

 Table 22--Measure Proposed for Removal Beginning With the PY 2017 ESRD
                                   QIP
------------------------------------------------------------------------
               NQF                         Measure title
------------------------------------------------------------------------
N/A.......................................  Anemia Management: Hgb >12.
                                            Percentage of Medicare
                                             patients with a mean
                                             hemoglobin value greater
                                             than 12 g/dL.
------------------------------------------------------------------------

b. Proposal To Determine When a Measure is ``Topped-Out'' in the ESRD 
QIP, and Proposal To Remove a Topped-Out Measure From the ESRD QIP, 
Beginning With PY 2017
    In the CY 2013 ESRD PPS final rule (77 FR 67475), we finalized a 
list of seven criteria we would consider when making 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.''
    In the CY 2014 ESRD PPS final rule (78 FR 72192), we stated that we 
were in the process of evaluating all of the ESRD QIP measures against 
the criteria. Subsequent to the publication of the CY 2014 ESRD PPS 
final rule, we completed our evaluation and determined that none of the 
measures finalized in the PY 2016 ESRD QIP met criteria 2 through 7, as 
listed above. With respect to the first criterion, we are proposing to 
more specifically define when performance on a clinical measure is so 
high and unvarying that the measure no longer reflects meaningful 
distinctions in improvements or performance. The statistical 
definitions that we are proposing to adopt will align our methodology 
with that used by the Hospital VBP program to determine when a measure 
is topped out (76 FR 26496 through 26497). Under this methodology, a 
clinical measure is considered to be topped out if national measure 
data show (1) statistically indistinguishable performance levels at the 
75th and 90th percentiles; and (2) a truncated coefficient of variation 
(CV) of less than or equal to 0.1.
    To determine whether a clinical measure is topped out, we initially 
focused on the top distribution of facility performance on each measure 
and noted if their 75th and 90th percentiles were statistically 
indistinguishable. Then, to ensure that we properly accounted for the 
entire distribution of scores, we analyzed the truncated coefficient of 
variation (CV) for each of the clinical measures.
    The CV is a common statistic that expresses the standard deviation 
as a percentage of the sample mean in a way that is independent of the 
units of observation. Applied to this analysis, a large CV would 
indicate a broad distribution of individual facility scores, with large 
and presumably meaningful differences between hospitals in relative 
performance. A small CV would indicate that the distribution of 
individual facility scores is clustered tightly around the mean value, 
suggesting that it is not useful to draw distinctions between 
individual facility performance scores. We used a modified version of 
the CV, namely a truncated CV, for each clinical measure, in which the 
5 percent of facilities with the lowest scores, and the 5 percent of 
facilities with the highest scores were first truncated (set aside) 
before calculating the CV. This was done to avoid undue effects of the 
highest and lowest outlier facilities; if included, they would tend to 
greatly widen the dispersion of the distribution and make the clinical 
measure appear to be more reliable or discerning. For example, a 
clinical measure for which most facility scores are tightly clustered 
around the mean value (a small CV) might actually reflect a more robust 
dispersion if there were also a number of facilities with extreme 
outlier values, which would greatly increase the perceived variance in 
the measure. Accordingly, the truncated CV of less than or equal to 
0.10 was added as a criterion for determining whether a clinical 
measure is topped out.
    We seek comments on this proposal.
    We evaluated each of the clinical measures finalized in the PY 2016 
ESRD QIP against these proposed statistical conditions. The full 
analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The results of that analysis appear below 
in Table 23.

                       Table 23--PY 2016 Clinical Measures Using CROWNWeb and Medicare Claims Data From January 2013-December 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     75th         90th                     Statistically indistin-     Truncated
              Measure                    N        percentile   percentile   Std. error            guishable                CV            TCV V.....................         5665         96.1         97.4         0.13  No..........................         0.04  Yes.
Adult PD Kt/V.....................         1176         92.9         94.8         0.55  No..........................         0.15  No.
Pediatric HD Kt/V.................           10         94.5         97.1         2.71  Yes.........................         0.08  Yes.
Hgb > 12..........................         5521          0.0          0.0         0.02  Yes.........................       dL measure meets the proposed criteria for 
determining when a clinical measure is topped-out in the ESRD QIP. 
Accordingly, we propose to remove the Hemoglobin Greater than 12 g/dL 
measure from the ESRD QIP, beginning with the PY 2017 program. We 
recognize that the Pediatric Hemodialysis Adequacy measure also meets 
the conditions for being a topped-out clinical measure in the ESRD QIP. 
However, we are not proposing to remove the Pediatric Hemodialysis 
Adequacy measure from the ESRD QIP because we have determined that 
removing the measure will not be useful for dialysis facilities. There 
are currently very few measures available that focus on the care 
furnished to

[[Page 40247]]

pediatric patients with ESRD, and we are reticent to remove a measure 
that addresses the unique needs of this population. In addition, 
although only 10 facilities were eligible to receive a score on the 
Pediatric Hemodialysis Adequacy measure (based on CY 2013 data), we 
believe that the publicly reported performance of these facilities can 
influence the standard of care furnished by other facilities that treat 
pediatric patients, even if a facility does not treat a sufficient 
number of pediatric patients to be eligible to be scored on the 
measure.
    For these reasons, we believe that the drawbacks of removing a 
topped out clinical measure could be outweighed by the other benefits 
to retaining the measure. Accordingly, we propose that even if we 
determine that a clinical measure is topped out according to the 
statistical criteria we apply, we will not remove or replace it if we 
determine that its continued inclusion in the ESRD QIP measure set will 
continue to set a high standard of care for dialysis facilities.
    We seek comments on these proposals.
c. New Measures Proposed for PY 2017 and Future Payment Years
    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 2017 ESRD QIP and future payment years, we are proposing to 
adopt one new clinical measure that addresses care coordination (see 
Table 24).

         Table 24--New Measure Proposed for the PY 2017 ESRD QIP
------------------------------------------------------------------------
               NQF                         Measure title
------------------------------------------------------------------------
N/A \1\...................................  Standardized Readmission
                                             Ratio, a clinical measure.
                                            Risk-adjusted standardized
                                             hospital readmissions
                                             ratio.
------------------------------------------------------------------------
\1\ We note that this measure is currently under review at NQF.

i. Proposed Standardized Readmission Ratio (SRR) Clinical Measure
Background
    At the end of 2011, 615,899 patients were being dialyzed, 115,643 
of whom were new (incident) patients with ESRD.\3\ The SRR measure 
assesses the rate of unplanned readmissions of ESRD patients to an 
acute care hospital within 30 days of an index discharge from an acute 
care hospital, thereby identifying potentially poor or incomplete 
quality of care in the dialysis facility. In addition, the SRR reflects 
an aspect of ESRD care that is especially resource-intensive. In 2011, 
the total amount paid by Medicare for the ESRD program was 
approximately $34.3 billion, a 5.4 percent increase from 2010.\2\ In 
particular, Medicare paid more than $10.5 billion for costs associated 
with hospitalized ESRD patients in 2011. In 2011, ESRD dialysis 
patients were admitted to the hospital twice on average, and spent an 
average of 12 total days in the hospital over the year, accounting for 
approximately 38 percent of Medicare expenditures for patients with 
ESRD.\2\ Furthermore, a substantial percentage (30 percent) of ESRD 
patients discharged from the hospital have an unplanned readmission 
within 30 days.\2\ In the non-ESRD population, clinical studies have 
demonstrated that improved care coordination and discharge planning may 
reduce readmission rates. The literature also reports a wide range of 
estimates of the percentage of readmissions that may be preventable. 
One literature review of more than 30 studies found the median 
proportion of readmissions that may be preventable was 27%, with a 
range of 5% to 79%.\4\ Preventability varied widely across diagnoses. 
Readmissions were more likely to be preventable in patients with more 
severe conditions. Therefore, a systematic measure on unplanned 
readmissions is essential for controlling escalating medical costs; it 
can identify where readmission rates are unusually high, and help 
facilities to provide cost-effective healthcare.
---------------------------------------------------------------------------

    \3\ United States Renal Data System, USRDS 2013 Annual Data 
Report: Atlas of Chronic Kidney Disease and End-Stage Renal Disease 
in the United States, National Institutes of Health, National 
Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, 
MD, 2013.
    \4\ van Walraven C, Bennett C, Jennings A, Austin PC, Forster 
AJ. Proportion of hospital readmissions deemed avoidable: a 
systematic review. CMAJ. 2011;183(7):E391-E402.
---------------------------------------------------------------------------

Overview of Measure
    The SRR is a one-year risk-standardized measure of a facility's 30-
day, all-cause rate of unplanned hospital readmissions among Medicare-
covered ESRD dialysis patients. The number of expected readmissions is 
determined by a risk-adjustment model that accounts for the hospital 
where the index discharge took place, certain patient characteristics 
(including age, sex, and comorbidities), and the national median 
expected performance for all dialysis facilities, given the same 
patient case mix.
    We are proposing to adopt the SRR measure currently under review by 
NQF (NQF 2496). 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)(iv) of the Act must have been endorsed by the entity with 
a contract under section 1890(a) of the Act (that entity currently is 
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.
    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. Although 
the NQF has endorsed an all-cause hospital readmission measure (NQF 
1789), we do not believe it is feasible to adopt this measure 
in the ESRD QIP because NQF 1789 is specified for use in 
hospitals, not dialysis facilities. In addition, NQF 1789 is 
intended to evaluate readmissions across all patient types, whereas the 
proposed SRR measure is specified for the unique population of ESRD 
dialysis patients, which have a different risk profile than the general 
population captured in NQF 1789. Because the proposed SRR 
measure has been developed specifically for the dialysis-facility 
setting, and because the measure has the potential to improve clinical 
practice and decrease healthcare costs, we believe it is appropriate to 
adopt the SRR in the ESRD QIP at this time.
    We have analyzed the measure's reliability, the results of which 
are provided below and in greater detail in the SRR Measure Methodology 
report, available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The Inter-Unit Reliability (IUR) was 
calculated for the proposed SRR using data from 2012 and a 
``bootstrap'' approach, which uses a resampling scheme to estimate the 
within-facility variation that cannot be directly estimated by the 
analysis of variance (ANOVA). The SRRs that we calculated for purposes 
of this analysis were for dialysis facilities that had at least 11 
patients who had been discharged from a hospital during 2012. A small 
IUR (near 0) reveals that most of the variation of the measures between

[[Page 40248]]

facilities is driven by ``random noise,'' indicating the measure would 
not be a reliable characterization of the differences among facilities, 
whereas a large IUR (near 1) indicates that most of the variation 
between facilities is due to the real differences between facilities. 
The IUR for the proposed SRR measure was found to be 0.49, indicating 
that about one-half of the variation in the SRR can be attributed to 
between-facility differences, and about half to within-facility 
variation. This value of IUR indicates that an average-size facility 
would achieve a moderate degree of reliability for this measure. This 
level of reliability is consistent with the reliability of other 
outcome measures in CMS quality-reporting and VBP programs, such as the 
30-day Risk-Standardized All-Cause Acute Myocardial Infarction, Heart 
Failure, and Pneumonia Readmission and Mortality measures used in the 
Hospital IQR and VBP Programs. We therefore believe that facilities can 
be reliably scored on the proposed SRR measure.
    We convened a technical expert panel (TEP) in May 2012 for the 
purpose of evaluating this measure, but the TEP did not reach a final 
consensus and declined to support the measure. Some members of the TEP 
were concerned that we did not risk-adjust for the nephrologist 
treating the patients, because actions taken by nephrologists can 
impact readmission rates. After reviewing the TEP's arguments, we 
determined that the suggested risk adjustment for nephrologist care 
would constitute a reversal of CMS policy not to risk adjust for 
factors related to care for which the provider is responsible. We do 
not think that it is appropriate to risk-adjust the measure for the 
nephrologist because the nephrologist is part of the facility's multi-
disciplinary team, and medical directors, as employees of the dialysis 
facilities, are responsible for ensuring that appropriate care is 
provided by a multi-disciplinary team. The Measures Application 
Partnership reviewed this measure in February 2013 and supported the 
direction of the measure, advising CMS that the measure would require 
additional development prior to implementation. Subsequently, we 
released draft specifications for the measure to the public for a 30-
day comment period and, based on comments received, finalized measure 
specifications in September 2013. We also, on a voluntary basis, 
provided individual dialysis facilities with a facility-specific report 
that calculated their SRR measure results and compared those results to 
SRR measure results at the state and national level, as well as 
discharge-level data upon request. Facilities also had an opportunity 
to submit questions to CMS regarding the measure and their reports. We 
therefore believe that the proposed SRR measure risk-adjusts 
appropriately for patient condition and comorbidities at the start of 
care for which the facility is not responsible. We also believe that 
the measure is ready for adoption because, as explained above, it 
achieves a moderate degree of reliability.
Data Sources
    The data we will use to calculate the proposed SRR measure come 
from various CMS-maintained data sources for ESRD patients including 
the CROWNWeb database, the CMS Annual Facility Survey (Form CMS-2744), 
Medicare claims, the CMS Medical Evidence Form (Form CMS-2728), 
transplant data from the Organ Procurement and Transplant Network 
(OPTN), the Death Notification Form (Form CMS-2746), the Nursing Home 
Minimum Dataset, and the Social Security Death Master File. These data 
sources include all Medicare-covered patients with ESRD. Information on 
hospitalizations is obtained from Medicare Inpatient Claims Standard 
Analysis Files (SAFs) and past-year comorbidity is obtained from 
Medicare Claims SAFs (inpatient, outpatient, physician/supplier, home 
health, hospice, and skilled nursing facility claims).
Outcome
    The outcome for this measure is 30-day all-cause, unplanned 
readmission defined as a hospital readmission for any cause beginning 
within 30 days of the discharge date of an index discharge, with the 
exclusion of planned readmissions. This 30-day readmission period is 
consistent with other publicly reported readmission measures endorsed 
by NQF and currently implemented in the Hospital Inpatient Quality 
Reporting Program and Hospital Readmission Reduction Program, and 
reflects an industry standard.
Cohort
    All discharges of Medicare ESRD dialysis patients from an acute 
care hospital in a calendar year are considered eligible for this 
measure, with the exception of the exclusions listed in the next 
section.
Inclusion and Exclusion Criteria
    The proposed SRR measure excludes from the measure cohort 
hospitalizations: (1) Where the patient died during the index 
hospitalization; (2) where the patient dies within 30 days of the index 
discharge with no readmission; (3) where the patient is discharged 
against medical advice; (4) where the patient was admitted with a 
primary diagnosis of certain conditions related to cancers, mental 
health conditions, or rehabilitation procedures (because these patients 
possess radically different risk profiles, and therefore cannot 
reasonably be compared to other patients discharged from hospitals); 
(5) where the patient is discharged from a PPS-exempt cancer hospital 
(because these hospitals care for a unique population of patients that 
cannot reasonably be compared to the patients admitted to other 
hospitals); (6) where the patient is transferred to another acute care 
hospital; and (7) where the patient has already been discharged 12 
times during the same calendar year (to respond to concerns raised by 
the TEP that patients who are hospitalized this frequently during a 
calendar year could unduly skew the measure rates for small 
facilities).
Risk Adjustment
    The measure adjusts for differences across facilities with regard 
to their patient case mix. Consistent with NQF guidelines, the model 
does not adjust for socioeconomic status or race, because risk 
adjusting for these characteristics would hold facilities with a large 
proportion of patients who are minorities and/or who have low 
socioeconomic status to a different standard of care than other 
facilities. One goal of this measure is to illuminate quality 
differences that such risk adjustment would obscure. As with the 
Hospital-Wide Readmission measure employed by the Hospital Readmissions 
Reduction program, the SRR employs a hierarchical logistic regression 
model to estimate the expected number of readmissions to an acute care 
hospital, taking into account the performance of all dialysis 
facilities, the discharging hospital, and the facility's patient case-
mix.
    Although the SRR risk-adjustment model is generally aligned with 
the Hospital-Wide Readmission measure risk-adjustment methodology, we 
are proposing to modify it to account for comorbidities and patient 
characteristics relevant to the ESRD population. The proposed SRR 
measure includes the following patient characteristics as risk 
adjustors, which are obtained from the following data sources:

[[Page 40249]]

------------------------------------------------------------------------
             Risk adjustor                         Data source
------------------------------------------------------------------------
Sex....................................  CMS Form 2728.
Age....................................  REMIS database.
Years on ESRD..........................  CMS Form 2728.
Diabetes as cause of ESRD..............  CMS Form 2728.
BMI at incidence of ESRD...............  CMS Form 2728.
Days hospitalized during index           Part A Medicare Inpatient
 admission.                               Claims SAFs.
23 past-year comorbidities (e.g.,        Medicare Claims SAFs: Part A
 cardiorespiratory failure/shock; drug    Inpatient, home health,
 and alcohol disorders).                  hospice, and skilled nursing
                                          facility; and Part B
                                          Outpatient.
Discharged with any of 11 high-risk      Part A Medicare Inpatient
 conditions (for example, cystic          Claims SAFs.
 fibrosis, and hepatitis).
------------------------------------------------------------------------

    More details on the risk-adjustment calculations, and the rationale 
for selecting these risk adjustors and not others, can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. We are proposing 
to risk adjust the proposed SRR measure based on sex, because we have 
determined that patients' sex affects the measure in ways that are 
beyond the control of dialysis facilities. We reached this 
determination by examining the effects of the risk adjusters, both 
independently and in combination, on rates of unplanned readmissions. 
This analysis yielded two conclusions. First, the analysis indicated 
that females are generally more likely than males to experience an 
unplanned readmission, even when accounting for the other risk 
adjustors. Second, the disparate effects of gender were substantially 
impacted by the effects of age: Females aged 15 to 45 were much more 
likely to experience an unplanned readmission than males of the same 
age, but this disparity was significantly reduced for men and women 
younger than 15 and older than 45. Based on these two conclusions, we 
believe that women in the 15-45 age range face a greater risk of 
experiencing an unplanned readmission, as compared to men of the same 
age with similar risk profiles. This does not appear to be a 
consequence of facility performance, however, because the disparity is 
not generally applicable to women, but only to a limited age group. We 
therefore believe it is essential to risk-adjust for sex to ensure that 
facilities with larger numbers of women aged 15 to 45 are not 
inappropriately disadvantaged, because not risk-adjusting for sex would 
potentially incentivize facilities to deny access to these individuals.
    As indicated in the table above, the measure is risk-adjusted, in 
part, based on 23 comorbidities that develop in the year prior to the 
index hospitalization, as well as 11 high-risk conditions that are 
present at the time of the index discharge. These data are taken from 
Medicare claims submitted by hospitals, dialysis facilities, and other 
types of long-term and post-acute care facilities.
    We believe that this proposed approach to risk-adjusting the SRR 
measure is consistent with NQF guidelines for measure developers. NQF 
evaluates measures on the basis of four criteria: Importance, 
scientific acceptability, feasibility, and usability. The validity and 
reliability of a measure's risk-adjustment calculations fall under the 
``scientific acceptability'' criterion, and Measure Evaluation 
Criterion 2b4 specifies NQF's preferred approach for risk-adjusting 
outcome measures (http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion states that 
patient comorbidities should only be included in risk-adjustment 
calculations if they are (1) present at the start of care and (2) not 
indicative of disparities or deficiencies in the quality of care 
provided. As indicated in the ``Inclusion and Exclusion Criteria'' 
subsection above, as well as the measure specifications that are 
currently under review at NQF, the start of care is defined as the 
index hospitalization. Accordingly, we believe that NQF Measure 
Evaluation Criterion 2b4 supports risk adjusting the proposed SRR 
measure on the basis of patient comorbidity data collected in the year 
prior to the index hospitalization, because these comorbidities are 
likely present at the start of care (that is, the date(s) that the 
patient spends in the hospital during the index hospitalization). For 
these reasons, we believe that the risk-adjustment methodology for the 
proposed SRR measure is consistent with NQF guidelines for measure 
developers and is appropriate for this measure.
    Full documentation of the SRR risk-adjustment methodology is 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Calculating the SRR Measure
    The SRR measure is calculated as the ratio of the number of 
observed unplanned readmissions to the number of expected unplanned 
readmissions. Facilities that have more unplanned readmissions than 
would be expected for an average facility with a similar case-mix would 
have a ratio greater than one. Facilities having fewer unplanned 
readmissions than would be expected for an average facility with a 
similar case-mix would have a ratio less than one. This ratio 
calculation is consistent with that employed by one NQF-endorsed 
outcome measure for ESRD, the Standardized Hospitalization Ratio (NQF 
1463).
    Hospitalizations are counted as events in the numerator if they 
meet the definition of unplanned readmission--which is that they (a) 
occurred within 30 days of the index discharge and (b) are not preceded 
by a ``planned'' readmission that also occurred within 30 days of the 
index discharge. Planned readmissions are defined as readmissions that 
do not bear on the quality of care furnished by the dialysis facility, 
that occur as a part of ongoing appropriate care of patients, or that 
involve elective care. Building on the algorithm developed for the 
Hospital-Wide Readmission measure (NQF 1789), the proposed 
planned readmission list incorporates minor changes appropriate to the 
ESRD population as suggested by technical experts. The full planned 
readmission list and algorithm are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. In general, a readmission is 
considered ``planned'' under two scenarios.
    1. The patient undergoes a procedure that is always considered 
planned (example, bone marrow transplant) or has a primary diagnosis 
that always indicates the hospitalization is planned (for example, 
maintenance chemotherapy).
    2. The patient undergoes a procedure that may be considered planned 
if it is not accompanied by an acute diagnosis. For example, a 
hospitalization involving a heart-valve procedure accompanied by

[[Page 40250]]

a primary diagnosis of acute myocardial infarction would be considered 
unplanned, whereas a hospitalization involving a heart-valve procedure 
accompanied by a primary diagnosis of diabetes would be considered 
planned (because acute myocardial infarction is a plausible alternative 
acute indication for hospitalization).
    The expected number of readmissions is calculated using 
hierarchical logistic modeling (HLM). This approach accounts for the 
hospital from which the patient was discharged and the patient case mix 
(as defined by factors such as age, sex, and patient comorbidities), as 
well as the national median performance of all dialysis facilities. The 
HLM is an appropriate statistical approach to measuring quality based 
on patient outcomes when patients are clustered within facilities (and 
therefore the patients' outcomes are not statistically independent), 
and when the number of qualifying patients for the measure varies from 
facility to facility. The HLM approach is also currently used to 
calculate readmission and mortality measures that are used in several 
quality-reporting and VBP programs by CMS, such as the Heart Failure 
and Pneumonia Mortality measures in the Hospital IQR and Hospital VBP 
Programs.
    The proposed SRR measure is a point estimate--the best estimate of 
a facility's readmission rate based on the facility's case mix. For 
more information on the proposed calculation methodology, please refer 
to our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
[GRAPHIC] [TIFF OMITTED] TP11JY14.000

3. Proposed Performance Period for the PY 2017 ESRD QIP
    Section 1881(h)(4)(D) of the Act requires the Secretary to 
establish the performance period with respect to a payment year, and 
that the performance period occur prior to the beginning of such year. 
In the CY 2013 ESRD PPS Final Rule (77 FR 67500), 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 these measures, and also provides adequate incentive and 
feedback for facilities and Medicare beneficiaries. CY 2015 is the 
latest period of time during which we can collect a full 12 months of 
data and still implement the PY 2017 payment reductions. Therefore, we 
propose to establish CY 2015 as the performance period for PY 2017 ESRD 
QIP.
    We seek comments on this proposal.
4. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2017 ESRD QIP
    We are proposing to adopt performance standards for the PY 2017 
ESRD QIP measures similar to those we finalized for PY 2016 (78 FR 
72211 through 72213). Section 1881(h)(4)(A) of the Act 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 use achievement 
thresholds and benchmarks to calculate scores on the clinical measures.

[[Page 40251]]

a. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2017 ESRD QIP
    With the exception of the NHSN Bloodstream Infection clinical 
measure, we propose to set the performance standards, achievement 
thresholds, and benchmarks for the PY 2017 clinical measures at the 
50th, 15th, and 90th percentile, respectively, of national performance 
in CY 2013, because this will give us enough time to calculate and 
assign numerical values to the proposed performance standards for the 
PY 2017 program prior to the beginning of the performance period. We 
continue to believe that these standards 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. As stated in the CY 2014 
ESRD PPS Final Rule (78 FR 72213 through 72215), CY 2014 is the first 
year for which we will have data for the NHSN Bloodstream Infection 
clinical measure. Accordingly, we propose to set the performance 
standard, achievement threshold, and benchmark for the NHSN Bloodstream 
Infection clinical measure based on the 50th, 15th, and 90th 
percentiles, respectively, of national performance in CY 2014.
    We seek comments on these proposals.
b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2017 ESRD QIP
    At this time, we do not have the necessary data to assign numerical 
values to the proposed performance standards, achievement thresholds, 
and benchmarks for the clinical measures, because we do not yet have 
complete data from CY 2013. Nevertheless, we are able to estimate these 
numerical values based on the most recent data available. For all of 
the proposed clinical measures except the proposed SRR measure, this 
partial data comes from the period of January through December 2013. 
For the proposed SRR measure, this partial data comes from the period 
of January through December 2012. In Table 25, we have provided the 
estimated numerical values for all of the proposed PY 2017 ESRD QIP 
clinical measures except the NHSN Bloodstream Infection clinical 
measure. We will publish updated values for the clinical measures, 
using data from the first part of CY 2014, in the CY 2015 ESRD PPS 
final rule.

  Table 25--Estimated Numerical Values for the Performance Standards for the PY 2017 ESRD QIP Clinical Measures
                                     Using the Most Recently Available Data
----------------------------------------------------------------------------------------------------------------
               Measure                   Performance standard    Achievement threshold          Benchmark
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    %Fistula.........................  64.49%.................  52.43%.................  78.64%
    %Catheter........................  9.9%...................  18.36%.................  3.21%
Kt/V:
    Adult Hemodialysis...............  93.65%.................  86.97%.................  97.55%
    Adult Peritoneal Dialysis........  87.50%.................  70.42%.................  95.74%
    Pediatric Hemodialysis...........  92.48%.................  79.55%.................  97.98%
Hypercalcemia........................  1.32%..................  4.78%..................  0.00%
NHSN Bloodstream Infection...........  50th percentile of       15th percentile of       90th percentile of
                                        eligible facilities'     eligible facilities'     eligible facilities'
                                        performance during CY    performance during CY    performance during CY
                                        2014.                    2014.                    2014.
Standardized Readmission Ratio.......  0.996..................  1.242..................  0.658
----------------------------------------------------------------------------------------------------------------

    We believe that the ESRD QIP should not have lower performance 
standards than in previous years. In accordance with our statements in 
the CY 2012 ESRD PPS final rule (76 FR 70273), if the final numerical 
value for a performance standard, achievement threshold, and/or 
benchmark is worse than it was for that measure in the PY 2016 ESRD 
QIP, then we propose to substitute the PY 2016 performance standard, 
achievement threshold, and/or benchmark for that measure.
    We seek comments on this proposal.
c. Proposed Performance Standards for the PY 2017 Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized performance 
standards for the Anemia Management, Mineral Metabolism, and ICH CAHPS 
reporting measures (78 FR 72213). We are proposing to continue to use 
these performance standards for these measures in the PY 2017 ESRD QIP. 
We seek comments on this proposal.
5. Proposal for Scoring the PY 2017 ESRD QIP Measures
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on achievement (78 FR 
72215). In determining a facility's achievement score for each measure 
under the PY 2017 ESRD QIP, we propose to continue using this 
methodology for all clinical measures. Under this methodology, 
facilities 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.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on improvement (78 FR 
72215 through 72216). In determining a facility's improvement score for 
each measure under the PY 2017 ESRD QIP, we propose to continue using 
this methodology for all clinical measures. Under this methodology, 
facilities receive points along an improvement range, defined as a 
scale running between the improvement threshold and the benchmark. We 
propose to define the improvement threshold as the facility's 
performance on the measure during CY 2014. The facility's improvement 
score would be calculated by comparing its performance on the measure 
during CY 2015 (the proposed performance period) to its performance 
rate on the measure during CY 2014.
6. Weighting the Total Performance Score
    We continue to believe that while the reporting measures are 
valuable, the clinical measures evaluate actual patient care and 
therefore justify a higher

[[Page 40252]]

combined weight (78 FR 72217). We are therefore not proposing to change 
our policy, finalized most recently in the CY 2014 ESRD PPS (78 FR 
72217), to weight clinical measures as 75 percent and reporting 
measures as 25 percent of the TPS. We are also not proposing any 
changes to the policy that facilities must be eligible to receive a 
score on at least one reporting measure and at least one clinical 
measure to be eligible to receive a TPS, or the policy that a 
facility's TPS will be rounded to the nearest integer, with half of an 
integer being rounded up.
7. Proposed Minimum Data for Scoring Measures for the PY 2017 ESRD QIP 
and Proposal for Changing Attestation Process for Patient Minimums
    For the same reasons described in the CY 2013 ESRD PPS final rule 
(77 FR 67510 through 67512), for PY 2017 we propose to only score 
facilities on clinical and reporting measures for which they have a 
minimum number of qualifying patients during the performance period. 
Our current policy is that a facility must treat at least 11 qualifying 
patients during the performance period in order to be scored on a 
clinical measure (77 FR 67510 through 67511). We are not proposing any 
changes to this policy.
    However, with respect to the proposed SRR measure, we propose that 
facilities with fewer than 11 index discharges will not be eligible to 
receive a score on that measure. We considered proposing to adopt the 
11 qualifying patient minimum that we use for the other clinical 
measures. We decided, however, to base facility eligibility for the 
measure on the number of index discharges attributed to a facility, 
because the measure calculations are determined by the number of index 
discharges, adjusted for patient case-mix. We decided to set the 
minimum number of index discharges at 11 because this is consistent 
with reporting for the proposed SRR measure during the dry run 
conducted earlier this year, as well as with the implementation of 
outcome measures in the Hospital Readmission Reduction Program, which 
base case minimums on the number of index discharges attributable to 
the facility.
    Additionally, for the proposed SRR measure, we propose to apply the 
small-facility adjuster to facilities that treat 41 or fewer index 
discharges because we determined that this was the minimum number of 
index discharges needed to achieve an IUR of 0.4 (that is, moderate 
reliability) for the proposed SRR measure. Because the small-facility 
adjuster gives facilities the benefit of the doubt when measure scores 
can be unduly influenced by a few outlier patients, we believe that 
setting the threshold at 41 index discharges will not unduly penalize 
facilities that treat small numbers of patients.
    In the CY 2014 ESRD PPS Final Rule, we finalized that the case 
minimum for the Mineral Metabolism and Anemia Management reporting 
measures is one, and that facilities that treat one qualifying patient 
could attest to this in CROWNWeb in order to avoid being scored on the 
measures (78 FR 72197 through 72199 and 72220 through 72221). In the 
process of responding to questions from facilities about the 
attestation requirements for the PY 2015 program, however, we found 
that facilities were confused by this requirement. For this reason, we 
propose to remove the option for facilities to attest that they did not 
meet the case minimum for these measures. Accordingly, facilities that 
meet the case minimum of one qualifying patient would be scored on 
these measures, facilities with between 2 and 11 qualifying patients 
would be required to report data for all but one qualifying patient, 
and facilities with 11 or more qualifying patients would be required to 
report data for all patients. Due to facility confusion with the 
attestation process, we also propose to remove the option for 
facilities to attest that they did not meet the case minimum for the 
ICH CAHPS survey reporting measure. As we stated above, we are not 
proposing any further changes to the 30 survey-eligible case minimum 
for this measure. We are proposing that the ESRD QIP program will 
determine facility eligibility for these measures based on available 
data submitted to CROWNWeb, in Medicare claims, and to other CMS 
administrative data sources.
    We seek comments on this proposal.
    We are proposing to continue our policies that govern when a newly 
opened facility would be eligible to be scored on measures as follows.
     Facilities with a CCN open date on or after July 1 of the 
performance period (for PY 2017, this would be July 1, 2015) are not 
eligible to be scored on any reporting measures except the ICH CAHPS 
reporting measure.
     Facilities with a CCN open date on or after January 1 of 
the performance period (for PY 2017, this would be January 1, 2015) are 
not eligible to receive a score on the ICH CAHPS reporting measure in 
the PY 2017 program, due to the time it takes to contract with a CMS-
approved third-party vendor to administer the survey.
     Facilities are eligible to receive a score on all of the 
clinical measures except the NHSN Bloodstream Infection clinical 
measure if they have a CCN open date at any time before the end of the 
performance period.
     Facilities with a CCN open date after January 1 of the 
performance period (for PY 2017, this would be January 1, 2015) are not 
eligible to receive a score on the NHSN Bloodstream Infection clinical 
measure, due to the need to collect 12 months of data to accurately 
score the measure.
    We are also proposing to continue our policy that a facility will 
not receive a TPS unless it receives a score on at least one clinical 
measure and at least one reporting measure. We note that as a result, 
facilities will not be eligible for a payment reduction under the PY 
2017 ESRD QIP if they have a CCN open date on or after July 1, 2015.
    We seek comments on these proposals.
    Table 26 displays the proposed patient minimum requirements for 
each of the reporting measures, as well as the CCN open dates after 
which a facility will not be eligible to receive a score on a reporting 
measure.

                      Table 26--Proposed Minimum Data Requirements for the PY 2017 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                                                                              Small facility
              Measure                 Minimum data requirements        CCN Open date             adjuster
----------------------------------------------------------------------------------------------------------------
Adult Hemodialysis Adequacy          11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Adult Peritoneal Dialysis Adequacy   11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Pediatric Hemodialysis Adequacy      11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).

[[Page 40253]]

 
Vascular Access Type: Catheter       11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Vascular Access Type: Fistula        11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Hypercalcemia (Clinical)...........  11 qualifying patients.....  N/A...................  11-25 patients.
NHSN Bloodstream Infection           11 qualifying patients.....  On or before January    11-25 patients.
 (Clinical).                                                       1, 2015.
SRR (Clinical).....................  11 index discharges........  N/A...................  11-41 index
                                                                                           discharges.
ICH CAHPS (Reporting)..............  Facilities with 30 or more   Before January 1, 2015  N/A.
                                      survey-eligible patients
                                      during the calendar year
                                      preceding the performance
                                      period must submit survey
                                      results. Facilities will
                                      not receive a score if
                                      they do not obtain a total
                                      of at least 30 completed
                                      surveys during the
                                      performance period.
Anemia Management (Reporting)......  Facilities with 11 or more   Before July 1, 2015...  N/A.
                                      qualifying patients must
                                      report data for all
                                      patients. Facilities with
                                      between 2 and 11
                                      qualifying patients must
                                      report data on all but 1
                                      qualifying patient.
                                      Facilities with 1
                                      qualifying patient must
                                      report for that patient.
Mineral Metabolism (Reporting).....  Facilities with 11 or more   Before July 1, 2015...  N/A.
                                      qualifying patients must
                                      report data for all
                                      patients. Facilities with
                                      between 2 and 11
                                      qualifying patients must
                                      report data on all but 1
                                      qualifying patient.
                                      Facilities with 1
                                      qualifying patient must
                                      report for that patient.
----------------------------------------------------------------------------------------------------------------

8. Proposed Payment Reductions for the PY 2017 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities, such 
that facilities achieving the lowest TPSs receive the largest payment 
reductions. For PY 2017, we are proposing that a facility will 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:
     It performed at the performance standard for each clinical 
measure;
     It received zero points for each clinical measure that 
does not have a numerical value for the performance standard 
established through the rulemaking process before the beginning of the 
PY 2017 performance period; and
     It received 10 points (which is the 50th percentile of 
facility performance on the PY 2015 reporting measures) for each 
reporting measure.
    We recognize that these conditions are more stringent than the 
conditions used to establish the minimum TPS in the PY 2016 ESRD QIP, 
because this proposal increases the number of points a facility would 
have to receive on each reporting measure from 5 to 10. The PY 2015 
program is the most recent year for which we will have calculated final 
measure scores before the beginning of the proposed performance period 
for PY 2017 (i.e., CY 2015). We note that facility performance on the 
Anemia Management, Mineral Metabolism, NHSN Dialysis Event, and ICH 
CAHPS reporting measures in the PY 2015 program is so high that the 
median score on each of the measures was 10 points. We are proposing to 
increase the number of points a facility would have to achieve for each 
reporting measure to the 50th percentile of facility performance on the 
PY 2015 reporting measures (i.e., the average of the median scores for 
each reporting measure), because a score of 5 on each of these 
reporting measures is indicative of a below-average performance, and we 
want to incentivize facilities to provide above-average care.
    We seek comments on this proposal.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. In 
the CY 2014 ESRD PPS Final Rule (78 FR 72223 through 72224), we 
finalized a payment reduction scale for PY 2016 and future payment 
years, such 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, with a maximum reduction of 2.0 percent. We are 
not proposing any changes to this policy at this time.
    Because we are not yet able to calculate the performance standards 
for each of the clinical measures, we are likewise not able to 
calculate the minimum TPS at this time. Based on the estimated 
performance standards listed above, we estimate that a facility must 
meet or exceed a minimum TPS of 58 for PY 2017. For all of the clinical 
measures except the NHSN Bloodstream Infection clinical measure, these 
data come from CY 2013. For the NHSN Bloodstream Infection clinical 
measure, we set the performance standard to zero for purposes of this 
estimate, because we are not able to establish a numerical value for 
the performance standard through the rulemaking process before the 
beginning of the PY 2017 performance period. We are proposing that 
facilities failing to meet the minimum TPS, as established in the CY 
2015 ESRD PPS Final Rule, will receive payment reductions based on the 
estimated TPS ranges indicated in Table 27 below.

  Table 27--Estimated Payment Reduction Scale for PY 2017 Based on the
                Most Recently Available Data From CY 2013
------------------------------------------------------------------------
                                                              Reduction
                  Total performance score                        (%)
------------------------------------------------------------------------
100--58....................................................            0
57--48.....................................................          0.5
47--38.....................................................          1.0
37--28.....................................................          1.5
27--0......................................................          2.0
------------------------------------------------------------------------

9. Proposal for Data Validation
    One of the critical elements of the ESRD QIP's success is ensuring 
that the data submitted to calculate measure scores and TPSs are 
accurate. We began a pilot data-validation program in CY 2013 for the 
ESRD QIP, and we have

[[Page 40254]]

procured the services of a data-validation contractor that is tasked 
with validating a national sample of facilities' records as they report 
CY 2014 data to CROWNWeb. Our first priority was to develop a 
methodology for validating data submitted to CROWNWeb under the pilot 
data-validation program, and this continues to be our goal. Once this 
methodology has been fully developed, we will propose to adopt it 
through the rulemaking process. For the PY 2016 ESRD QIP (78 FR 72223 
through 72224), we finalized a requirement to sample approximately 10 
records from 300 randomly selected facilities; these facilities will 
have 60 days to comply once they receive requests for records. We are 
proposing to continue this pilot for the PY 2017 ESRD QIP. Under this 
continued validation study, we will sample the same number of records 
(approximately 10 per facility) from the same number of facilities 
(that is, 300) during CY 2015. If a facility is randomly selected to 
participate in the pilot validation study but does not provide CMS with 
the requisite medical records within 60 days of receiving a request, 
then we propose to deduct 10 points from the facility's TPS. Once we 
have developed and adopted a methodology for validating the CROWNWeb 
data, we intend to consider whether payment reductions under the ESRD 
QIP should be based, in part, on whether a facility has met our 
standards for data validation.
    We seek comments on this proposal.
    We are also proposing a feasibility study for validating data 
reported to CDC's NHSN Dialysis Event Module for the NHSN Bloodstream 
Infection clinical measure. HAIs are relatively rare, and we are 
proposing that the feasibility study would target records with a higher 
probability of including a dialysis event, because this would enrich 
the validation sample while reducing the burden on facilities. The 
methodology for this proposed feasibility study would resemble the 
methodology used by the Hospital Inpatient Quality Reporting Program to 
validate the central line-associated bloodstream infection measure, the 
catheter-associated urinary tract infection measure, and the surgical 
site infection measure (77 FR 53539 through 535553).
    Specifically, we propose to randomly select nine facilities to 
participate in the feasibility study. A CMS contractor will send these 
facilities quarterly requests for lists of all positive blood cultures 
drawn from its patients during the quarter, including any positive 
blood cultures that were collected from the facility's patients on the 
day of, or the day following, their admission to a hospital. Facilities 
will have 60 days to respond to quarterly requests for lists of 
positive blood cultures. A CMS contractor will then develop a 
methodology for determining when a positive blood culture qualifies as 
a ``candidate dialysis event,'' and is therefore appropriate for 
further validation. Once the contractor determines a methodology for 
identifying candidate dialysis events, the contractor will analyze the 
records of patients who had a positive blood culture in order to 
determine if the facility reported dialysis events for those patients 
in accordance with the NHSN Dialysis Event Protocol. If the contractor 
determines that additional medical records are needed from a facility 
to validate whether the facility accurately reported the dialysis 
events, then the contractor will send a request for additional 
information to the facility, and the facility will have 60 days from 
the date of the letter to respond to the request. Overall, we estimate 
that, on average, quarterly lists will include two positive blood 
cultures per facility, but we recognize these estimates may vary 
considerably from facility to facility. If a facility is randomly 
selected to participate in the feasibility study but does not provide 
CMS with the requisite lists of positive blood cultures or the 
requisite medical records within 60 days of receiving a request, then 
we propose to deduct 10 points from the facility's TPS.
    The goals of the proposed feasibility study will be five-fold: (1) 
To estimate the burden and associated costs to facilities of validating 
the NHSN Bloodstream Infection clinical measure; (2) to assess the 
costs to CMS to validate this measure; (3) to develop a methodology for 
identifying candidate dialysis events from lists of positive blood 
cultures; (4) to develop a methodology for determining whether a 
facility accurately reported dialysis events under the NHSN Bloodstream 
Infection clinical measure; and (5) to reach some preliminary 
conclusions about whether facilities are accurately reporting data 
under the NHSN Bloodstream Infection clinical measure. Based on the 
results of this study, we will consider the feasibility of proposing in 
future rulemaking to validate the NHSN Bloodstream Infection clinical 
measure for all facilities.
    We seek comments on this proposal.
10. Proposal To Monitor Access to Dialysis Facilities
    Public comments on the proposal to adopt the Standardized 
Hospitalization Ratio measure in the PY 2014 ESRD QIP (76 FR 70267) 
expressed concerns that ``the measure may lead to `cherry-picking' of 
patients based on their risk of hospitalizations, causing access to 
care issues for patients with more severe illness.'' We share 
commenters' concerns about the SHR measure, and we believe that these 
concerns equally apply to other outcome measures proposed for the ESRD 
QIP. We recognize that, in general, inadequate risk adjustment in 
outcome measure calculations can create an incentive for facilities to 
deny services to sicker patients, because these patients' illnesses 
would not be properly accounted for in the risk-adjustment 
calculations. We believe that outcome measures proposed and adopted for 
the ESRD QIP properly risk adjust for patients with severe illnesses, 
but we remain concerned that misperceptions to the contrary might 
negatively impact access to dialysis therapy.
    Since we are proposing to adopt the SRR clinical measure for the PY 
2017 program, and below we are proposing to adopt the STrR clinical 
measure for the PY 2018 program, we propose to initiate a monitoring 
program focused on access to dialysis therapy. This program would 
compare dialysis data before and after the adoption of an outcome 
measure, looking for changes in admission and discharge practices, as 
well as changes in rates and patterns of involuntary discharges. 
Specifically, this program would assess and analyze the characteristics 
of beneficiaries admitted to dialysis centers (stratified by location, 
size, and setting) in order to determine when and if selective 
admission and discharge practices are coupled with negative patient 
attributes and trends over time. We believe this program will enable us 
to identify patterns that are indicative of diminished access to 
dialysis therapy.
    We seek comments on this proposal.
11. Proposed Extraordinary Circumstances Exception
    Many comments on the CY 2014 ESRD PPS proposed rule included the 
recommendation to exempt a facility from all the requirements of the 
ESRD QIP clinical and reporting measures during the time the facility 
was forced to close temporarily due to a natural disaster or other 
extraordinary circumstances. In response to these comments, we agreed 
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

[[Page 40255]]

burden during these times'' (78 FR 72209).
    Section 1881(h)(3)(A)(i) of the Act states, ``[T]he Secretary shall 
develop a methodology for assessing the total performance of each 
provider of services and renal dialysis facility based on performance 
standards with respect to the measures selected under paragraph (2) for 
a performance period established under paragraph (4)(D).'' Given the 
possibility that facilities could be unfairly penalized for 
circumstances that are beyond their control, we believe the best way to 
implement an extraordinary circumstances exception is under the 
authority of this section. We are therefore proposing to interpret 
section 1881(h)(3)(A)(i) of the Act to enable us to configure the 
methodology for assessing facilities' total performance such that we 
will not require a facility to submit, nor penalize a facility for 
failing to submit, data on any ESRD QIP quality measure data from any 
month in which a facility is granted an extraordinary circumstances 
exception.
    Under this policy, we propose that, in the event of extraordinary 
circumstances not within the control of the facility (such as a natural 
disaster), for the facility to receive consideration for an exception 
from all ESRD QIP requirements during the period in which the facility 
was closed, the facility would need to submit a CMS Disaster Extension/
Exception Request Form through www.qualitynet.org within 90 calendar 
days of the date of the disaster or extraordinary circumstance. We are 
proposing that the facility would need to provide the following 
information on the form:
     Facility CCN;
     Facility name;
     CEO name and contact information;
     Additional contact name and contact information;
     Reason for requesting an exception;
     Dates affected;
     Date facility will start submitting data again, with 
justification for this date; and
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper, and other media 
articles.
    Incomplete forms will be returned to the facility without further 
review of their content. We will evaluate the request and provide the 
facility with a response. If we determine that the facility was, in 
fact, closed for a period of time due to extraordinary circumstances, 
then we will exempt the facility from the ESRD QIP requirements for any 
month during which the facility was closed due to the extraordinary 
circumstances. As such, a facility granted a temporary exception will 
be scored on each measure only for the months during a performance 
period not covered by the exception. For example, if a facility is 
granted an extraordinary circumstances exception for the time period 
between January 15 and February 15, 2015, then the facility will not be 
required to report, and will not be penalized for not reporting, data 
on any ESRD QIP measure data for January and February of CY 2015. The 
effect of this proposal is that if a facility, because it has been 
granted an exception, cannot meet the reporting requirements that apply 
to a measure, the facility will not receive a score on the measure. For 
example, if a facility is granted an extraordinary circumstances 
exception for February 2015, then that facility would not be scored on 
the NHSN Bloodstream Infection clinical measure for the applicable 
payment year, because this measure requires facilities to submit 12 
months of data in order to avoid receiving zero points on the measure.
    This policy does not preclude us from granting exceptions to 
facilities that have not requested them when we determine that an 
extraordinary circumstance (for example, a hurricane or other act of 
nature) affects an entire region or locale. If we make the 
determination to grant an exception to facilities in a region or 
locale, then we propose to communicate this decision through routine 
communication channels to facilities, vendors, and Networks, including 
but not limited to issuing memoranda, emails, and notices on a CMS-
approved Web site.
    We seek comments on this proposal.

G. Proposed Requirements for the PY 2018 ESRD QIP

1. Proposal To Modify the Mineral Metabolism Reporting Measure 
Beginning in PY 2018
    In the CY 2013 ESRD QIP, we adopted a reporting measure focused on 
mineral metabolism, which was based in part on NQF 0255 (77 FR 
67487 through 67487). In the CY 2014 ESRD PPS, we finalized two 
revisions to the Mineral Metabolism reporting measure: (1) To include 
home peritoneal dialysis patients in the measure; and (2) to remove 
serum calcium reporting from the measure because of its reporting under 
the Hypercalcemia clinical measure (78 FR 72197 through 72198). 
Accordingly, in order to meet the requirements for the Mineral 
Metabolism reporting measure, facilities currently must report serum 
phosphorus values for each qualifying patient treated at the facility 
on a monthly basis.
    Since the publication of the CY 2014 ESRD PPS final rule, members 
of the renal community requested an ad hoc NQF review of measure 
0255, focusing in particular on whether the measure should be 
updated to allow for the reporting of plasma phosphorus data. The NQF 
Consensus Standards Approval Committee (CSAC) reviewed the measure and 
recommended that the phosphorus reporting measure (NQF 0255) 
be modified to allow for the reporting of plasma phosphorus data as an 
alternative to serum phosphorus data. Although our TEP reviewed this 
issue and concluded that measure 0255 should remain unchanged, 
we concur with the CSAC's recommendation due to the CSAC's ad hoc 
review of lab data demonstrating the equivalency of plasma and serum 
measurements of phosphorus, as well as an additional concurrent 
internal review of the data by CMS and our measure development 
contractor. We are in agreement with the CSAC that readings of 
phosphorus using either plasma or serum are appropriate for the 
measure. As the measure developer for NQF 255, we are also in 
the process of revising the specifications for that measure and plan to 
submit the revised measure specifications to the NQF for endorsement. 
We believe the change to these specifications is non-substantive 
because plasma readings are an alternative method of reporting on 
phosphorus data and, as we state above, are roughly equivalent to serum 
phosphorus readings.
    We considered proposing to allow facilities to report plasma 
phosphorus data for the Mineral Metabolism reporting measure in the PY 
2017 program, but we have determined that it is not operationally 
feasible to configure the relevant data fields in CROWNWeb to accept 
plasma phosphorus readings prior to January 1, 2015, the beginning of 
the performance period for that program year. For this reason, we 
propose to modify the measure specifications for the Mineral Metabolism 
reporting measure to allow facilities to report either serum phosphorus 
data or plasma phosphorus data, beginning with the PY 2018 program. We 
further clarify that we are not proposing any other changes to the 
measure specifications for the Mineral Metabolism reporting measure.
2. Proposed New Measures for the PY 2018 ESRD QIP and Future Payment 
Years
    For the PY 2018 ESRD QIP, we are proposing to continue to use all 
of the

[[Page 40256]]

measures proposed for the PY 2017 ESRD QIP, with the exception of the 
ICH CAHPS reporting measure, which we are proposing to convert to a 
clinical measure. We are also proposing to adopt five new measures. The 
proposed new measures include one new outcome measure evaluating 
transfusions in the ESRD population, one measure on pediatric 
peritoneal dialysis adequacy, one measure on pain assessment, one 
measure on clinical depression screening, and one measure on healthcare 
personnel influenza vaccination (see Table 28).

        Table 28--New Measures Proposed for the PY 2018 ESRD QIP
------------------------------------------------------------------------
         NQF                        Measure title
------------------------------------------------------------------------
N/A..........................  Pediatric Peritoneal Dialysis Adequacy, a
                                clinical measure.
                               Percentage of pediatric peritoneal
                                dialysis patient-months with spKt/V
                                greater than or equal to 1.8 (dialytic +
                                residual).
0258.........................  In-Center Hemodialysis Consumer
                                Assessment of Providers and Systems
                                Survey,\1\ a clinical measure.
                               Proportion of responses to rating items
                                grouped into three composite measures
                                and three global ratings.
N/A..........................  Standardized Transfusion Ratio, a
                                clinical measure.
                               Risk-adjusted standardized transfusion
                                ratio for dialysis facility patients.
N/A\2\.......................  Pain Assessment and Follow-Up, a
                                reporting measure.
                               Percentage of adult patients with
                                documentation of pain assessment through
                                discussion with the patient including
                                the use of a standardized tool(s) on
                                each visit and documentation of a follow-
                                up place when pain is present.
N/A\3\.......................  Depression Screening and Follow-Up, a
                                reporting measure.
                               Percentage of adult patients screened for
                                clinical depression using a standardized
                                tool and follow-up plan is documented.
N/A\4\.......................  NHSN Healthcare Personnel Influenza
                                Vaccination, a reporting measure.
------------------------------------------------------------------------
\1\ The proposed dimensions of the ICH CAHPS survey for use in the PY
  2018 ESRD QIP are: Nephrologists' Communication and Caring, Quality of
  Dialysis Center Care and Operations, Providing Information to
  Patients, Overall Rating of the Nephrologists, Overall Rating of the
  Dialysis Center Staff, and Overall Rating of the Dialysis Facility.
\2\ We note that the NQF has previously endorsed a pain measure (NQF
  0420) upon which this measure is based.
\3\ We note that the NQF has previously endorsed a depression measure
  (NQF 0418) upon which this measure is based.
\4\ We note that the NQF has previously endorsed a vaccination measure
  (NQF 0431) upon which this measure is based.

a. Proposed Standardized Transfusion Ratio (STrR) Clinical Measure
Background
    We are concerned that the inclusion of erythropoiesis-stimulating 
agents (ESAs) in the ESRD PPS and the removal of the Hemoglobin Less 
than 10 g/dL clinical measure from the ESRD QIP measure set could 
result in the underutilization of ESAs to manage anemia in ESRD 
patients, with the result that these patients have lower achieved 
hemoglobin levels and more frequently need red-blood-cell transfusions.
    In addition, patients with ESRD who are eligible to receive a 
kidney transplant and are transfused risk becoming sensitized to the 
donor pool, thereby making it less likely that a transplant will be 
successful. Blood transfusions also carry a small risk of transmitting 
blood-borne infections to the patient, and the patient could 
additionally develop a transfusion reaction. Furthermore, using 
infusion centers or hospitals to transfuse patients is expensive, 
inconvenient, and could compromise future vascular access.
Overview of Measure
    The Standardized Transfusion Ratio (STrR) for all adult Medicare 
ESRD patients is a ratio of the number of observed eligible blood 
transfusion events occurring in patients dialyzing at a facility to the 
number of eligible transfusions that would be expected from a 
predictive model that accounts for patient characteristics within each 
facility. Eligible transfusions are those that do not have any claims 
pertaining to the comorbidities identified for exclusion in the 12 
months immediately prior to the transfusion date.
    We plan to submit the STrR measure to NQF for review at the next 
available call for measures. 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)(iv) 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.
    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. NQF has 
not endorsed and a consensus organization has not adopted a measure on 
transfusions. Because the proposed STrR measure has the potential to 
decrease transfusions resulting from underutilization of anemia 
medications, we believe it is appropriate to adopt the STrR in the PY 
2018 ESRD QIP. We considered proposing to adopt the measure for the PY 
2017, but we recognized that this is a new measure, and wanted to give 
facilities more time to familiarize themselves with it. The Measure 
Application Partnership, in its February 1, 2013 Pre-Rulemaking Report, 
supported the direction of the measure, stating that it ``addresses an 
important concept, but the establishment of guidelines for hemoglobin 
range is needed.'' We have received public comments and input from a 
TEP that we convened on a prototype STrR measure, and finalized 
development of the proposed STrR measure in September 2013. The 
resulting measure specifications did not include hemoglobin thresholds, 
as no input from the TEP or public comments supported moving forward 
with thresholds included in the measure. We therefore believe these 
efforts meet the requirements for further development of the STrR prior 
to implementation in the ESRD QIP.
    In the process of preparing to submit the measure for NQF review, 
we conducted analyses on the reliability of the STrR measure. The full 
analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The STrR is not a simple average; 
instead, we estimate the IUR using a bootstrap approach, which uses a 
resampling

[[Page 40257]]

scheme to estimate the within facility variation that cannot be 
directly estimated by ANOVA. A small IUR (near 0) reveals that most of 
the variation of the measures between facilities is driven by ``random 
noise,'' indicating the measure would not be a reliable 
characterization of the differences among facilities, whereas a large 
IUR (near 1) indicates that most of the variation between facilities is 
due to the real difference between facilities. We have determined that 
the average IUR for the STrR measure is 0.54, meaning that about half 
of the variation in the measure can be attributed to between-facility 
differences, and about half to within-facility variation. This value of 
IUR indicates a moderate degree of reliability and is consistent with 
the reliability of other outcome measures in CMS quality reporting and 
VBP programs. We therefore believe that facilities can be reliably 
scored on the proposed STrR measure.
Data Sources
    Data for the measure come from various CMS-maintained data sources 
for ESRD patients including Program Medical Management and Information 
System (PMMIS/REMIS), Medicare claims, the CROWNWeb database, the CMS 
Annual Facility Survey (Form CMS-2744), Medicare dialysis and hospital 
payment records, the CMS Medical Evidence Form (Form CMS-2728), 
transplant data from the OPTN, the Death Notification Form (Form CMS-
2746), the Nursing Home Minimum Dataset, and the Social Security Death 
Master File. These data sources include all Medicare patients. 
Information on transfusions is obtained from Medicare Inpatient and 
Outpatient Claims SAFs.
Outcome
    The outcome of interest for the STrR is blood transfusion events 
(defined as the transfer of one or more units of blood or blood 
products into the recipient's blood stream) among Medicare ESRD 
patients dialyzing at the facility during the inclusion time periods.
Cohort
    The cohort for the STrR includes all adult Medicare ESRD dialysis 
patients who have been documented as having had ESRD for at least 90 
days.
Inclusion and Exclusion Criteria
    Patients will not be included in the STrR during the first 90 days 
of ESRD dialysis treatment. Starting with day 91 after onset of ESRD, a 
patient is attributed to a facility once he or she has been receiving 
dialysis there for 60 days. When a patient transfers from one facility 
to another, we are proposing that the patient would continue to be 
attributed to the original facility for 60 days from the date of the 
transfer. Starting on day 61, the patient would be attributed to the 
transferee facility. Patients would be excluded from the measure for 
three days prior to the date they receive a transplant to avoid 
including transfusions associated with the transplant hospitalization.
    We are also proposing to require that patients reach a certain 
level of Medicare-paid dialysis bills to be included in the STrR, or 
that patients have Medicare-paid inpatient claims during the period. 
This requirement is intended to assure completeness of transfusion 
information for all patients included in the measure calculation by 
excluding non-Medicare patients and patients for whom Medicare is a 
secondary payer, because they are not expected to have complete 
information on transfusion available in the claims data. For each 
patient, a month is included as a month at risk for transfusion if that 
month in the period is considered ``eligible.'' A month is considered 
eligible if it is within two months of a month in which a patient has 
$900 of Medicare-paid claims or at least one Medicare-paid inpatient 
claim. The $900 amount represents approximately the tenth percentile of 
monthly dialysis claims per patient.
    In addition, a transfusion event is eligible for inclusion in the 
STrR measure if the patient did not present with certain comorbid 
conditions during the 12 month period immediately prior to the date of 
the transfusion event. We are proposing to exclude these transfusion 
events because the identified comorbid conditions are associated with a 
higher risk of transfusion and require different anemia management 
practices that the measure is not intended to address. Specifically, we 
are proposing that a transfusion event will be excluded from the 
measure if the patient, during the 12 month look back period, had a 
Medicare claim for: hemolytic and aplastic anemia; solid organ cancer 
(breast, prostate, lung, digestive tract and others); lymphoma; 
carcinoma in situ; coagulation disorders; multiple myeloma; 
myelodysplastic syndrome and myelofibrosis; leukemia; head and neck 
cancer; other cancers (connective tissue, skin, and others); metastatic 
cancer; or sickle cell anemia. The specific diagnoses used to identify 
each of these conditions are listed in the proposed measure 
specifications, which are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Risk Adjustment
    The denominator of the STrR uses expected transfusions calculated 
from a Cox model that is extended to handle repeated events. For 
computational purposes, the proposed STrR measure adopts a model with 
piecewise-constant baseline rates. A stage 1 model is fitted to the 
national data with piecewise-constant baseline rates across facilities. 
Transfusion rates are adjusted for: patient age; diabetes as a cause of 
ESRD; duration of ESRD; nursing home status; BMI at incidence; 
comorbidity index at incidence; and calendar year. This model allows 
baseline transfusion rates to vary between facilities, and applies the 
regression coefficients for the risk-adjustment model to each facility 
identically. This approach is robust to possible differences between 
facilities in the patient mix being treated. The second stage uses the 
risk-adjustment factor from the first stage as an offset. The stage 2 
model then calculates the national baseline transfusion rate.
    The STrR measure includes the following risk adjustors, which are 
obtained from the following data sources:

----------------------------------------------------------------------------------------------------------------
                 Risk adjustor                                             Data source
----------------------------------------------------------------------------------------------------------------
Age...........................................  REMIS database.
Diabetes as cause of ESRD.....................  CMS Form 2728.
BMI at incidence of ESRD......................  CMS Form 2728.
Comorbidity index.............................  CMS Form 2728.
Nursing home status...........................  Nursing Home Minimum Dataset.
Duration of ESRD..............................  CMS Form 2728.
----------------------------------------------------------------------------------------------------------------

[[Page 40258]]

    More details on the risk-adjustment calculations, and the rationale 
for selecting these risk adjustors and not others, can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    As indicated in the table above, the proposed STrR measure risk 
adjusts predominantly on the basis of patient characteristics collected 
on CMS Form 2728, and we believe that this risk-adjustment methodology 
is reliable and valid.
    NQF evaluates measures on the basis of four criteria: importance, 
scientific acceptability, feasibility, and usability. The validity and 
reliability of a measure's risk-adjustment calculations fall under the 
``scientific acceptability'' criterion, and Measure Evaluation 
Criterion 2b4 specifies NQF's preferred approach for risk adjusting 
outcome measures (http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion states that 
patient comorbidities should only be included in risk-adjustment 
calculations if they are (1) present at the start of care and (2) not 
indicative of disparities or deficiencies in the quality of care 
provided. As indicated in the ``Inclusion and Exclusion Criteria'' 
subsection above, the proposed STrR clinical measure includes Medicare 
patients who have been documented as having had ESRD for at least 90 
days and are not excluded for other reasons. Accordingly, we believe 
that NQF Measure Evaluation Criterion 2b4 supports risk-adjusting the 
proposed STrR measure on the basis of incident patient comorbidity data 
collected on CMS Form 2728, because these comorbidities are likely 
present at the start of care. Moreover, comorbidities that develop 
after the 90th day of chronic dialysis treatment, and are statistically 
associated with transfusions, can be reflective of the quality of care 
provided by the facility. Therefore, we do not believe that NQF Measure 
Evaluation Criterion 2b4 supports risk adjusting the proposed STrR 
measure on the basis of updated comorbidity data, because doing so may 
mask disparities or deficiencies in the quality of care provided, 
thereby obscuring assessments of facility performance. For these 
reasons, we believe that the risk-adjustment methodology for the 
proposed STrR measure is consistent with NQF guidelines for measure 
developers. Testing that we have undertaken has confirmed the validity 
and reliability of the proposed STrR measure using these data. We 
anticipate submitting the measure to the NQF for endorsement in CY 
2015.
    Full documentation of the STrR risk-adjustment methodology is 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
Calculating the STrR Measure
    The STrR measure is calculated as the ratio of the number of 
observed transfusions to the number of expected transfusions. The ratio 
is greater than one for facilities that have more transfusions than 
would be expected for an average facility with similar cases, and less 
than one if the facility has fewer transfusions than would be expected 
for an average facility with similar cases. This ratio is calculated in 
terms of patient-years at risk. ``Patient-year at risk'' means that the 
denominator of the rate calculation is obtained by adding exposure 
times of all patients until a censoring event (that is, death, 
transplant, or end of the time period) because each patient's time at 
risk varies based on these censoring events. Time at risk is the time 
period in which each patient is eligible to have the transfusion event 
occur for the purposes of the measure calculation, exclusive of all 
days that have claims pertaining to the exclusionary comorbidities 
identified within the previous 12 months.
    The predicted value from stage 1 of the model and the baseline rate 
from stage 2 of the model, as described above, are then used to 
calculate the expected number of transfusion events for each patient 
over the period during which the patient is seen to be at risk for a 
transfusion event.
    The STrR is a point estimate--the best estimate of a facility's 
transfusion rate based on the facility's case mix. For more detailed 
information on the calculation methodology, please refer to our Web 
site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal to adopt the proposed STrR 
clinical measure.
b. Proposal To Adopt the Pediatric Peritoneal Dialysis Adequacy 
Clinical Measure and Add the Proposed Measure to the Dialysis Adequacy 
Measure Topic
    Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate 
facilities based on measures of dialysis adequacy. Beginning with the 
PY 2018 ESRD QIP, we propose to add a new measure of pediatric 
peritoneal dialysis adequacy to the Dialysis Adequacy measure topic. If 
this proposal is finalized, then the modified Dialysis Adequacy measure 
topic would include four clinical measures on dialysis adequacy--(1) 
Adult Hemodialysis Adequacy; (2) Adult Peritoneal Dialysis Adequacy; 
and (3) Pediatric Hemodialysis Adequacy; and (4) Pediatric Peritoneal 
Dialysis Adequacy.
    Approximately 900 pediatric patients in the United States receive 
peritoneal dialysis.\5\ Although recent studies suggest improvement in 
mortality rates among pediatric patients receiving maintenance dialysis 
over time, mortality in this patient population remains high.\6\ 
Despite a lack of long-term outcome studies on pediatric peritoneal 
dialysis patients, outcome studies performed in the adult ESRD 
population have shown an association between the dose of peritoneal 
dialysis and clinical outcomes,\7\ which could suggest that improved 
quality of dialysis care in the fragile pediatric patient population 
may further improve survival in those patients.
---------------------------------------------------------------------------

    \5\ U.S. Renal Data System, USRDS 2012 Annual Data report: Atlas 
of Chronic Kidney Disease and End-stage Renal Disease in the United 
States, National Institutes of Health, National Institute of 
Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 2012.
    \6\ U.S. Renal Data System, USRDS 2012 Annual Data report: Atlas 
of Chronic Kidney Disease and End-stage Renal Disease in the United 
States, National Institutes of Health, National Institute of 
Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 2012.
    \7\ Paniagua R, Amato D, Vonesh E, et al. ``Effects of increased 
peritoneal clearance on mortality rates in peritoneal dialysis: 
ADEMEX, a prospective, randomized, controlled trial.'' Journal of 
the American Society of Nephrology: JASN (2002) 13:1307-1320. PMID: 
11961019; See also Lo WK, Lui SL, Chan TM, et al. ``Minimal and 
optimal peritoneal Kt/V targets: Results of anuric peritoneal 
dialysis patient's survival analysis.'' Kidney international (2005) 
67:2032-2038. PMID: 15840054.
---------------------------------------------------------------------------

    Section 1881(h)(2)(A)(iv) gives the Secretary authority to adopt 
measures for the ESRD QIP that cover a wide variety of topics. Section 
1881(h)(2)(B)(ii) of the Act states that ``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 Act [in this case NQF], 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.'' We have 
given due consideration to endorsed measures, as well as those adopted 
by a consensus organization. Because no NQF-endorsed measures or 
measures adopted by a consensus organization on

[[Page 40259]]

pediatric peritoneal dialysis adequacy currently exist, we are 
proposing to adopt the Pediatric Peritoneal Dialysis Adequacy clinical 
measure under the authority of section 1881(h)(2)(B)(ii) of the Act.
    The Measure Application Partnership expressed conditional support 
for measure XCBMM, ``Pediatric Peritoneal Dialysis Adequacy: 
Achievement of Target Kt/V'' in its January 2014 Pre-Rulemaking Report, 
noting it would ``consider this measure for inclusion in the program 
once it has been reviewed for endorsement.'' However, we believe the 
measure is ready for adoption in the ESRD QIP because it has been fully 
tested for reliability and has received consensus support from the TEP 
that was tasked with developing it. We intend to submit this measure to 
the NQF for endorsement in late 2014 or early 2015.
    For PY 2018 and future payment years, we propose to adopt the 
Pediatric Peritoneal Dialysis Adequacy clinical measure, which assesses 
the percentage of eligible pediatric peritoneal dialysis patient-months 
in which a Kt/V of greater than or equal to 1.8 was achieved during the 
performance period. Qualifying patient-months are defined as months in 
which a peritoneal dialysis patient is under the age of 18 and has been 
receiving peritoneal dialysis treatment for 90 days or longer. 
Performance on this measure will be expressed as a proportion of 
patient-months meeting the measure threshold of 1.8, and the measure 
will be scored based on Kt/V data entered on Medicare 72x claims. The 
measure is a complement to the existing Kt/V dialysis adequacy measures 
previously adopted in the ESRD QIP. Technical specifications for the 
proposed pediatric peritoneal dialysis adequacy clinical measure can be 
found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal to adopt the Pediatric Peritoneal 
Dialysis Adequacy measure.
c. Proposed ICH CAHPS Clinical Measure
    Section 1881(h)(2)(A)(ii) of the Act states that the Secretary 
shall specify, to the extent feasible, measures of patient 
satisfaction. Patients with ESRD are an extremely vulnerable 
population: They are completely reliant on ESRD providers for life-
saving care, and they are often reluctant to express concerns about the 
care they receive from an array of staff, both professional and non-
professional. Patient-centered experience is an important measure of 
the quality of patient care, and it is a component of the 2013 NQS, 
which emphasizes patient-centered care by rating patient experience as 
a means for empowering patients and improving the quality of their 
care.
    Following a rigorous process, the ICH CAHPS Survey was developed to 
capture the experience of in-center hemodialysis patients. The NQF 
endorsed and the Measures Application Partnership supported this 
quality measure (NQF 0258: CAHPS In-Center Hemodialysis 
Survey). The ICH CAHPS Survey captures the experience of in-center 
hemodialysis patients on three dimensions: ``nephrologists' 
communication and caring;'' ``quality of dialysis center care and 
operations;'' and ``providing information to patients.'' Three global 
ratings are also part of the standardized ICH CAHPS Survey: Rating of 
the nephrologist; rating of the staff; and rating of the facility.
    We believe that this measure enables patients to rate their 
experience of in-center dialysis treatment without fear of retribution. 
Public reporting of results from the ICH CAHPS survey, once enough data 
are available, will satisfy requests to provide consumers (patients and 
family members alike) with desired information on viewpoints from 
patients. In addition, collecting and reporting ICH CAHPS survey 
results assists facilities with their internal quality improvement 
efforts and external benchmarking with other facilities, and it 
provides CMS with information that can be used to monitor the 
experience of patients with ESRD.
    Starting with the PY 2014 program, we have taken steps to develop 
the baseline data necessary to propose and implement NQF 0258 
as a clinical measure in PY 2018. In the PY 2014 and PY 2015 programs, 
we adopted a reporting measure related to the ICH CAHPS survey, which 
required that facilities attest they had administered the survey 
according to the specifications set by the Agency for Healthcare 
Research and Quality (AHRQ). In the CY 2014 ESRD PPS final rule, we: 
(1) Expanded the ICH CAHPS reporting measure to require facilities to 
submit (via CMS-approved vendors) their survey results to CMS; (2) 
increased the patient minimum for the measure from 11 to 30 survey-
eligible patients; (3) required that facilities (via CMS-approved 
vendors) administer the survey according to specifications set by CMS; 
and (4) required facilities (via CMS-approved vendors) to administer 
the survey twice during each performance period, and to report both 
sets of survey results by the date specified on http://ichcahps.org, 
starting in PY 2017 (78 FR 72193 through 72196).
    By CY 2016 (the proposed performance period for the PY 2018 ESRD 
QIP), we will have worked with dialysis facilities for four years to 
help them become familiar with the ICH CAHPS survey. By that time, we 
believe that facilities will be sufficiently versed in the survey 
administration process to be reliably evaluated on the NQF-endorsed ICH 
CAHPS measure (NQF 0258). Because facilities (and CMS-approved 
vendors) will be familiar enough with the ICH CAHPS survey instrument 
to be reliably scored on the basis of their survey results, we believe 
it is reasonable to expand the ICH CAHPS reporting measure into a 
clinical measure for the PY 2018 ESRD QIP.
    For these reasons, and because a clinical measure would have a 
greater impact on clinical practice by holding facilities accountable 
for their actual performance, we propose to replace the ICH CAHPS 
reporting measure that we adopted in the CY 2014 ESRD PPS Final Rule 
with a new clinical measure for PY 2018 and future payment years. This 
proposed ICH CAHPS clinical measure is NQF 0258: CAHPS In-
Center Hemodialysis Survey. We are not proposing to change the 
semiannual survey administration and reporting requirements. The 
proposed scoring methodology for the ICH CAHPS clinical measure is 
discussed below in section III.G.4.c. Technical specifications for the 
ICH CAHPS clinical measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal.
d. Proposed Screening for Clinical Depression and Follow-Up Reporting 
Measure
    Depression is the most common psychological disorder in patients 
with ESRD. Depression causes suffering, a decrease in quality of life, 
and impairment in social and occupational functions; it is also 
associated with increased health care costs. Current estimates put the 
depression prevalence rate as high as 20 percent to 25 percent in 
patients with ESRD.\8\ Studies have also shown that depression and 
anxiety are the most common comorbid

[[Page 40260]]

illnesses in patients with ESRD.\9\ Moreover, depressive affect and 
decreased perception of social support have been associated with higher 
rates of mortality in the ESRD population, and some studies suggest 
that this association is as strong as that between medical risk factors 
and mortality.\10\ Nevertheless, depression and anxiety remain under-
recognized and under-treated, despite the availability of reliable 
screening instruments.\11\ Therefore, a measure that assesses whether 
facilities screen patients for depression, and develop follow-up plans 
when appropriate, offers an opportunity to improve the health of 
patients with ESRD.
---------------------------------------------------------------------------

    \8\ Kimmel PL, Cuckor D, Cohen SD, Peterson RA. Depression in 
end-stage renal disease patients: a critical review. Advances in 
Chronic Kidney Disease. 2007:14(4):328-34.
    \9\ Feroze, U., Martin, D., Reina-Patton, A., Kalantar-Zadeh, 
K., & Kopple, J. D. (2010). Mental health, depression, and anxiety 
in patients on maintenance dialysis. Iranian Journal of Kidney 
Diseases, 4(3), 173-80.
    \10\ Cukor, D., Cohen, S. D., Peterson, R. A., & Kimmel, P. L. 
(2007). Psychosocial aspects of chronic disease: ESRD as a 
paradigmatic illness. Journal of the American Society of Nephrology, 
18(12), 3042-3055; and Kimmel, P. L., Peterson, R. A., Weihs, K. L., 
Simmens, S. J., Alleyne, S., Cruz, I., & Veis, J. H. (2000). 
Multiple measurements of depression predict mortality in a 
longitudinal study of chronic hemodialysis outpatients. Kidney 
International, 57(5), 2093-2098.
    \11\ Preljevic, V. T., [Oslash]sthus, T. B. H., Sandvik, L., 
Opjordsmoen, S., Nordhus, I. H., Os, I., & Dammen, T. (2012). 
Screening for anxiety and depression in dialysis patients: 
Comparison of the Hospital Anxiety and Depression Scale and the Beck 
Depression Inventory. Journal of Psychosomatic Research, 73(2), 139-
144.
---------------------------------------------------------------------------

    We are proposing to adopt a depression measure that is based on an 
NQF-endorsed measure (NQF 0418: Screening for Clinical 
Depression). NQF 0418 assesses the percentage of patients 
screened for clinical depression using an age-appropriate standardized 
tool and documentation of a follow-up plan where necessary. The 
Measures Application Partnership supported the use of NQF 0418 
in the ESRD QIP in its January 2014 Pre-Rulemaking Report, because the 
measure ``addresses a National Quality Strategy [NQS] aim not 
adequately addressed in the program measure set'' and promotes person- 
and family-centered care. We are proposing to adopt a reporting measure 
based on this NQF-endorsed measure so that we can collect data that we 
can use in the future to calculate both achievement and improvement 
scores, should we propose to adopt the clinical version of this measure 
in future rulemaking. Although we recognize that we recently adopted 
the NHSN Bloodstream Infection clinical measure despite a lack of 
baseline data to calculate achievement and improvement scores, we 
believe that measure warranted special treatment in light of the fact 
that it addresses patient safety. Because the proposed screening for 
clinical depression measure addresses quality of life and patient well-
being, and not patient safety, we think it is appropriate to adopt it 
as a reporting measure until such time that we can collect the baseline 
data needed to score it as a clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``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) [in this case NQF], the 
Secretary may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary.'' Because we 
have given due consideration to endorsed measures as well as those 
adopted by a consensus organization and determined it is not practical 
or feasible to adopt NQF 0418 as a clinical measure in the 
ESRD QIP at this time, we are proposing to adopt the Screening for 
Clinical Depression and Follow-Up Plan reporting measure under the 
authority of section 1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we propose that facilities 
must report one of the following conditions in CROWNWeb, at least once 
per performance period, for each qualifying patient (defined below):
    1. Screening for clinical depression is documented as being 
positive, and a follow-up plan is documented.
    2. Screening for clinical depression documented as positive, and a 
follow-up plan not documented, and the facility possess documentation 
stating the patient is not eligible.
    3. Screening for clinical depression documented as positive, the 
facility possesses no documentation of a follow-up plan, and no reason 
is given.
    4. Screening for clinical depression is documented as negative, and 
a follow-up plan is not required.
    5. Screening for clinical depression not documented, but the 
facility possesses documentation stating the patient is not eligible.
    6. Clinical depression screening not documented, and no reason is 
given.
    For this proposed measure, qualifying patients are defined as 
patients 12 years or older who have been treated at the facility for 90 
days or longer. This proposed measure will collect the same data 
described in NQF 0418, but we are proposing to score 
facilities based on whether they successfully report the data, and not 
the measure results. More specifically, facilities will be scored on 
whether they report one of the above conditions for each qualifying 
patient once before February 1 of the year directly following the 
performance period. Technical specifications for the Screening for 
Clinical Depression and Follow-Up reporting measure can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on these proposals.
e. Proposed Pain Assessment and Follow-Up Reporting Measure
    Pain is one of the most common symptoms in patients with ESRD.\12\ 
Studies have shown that pain is a significant problem for more than 50 
percent of patients with ESRD, and up to 82 percent of those patients 
report moderate to severe chronic pain.\13\ Pain is commonly associated 
with quality of life in early- and late-stage chronic kidney disease 
patients, but it is not effectively managed in the ESRD patient 
population and chronic pain often goes untreated.\14\ Observational 
studies suggest that under-managed pain has the potential to induce or 
exacerbate comorbid conditions in ESRD, which may in turn adversely 
affect dialysis treatment.\15\ Patients with ESRD frequently experience 
pain that has a debilitating impact on their daily lives, and research 
has shown a lack of effective pain management strategies currently in 
place in dialysis facilities.\16\ Therefore, a measure that assesses 
whether facilities regularly assess their patients' pain, and develop 
follow-up plans as necessary, offers the possibility

[[Page 40261]]

of improving the health and well-being of patients with ESRD.
---------------------------------------------------------------------------

    \12\ Cohen, S. D., Patel, S. S., Khetpal, P., Peterson, R. A., & 
Kimmel, P. L. (2007). Pain, sleep disturbance, and quality of life 
in patients with chronic kidney disease. Clinical Journal of the 
American Society of Nephrology, 2(5), 919-925.
    \13\ Davison SN. Pain in hemodialysis patients: prevalence, 
cause, severity, and management. American Journal of Kidney Disease. 
2003; 42:1239-1247
    \14\ Davison, S. N. (2007). The prevalence and management of 
chronic pain in end-stage renal disease. Journal of Palliative 
Medicine, 10(6), 1277-1287.
    \15\ De Castro C. (2013). Pain assessment and management in 
hemodialysis patients. CANNT Journal; 23(3):29-32; Weisbord SD, 
Fried LF, Arnold RM, Fine MJ, Levenson DJ, et al. Prevalence, 
severity, and importance of physical and emotional symptoms in 
chronic hemodialysis patients. (2005) Journal of the American 
Society of Nephrology; 16(8):2487-2494.
    \16\ De Castro C. (2013). Pain assessment and management in 
hemodialysis patients. CANNT Journal; 23(3):29-32; Wyne A, Rai R, 
Cuerden M, Clark WF, Suri RS. (2011). Opioid and benzodiazepine use 
in end-stage renal disease: a systematic review. Clinical Journal of 
the American Society of Nephrology. 6(2):326-333.
---------------------------------------------------------------------------

    We are proposing to adopt a pain measure that is based on an NQF-
endorsed measure (NQF 0420: Pain Assessment and Follow-Up). 
NQF 0420 assesses the percentage of patients with 
documentation of a pain assessment using a standardized tool, and 
documentation of a follow-up plan when pain is present. The Measures 
Application Partnership supported the use of NQF 0420 in the 
ESRD QIP in its January 2014 Pre-Rulemaking Report, because the measure 
``addresses a National Quality Strategy [NQS] aim not adequately 
addressed in the program measure set'' and promotes person- and family-
centered care. We are proposing to adopt a reporting measure based on 
this NQF-endorsed measure so that we can collect data that we can use 
in the future to calculate both achievement and improvement scores, 
should we propose to adopt the clinical version of this measure in 
future rulemaking. Although we recognize that we recently adopted the 
NHSN Bloodstream Infection clinical measure despite a lack of baseline 
data to calculate achievement and improvement scores, we believe that 
measure warranted special treatment in light of the fact that it 
addresses patient safety. Because the proposed screening for pain 
measure addresses quality of life and patient well-being, and not 
patient safety, we think it is appropriate to adopt it as a reporting 
measure until such time that we can collect the baseline data needed to 
score it as a clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``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 [in this case 
NQF], 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.'' 
Because we have given due consideration to endorsed measures, as well 
as those adopted by a consensus organization, and determined it is not 
practical or feasible to adopt those measures in the ESRD QIP, we are 
proposing to adopt the Pain Assessment and Follow-Up reporting measure 
under the authority of section1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we propose that facilities 
must report one of the following conditions in CROWNWeb, once every six 
months per performance period, for each qualifying patient (defined 
below):
    1. Pain assessment using a standardized tool is documented as 
positive, and a follow-up plan is documented.
    2. Pain assessment documented as positive, a follow-up plan is not 
documented, and the facility possesses documentation that the patient 
is not eligible.
    3. Pain assessment documented as positive using a standardized 
tool, a follow-up plan is not documented, and no reason is given.
    4. Pain assessment using a standardized tool is documented as 
negative, and no follow-up plan required.
    5. No documentation of pain assessment, and the facility possesses 
documentation the patient is not eligible for a pain assessment using a 
standardized tool.
    6. No documentation of pain assessment, and no reason is given.
    For this measure, a qualifying patient is defined as a patient aged 
18 years or older who has been treated at the facility for 90 days or 
longer. This proposed measure will collect the same data described in 
NQF 0420, but we are proposing a few modifications to the NQF-
endorsed version. First, we are proposing that facilities must report 
data for each patient once every six months, whereas NQF 0420 
requires facilities to report the data based on each visit. We are 
proposing this modification because we agree with public comments 
reflected on the Measures Application Partnership's January 2014 Pre-
Rulemaking Report, which stated that conducting a pain assessment every 
time a patient receives dialysis would be unduly burdensome for 
facilities. Second, we are proposing that conditions covering the first 
six months of the performance period must be reported in CROWNWeb 
before August 1 of the performance period, and that conditions covering 
the second six months of the performance period must be reported in 
CROWNWeb before February 1 of the year directly following the 
performance period. We believe this reporting schedule will ensure 
regular monitoring and follow-up of patients' pain without imposing an 
undue burden on facilities. Third, we are proposing to score facilities 
based on whether they successfully report the data, and not based on 
the measure results. Technical specifications for the Pain Assessment 
and Follow-Up reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We seek comments on this proposal.
f. Proposed NHSN Healthcare Personnel Influenza Vaccination Reporting 
Measure
    Infection is the second most common cause of death in patients with 
ESRD, following cardiovascular causes,\17\ and influenza accounts for 
significant morbidity and mortality in patients receiving 
hemodialysis.\18\ Healthcare personnel (HCP) can acquire influenza from 
patients and transmit influenza to patients and other HCP; decreasing 
transmission of influenza from HCP to persons at high risk likely 
reduces influenza-related deaths among persons at high risk for 
complications from influenza, including patients with ESRD.\19\ 
Vaccination is an effective preventive measure against influenza that 
can prevent many illnesses, deaths, and losses in productivity.\20\ In 
addition, HCP are considered high priorities for vaccine use. Achieving 
and sustaining high influenza vaccination coverage among HCP is 
intended to help protect HCP and their patients, and to reduce disease 
burden and healthcare costs. Results of studies in post-acute care 
settings similar to the ESRD facility setting indicate that higher 
vaccination coverage among HCP is associated with lower all-cause 
mortality.\21\ We therefore propose to adopt an NHSN HCP Influenza 
Vaccination reporting measure for PY 2018 and future payment years.
---------------------------------------------------------------------------

    \17\ Soni R, Horowitz B, Unruh M. Immunization in end-stage 
renal disease: Opportunity to improve outcomes. Semin, Dial. 2013 
Jul-Aug;26(4):416-26.
    \18\ Fiore AE, Shay DK, Haber P, et al. Prevention and control 
of influenza. Recommendations of the Advisory Committee on 
Immunization Practices (ACIP). MMWR Recomm Rep. 2007;56:1-54.
    \19\ Pearson ML, Bridges CM, Harper SA. Influenza vaccination of 
health-care personnel: Recommendations of the Healthcare Infection 
Control Practices Advisory Committee (HICPAC) and the Advisory 
Committee on Immunization Practices (ACIP). MMWR. 2006:55:1-16.
    \20\ Talbot TR, Bradley SE., Cosgrove SE., et al. Influenza 
vaccination of healthcare workers and vaccine allocation for 
healthcare workers during vaccine shortages. Infect Control Hosp 
Epidemiol. 2005;26(11):882-90.
    \21\ Carman WF, Elder AG, Wallace LA, et al. Effects of 
influenza vaccination of health-care workers on mortality of elderly 
people in long-term care: a randomized controlled trial. Lancet. 
2000;355(9198):93-7; see also Potter J, Stott DJ, Roberts MA, et al. 
Influenza vaccination of health care workers in long-term-care 
hospitals reduces the mortality of elderly patients. J infect Dis. 
1997;175(1):1-6.
---------------------------------------------------------------------------

    We are proposing to use a measure that is based on an NQF-endorsed 
measure (NQF 0431: Influenza Vaccination Coverage Among 
Healthcare Personnel) of the percentage of qualifying HCP who (a) 
received an influenza vaccination; (b) were determined to have a 
medical

[[Page 40262]]

contraindication; (c) declined influenza vaccination; or (d) were of an 
unknown vaccination status. A ``qualifying HCP'' is defined as an 
employee, licensed independent practitioner, or adult student/trainee/
volunteer who works in a facility for at least one day between October 
1 and March 31. The Measures Application Partnership supported the use 
of NQF 0431 in the ESRD QIP in its January 2014 Pre-Rulemaking 
Report because the measure is NQF-endorsed for use in the dialysis 
facility care setting. We are proposing to adopt a reporting measure 
based on this NQF-endorsed measure so that we can collect data that we 
can use in the future to calculate both achievement and improvement 
scores, should we propose to adopt the clinical version of this measure 
in future rulemaking. Although we recognize that we recently adopted 
the NHSN Bloodstream Infection clinical measure despite a lack of 
baseline data to calculate achievement and improvement scores, we 
believe that measure warranted special treatment in light of the fact 
that it addresses patient safety. Because the proposed NHSN HCP 
Influenza Vaccination reporting measure addresses population health, 
and not patient safety, we think it is appropriate to adopt it as a 
reporting measure until such time that we can collect the baseline data 
needed to score it as a clinical measure.
    Section 1881(h)(2)(B)(ii) of the Act states that ``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) [in this case, NQF], the 
Secretary may specify a measure that is not so endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization identified by the Secretary.'' Because we 
have given due consideration to endorsed measures as well as those 
adopted by a consensus organization, and determined it is not practical 
or feasible to adopt this measure in the ESRD QIP, we are proposing to 
adopt the NHSN Healthcare Personnel Influenza Vaccination reporting 
measure under the authority of section 1881(h)(2)(B)(ii) of the Act.
    For PY 2018 and future payment years, we propose that facilities 
must submit, on an annual basis, an HCP Influenza Vaccination Summary 
Form to CDC's NHSN system, according to the specifications available in 
the NHSN Healthcare Personnel Safety Component Protocol (http://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf). This proposed measure differs from NQF 0431 in 
that we are proposing to collect the same data but will score 
facilities on the basis of whether they submit this data, rather than 
on the percentage of HCP vaccinated. We propose that the deadline for 
reporting this information to NHSN be May 15th of each year. This date 
is consistent with the reporting deadline established by CMS for other 
provider types reporting HCP vaccination data to NHSN. Because the flu 
season typically spans from October to April, NHSN protocols submitted 
by May 15 would document vaccinations received during the preceding flu 
season. For example, NHSN HCP Influenza Vaccination Summary Forms 
submitted by May 15, 2016, would contain data from October 1, 2015 to 
March 31, 2016, and would be used for the PY 2018 ESRD QIP; NHSN 
protocols submitted by May 15, 2017, would contain data from October 1, 
2016 to March 31, 2017, and would be used for the PY 2019 ESRD QIP, and 
so on. Technical specifications for this measure can be found at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html.
    We request comments on this proposal.

[[Page 40263]]

[GRAPHIC] [TIFF OMITTED] TP11JY14.001

2. Proposed Performance Period for the PY 2018 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 
accordance with our proposal to adopt CY 2015 as the performance period 
for the PY 2017 ESRD QIP, as well as our policy goal to collect 12 
months of data on each measure when feasible, we are proposing to adopt 
CY 2016 as the performance period for the PY 2018 ESRD QIP. With 
respect to the NHSN Healthcare Personnel Influenza Vaccination 
Reporting measure, we are proposing that the performance period will be 
from October 1, 2015 through March 31, 2016, which is consistent with 
the length of the 2015-2016 influenza season.
    We seek comments on these proposals.
3. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the PY 2018 ESRD QIP
a. Proposed Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures in the PY 2018 ESRD QIP
    For the same reasons stated in the CY 2013 ESRD PPS final rule (77 
FR 67500 through 76502), we are proposing for PY 2018 to set the 
performance standards, achievement thresholds, and benchmarks based on 
the 50th, 15th, and 90th percentile, respectively, of national 
performance in CY 2014 for all the clinical measures except for the 
proposed ICH CAHPS clinical measure. As finalized in the CY 2014 ESRD 
PPS Final Rule (78 FR 72213), facilities are not required to administer 
the ICH CAHPS survey (via a CMS-approved third-party vendor) on a 
semiannual basis until CY 2015, the proposed performance period for the 
PY 2017 ESRD QIP. We believe that ICH CAHPS data collected during CY 
2014 will not be reliable enough to use for the purposes of 
establishing performance standards, achievement thresholds, and 
benchmarks, because facilities are only required to administer the 
survey once in CY 2014. Therefore, we propose to set the performance 
standards, achievement thresholds, and benchmarks based on the 50th, 
15th, and 90th percentile, respectively, of national performance in CY 
2015 for the proposed ICH CAHPS clinical measure.
    We seek comments on these proposals.
b. Estimated Performance Standards, Achievement Thresholds, and 
Benchmarks for the Clinical Measures Proposed for the PY 2018 ESRD QIP
    At this time, we do not have the necessary data to assign numerical 
values to the proposed performance standards for the clinical measures, 
because we do not yet have data from CY 2014 or the first portion of CY 
2015. We will publish values for the clinical measures, using data from 
CY 2014 and the first portion of CY 2015, in the CY 2016 ESRD PPS Final 
Rule.
c. Proposed Performance Standards for the PY 2018 Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized performance 
standards for the Anemia Management and Mineral Metabolism reporting 
measures (78 FR 72213). We are not proposing any changes to this policy 
beyond the proposal to modify the reporting requirements for the 
Mineral Metabolism reporting measure, which appears above in Section 
III.G.1.
    For the Screening for Clinical Depression and Follow-Up reporting 
measure, we propose to set the performance standard as successfully 
reporting one of the above-listed clinical depression and follow-up 
screening conditions for each qualifying patient in CROWNWeb before the 
February 1st

[[Page 40264]]

directly following the performance period.
    For the Pain Assessment and Follow-Up reporting measure, we propose 
to set the performance standard as successfully reporting one of the 
above-listed pain assessment and follow-up conditions for each 
qualifying patient in CROWNWeb twice annually: once before August 1st 
for the first 6 months of the performance period, and once before the 
February 1st directly following the performance period for the last six 
months of the performance period.
    For the NHSN Healthcare Provider Influenza Vaccination reporting 
measure, we propose to set the performance standard as successfully 
submitting the HCP Influenza Vaccination Summary Form to CDC's NHSN 
system by May 15, 2017.
    We seek comments on these proposals.
4. Proposal for Scoring the PY 2018 ESRD QIP Measures
a. Scoring Facility Performance on Clinical Measures Based on 
Achievement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on achievement (78 FR 
72215). In determining a facility's achievement score for each measure 
under the PY 2018 ESRD QIP, we propose to continue using this 
methodology for all clinical measures except the ICH CAHPS clinical 
measure. Under this methodology, facilities 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.
b. Scoring Facility Performance on Clinical Measures Based on 
Improvement
    In the CY 2014 ESRD PPS Final Rule, we finalized a policy for 
scoring performance on clinical measures based on improvement (78 FR 
72215 through 72216). In determining a facility's improvement score for 
each measure under the PY 2018 ESRD QIP, we propose to continue using 
this methodology for all clinical measures except the ICH CAHPS 
clinical measure. Under this methodology, facilities receive points 
along an improvement range, defined as a scale running between the 
improvement threshold and the benchmark. We propose to define the 
improvement threshold as the facility's performance on the measure 
during CY 2015. The facility's improvement score would be calculated by 
comparing its performance on the measure during CY 2016 (the proposed 
performance period) to its performance rate on the measure during CY 
2015.
c. Proposal for Scoring the ICH CAHPS Clinical Measure
    For PY 2018 and future payment years, we propose the following 
scoring methodology for the ICH CAHPS clinical measure. We propose to 
score the measure on the basis of three composite measures and three 
global ratings.
    Composite Measures:
     Nephrologists' Communication and Caring;
     Quality of Dialysis Center Care and Operations; and
     Providing Information to Patients.
    Global Ratings:
     Overall rating of the nephrologists (Question 8)
     Overall rating of the dialysis center staff (Question 32)
     Overall rating of the dialysis facility (Question 35)

The composite measures are groupings of questions that measure the same 
dimension of healthcare. (Groupings of questions and composite measures 
can be found at https://ichcahps.org/Portals/0/ICH_Composites_English.pdf.) Global ratings questions employ a scale of 0 to 10, worst 
to best; each of the questions within a composite measure use either 
``Yes'' or ``No'' responses, or response categories ranging from 
``Never'' to ``Always,'' to assess the patient's experience of care at 
a facility. Facility performance on each composite measure will be 
determined by the percent of patients who choose ``top-box'' responses 
(i.e., most positive or ``Always'') to the ICH CAHPS survey questions 
in each domain. Examples of questions and top-box responses are 
displayed below:

    Q11: In the last 3 months, how often did the dialysis center 
staff explain things in a way that was easy for you to understand?
    Top-box response: ``Always''
    Q19: The dialysis center staff can connect you to the dialysis 
machine through a graft, fistula, or catheter. Do you know how to 
take care of your graft, fistula or catheter?
    Top-box response: ``Yes''

    We propose that a facility will receive an achievement score and an 
improvement score for each of the composite measures and global ratings 
in the ICH CAHPS survey instrument. For purposes of calculating 
achievement scores for the ICH CAHPS clinical measure, we propose to 
base the score on where a facility's performance rate falls relative to 
the achievement threshold and the benchmark for that measure. We 
propose that facilities will earn between 0 to 10 points for 
achievement based on where its performance for the measure falls 
relative to the achievement threshold. 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.
    For the purposes of calculating improvement scores for the ICH 
CAHPS clinical measure, we propose that the improvement threshold will 
be defined as facility performance in CY 2015, and further propose to 
base the score on where a facility's performance rate falls relative to 
the improvement threshold and the benchmark for that measure. We 
propose that a facility can earn between 0 to 9 points based on how 
much its performance on the measure during the performance period 
improves from its performance on the measure during the baseline 
period. If a facility's performance rate during the performance period 
is:
     Less than the improvement threshold, then the facility 
would receive 0 points for improvement; or
     Equal to or greater than the improvement threshold, but 
below the benchmark, then the following formula would be used to derive 
the improvement score: [10 * ((Facility performance period rate - 
Improvement threshold)/(Benchmark - Improvement threshold))] - .5, with 
all scores rounded to the nearest integer, with half rounded up.
    We further propose that a facility's ICH CAHPS score will be based 
on the higher of the facility's achievement or improvement score for 
each of the composite measures and global ratings. Additionally, we 
propose that achievement and/or improvement scores on the three 
composite measures and the three global ratings will be averaged 
together to yield an overall score on the ICH CAHPS clinical measure.
    The timing and frequency of administering the ICH CAHPS survey is 
critical to obtaining reliable results. For

[[Page 40265]]

example, if a facility did not conduct two semiannual surveys during a 
given performance period, then patient experiences during the 6-month 
period(s) covered by the missed survey(s) would not be captured. 
Additionally, if facilities (via CMS-approved vendors) do not report 
their ICH CAHPS survey results to CMS, then these results cannot be 
taken into account when establishing national performance standards for 
the measure, thereby diminishing the measure's reliability. Because 
timely survey administration and data reporting is critical to reliably 
scoring ICH CAHPS as a clinical measure in the ESRD QIP, we propose 
that a facility will receive a score of 0 on the measure if it does not 
meet the survey administration and reporting requirements finalized in 
the CY 2014 ESRD PPS Final Rule (78 FR 72193 through 72196).
    We seek comments on these proposals to score the ICH CAHPS clinical 
measure.
d. Proposals for Calculating Facility Performance on Reporting Measures
    In the CY 2014 ESRD PPS Final Rule, we finalized policies for 
scoring performance on the Anemia Management and Mineral Metabolism 
reporting measures in the ESRD QIP (78 FR 72216). We are not proposing 
any changes to these policies beyond the proposals that were made 
beginning with the PY 2017 program, which appear in section III.F.7 
above.
    With respect to the Screening for Clinical Depression and Follow-
up, Pain Assessment and Follow-Up, and NHSN Healthcare Provider 
Influenza Vaccination reporting measures, we propose that facilities 
will receive a score of 10 on the measures if they meet the proposed 
performance standards for the measures, and a score of 0 on the measure 
if they do not. We are proposing to score these reporting measures 
differently than the Anemia Management and Mineral Metabolism reporting 
measures because they require annual or semiannual reporting, and 
therefore scoring based on monthly reporting rates is not feasible.
    We seek comments on these proposals.
5. Proposed Minimum Data for Scoring Measures for the PY 2018 ESRD QIP
    With the following exceptions discussed below, we are not proposing 
to change the minimum data policies for the PY 2018 ESRD QIP from that 
proposed above for the PY 2017 ESRD QIP. We are also proposing that the 
30 survey-eligible patient minimum during the eligibility period and 30 
survey complete minimum during the performance period that we proposed 
to adopt for the ICH CAHPS reporting measure will also apply to the ICH 
CAHPS clinical measure. We have determined that the ICH CAHPS survey is 
satisfactorily reliable when a facility obtains a total of at least 30 
completed surveys during the performance period. Therefore, even if a 
facility meets the 30 survey-eligible patient minimum during the 
eligibility period and the survey administration and reporting 
requirements, if the facility is only able to obtain 29 or fewer survey 
completes during the performance period, the facility will not be 
eligible to receive a score on the ICH CAHPS clinical measure.
    We further propose the facilities with fewer than 10 patient-years 
at risk will not be eligible to receive a score on the proposed STrR 
clinical measure. We considered adopting the 11-patient minimum 
requirement that we use for the other clinical measures. We decided, 
however, to base facilities' eligibility for the measure in terms of 
the number of patient-years at risk, because facility performance rates 
are based on the number of patient-years at risk, not the number of 
patients. Additionally, we decided to set the minimum data requirements 
at 10 patient-years at risk because, based on national average event 
rates, this is the time required to achieve an average of 5 transfusion 
events. The 5 expected transfusion events requirement translates to a 
standard deviation of approximately 0.45 if the facility has rates 
exactly corresponding to the national average. In addition, 10 patient-
years at risk is the threshold used in the Dialysis Facility Compare 
program, and we believe that public-reporting and VBP programs for ESRD 
should adopt consistent measure specifications where feasible.
    For the proposed STrR measure, we propose to apply the small-
facility adjuster to facilities with 21 or fewer patient-years at risk. 
We decided to base the threshold for applying the small-facility 
adjuster on the number of patient-years at risk, because facility 
performance rates are based on the number of patient-years at risk, not 
the number of patients. We are proposing to set the threshold at 21 
patient-years at risk, because we determined that this was the minimum 
number of patient-years at risk needed to achieve an IUR of 0.4 (that 
is, moderate reliability) for the proposed STrR measure. Because the 
small-facility adjuster gives facilities the benefit of the doubt when 
measure scores can be unduly influenced by a few outlier patients, we 
believe that setting the threshold at 21 qualifying patient-years at 
risk will not unduly penalize facilities that treat small numbers of 
patients on the proposed STrR clinical measure.
    With these exceptions, we are not proposing to change the policy, 
finalized most recently in the CY 2014 ESRD PPS Final Rule (78 FR 72220 
through 72221), that facilities must have at least 11 qualifying 
patients for the entire performance period in order to be scored on a 
clinical measure.
    We currently have a policy, most recently finalized in the CY 2014 
ESRD PPS final rule (78 FR 72197 through 72198 and 72220 through 
72221), to score facilities on reporting measures only if they have a 
minimum number of qualifying patients during the performance period. As 
discussed in Section III.F.7 above, we are proposing to modify the case 
minimum requirements for the Anemia Management and Mineral Metabolism 
reporting measures beginning with the PY 2017 ESRD QIP. We are not 
proposing any additional changes in the patient minimum requirements 
for the Anemia Management and Mineral Metabolism reporting measures in 
the PY 2018 program.
    For the Screening for Clinical Depression and Follow-Up and the 
Pain Assessment and Follow-Up reporting measures, we propose a case 
minimum of one qualifying patient. We believe this patient minimum 
requirement will enable us to gather a sufficient amount of data to 
calculate future performance standards, benchmarks, and achievement 
thresholds, should we propose to adopt clinical versions of these 
measures in the future.
    As discussed in Section III.G.2.f, we are not proposing that a 
facility will have to meet a patient minimum in order to receive a 
score on the NHSN Healthcare Provider Influenza Vaccination reporting 
measure. We believe it is standard practice for all HCP to receive 
influenza vaccinations and, as discussed above, HCP vaccination is 
likely to reduce influenza-related deaths and complications among the 
ESRD population. Accordingly, we are proposing that all facilities, 
regardless of patient population size, will be scored on the influenza 
vaccination measure.
    Under our current policy, we begin counting the number of months 
for which a facility is open on the first day of the month after the 
facility's CCN open date. Only facilities with a CCN open date before 
July 1, 2016, are eligible to be scored on the Anemia Management and 
Mineral Metabolism reporting measures in the PY 2018

[[Page 40266]]

program. We are proposing to apply this finalized policy to the 
proposed Screening for Depression and Follow-Up and the Pain Assessment 
and Follow-Up reporting measures. We further propose that facilities 
with a CCN open date after January 1, 2016, will not be eligible to 
receive a score on the NHSN Healthcare Personnel Influenza Vaccination 
reporting measure in the PY 2018 program. Due to the time it takes for 
facilities to register with NHSN and become familiar with the NHSN 
Healthcare Personnel Safety Component Protocol, we do not believe it is 
reasonable to expect facilities with CCN open dates after January 1, 
2016, to submit an HCP Influenza Vaccination Summary Form to CDC's NHSN 
system before the May 15, 2016, deadline.
    As finalized in the CY 2014 ESRD PPS Final Rule (78 FR 72220), 
facilities are generally eligible to receive a score on the clinical 
measures if their CCN open date occurs before the end of the 
performance period. However, facilities with a CCN open date after 
January 1 of the performance period are not eligible to receive a score 
on the NHSN Bloodstream Infection clinical measure, due to the need to 
collect 12 months of data to accurately score the measure. We are now 
proposing that facilities with a CCN open date after January 1, 2016, 
will also not be eligible to receive a score on the ICH CAHPS clinical 
measure in the PY 2018 program. Due to the additional time needed to 
arrange to contract with CMS-approved third-party vendors, and for 
vendors to administer the survey twice and report the results to CMS, 
we do not believe facilities with CCN open dates after January 1, 2016, 
can reasonably be expected to meet the requirements associated with the 
proposed ICH CAHPS clinical measure for that performance period.
    As discussed in the Section III.G.7 below, we are continuing our 
policy that a facility will not receive a TPS unless it receives a 
score on at least one clinical measure and at least one reporting 
measure. We note that finalizing the above proposals would result in 
facilities not being eligible for a payment reduction for the PY 2018 
ESRD QIP if they have a CCN open date on or after July 1, 2016.
    We seek comments on these proposals.
    Table 29 displays the proposed patient minimum requirements for 
each of the measures, as well as the proposed CCN open dates after 
which a facility will not be eligible to receive a score on a reporting 
measure.

                      Table 29--Proposed Minimum Data Requirements for the PY 2018 ESRD QIP
----------------------------------------------------------------------------------------------------------------
                                                                                              Small facility
              Measure                 Minimum data requirements        CCN Open date             adjuster
----------------------------------------------------------------------------------------------------------------
Adult Hemodialysis Adequacy          11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Adult Peritoneal Dialysis Adequacy   11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Pediatric Hemodialysis Adequacy      11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Pediatric Peritoneal Dialysis        11 qualifying patients.....  N/A...................  11-25 patients.
 Adequacy (Clinical).
Vascular Access Type: Catheter       11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Vascular Access Type: Fistula        11 qualifying patients.....  N/A...................  11-25 patients.
 (Clinical).
Hypercalcemia (Clinical)...........  11 qualifying patients.....  N/A...................  11-25 patients.
NHSN Bloodstream Infection           11 qualifying patients.....  Before January 1, 2016  11-25 patients.
 (Clinical).
SRR (Clinical).....................  11 index discharges........  N/A...................  11-41 index
                                                                                           discharges.
STrR (Clinical)....................  10 patient-years at risk...  N/A...................  10-21 patient-years at
                                                                                           risk.
ICH CAHPS (Clinical)...............  Facilities with 30 or more   Before January 1, 2016  N/A.
                                      survey-eligible patients
                                      during the calendar year
                                      preceding the performance
                                      period must submit survey
                                      results. Facilities will
                                      not receive a score if
                                      they do not obtain a total
                                      of at least 30 completed
                                      surveys during the
                                      performance period.
Anemia Management (Reporting)......  Facilities with 11 or more   Before July 1, 2016...  N/A.
                                      qualifying patients must
                                      report data for all
                                      patients. Facilities with
                                      between 2 and 11
                                      qualifying patients must
                                      report data on all but 1
                                      qualifying patient.
                                      Facilities with 1
                                      qualifying patient must
                                      report for that patient.
Mineral Metabolism (Reporting).....  Facilities with 11 or more   Before July 1, 2016...  N/A.
                                      qualifying patients must
                                      report data for all
                                      patients. Facilities with
                                      between 2 and 11
                                      qualifying patients must
                                      report data on all but 1
                                      qualifying patient.
                                      Facilities with 1
                                      qualifying patient must
                                      report for that patient.
Depression Screening and Follow-Up   One qualifying patient.....  Before July 1, 2016...  N/A.
 (Reporting).
Pain Assessment and Follow-Up        One qualifying patient.....  Before July 1, 2016...  N/A.
 (Reporting).
NHSN HCP Influenza Vaccination       N/A........................  Before January 1, 2016  N/A.
 (Reporting).
----------------------------------------------------------------------------------------------------------------

[[Page 40267]]

6. Proposal for Calculating the Clinical Measure Domain Score
    As the ESRD QIP evolves and we continue to adopt new clinical 
measures that track the goals of the NQS, we do not believe that the 
current scoring methodology provides the program with enough 
flexibility to strengthen incentives for quality improvement in areas 
where quality gaps continue to exist. Therefore, under the authority of 
Section 1881(h)(3)(A)(i) of the Act, we are proposing to revise the 
scoring methodology beginning with the PY 2018 ESRD QIP so that we 
assign measure scores on the basis of two domains: a Clinical Measure 
Domain and a Reporting Measure Domain.
    First, we propose to establish a Clinical Measure Domain, which we 
define as an aggregated metric of facility performance on the clinical 
measures and measure topics in the ESRD QIP. Under this proposed 
approach, we would score individual clinical measures and measure 
topics using the methodology we finalize for that measure or measure 
topic. Clinical measures and measure topics would then be grouped into 
subdomains within the Clinical Measure Domain, according to quality 
categories. Within these subdomains, measure scores would be multiplied 
by a weighting coefficient, weighted measure scores would be summed 
together to determine subdomain scores, and then subdomain scores would 
be summed together to determine a facility's Clinical Measure Domain 
score. This scoring methodology provides more flexibility to focus on 
quality improvement efforts, because it makes it possible to group 
measures according to quality categories and to weight each category 
according to opportunities for quality improvement.
    We further propose to divide the clinical measure domain into three 
subdomains for the purposes of calculating the Clinical Measure Domain 
score:

 Safety
 Patient and Family Engagement/Care Coordination
 Clinical Care

    We took several considerations into account when selecting these 
particular subdomains. First, safety, patient engagement, care 
coordination, and clinical care are all NQS goals for which the ESRD 
QIP has proposed and/or finalized measures. We are attempting to align 
all CMS quality improvement efforts with the NQS because its patient-
centered approach prioritizes measures across our quality reporting and 
pay-for-performance programs to ensure that the measurement approaches 
in these programs, as a whole, can make meaningful improvements in the 
quality of care furnished in a variety of settings. We also believe 
that adopting an NQS-based subdomain structure for the clinical 
measures in the ESRD QIP is responsive to stakeholder requests that we 
align our measurement approaches across HHS programs.
    Second, we are proposing to combine the NQS goals of Care 
Coordination and Patient- and Caregiver-Centered Experience of Care 
into one subdomain because we believe the two goals complement each 
other. ``Care Coordination'' refers to the NQS goal of promoting 
effective communication and coordination of care. ``Patient- and 
Caregiver-Centered Experience of Care'' refers to the NQS goal of 
ensuring that each patient and family is engaged as a partner in care. 
In order to engage patients and families as partners, we believe that 
effective communication and coordination of care must coexist, and that 
patient and family engagement cannot occur independently of effective 
communication and care coordination. We therefore believe that it is 
appropriate to combine measures of care coordination with those of 
patient and family engagement for the purposes of calculating a 
facility's clinical measure domain score.
    For PY 2018 and future payment years, we propose to include the 
following measures in the following subdomains of the proposed clinical 
measure domain (see Table 30):

                          Table 30--Proposed Subdomains in the Clinical Measure Domain
----------------------------------------------------------------------------------------------------------------
                 Subdomain                                       Measures and measure topics
----------------------------------------------------------------------------------------------------------------
Safety Subdomain..........................  NHSN Bloodstream Infection measure.
Patient and Family Engagement/Care          ICH CAHPS measure.
 Coordination Subdomain.
                                            SRR measure.
Clinical Care Subdomain...................  STrR measure.
                                            Dialysis Adequacy measure topic.
                                            Vascular Access Type measure topic.
                                            Hypercalcemia measure.
----------------------------------------------------------------------------------------------------------------

    We seek comments on these proposals to adopt a Clinical Measure 
Domain that includes three subdomains (safety, patient and family 
engagement/care coordination, and clinical care) for the purpose of 
calculating a facility's clinical measure domain score for PY 2018.
    In deciding how to weight the proposed subdomains that comprise the 
clinical measure domain score, we took the following considerations 
into account: (1) the number of measures and measure topics in a 
proposed subdomain; (2) how much experience facilities have had with 
the measures and measure topics in a proposed subdomain; and (3) how 
well the measures align with CMS's highest priorities for quality 
improvement for patients with ESRD. Because the proposed Clinical Care 
subdomain contains the largest number of measures, and facilities have 
the most experience with the measures in this subdomain, we are 
proposing to weight the Clinical Care subdomain significantly higher 
than the other subdomains. Facilities have more experience with the 
NHSN Bloodstream Infection measure in the proposed Safety subdomain 
than they do with the SRR measure in the proposed Patient and Family 
Engagement/Care Coordination subdomain, but we are proposing to include 
a larger number of measures in the Patient and Family Engagement/Care 
Coordination subdomain. We are proposing to give the Patient and Family 
Engagement/Care Coordination subdomain slightly more weight than the 
Safety subdomain, because it includes two measures, whereas only one 
measure appears in the proposed Safety subdomain. In future rulemaking, 
we will consider revising these weights based on facility experience 
with the measures contained within these proposed subdomains.
    For these reasons, we propose the following weights for the three 
subdomains in the clinical measure domain score for PY 2018:

[[Page 40268]]

------------------------------------------------------------------------
                                                           Weight in the
                                                             clinical
                        Subdomain                         measure domain
                                                            score  (%)
------------------------------------------------------------------------
Safety..................................................              20
Patient and Family Engagement/Care Coordination.........              30
Clinical Care...........................................              50
------------------------------------------------------------------------

We seek comments on this proposal.

    In deciding how to weight measures and measure topics within a 
proposed subdomain, we took into account the same considerations we 
considered when deciding how to weight the proposed subdomains. Because 
the NHSN Bloodstream Infection clinical measure is the only measure in 
the proposed Safety subdomain, we are proposing to assign the entire 
subdomain weight to that measure. We additionally note that improving 
patient safety and reducing bloodstream infections in patients with 
ESRD is one of our highest priorities for quality improvement, so we 
believe it is appropriate to weight the NHSN Bloodstream Infection 
clinical measure at 20 percent of a facility's Clinical Measure Domain 
Score. Because facilities have substantially more experience with the 
ICH CAHPS clinical measure, as compared with the SRR clinical measure, 
we are proposing to give the proposed ICH CAHPS measure twice as much 
weight as the proposed SRR measure. Additionally, we note that 
improving patients' experience of care is as high a priority for CMS 
quality improvement efforts as improving patient safety, so we believe 
it is appropriate to assign the ICH CAHPS clinical measure the same 
weight as the NHSN Bloodstream Infection clinical measure. We are 
proposing to give the Dialysis Adequacy and Vascular Access Type 
measure topics the most weight in the Clinical Care subdomain because 
facilities have substantially more experience with these measure 
topics, as compared to the other measures in the Clinical Care 
subdomain. We are proposing to assign equal weights to the STrR and 
Hypercalcemia measures because PY 2018 would be the first program year 
in which facilities are measured on the STrR measure, and because the 
clinical significance of the Hypercalcemia measure is diminished in the 
absence of other information about mineral metabolism (for example, a 
patient's phosphorus and plasma parathyroid hormone levels), which 
would provide a more comprehensive assessment of mineral metabolism (78 
FR 72217). For these reasons, we propose to use the following weighting 
system for calculating a facility's Clinical Measure domain score:

------------------------------------------------------------------------
                                                       Measure weight in
                                                          the clinical
         Measures/measure topics by subdomain            measure domain
                                                           score (%)
------------------------------------------------------------------------
Safety Subdomain.....................................                 20
    NHSN Bloodstream Infection measure...............                 20
Patient and Family Engagement/Care Coordination                       30
 Subdomain...........................................
    ICH CAHPS measure................................                 20
    SRR measure......................................                 10
    Clinical Care Subdomain..........................                 50
    STrR measure.....................................                  7
    Dialysis Adequacy measure topic..................                 18
    Vascular Access Type measure topic...............                 18
    Hypercalcemia measure............................                  7
------------------------------------------------------------------------

We seek comments on this proposal for weighting individual measures 
within the Clinical Measure Domain.
7. Proposal for Calculating the Reporting Measure Domain Score, the 
Reporting Measure Adjuster, and the TPS for the PY 2018 ESRD QIP
    Starting with the PY 2014 program, the ESRD QIP has used a scoring 
methodology in which the clinical measures receive substantially more 
weight than the reporting measures in the TPS, and the weighting 
coefficients for the two types of measures total 100 percent of the 
TPS. We continue to believe it is appropriate to incorporate reporting 
measure scores in the TPS calculations because ``reporting is an 
important component in quality improvement'' (76 FR 70274); we also 
continue to believe that clinical measures should carry substantially 
more weight than reporting measures because clinical measures ``score 
providers/facilities based upon actual outcomes'' (76 FR 70275). These 
statements reflect the fact that clinical and reporting measures serve 
different functions in the ESRD QIP. Clinical measures provide a direct 
assessment of the quality of care a facility provides, relative to 
either the facility's past performance or standards of care nationwide. 
Reporting measures create an incentive for facilities to monitor 
significant indicators of health and illness, and they help facilities 
become familiar with CMS data systems. In addition, they allow the ESRD 
QIP to collect the robust clinical data needed to establish performance 
standards for clinical measures.
    As we continue to add reporting measures to the ESRD QIP measure 
set, it becomes increasingly challenging to not weight them so heavily 
that they dilute the significance of the clinical measures, while still 
ensuring that we do not weight the reporting measures so lightly that 
facilities are not incentivized to meet the reporting measure 
requirements.
    Although we considered the possibility of abandoning the use of 
reporting measures, we determined that this is not feasible because 
doing so would make it impossible to calculate performance standards 
for many clinical measures that promise to promote high-quality care. 
We also considered the possibility of weighting the reporting measures 
such that each reporting measure comprised a smaller percentage of the 
TPS. We believe, however, that doing so would result in the reporting 
measures not carrying enough weight to provide facilities with an 
incentive to meet the reporting requirements, particularly if 
additional reporting measures were added to the program. For example, 
if 5 reporting measures were adopted in the ESRD QIP, and the reporting 
measures collectively were weighted at 5 percent of a facility's TPS 
(in order to preserve the significance of the clinical measures), then 
each reporting measure would only comprise 1 percent of a facility's 
TPS. Under such conditions, we believe that facilities

[[Page 40269]]

may choose not to meet the reporting measure requirements, because not 
doing so would have a negligible impact on their overall TPS. If enough 
facilities reached this determination, then we would not be able to 
establish reliable baselines, should we propose to adopt clinical 
measure versions of the reporting measures. For these reasons, we are 
proposing the following scoring methodology for determining the impact 
of reporting measure scores on a facility's payment reductions.
    For PY 2018 and future payment years, we propose to establish a new 
Reporting Measure Domain. We further propose that a facility's 
reporting measure domain score will be the sum of all the reporting 
measure scores that the facility receives. We strive to expand 
reporting measures into clinical measures in the ESRD QIP as quickly as 
measure development and administrative processes permit. Therefore, 
unlike the case with clinical measures in the Clinical Domain Score, we 
do not intend to continue to use any particular reporting measure in 
the ESRD QIP for an indefinite period of time. For this reason, we 
believe that it would be unnecessarily opaque and confusing to group 
reporting measures into subdomains, as we are proposing for the 
clinical measures in the Clinical Measure Domain.
    Additionally, we propose to establish a Reporting Measure Adjuster 
(RMA), which will provide the ESRD QIP with an index of facility 
performance on reporting measures within the Reporting Measure Domain. 
We propose to use the following general formula to determine a 
facility's RMA, based on its reporting measure domain score:
[GRAPHIC] [TIFF OMITTED] TP11JY14.002

This formula is constructed such that a high RMA is indicative of low 
performance on the reporting measures, and a low RMA is indicative of 
high performance. A facility's Reporting Measure Domain score (that is, 
the sum of its scores on the reporting measures) is subtracted from the 
total number of points a facility could earn on the reporting measures 
for which it was eligible. This result is then multiplied by ``C,'' 
which is a coefficient used to translate reporting measure points into 
TPS points. As C increases, so too does the TPS ``value'' of a 
reporting measure point. For example, if C is set to 2, then 1 
reporting measure point is worth 2 TPS points. If C is set to 0.5, then 
1 reporting measure point is worth one-half of a TPS point. The value 
of C is in not tied to the number of reporting measures in the ESRD 
QIP; rather, it represents how much value we place on the reporting 
measures' contribution to the quality goals of the ESRD QIP. We will 
use the rulemaking process to set the value for C for each program 
year.
    For the PY 2018 ESRD QIP, we propose to use the following formula 
to determine a facility's RMA:
[GRAPHIC] [TIFF OMITTED] TP11JY14.003

We set coefficient C at five-sixths for the PY 2018 program because 
each reporting measure point in the PY 2016 program, and the proposed 
PY 2017 program, is equivalent to five-sixths of a TPS point (that is, 
30 points for three reporting measures comprised 25 TPS points). We 
believe it is important to maintain as much consistency as possible in 
the transition to the proposed scoring methodology. Therefore, we are 
proposing that the ``value'' of a reporting measure point in the TPS, 
as finalized in the PY 2016 program and proposed for the PY 2017 
program, will remain constant in PY 2018.
    For the reasons described above, we continue to believe that the 
clinical measures are considerably more important than the reporting 
measures in the ESRD QIP. We therefore believe that a facility's TPS 
should be predominantly determined by its Clinical Measure Domain 
score, and that a facility's TPS should be downwardly adjusted in the 
case of noncompliance with the reporting measure requirements. The RMA, 
as described above, is constructed such that a high RMA value indicates 
low reporting measure scores and a low RMA value indicate high 
reporting measure scores. As a result, a facility's TPS would be 
entirely determined by its Clinical Measure Domain score if it receives 
full credit on the reporting measures; the TPS would be slightly 
decreased if the facility received high (but not perfect) scores on the 
reporting measures; and the TPS would be significantly decreased if it 
performed poorly on the reporting measures. For these reasons, we 
propose to calculate a facility's TPS by subtracting the facility's RMA 
from its Clinical Measure Domain score. Additionally, we propose to 
continue our policy 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 (78 FR 72217).
    In an effort to estimate the impact of this proposed change for the 
ESRD QIP's scoring methodology, we conducted an analysis of how the 
proposed scoring methodology affected payment reduction distributions, 
based on data from CY 2012 and CY 2013. This analysis compared the 
scoring methodology proposed in this section and the previous section 
to the scoring methodology finalized for the PY 2016 program. In order 
to ensure that the analysis reliably estimated the impact on 
facilities' payment reductions, the proposed scoring methodology and 
the methodology finalized for the PY 2016 program were each applied to 
the PY 2016 measure set. The full analysis is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The results of 
this analysis are presented below in Table 31.

[[Page 40270]]

   Table 31--Expected Impact of Proposed Scoring Methodology on the Distribution of Payment Reductions, Using
        Measures and Measure Weights Finalized for the PY 2016 ESRD QIP and Data From CY 2012 and CY 2013
----------------------------------------------------------------------------------------------------------------
                                                   Finalized scoring methodology   Proposed scoring methodology
                                                      for PY 2016, applied to         for PY 2018, applied to
                                                   measures and measure  weights   measures and measure  weights
                                                     finalized in the  PY 2016       finalized in the  PY 2016
              Payment reduction (%)                           program                         program
                                                 ---------------------------------------------------------------
                                                     Number of                       Number of
                                                    facilities        Percent       facilities        Percent
----------------------------------------------------------------------------------------------------------------
0...............................................           4,828            79.4           4,606            75.7
0.5.............................................             884            14.5             739            12.2
1.0.............................................             242             4.0             306             5.0
1.5.............................................              69             1.1             108             1.8
2.0.............................................              59             1.0             323             5.3
----------------------------------------------------------------------------------------------------------------

As illustrated in Table 31, we expect that 4.3 percent more facilities 
(222 overall) would receive a payment reduction under the proposed 
methodology for PY 2018, as compared with the scoring methodology that 
we will use for the PY 2016 program. We therefore believe that adopting 
the scoring methodology proposed in this section and the previous 
section will not appreciably change the distribution of facility 
payment reductions, as is our intention.
    We seek comments on these proposals for calculating a facility's 
reporting measure domain score, to calculate the RMA, and to determine 
the TPS.
    Although we believe advantages are afforded by adopting the scoring 
methodology proposed in this section and the previous section, we also 
recognize that there may be advantages associated with maintaining 
consistency with previous years' scoring methodology. Accordingly, as 
an alternative to the scoring methodology proposed in this section and 
the previous section, we are also seeking public comments on whether we 
should continue to use the same methodology we currently use to weight 
measures in the ESRD QIP and calculate a facility's TPS, with the 
exception that the clinical and reporting measures would be weighted at 
90 percent and 10 percent, respectively, of a facility's TPS.
8. Example of the Proposed PY 2018 ESRD QIP Scoring Methodology
    In this section, we provide an example to illustrate the proposed 
scoring methodology for PY 2018 and future payment years. Figures 3-7 
illustrate how to calculate the clinical measure domain score, the 
reporting measure domain score, the RMA, and the TPS. Note that for 
this example, Facility A, a hypothetical facility, has performed very 
well. Figure 1 illustrates the general methodology used to calculate 
domain scores for the clinical measure domain, as well as the example 
calculations for Facility A.

[[Page 40271]]

[GRAPHIC] [TIFF OMITTED] TP11JY14.004

Figure 2 illustrates the general methodology for weighting subdomains 
in the clinical measure domain, as well as the example calculations for 
Facility A's clinical measure domain score.

[[Page 40272]]

[GRAPHIC] [TIFF OMITTED] TP11JY14.005

Figure 3 illustrates the general methodology for calculating a 
facility's reporting measure domain score, as well as the example 
calculations for Facility A.
[GRAPHIC] [TIFF OMITTED] TP11JY14.006

Figure 4 illustrates the general methodology for calculating a 
facility's RMA, as well as the example calculations for Facility A.

[[Page 40273]]

[GRAPHIC] [TIFF OMITTED] TP11JY14.007

Figure 5 illustrates the general methodology for calculating a 
facility's TPS, as well as the example calculations for Facility A.
[GRAPHIC] [TIFF OMITTED] TP11JY14.008

9. Proposed Payment Reductions for the PY 2018 ESRD QIP
    Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to 
ensure that the application of the scoring methodology results in an 
appropriate distribution of payment reductions across facilities, such 
that facilities achieving the lowest TPSs receive the largest payment 
reductions. For the same reasons described in Section III.F.8 above, we 
propose that a facility would not receive a payment reduction for PY 
2018 if it achieves a minimum TPS that is equal to or greater than the 
total of the points it would have received if:
     It performed at the performance standard for each clinical 
measure;
     It received the number of points for each reporting 
measure that corresponds to the 50th percentile of facility performance 
on each of the PY 2016 reporting measures.
    The PY 2016 program is the most recent year for which we will have 
calculated final measure scores before the beginning of the proposed 
performance period for PY 2018 (i.e., CY 2016). Because we have not yet 
calculated final measure scores, we are unable to determine the 50th 
percentile of facility performance on the PY 2016 reporting measures. 
We will publish that value in the CY 2016 ESRD PPS final rule once we 
have calculated final measure scores for the PY 2016 program.
    We seek comments on this proposal.
    Section 1881(h)(3)(A)(ii) of the Act requires that facilities 
achieving the lowest TPSs receive the largest payment reductions. In 
the CY 2014 ESRD PPS Final Rule (78 FR 72223 through 72224), we 
finalized a payment reduction scale for PY 2016 and future payment 
years: 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. We are not proposing any changes to this 
policy at this point.
    Because we are not yet able to calculate the performance standards 
for each of the clinical measures, we are also not able to calculate a 
proposed minimum TPS at this time. We will publish the minimum TPS, 
based on data from CY 2014 and the first part of

[[Page 40274]]

CY 2015, in the CY 2016 ESRD PPS Final Rule.
    We seek comments on this proposal.

H. Future Considerations for Stratifying ESRD QIP Measures for Dual-
Eligible Beneficiaries

    CMS recognizes that individuals with both Medicare and Medicaid 
(also known as ``dual-eligible beneficiaries''), comprise a relatively 
large proportion of Medicare enrollees with ESRD. Because ESRD programs 
have a long history of performance measurement linked with public 
reporting, and because there are a large number of dual-eligible 
beneficiaries receiving ESRD care, we are considering stratifying ESRD 
QIP measures for Medicare-Medicaid enrollees.
    Measure reporting under the ESRD QIP does not currently allow us to 
separately review results for dual-eligible beneficiaries or compare 
those results with results achieved by other patients with ESRD, so it 
is not currently known if their experiences are better, worse, or the 
same as other patients. Even the basic demographics of dual-eligible 
beneficiaries receiving ESRD care are not well understood. After 
discussion of the pros and cons that included input from the ESRD 
provider community, the Measures Application Partnership's dual-
eligible workgroup recommended that CMS take the first step in 
exploring the feasibility of requiring facilities to separately report 
ESRD QIP measures for Medicare-Medicaid enrollees by analyzing the 
composition of the dual-eligible beneficiary population receiving ESRD 
care and determining potential ways in which stratified reporting may 
further quality improvement efforts. Furthermore, the Measures 
Application Partnership recommended, in the context of measure 
development, that CMS explore whether other risk factors unique to the 
dual-eligible population receiving ESRD care would present significant 
hurdles to measure stratification along these lines. We are therefore 
seeking comments on whether it would be feasible to stratify ESRD QIP 
measures based on whether the beneficiary is a dual eligible. We are 
interested in whether stakeholders recommend stratification and, if so, 
for what specific measures stakeholders would find stratification most 
compelling.
    We are particularly interested in public comments on whether 
Medicare-Medicaid stratified quality measures under the ESRD QIP should 
be reported publicly, and how we should factor those measures into our 
scoring methodology. We seek comments on the meaningfulness of 
stratifying measures, and the feasibility and burden associated with 
reporting stratified measures.

IV. Technical Corrections for 42 Part 405

    In the April 15, 2008, final rule ``Conditions for Coverage for 
End-Stage Renal Disease Facilities,'' (73 FR 20370) we revised the 
health and safety standards for Medicare-participating End-Stage Renal 
Disease (ESRD) facilities. This rule made the first comprehensive 
revisions to the ESRD Conditions for Coverage (CfCs) since they were 
adopted in 1976. The original ESRD CfCs at 42 CFR Part 405 Subpart U 
were deleted and new conditions were issued at 42 CFR Part 494. Subpart 
U now only addresses certain requirements for ESRD networks.
    As a part of these revisions, we intended to delete most of the 
terms and definitions set out in Part 405 Subpart U, and create new 
definitions in Part 494. This is discussed in the 2008 final rule and 
in the corresponding proposed rule (70 FR 6184), and is laid out in the 
final rule crosswalk (comparing the old CfCs with the new ones) at 73 
FR 20451.
    While we intended to delete most of the definitions at Part 405 
Subpart U, we inadvertently omitted the regulations text that would 
have made those changes. Subpart U, at Sec.  405.2102, still has 32 
definitions, most of them unnecessary and several of them obsolete. 
This creates confusion for ESRD stakeholders, patients, and suppliers.
    We propose to make a technical correction that deletes the outdated 
terms and definitions at Sec.  405.2102. Specifically, we propose to 
delete these terms and definitions: agreement, arrangement, dialysis, 
end-stage renal disease (ESRD), ESRD facility, renal dialysis center, 
renal dialysis facility, self-dialysis unit, special purpose renal 
dialysis facility, ESRD service, dialysis service, inpatient dialysis, 
outpatient dialysis, staff-assisted dialysis, self-dialysis, home 
dialysis, self-dialysis and home dialysis training, furnishes directly, 
furnishes on the premises, medical care criteria, medical care norms, 
medical care standards, medical care evaluation study (MCE), qualified 
personnel, chief executive officer, dietitian, medical record 
practitioner, nurse responsible for nursing service, physician-
director, and social worker. We also propose to delete the term and 
definition for ``ESRD network organization,'' as it is duplicated 
within Sec.  405.2102 as ``network organization.'' We would retain the 
terms and definitions for ``network, ESRD,'' and ``network 
organization.'' These changes are also outlined in Table 32 below.''

           Table 32--Technical Corrections to Sec.   405.2102
------------------------------------------------------------------------
              Term                  Proposed action    Other FR location
------------------------------------------------------------------------
Agreement.......................  Delete
Arrangement.....................  Delete
Dialysis........................  Delete
End-Stage Renal Disease (ESRD)..  Delete.............  406.13(b).
ESRD facility introductory text.  Delete
    1Renal dialysis center......  Delete
    1Renal dialysis facility....  Delete.............  494.10.
    Self-dialysis unit..........  Delete
    Special purpose renal         Delete.............  494.120.
     dialysis facility.
ESRD Network organization.......  Delete
ESRD service introductory text..  Delete
    Dialysis service............  Delete
    1Inpatient dialysis.........  Delete
    Outpatient dialysis.........  Delete
    Staff-assisted dialysis.....  Delete
    Self-dialysis...............  Delete.............  494.10.
    Home dialysis...............  Delete.............  494.10.
    Self-dialysis and home        Delete
     dialysis training.

[[Page 40275]]

 
Furnishes directly..............  Delete.............  494.10.
Furnishes on the premises.......  Delete.............  494.180(d)
Medical care criteria...........  Delete
Medical care norms..............  Delete
Medical care standards..........  Delete
Medical care evaluation study     Delete
 (MCE).
Network, ESRD...................  Retain.............  N/A.
Network organization............  Retain.............  N/A.
Qualified personnel.............  Delete
    Chief executive officer.....  Delete
    Dietitian...................  Delete.............  494.140(c).
    Medical record practitioner.  Delete
    Nurse responsible for         Delete.............  494.140(b).
     nursing service.
    Physician-director..........  Delete.............  494.140(a).
    Social worker...............  Delete.............  494.140(d).
------------------------------------------------------------------------

V. Methodology for Adjusting DMEPOS Payment Amounts Using Information 
From Competitive Bidding Programs

A. Background

1. Payment Basis for Certain DMEPOS
    Section 1834(a) of the Act governs payment for durable medical 
equipment (DME) covered under Part B and under Part A for a home health 
agency and provides for the implementation of a fee schedule payment 
methodology for DME furnished on or after January 1, 1989. Sections 
1834(a)(2) through (a)(7) of the Act set forth separate payment 
categories of DME and describe how the fee schedule for each of the 
following categories is established:
     Inexpensive or other routinely purchased items,
     Items requiring frequent and substantial servicing,
     Customized items,
     Oxygen and oxygen equipment,
     Other covered items (other than DME), and
     Other items of DME (capped rental items).
    Section 1834(h) of the Act governs payment for prosthetic devices, 
prosthetics, and orthotics (P&O) and sets forth fee schedule payment 
rules for P&O. Effective for items furnished on or after January 1, 
2002, payment is also made on a national fee schedule basis for 
parenteral and enteral nutrition (PEN) in accordance with the authority 
under section 1842(s) of the Act. The term ``enteral nutrition'' will 
be used throughout this document to describe enteral nutrients supplies 
and equipment covered as prosthetic devices in accordance with section 
1861(s)(8) of the Act and paid for on a fee schedule basis and enteral 
nutrients under DMEPOS Competitive Bidding Program (CBP), as authorized 
under section 1847(a)(2)(B) of the Act. Section 1842(o)(1)(D) of the 
Act mandates that payment for infusion drugs furnished through a 
covered item of DME on or after January 1, 2004, is equal to 95 percent 
of the average wholesale price for such drug in effect on October 1, 
2003.
    For DMEPOS items subject to payment under 1834 of the Act (not 
subject to the CBP), the Medicare's allowed payment amount is equal to 
the lesser of the actual charge for the item or the fee schedule amount 
for the item. The fee schedule amounts are based on average payments 
made under the previous payment methodology of reasonable charges, 
which utilized supplier charges for furnishing items and services in 
local areas throughout the nation to establish the Medicare allowed 
payment amounts for the items and services. The reasonable charge data 
used is from a specific period of time that varies slightly by payment 
class (for example, July 1986 through June 1987 for inexpensive DME). 
The fee schedule amounts for most items are updated on an annual basis 
by covered item update factors provided in the statute for DME under 
section 1834(a)(14) of the Act, for P&O under section 1834(h)(4)(A) of 
the Act, and for enteral nutrition under section 1842(s)(1)(B) of the 
Act.
    The rules pertaining to the calculation of reasonable charges are 
located at 42 CFR Part 405, Subpart E of our regulations. Under this 
general methodology, several factors were taken into consideration in 
determining the reasonable charge for an item. Each supplier's 
``customary charge'' for an item, or the 50th percentile of charges for 
an item over a 12-month period, was one factor used in determining the 
reasonable charge. 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 PEN 
items and services only, the ``lowest charge level (LCL)'' was also 
taken into consideration and was based on the 25th percentile of all 
charges for an item. For the purpose of calculating prevailing charges, 
a ``locality'' is defined at 42 CFR 405.505 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.'' For PEN items and services only, the entire nation 
was used as the locality for the purpose of calculating the LCL and 
prevailing charges.
    Effective for items furnished on or after October 1, 1985, an 
additional factor, the inflation-indexed charge (IIC) as cited at 42 
CFR 405.509, was added to the factors taken into consideration in 
determining the reasonable charge for an item. The IIC is equal to the 
lowest of the customary charge, prevailing charge, LCL (if applicable), 
and IIC from the previous year updated by an inflation adjustment 
factor. To summarize, the reasonable charges for each item that were 
used to calculate the fee schedule amounts are equal to the lower of:
     the supplier's actual charge on the claim;
     the supplier's customary charge for the item;
     the prevailing charge in the locality for the item;
     the LCL in the locality for the item, if applicable; or
     the IIC.
    Under the reasonable charge payment methodology, it is assumed that 
suppliers took all of their costs of

[[Page 40276]]

furnishing various items and services in various localities throughout 
the nation into account in setting the prices they charge for covered 
items and services.
    We implemented the fee schedule payment methodologies for PENs at 
42 CFR Part 414, Subparts C, and for DME prosthetic devices, 
prosthetics, orthotics, and surgical dressings at 42 CFR Part 414, 
Subpart D of our regulations. In accordance with section 1834(a)(10) of 
the Act, the Secretary may adjust DMEPOS fee schedule amounts in 
situations where it is determined that the amounts are not inherently 
reasonable. This ``inherent reasonableness'' authority for adjusting 
fee schedule payment amounts is governed by paragraphs (8) and (9) of 
section 1842(b) of the Act and implemented at 42 CFR Part 405, Subpart 
E of our regulations. Finally, in the case of DMEPOS furnished on or 
after January 1, 2011, under section 1834(a)(1)(F)(ii) of the Act, the 
Secretary may (in beginning January 1, 2016, must) use information on 
the payment determined under the CBP in accordance with section 1847 of 
the Act to adjust the fee schedule payment amounts for DME that are not 
in a competitive bidding area (CBA), and the inherent reasonableness 
authority does not apply. Adjustment of fee schedule amounts based on 
CBP payment information (and the limitation on using inherent 
reasonableness) is also authorized under section 1834(h)(1)(H)(ii) of 
the Act for certain orthotics and section 1842(s)(3)(B) of the Act for 
enteral nutrition in non-competitive bid areas.
2. Fee Schedule Payment Methodologies
    Section 4062(b) of the Omnibus Budget Reconciliation Act of 1987 
(OBRA 87), Public Law 100-203, added section 1834(a) of the Act and 
mandated the implementation of local fee schedule amounts in 1989 for 
DME and P&O based on the average of reasonable charges for items and 
services furnished in carrier service areas throughout the United 
States. The carriers were (now Medicare administrative contractors) 
responsible for processing claims for Part B items and services in 
accordance with section 1842(a) of the Act. The carrier service areas 
used in establishing the fee schedule amounts could not exceed an 
entire state. A few states were made up of two carrier service areas 
and the State of New York had three carrier service areas. A carrier 
service area is not to be confused with a locality established for the 
purpose of calculating reasonable charges as described above. For 
example, although claims for items furnished in the State of Texas were 
processed by a single carrier, for reasonable charge calculation 
purposes, Texas was divided into more than 50 different localities. In 
1993, the local fee schedule amounts for states with more than one 
carrier service areas were transitioned to statewide fee schedule 
amounts. The reasonable charge data used to calculate the statewide fee 
schedule amounts therefore reflected the average payment made under the 
supplier charge based reasonable charge payment methodology for items 
and services furnished throughout the state, including both rural and 
urban areas of the state.
    Section 4062(b) of OBRA 87 mandated that local fee schedule amounts 
for both DME and P&O be transitioned to regional fee schedule amounts 
as part of a multi-year phase in ending in 1993. Section 4152(b) of the 
Omnibus Budget Reconciliation Act of 1990 (OBRA 90), Public Law 101-
508, eliminated the regional fee schedule transition for DME and 
amended section 1834(a) of the Act to mandate that the local 
(statewide) fee schedule amounts be limited by a national ceiling 
(upper) limit, based on the median of the statewide fee schedule 
amounts, and a national floor (lower limit), based on 85 percent of the 
median of the statewide fee schedule amounts. The fee schedule ceiling 
and floor limits for DME were phased in from 1991 through 1993. The 
conversion to regional fee schedule amounts therefore never took place 
for DME and instead the statewide fee schedule amounts were limited so 
that they could not vary by more than 15 percent from the national 
ceiling to the national floor. The fee schedule amounts for areas 
outside the contiguous United States are not subject to the national 
ceiling and floor limits. The transition to regional fee schedule 
amounts was retained for P&O, although OBRA 90 changed the phase in 
schedule so that the regional fee schedule amounts were not fully 
phased in until January 1, 1994, rather than January 1, 1993. As 
explained in more detail below, the regional fee schedule methodology 
allows for regional geographic variation in fee schedule payment 
amounts and a wider range in fees across the nation than the fee 
schedule methodology used for DME which caps the local, statewide fee 
schedule amounts at the national median. That being said, we have not 
seen any problems associated with access to either P&O or DME in rural 
areas or any areas of the country since payments have been made based 
on these fee schedule methodologies. This has been the case even though 
the average reasonable charges used to compute the statewide fee 
schedule amounts include a comingling of reasonable charge data for 
items and services furnished in both urban and rural areas. In 
addition, we have not seen any problems with access to PEN in rural 
areas or any areas of the country since payments have been made based 
on national fee schedule amounts.
3. Regional Fee Schedule Payment Methodology for P&O
    The regional fee schedules for P&O are mandated by section 
1834(h)(2)(B) of the Act. The regional fee schedule amounts only apply 
to areas within the contiguous United States. The regional fee schedule 
amounts are calculated based on the weighted average (weighted by total 
Part B claims volume) of statewide fee schedule amounts for states in 
each of the ten CMS Regional Office boundaries identified below. The 
statewide fee schedule amounts are based on average reasonable charges 
(statewide fees) for items furnished from July 1, 1986 through June 30, 
1987.
    The ten CMS Regional Office boundaries are:
     Boston (Region One), including the six states of 
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and 
Vermont;
     New York (Region Two), including the two states of New 
Jersey and New York;
     Philadelphia (Region Three), including the five states of 
Delaware, Maryland, Pennsylvania, Virginia, West Virginia and the 
District of Columbia;
     Atlanta (Region Four), including the eight states of 
Alabama, North Carolina, South Carolina, Florida, Georgia, Kentucky, 
Mississippi, and Tennessee;
     Chicago (Region Five), including the six states of 
Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin;
     Dallas (Region Six), including the five states of 
Arkansas, Louisiana, New Mexico, Oklahoma and Texas;
     Kansas City (Region Seven), including the four states of 
Iowa, Kansas, Missouri and Nebraska;
     Denver (Region Eight), including the six states of 
Colorado, Montana, North Dakota, South Dakota, Utah and Wyoming;
     San Francisco (Region Nine), including the three states of 
Arizona, California and Nevada; and
     Seattle (Region Ten), including the three states of Idaho, 
Oregon and Washington.
    As an example, the regional fee schedule amounts for Region Nine 
are based on the weighted average of the

[[Page 40277]]

statewide fees for Arizona, California, and Nevada. Since California 
accounts for the largest volume of Part B claims in the region, the 
California statewide fees are weighted more heavily in determining the 
regional fee schedule amounts than the statewide fees for Arizona or 
Nevada. Once all of the regional fee schedule amounts are established, 
the regional fee schedule amounts are further limited by a national 
ceiling equal to 120 percent of the average of the regional fee 
schedule amounts for all the states and a national floor equal to 90 
percent of the average of the regional fee schedule amounts for all the 
states.
    The national ceiling and floor limits for DME and P&O set national 
parameters on how much the statewide or regional fee schedule amounts 
can vary. For DME, the upper payment limit or ceiling is based on the 
national median of the statewide fees, essentially bringing half of the 
state fees down to the national median. The lower limit or floor is 
based on 85 percent of the national median and brings those state fees 
below the floor amount up to the floor amount. In contrast, the 
national ceiling and floor parameters for P&O are based on 120 percent 
and 90 percent, respectively, of the average of the various regional 
fee schedule amounts. Differences in reasonable charge based fees in 
various geographic regions of the country are maintained within the 
parameters of the national ceilings and floors for P&O.
4. DMEPOS Competitive Bidding Programs Payment Rules
    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement CBPs in CBAs throughout the United States for contract award 
purposes for the furnishing of certain competitively priced DMEPOS 
items and services. The programs mandated by section 1847(a) of the Act 
are collectively referred to as the ``Medicare DMEPOS Competitive 
Bidding Program.'' Section 1847(a)(2) of the Act provides that the 
items and services to which competitive bidding applies are:
     Off-the-shelf (OTS) orthotics for which payment would 
otherwise be made under section 1834(h) of the Act;
     Enteral nutrients, equipment and supplies described in 
section 1842(s)(2)(D) of the Act; and
     Certain DME and medical supplies, which are covered items 
(as defined in section 1834(a)(13) of the Act) for which payment would 
otherwise be made under section 1834(a) of the Act.
    The DME and medical supplies category includes items used in 
infusion and drugs (other than inhalation drugs) and supplies used in 
conjunction with DME, but excludes class III devices under the Federal 
Food, Drug, and Cosmetics Act and Group 3 or higher complex 
rehabilitative power wheelchairs and related accessories when furnished 
with such wheelchairs. Sections 1847(a) and (b) of the Act specify 
certain requirements and conditions for implementation of the Medicare 
DMEPOS CBP.
    On July 15, 2008, the Medicare Improvements for Patients and 
Providers Act (MIPPA) was enacted. Section 154 of the MIPPA amended 
section 1847 of the Act to make certain limited changes to the Medicare 
DMEPOS CBP, including a revised timeframe for phasing in the programs.
    On March 23, 2010, the Affordable Care Act was enacted. Section 
6410(a) of the Affordable Care Act amended section 1847(a)(1) of the 
Act, mandating the phase in of 21 additional Metropolitan Statistical 
Areas (MSAs).
    Section 1847(a) of the Act requires that the DMEPOS CBP be phased 
in so that competition under the programs occurs in 9 of the largest 
Metropolitan Statistical Areas (MSAs) in 2009, 91 additional large MSAs 
in 2011, and additional areas after 2011 (or, in the case of national 
mail order for items and services, after 2010). Section 
1847(a)(1)(D)(ii) of the Act provides discretion to subdivide MSAs and 
through notice and comment rulemaking we subdivided the New York-
Northern New Jersey-Long Island, NY-NJ-PA; Los Angeles-Long Beach-Santa 
Ana, CA; and Chicago-Naperville-Joliet, IL-IN-WI MSAs. The final rule 
was published in the Federal Register on November 29, 2010 (75 FR 
73454) and divided the New York-Northern New Jersey-Long Island, NY-NJ-
PA MSA into six CBAs. In addition, the Los Angeles-Long Beach-Santa 
Ana, CA MSA was divided into two CBAs and the Chicago-Naperville-
Joliet, IL-IN-WI MSA was divided into four CBAs (75 FR 73460). 
Altogether this created a total of 100 CBAs for the competitions 
occurring in the 91 MSAs in 2011, or a total of 109 CBAs for the 
competitions occurring in 100 MSAs in 2009 and 2011.
    Finally, section 1847(a)(1)(D)(iii) of the Act specifies that 
competitions occurring before 2015 for items and services other than 
national mail order, may not include rural areas or MSAs with a 
population of less than 250,000.
    In addition to the national mail order program for diabetic 
supplies, the product categories (PCs) that have been phased in thus 
far in 100 Round 2 CBAs and 9 Round 1 CBAs include the following:
Round 2 CBAs (Contract Period July 1, 2013, Thru June 30, 2016)
 Oxygen, oxygen equipment, and supplies
 Standard (Power and Manual) wheelchairs, scooters, and related 
accessories
 Enteral nutrients, equipment, and supplies
 Continuous Positive Airway Pressure (CPAP) devices and 
Respiratory Assist Devices (RADs) and related supplies and accessories
 Hospital beds and related accessories
 Walkers and related accessories
 Negative Pressure Wound Therapy pumps and related supplies and 
accessories
 Support surfaces (Group 2 mattresses and overlays)
Round 1 CBAs (Contract Period January 1, 2014, Thru December 31, 2016)
 Respiratory Equipment and Related Supplies and Accessories
[cir] includes oxygen, oxygen equipment, and supplies; CPAP devices and 
RADs and related supplies and accessories; and standard nebulizers
 Standard Mobility Equipment and Related Accessories
[cir] includes walkers, standard power and manual wheelchairs, 
scooters, and related accessories
 General Home Equipment and Related Supplies and Accessories
[cir] includes hospital beds and related accessories, group 1 and 2 
support surfaces, transcutaneous electrical nerve stimulation (TENS) 
devices, commode chairs, patient lifts, and seat lifts
 Enteral Nutrients, Equipment and Supplies
 Negative Pressure Wound Therapy Pumps and Related Supplies and 
Accessories
 External Infusion Pumps and Supplies
In addition, contracts and SPAs were in effect in the 9 Round 1 CBAs 
from January, 1 2011 thru December 31, 2013, for the items listed below 
which are not included in current Round 1 or 2 PCs:
 Complex Rehabilitative Power Wheelchairs and Related 
Accessories (Group 2)
 Adjustable Wheelchair Seat Cushions

[[Page 40278]]

5. Adjusting Payment Amounts Using Information From the DMEPOS 
Competitive Bidding Program
    Section 1834(a)(1)(F)(ii) of the Act provides authority for using 
information from the DMEPOS CBPs to adjust the DME payment amounts for 
covered items furnished on or after January 1, 2011, in areas where 
competitive bidding is not implemented for the items. Similar authority 
exists at section 1834(h)(1)(H)(ii) of the Act for OTS orthotics, and 
at section 1842(s)(3)(B) of the Act for enteral nutrition. Section 
1834(a)(1)(F) also requires adjustments to the payment amounts for all 
DME items subject to competitive bidding furnished in areas where CBPs 
have not been implemented on or after January 1, 2016.
    For items furnished on or after January 1, 2016, section 
1834(a)(1)(F)(iii) requires us to continue to make such adjustments to 
DME payment amounts where CBPs have not been implemented, as additional 
covered items are phased in or information is updated as contracts are 
recompeted.
    Section 1834(a)(1)(G) of the Act requires that the methodology used 
to adjust payment amounts for DME and OTS orthotics using information 
from the CBPs be promulgated through notice and comment rulemaking, 
which is the purpose of this proposed rule. Section 1834(a)(1)(G) of 
the Act also requires that we consider the ``costs of items and 
services in areas in which such provisions [sections 1834(a)(1)(F)(ii) 
and 1834(h)(1)(H)(ii)] would be applied compared to the payment rates 
for such items and services in competitive acquisition [competitive 
bidding] areas.'' We are proposing to apply the same methodology for 
making adjustments to the payment amounts for enteral nutrition as 
authorized by section 1842(s)(3)(B) of the Act.
6. Diversity of Costs
    As mentioned above, under section 1834(a)(1)(G) of the Act we must 
consider the costs of furnishing items and services in areas where 
prices will be adjusted compared to the payment rates for the items and 
services furnished in CBAs. We believe that the methodology for using 
the single payment amounts (SPAs) as a basis for adjusting payment 
rates in other areas needs to ensure that adjusted payment amounts in 
an area are adequate to cover the unique costs of furnishing the items 
and services in those areas.
    The SPAs are based on the median of successful bids for furnishing 
items and services in MSAs, which are mainly urban areas, from 
suppliers with costs and characteristics that may or may not be similar 
to suppliers in other areas. In addition, under the DMEPOS CBP, many 
low population density areas within MSAs were excluded from the CBAs as 
authorized by statute, making the geographic bidding areas smaller and 
more densely populated than they would have been if the initial MSA 
boundaries had been retained for bidding purposes.
    Regarding the size of suppliers submitting the bids used to 
generate the SPAs compared to the size of suppliers in areas where 
price adjustments based on the SPAs would occur, it is important to 
note that small suppliers are given special considerations under the 
CBP and that a majority of contracts are offered to small suppliers. 
Section 1847(b)(6)(D) of the Act requires that, in developing 
procedures relating to bidding and the awarding of contracts, CMS 
``take appropriate steps to ensure that small suppliers of items and 
services have an opportunity to be considered for participation in the 
program.'' We have established a number of provisions to ensure that 
small suppliers are given an opportunity to participate in the DMEPOS 
CBP. For example, under 42 CFR 414.414(g)(1)(i), we have established a 
30 percent target for small supplier participation; thereby, ensuring 
efforts are made to award at least 30 percent of contracts to small 
suppliers. Also, CMS worked in coordination with the Small Business 
Administration (SBA) to develop an appropriate definition of a ``small 
supplier'' for this program. Under 42 CFR 414.402, a small supplier is 
one that generates gross revenues of $3.5 million or less in annual 
receipts, including Medicare and non-Medicare revenue. Under 42 CFR 
414.418, small suppliers may join together in ``networks'' in order to 
submit bids that meet the various program requirements. For contracts 
taking effect on July 1, 2013 in Round 2, in 100 CBAs throughout the 
country, 63 percent of all contract suppliers are small suppliers, with 
only 10 percent of contract suppliers being new to the areas. In 
addition, for contracts taking effect on January 1, 2014 in the Round 1 
Recompete, in the 9 initial CBAs, 58 percent of all contract suppliers 
are small suppliers, with only 3 percent of contract suppliers being 
new to the areas. Therefore, the majority of bids used in establishing 
the SPAs come from small suppliers with a history of furnishing the 
items in the CBAs.
    Prior to awarding contracts, each supplier is carefully screened to 
ensure that it is accredited under applicable Medicare quality 
standards and meets rigid financial standards, specific Medicare 
supplier enrollment requirements, and applicable state licensing 
standards. Each bid is screened to ensure that it is a bona fide bid, 
and those that fail are excluded from the competition. Approximately 94 
percent of bids screened as part of the Round 2 and Round 1 Recompete 
competitions were determined to be bona fide. The invoices and purchase 
orders submitted by bidding suppliers to support their bids reflected 
prices already paid by the supplier (that is, prior to becoming a 
contract supplier) and for the most part did not reflect large volume 
purchasing discounts. Once non-bona fide bids are excluded, suppliers 
are ranked in order based on bid amounts, and the median of bids from 
the number of suppliers determined to be necessary to meet projected 
demand are used to establish the SPAs. The projected demand for items 
and services in a CBA is intentionally overstated for the purpose of 
ensuring that contracts are awarded to more than a sufficient number of 
suppliers to serve the beneficiaries in the area. The establishment of 
the demand level is explained in detail in the competitive bidding 
final rule (Medicare Program; Competitive Acquisition for Certain 
DMEPOS and Other issue) published April 10, 2007 (72 FR 18039). Thus, 
the SPAs are higher than they would otherwise be if demand was not 
overstated because the high demand generally results in an increase in 
the number of contract suppliers which in most cases increases the 
median bid amount. CMS also conducts its review of supplier capacity 
and expansion plans during the bid evaluation process. If a supplier is 
new to an area, new to a PC, or submits estimated capacity that 
represents substantial growth over current levels, CMS may conduct a 
more detailed evaluation of that supplier's expansion plan to verify 
the supplier's ability to provide items and services in the CBA on day 
one of the contract period. If a bidder's financial data and expansion 
plan do not support the supplier's estimated capacity, CMS will adjust 
the capacity to the supplier's historic level, which would be zero for 
a new supplier. CMS uses the estimated capacity information and the bid 
amounts to determine the array of winning suppliers in a CBA.
    Under Round 2 and the Round 1 Recompete competitions, 92 percent of 
suppliers accepted contract offers at the SPAs set through the 
competitions. In addition, CMS reviewed all contract

[[Page 40279]]

suppliers based on financial standards when evaluating their bids. This 
process includes review of tax records, credit reports, and other 
financial data, which leads to the calculation of a score, similar to 
processes used by lenders when evaluating the viability of a company. 
All contract suppliers met the financial standards established for the 
program.
    From January 1, 2011, when the initial Round 1 contracts and SPAs 
took effect, to present, we have seen no indication that beneficiaries 
have been denied access to necessary items and services subject to the 
programs in CBAs as a result of the SPAs. In addition, we have been 
closely monitoring inquiries as well as real time claims and health 
outcomes data and have seen no negative impacts on access to items and 
services under the program. Therefore, the SPAs appear to be sufficient 
to cover the costs of the suppliers furnishing items in the 109 CBAs.
    In previous legislation, which we will discuss below, the Congress 
mandated that the costs of furnishing DME in different geographic 
regions of the country be studied. Section 135 of the Social Security 
Act Amendments of 1994, Public Law 103-432, required an examination of 
the geographic variations in DME supplier costs in order to determine 
whether the fee schedules are reasonably adjusted to account for any 
geographic differences. Jing Xing Health and Safety Resources, Inc. 
provided assistance to the Health Care Financing Administration, now 
CMS, in conducting this study. The project entitled ``Durable Medical 
Equipment Supplier Product and Service Cost Study'', was completed 
under Contract Number HCFA 500-95-0044 and submitted to the agency in 
June 1996. As part of the study, a Federal Advisory Panel was convened, 
a formal meeting with representatives of the DME industry was held, and 
a literature review was conducted. The general consensus among industry 
representatives and government agencies that participated in the study 
was that there is no conclusive evidence that urban and rural costs 
differed significantly or that the costs of furnishing DME items and 
services were higher in urban areas versus rural areas or vice versa.
    The 109 CBAs where competitive bidding has been phased in include a 
wide range of different size urban areas with surrounding counties, and 
suppliers take the costs of furnishing items and services in these 
different areas into account when submitting bids under the programs. 
They include one CBA (Honolulu, HI) that is not within the contiguous 
Unites States and CBAs that range in population size from approximately 
300 thousand to 10 million (See Table 33). There are 7 CBAs with a 
population of less than 500,000, 42 CBAs with a population of more than 
500,000, but less than 1 million, 27 CBAs with a population of more 
than 1 million, but less than 2 million, 19 CBAs with a population of 2 
to 4 million, and 14 CBAs with a population of over 4 million.

                      Table 33--CBA Population Size
------------------------------------------------------------------------
                           CBA                              Population
------------------------------------------------------------------------
Los Angeles County CBA..................................       9,453,357
Nassau-Brooklyn-Queens-Richmond County Metro CBA........       6,630,278
Dallas-Fort Worth-Arlington, TX.........................       6,554,334
Central-Chicago Metro CBA...............................       6,179,455
Houston-Sugar Land-Baytown, TX..........................       6,152,650
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD.............       5,995,992
Washington-Arlington-Alexandria, DC-VA-MD-WV............       5,662,358
Miami-Fort Lauderdale-Pompano Beach, FL.................       5,604,979
Atlanta-Sandy Springs-Marietta, GA......................       5,293,136
Boston-Cambridge-Quincy, MA-NH..........................       4,595,431
San Francisco-Oakland-Fremont, CA.......................       4,407,286
Detroit-Warren-Livonia, MI..............................       4,256,579
Phoenix-Mesa-Glendale, AZ...............................       4,251,146
Riverside-San Bernardino-Ontario, CA....................       4,157,332
Seattle-Tacoma-Bellevue, WA.............................       3,522,509
Northern NJ Metro CBA...................................       3,473,815
Minneapolis-St. Paul-Bloomington, MN-WI.................       3,326,864
San Diego-Carlsbad-San Marcos, CA.......................       3,118,844
Orange County CBA.......................................       3,067,829
Southern NY Metro CBA...................................       3,015,460
Bronx-Manhattan NY CBA..................................       2,983,009
St. Louis, MO-IL........................................       2,844,160
Tampa-St. Petersburg-Clearwater, FL.....................       2,810,479
Baltimore-Towson, MD....................................       2,751,529
Denver-Aurora-Broomfield, CO............................       2,568,221
Pittsburgh, PA..........................................       2,361,317
Portland-Vancouver-Hillsboro, OR-WA.....................       2,259,089
San Antonio-New Braunfels, TX...........................       2,223,779
Orlando-Kissimmee-Sanford, FL...........................       2,176,846
Sacramento-Arden-Arcade-Roseville, CA...................       2,174,556
Cincinnati-Middletown, OH-KY-IN.........................       2,121,660
Cleveland-Elyria-Mentor, OH.............................       2,074,790
Kansas City, MO-KS......................................       2,050,306
Las Vegas-Paradise, NV..................................       1,967,341
San Jose-Sunnyvale-Santa Clara, CA......................       1,898,173
Columbus, OH............................................       1,844,571
Charlotte-Gastonia-Rock Hill, NC-SC.....................       1,832,391
Austin-Round Rock-San Marcos, TX........................       1,813,495
Indianapolis-Carmel, IN.................................       1,764,136
Virginia Beach-Norfolk-Newport News, VA-NC..............       1,673,547
Nashville-Davidson-Murfreesboro-Franklin, TN............       1,607,708

[[Page 40280]]

 
Providence-New Bedford-Fall River, RI-MA................       1,603,029
Milwaukee-Waukesha-West Allis, WI.......................       1,570,548
Suffolk County CBA......................................       1,488,017
South-West-Chicago-Metro CBA............................       1,464,818
Jacksonville, FL........................................       1,371,407
North East NY CBA Metro.................................       1,363,882
Memphis, TN-MS-AR.......................................       1,309,806
Louisville/Jefferson County, KY-IN......................       1,277,282
Oklahoma City, OK.......................................       1,276,642
Richmond, VA............................................       1,262,088
Hartford-West Hartford-East Hartford, CT................       1,214,313
Raleigh-Cary, NC........................................       1,190,534
Northern-Chicago Metro CBA..............................       1,187,661
New Orleans-Metairie-Kenner, LA.........................       1,182,382
Salt Lake City, UT......................................       1,158,617
Buffalo-Niagara Falls, NY...............................       1,133,325
Birmingham-Hoover, AL...................................       1,121,219
Rochester, NY...........................................       1,062,561
Tucson, AZ..............................................       1,004,374
Honolulu, HI............................................         962,112
Fresno, CA..............................................         949,093
Tulsa, OK...............................................         945,366
Bridgeport-Stamford-Norwalk, CT.........................         922,063
Albuquerque, NM.........................................         896,202
Omaha-Council Bluffs, NE-IA.............................         883,233
Albany-Schenectady-Troy, NY.............................         866,077
New Haven-Milford, CT...................................         862,551
Dayton, OH..............................................         839,984
Oxnard-Thousand Oaks-Ventura, CA........................         830,680
Allentown-Bethlehem-Easton, PA-NJ.......................         826,740
El Paso, TX.............................................         826,163
Baton Rouge, LA.........................................         811,243
Bakersfield-Delano, CA..................................         810,348
Worcester, MA...........................................         800,404
McAllen-Edinburg-Mission, TX............................         799,023
Grand Rapids-Wyoming, MI................................         783,733
Columbia, SC............................................         767,793
Greensboro-High Point, NC...............................         746,685
Little Rock-North Little Rock-Conway, AR................         710,371
North Port-Bradenton-Sarasota, FL.......................         708,687
Indiana-Chicago Metro CBA...............................         706,110
Knoxville, TN...........................................         705,446
Springfield, MA.........................................         698,926
Akron, OH...............................................         687,788
Stockton, CA............................................         685,542
Greenville-Mauldin-Easley, SC...........................         683,793
Charleston-North Charleston-Summerville, SC.............         682,539
Syracuse, NY............................................         671,076
Poughkeepsie-Newburgh-Middletown, NY....................         665,524
Colorado Springs, CO....................................         665,484
Toledo, OH..............................................         649,956
Wichita, KS.............................................         634,116
Boise City-Nampa, ID....................................         634,037
Cape Coral-Fort Myers, FL...............................         631,611
Lakeland-Winter Haven, FL...............................         602,671
Augusta-Richmond County, GA-SC..........................         570,656
Scranton-Wilkes-Barre, PA...............................         556,282
Youngstown-Warren-Boardman, OH-PA.......................         553,382
Palm Bay-Melbourne-Titusville, FL.......................         550,416
Jackson, MS.............................................         544,285
Chattanooga, TN-GA......................................         533,309
Deltona-Daytona Beach-Ormond Beach, FL..................         501,906
Visalia-Porterville, CA.................................         439,968
Flint, MI...............................................         435,877
Asheville, NC...........................................         434,665
Beaumont-Port Arthur, TX................................         397,872
Ocala, FL...............................................         323,229
Huntington-Ashland, WV-KY-OH............................         289,474
------------------------------------------------------------------------
Source: U.S. Census Bureau, Population Division, 2012 Population
  Estimates. Population estimates for MSAs and counties were adjusted to
  reflect CBA boundaries.

[[Page 40281]]

7. Advanced Notice of Proposed Rulemaking
    CMS issued an Advance Notice of Proposed Rulemaking (ANPRM): 
Medicare Program; Methodology for Adjusting Payment Amounts for Certain 
Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 
(DMEPOS) using Information From Competitive Bidding Programs. The ANPRM 
was published in the Federal Register on February 26, 2014 (79 FR 
10754) and solicited comments on several aspects to consider in 
developing the proposed methodology to adjust DMEPOS fee schedule 
amounts or other payment amounts in non-competitive areas based on 
DMEPOS competitive bidding payment information. Specific questions 
related to this topic were presented in the notice, including:
     Do the costs of furnishing various DMEPOS items and 
services vary based on the geographic area in which they are furnished?
     Do the costs of furnishing various DMEPOS items and 
services vary based on the size of the market served in terms of 
population and/or distance covered or other logistical or demographic 
reasons?
     Should an interim or different methodology be used to 
adjust payment amounts for items that have not yet been included in all 
CBPs (for example, items such as TENS devices that have only been 
phased into the nine Round 1 areas thus far)?
    The comment period for the ANPRM ended on March 28, 2014, and CMS 
received approximately 185 comments from suppliers, manufacturers, 
professional, state and national trade associations, physicians, 
physical therapists, beneficiaries and their caregivers, and one state 
government office.
    Commenters generally agreed that costs do vary by geographic region 
and that costs in rural and non-contiguous areas are higher than costs 
in urban areas. However, few commenters offered specific proposals or 
suggestions for addressing these costs differences and the suggestions 
that were provided were vague (for example, use the 75th percentile of 
SPAs rather than the national median SPA). Several commenters stated 
that the costs of furnishing DMEPOS items and services in different 
regions of the country do vary. One commenter representing many 
suppliers said that there exists no reliable cost data. Another 
commenter representing many manufacturers and suppliers listed several 
key variables or factors that influence the cost of furnishing items 
and services in different areas that should be considered, but the 
commenter did not provide information on how valid and reliable 
information related to these factors could be obtained. This commenter 
stated that information of all bids submitted under the programs should 
also be considered and not just the bids of winning suppliers. Some 
commenters expressed concern that the SPAs assume a significant 
increase in volume to offset lower payment amounts. Some commenters 
suggested that the price adjustments be phased in rather than making 
full, one-time adjustments.

B. Proposed Provisions

    We propose establishing three methodologies for adjusting DMEPOS 
fee schedule amounts in areas where CBPs have not been established for 
these items and services based on SPAs established in accordance with 
the payment rules at Sec.  414.408. Use of SPAs that may be established 
in accordance with the special payment rules proposed in section V to 
adjust DMEPOS fee schedule amounts in areas where CBPs have not been 
established for these items and services would be addressed in future 
notice and comment rulemaking. One proposed methodology is described in 
subsection 1 below and would utilize regional adjustments limited by 
national parameters for items bid in more than 10 CBAs throughout the 
country. A second proposed methodology is described in subsection 2 
below and would be used for lower volume items or other items that were 
bid in no more than 10 CBAs for various reasons. A third proposed 
methodology is described in subsection 5 and would be used for mail 
order items furnished in the Northern Mariana Islands. We are also 
proposing rules that would apply to all of these proposed 
methodologies.
1. Proposed Regional Adjustments Limited by National Parameters
    CBPs are currently in place in 100 of the largest MSAs in the 
country for items and services that make up over 80 percent of the 
total allowed charges for items subject to the DMEPOS CBP. SPAs are 
currently used in 109 CBAs that include areas in every state throughout 
the country except for Alaska, Maine, Montana, North Dakota, South 
Dakota, Vermont, and Wyoming. The number of CBAs, as listed in Table 33 
that are fully or partially located within a given state range from one 
to twelve. The Honolulu CBA was phased in under Round 2 of the program. 
Suppliers submitting bids for furnishing items and services in these 
areas have received extensive education that they should factor all 
costs of furnishing items and services in an area as well as overhead 
and profit into their bids.
    For items and services that are subject to competitive bidding and 
have been included in more than 10 CBAs throughout the country, we 
propose to adjust the fee schedule payment amounts for these items and 
services using a methodology that is modeled closely after the regional 
fee schedule payment methodology in effect for P&O to allow for 
variations in payment based on bids for furnishing items and services 
in different parts of the country. Under the proposed methodology, 
adjusted fee schedule amounts for areas within the contiguous United 
States would be determined based on regional SPAs or RSPAs limited by a 
national floor and ceiling. The RSPA would be established using the 
average of the SPAs for an item from all CBAs that are fully or 
partially located in the region. The adjusted payment amount for the 
item would be equal to its RSPA but not less than 90 percent and not 
more than 110 percent of the national average, which is the average of 
the RSPAs weighted by the number of states in the region.
    We believe modeling the proposed methodology on the regional fee 
schedule payment methodology for P&O is appropriate because the 
regional fee schedule payment methodology for P&O allows for variations 
in Medicare fee schedule amounts based on supplier charges for 
furnishing items and services in different regions of the country. The 
regional fee schedule payment methodology for P&O adjusts the Medicare 
allowed payments for entire regions of the country, including low 
population density or rural areas, based primarily on supplier 
information for furnishing items and services in urban areas. The 
regional fee schedule payment methodology for P&O has been fully phased 
in since 1994 in the contiguous United States and has not resulted in 
any barriers to access since then in any specific region of the country 
in which it has been applied. The DME and P&O fee schedule amounts are 
based in a part on statewide average reasonable charges calculated 
using supplier charges for furnishing items and services in localities 
throughout each state. Supplier charges for furnishing items in rural 
areas of the state are combined with charges for furnishing items in 
urban areas of the state, which represents the bulk of the charges 
since the vast majority of beneficiaries in each state reside in urban 
areas rather than rural areas. Although the fee schedule

[[Page 40282]]

payments are based heavily on charges for furnishing items and services 
in urban areas, this has not affected access to items and services in 
rural areas that are paid based on these fee schedule amounts.
    We considered modeling the proposed methodology on the fee schedule 
payment methodology for DME which establishes an upper limit on all fee 
schedule amounts based on the median of the state fee schedule amounts; 
however, this methodology does not allow for regional variations in fee 
schedule amounts, allows for 0 percent variations in state fee schedule 
amounts above the national median amount, and only allows for up to 15 
percent variation in state fee schedule amounts below the national 
median amount. The statewide average reasonable charges for DME are 
updated by an annual covered item update factor and are then limited by 
a national ceiling and floor based on the median of the statewide 
amounts and 85 percent of the median of the statewide amounts. The DME 
fee schedule methodology allows for no variation in payment whatsoever 
above the national median statewide amount. The maximum variation in 
fee schedule amounts that is allowed is 15 percent below the national 
median statewide amount. By contrast, the regional fee schedule 
methodology for P&O allows for regional variation in fee schedule 
payment amounts by as much as 10 percent below the national average 
amount and 20 percent above the national average amount. Similarly, the 
fee schedules for enteral nutrition are based on national average 
reasonable charges, and therefore, do not allow for any regional 
variation in fee schedule amounts. We believe that the model whereby 
regional fee schedule amounts for P&O are based on supplier charges for 
furnishing items and services within each region should be adopted when 
using SPAs to adjust fee schedule payment amounts in a way that 
reflects bidding in different regions of the country. The regional 
adjusted amounts are based on supplier bids for furnishing items and 
services within each region, as explained below.
a. Regional Payment Adjustments
    Rather than adjusting state, regional, or national fee schedule 
amounts or infusion drug payment amounts based on all bids for an item 
in all CBAs across the country or based on all bids for an item in all 
CBAs within each state, we propose to adjust the payment amounts based 
on the average of bids for an item in CBAs that are fully or partially 
located in different regions of the country. In the first step of the 
proposed methodology we propose to calculate RSPAs or the average of 
the SPAs for an item and service in different regions of the country. 
In keeping with the example established by the P&O regional fee 
schedule payment methodology, this would allow variation in payment 
amounts for different regions of the country. For the purpose of 
establishing the boundaries for the regions, we propose using 8 regions 
developed for economic analysis purposes by the Bureau of Economic 
Analysis (BEA) within the Department of Commerce. These regions are 
proposed based on research and analysis conducted by the BEA indicating 
that the states in each region share economic ties. Further information 
can be obtained at https://www.bea.gov/regional/definitions/nextpage.cfm?key=Regions.
    The information provided at this link states that:

    BEA Regions are a set of Geographic Areas that are aggregations 
of the states. The following eight regions are defined: Far West, 
Great Lakes, Mideast, New England, Plains, Rocky Mountain, 
Southeast, and Southwest. The regional classifications, which were 
developed in the mid-1950s, are based on the homogeneity of the 
states in terms of economic characteristics, such as the industrial 
composition of the labor force, and in terms of demographic, social, 
and cultural characteristics. For a brief description of the 
regional classification of states used by BEA, see U.S. Department 
of Commerce, Census Bureau, Geographic Areas Reference Manual, 
Washington, DC, U.S. Government Printing Office, November 1994, pp. 
6-18;6-19.

    Therefore, we propose to revise the definition of region in Sec.  
414.202 to mean a region developed for economic analysis purposes by 
the Bureau of Economic Analysis (BEA) within the Department of Commerce 
for the purpose of calculating regional single payment amounts (RSPAs); 
the definition of region for the purposes of the P&O regional fee 
schedule would also continue to apply for those items and services not 
adjusted based on prices in competitively bid areas. According to the 
BEA, the regional classifications are based on the homogeneity of the 
states in terms of economic characteristics, such as the industrial 
composition of the labor force, and in terms of demographic, social, 
and cultural characteristics. The contiguous areas of the United States 
that fall under the 8 BEA regions under our proposal are listed in 
Table 34 below. Further information can be obtained at http://www.bea.gov/.

              Table 34--Bureau of Economic Analysis Regions
------------------------------------------------------------------------
      Region                   Name               States/Areas (count)
------------------------------------------------------------------------
1................  New England................  Connecticut, Maine,
                                                 Massachusetts, New
                                                 Hampshire, Rhode
                                                 Island, and Vermont
                                                 (6).
2................  Mideast....................  Delaware, District of
                                                 Columbia, Maryland, New
                                                 Jersey, New York, and
                                                 Pennsylvania (6).
3................  Great Lakes................  Illinois, Indiana,
                                                 Michigan, Ohio, and
                                                 Wisconsin (5).
4................  Plains.....................  Iowa, Kansas, Minnesota,
                                                 Missouri, Nebraska,
                                                 North Dakota, and South
                                                 Dakota (7).
5................  Southeast..................  Alabama, Arkansas,
                                                 Florida, Georgia,
                                                 Kentucky, Louisiana,
                                                 Mississippi, North
                                                 Carolina, South
                                                 Carolina, Tennessee,
                                                 Virginia, and West
                                                 Virginia (12).
6................  Southwest..................  Arizona, New Mexico,
                                                 Oklahoma, and Texas
                                                 (4).
7................  Rocky Mountain.............  Colorado, Idaho,
                                                 Montana, Utah, and
                                                 Wyoming (5).
8................  Far West...................  California, Nevada,
                                                 Oregon, and Washington
                                                 (4).
------------------------------------------------------------------------

    We are soliciting public comments on whether different regional 
boundaries (e.g. CMS regions or Census Divisions) should be considered 
that would better reflect potential regional differences in the costs 
of furnishing items and services subject to the DMEPOS CBP. In addition 
to the CMS regions listed in section A.3 above, other established 
regional boundaries include those defined by the United States Census 
Bureau in the Department of Commerce for the purpose of reporting and 
analyzing census data. The Census Bureau uses 4 regions that are 
further divided into 9 divisions. The Census divisions are as follows:
     New England (Division 1); including the 6 states 
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and 
Vermont.

[[Page 40283]]

     Middle Atlantic (Division 2); including the 3 states New 
Jersey, New York and Pennsylvania.
     East North Central (Division 3); including the 5 states 
Illinois, Indiana, Michigan, Ohio and Wisconsin.
     West North Central (Division 4); including the 7 states 
Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South 
Dakota.
     South Atlantic (Division 5); including the 9 states 
Delaware, District of Columbia, Florida, Georgia, Maryland, North 
Carolina, South Carolina, Virginia and West Virginia.
     East South Central (Division 6); including the 4 states 
Alabama, Kentucky, Mississippi and Tennessee.
     West South Central (Division 7); including the 4 states 
Arkansas, Louisiana, Oklahoma, and Texas.
     Mountain (Division 8); including the 8 states Arizona, 
Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming.
     Pacific (Division 9); including the 5 states Alaska, 
California, Hawaii, Oregon and Washington.

    Table 35 below lists the states and number of CBAs located in each 
of the CMS regions, BEA regions, and census divisions.

                               Table 35--States and Number of Current CBAs per CMS Region, BEA Region, and Census Division
--------------------------------------------------------------------------------------------------------------------------------------------------------
                       10 CMS Regions                                      9 Census Divisions                               8 BEA Regions
--------------------------------------------------------------------------------------------------------------------------------------------------------
             Region                    States         CBAs        Division             States        CBAs         Region             States        CBAs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Boston.........................  CT, ME, MA, NH,          7  New England.......  CT, ME, MA, NH,         7  New England......  CT, ME, MA, NH,         7
                                  RI, VT.                                         RI, VT.                                       RI, VT.
New York.......................  NJ, NY............      13  Middle Atlantic...  NJ, NY, PA.......      15  Mideast..........  DE, DC, MD, NJ,        17
                                                                                                                                NY, PA.
Phila..........................  DE, DC, MD, PA,          9
                                  VA, WV.
Atlanta........................  AL, FL, GA, KY,         28  South Atlantic....  DE, DC, FL, GA,        30  Southeast........  AL, AR, FL, GA,        34
                                  MS, NC, SC, TN.                                 MD, NC, SC, VA,                               KY, LA, MS, NC,
                                                                                  WV.                                           SC, TN, VA, WV.
                                                             East South Central  AL, KY, MS, TN...       7
Chicago........................  IL, IN, MI, MN,         19  East North Central  IN, IL, MI, OH,        19  Great Lakes......  IL, IN, MI, OH,        19
                                  OH, WI.                                         WI.                                           WI.
Dallas.........................  AR, LA, NM, OK, TX      14  West South Central  AR, LA, OK, TX...      13  Southwest........  AZ, NM, OK, TX...      11
Kansas City....................  IA, KS, MO, NE....       4  West North Central  IA, KS, MN, MO,         5  Plains...........  IA, KS, MN, MO,         5
                                                                                  NE, ND, SD.                                   NE, ND, SD.
Denver.........................  CO, MT, ND, SD,          3  Mountain..........  AZ, CO, ID, NM,         8  Rocky Mountain...  CO, ID, MT, UT,         4
                                  UT, WY.                                         MT, UT, NV, WY.                               WY.
San Fran.......................  AZ, CA, NV........      16  Pacific...........  CA, OR, WA.......      15  Far West.........  CA, NV, OR, WA...      16
Seattle........................  ID, OR, WA........       3
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The regional fee schedule amounts for P&O are based on the average 
of the statewide fees for P&O, weighted by total Part B claims for paid 
claims with dates of service from July 1, 1991, thru June 30, 1992, 
which results in fees for states with a greater volume of Part B claims 
having more influence on the regional fee schedule amounts than states 
with a smaller volume of Part B claims. We believe this aspect of the 
regional fee schedule payment methodology for P&O tends to favor more 
heavily populated states. The statewide fees for larger, more urban 
states where the most Medicare claims are processed, for example, 
Massachusetts for Region 1, play a larger role in determining the 
regional price than the statewide fees for smaller, more rural states 
in the region, for example, Vermont. Table 36 below shows the relative 
weighs applied to the statewide fees used in calculating the regional 
P&O fees for the CMS Boston Region or Region 1.

 Table 36--P&O Regional Fee Weights--CMS Region 1 (Boston) (Weighted by
 Total Paid Claims for Dates of Service From July 1, 1991, Thru June 30,
                                  1992)
------------------------------------------------------------------------
                                                            Percent of
                  State                    Total part B      total for
                                              claims          Region
------------------------------------------------------------------------
MA......................................      11,710,121             48%
CT......................................       6,288,638             26%
RI......................................       2,251,892              9%
ME......................................       2,012,385              8%
NH......................................       1,571,936              6%
VT......................................         759,242              3%
Region..................................      24,594,214  ..............
------------------------------------------------------------------------

    As can be seen in this table, the regional P&O fees for the Boston 
Region are weighted heavily in favor of the statewide fees and average 
reasonable charges from 1986/87 for the more heavily populated urban 
states of Massachusetts and Connecticut with a greater utilization of 
Part B items and services, whereas the fees for more rural States like 
Vermont and Maine have a very minor impact in determining the regional 
fees. In contrast, we are proposing that the RSPAs be calculated based 
on a simple average of the SPAs for CBAs in each region, without 
weighting in favor of larger, more heavily populated CBAs. Using the 
New England BEA Region that is comprised of the same 6 states that make 
up the CMS Boston Region as an example, the proposed RSPA for this 
region would be based on the average of the SPAs for the following 7 
CBAs, with estimated 2012 population in parentheses:
     Boston-Cambridge-Quincy, MA-NH (4,640,802)
     Providence-New Bedford-Fall River, RI-MA (1,601,374)
     Hartford-West Hartford-East Hartford, CT (1,214,400)
     Bridgeport-Stamford-Norwalk, CT (933,835)
     Worcester, MA (923,762)
     New Haven-Milford, CT (862,813)
     Springfield, MA (625,718)
    Therefore, rather than weighting the average of the SPAs in favor 
of more

[[Page 40284]]

heavily populated CBAs, we propose that the RSPA be based on the simple 
average of the SPAs for the CBAs in the region, with the SPA for the 
much smaller Springfield, MA CBA and the SPA for the much larger 
Boston-Cambridge-Quincy, MA-NH Springfield, MA CBA contributing equally 
toward calculation of the RSPA. We believe this approach would result 
in adjustments that factor in the regional costs associated with 
furnishing items and services in the New England region of the country, 
while not giving undue weight to the costs of furnishing items and 
services in larger markets.
b. National Parameters
    As explained above, the regional fee schedule amounts for P&O are 
limited by a national ceiling equal to 120 percent of the average of 
the regional fee schedule amounts for all the states and a national 
floor equal to 90 percent of the average of the regional fee schedule 
amounts for all the states. This limits the range in the regional fee 
schedule amounts from highest to lowest to no more than 30 percent, 20 
percent above the national average and 10 percent below the national 
average. By contrast, the fee schedule payment methodology for DME only 
allows for a variation in statewide fees of 15 percent below the median 
of statewide fees for all the states. The national limits to the fee 
schedule amounts for P&O and DME have not resulted in a barrier to 
access to items and services in any part of the country. We believe 
this reflects the fact that the costs of furnishing DMEPOS items and 
services do not vary significantly from one part of the country to 
another and that national limits on regional prices is warranted. We 
therefore propose to limit the variation in the RSPAs using a national 
ceiling and floor in order to prevent unnecessarily high or low 
regional amounts that vary significantly from the national average 
prices for the items and services. The national ceiling and floor 
limits would be based on 110 percent and 90 percent, respectively, of 
the average of the RSPAs applicable to each of the 48 contiguous states 
and the District of Columbia (that is, the average of RSPAs is weighted 
by the number of contiguous states including the District of Columbia 
per region). We propose that any RSPA above the national ceiling would 
be brought down to the ceiling and any RSPA below the national floor 
would be brought up to the floor. We propose that the national ceiling 
would exceed the average of the RSPAs by the same percentage that the 
national floor would be under the average of the RSPAs. This allows for 
a maximum variation of 20 percent from the lowest RSPA to the highest 
RSPA. We believe that a variation in payment amounts both above and 
below the national average price should be allowed, and we believe that 
allowing for the same degree of variation (10 percent) above and below 
the national average price is more equitable and less arbitrary than 
allowing a higher degree of variation (20 percent) above the national 
average price than below (10 percent), as in the case of the national 
ceiling and floor for the P&O fee schedule, or allowing for only 15 
percent variation below the national average price, as in the case of 
the national ceiling and floor for the DME fee schedule.
c. Rural and Frontier State Adjustments
    Under the DMEPOS CBP, the statute prohibits competitions before 
2015 in new CBAs that are rural areas or MSAs with a population of less 
than 250,000. Even if competitions were to begin in these areas in 
2015, it is very unlikely that the SPAs from these areas would be 
computed and finalized by January 1, 2016. Therefore, we propose that 
the proposed RSPAs initially be based solely on information from 
existing programs implemented in 100 MSAs, which are generally 
comprised of more densely populated, urban areas than areas outside 
MSAs. We therefore believe that the initial RSPAs would not directly 
account for unique costs that may be associated with furnishing DMEPOS 
in states that have few MSAs and are predominantly rural or cover large 
geographic areas and are sparsely populated. However, in keeping with 
the discussion above, we do not believe that the cost of furnishing 
DMEPOS in these areas should deviate significantly from the national 
average price established based on supplier bids for furnishing items 
and services in different areas throughout the country.
    As explained above, the DMEPOS fee schedule amounts are based 
primarily on supplier charges for furnishing items and services in 
urban areas and this has not resulted in problems associated with 
access to these items and services in rural areas or large, sparsely 
populated areas. Nonetheless, for the purpose of ensuring access to 
necessary items and services in states that are more rural or sparsely 
populated than others, we propose that the adjusted fee schedule 
amounts for states that are more rural than urban and defined as 
``rural states'' or states where a majority of the counties are 
sparsely populated and defined as ``frontier states'' would be no lower 
than the national ceiling amount discussed in section b above.
    We propose in Sec.  414.202 that a rural state be defined as a 
state where more than 50 percent of the population lives in rural areas 
within the state as determined through census data, since a majority of 
the general population of the state lives in rural areas, it is likely 
that a majority of DMEPOS items and services are furnished in rural 
settings in the state. This is in contrast to other states where the 
majority of the general population of the state lives in urban areas, 
making it more likely that a majority of DMEPOS items and services are 
furnished in urban settings or in MSAs. We believe that for states 
where a majority of the general population lives in rural areas, 
adjustments to the fee schedule amounts should be based on the national 
ceiling amount if the RSPA is lower than the national ceiling amount. 
This higher level of payment would provide more assurance that access 
to items and services in states within a region that are more rural 
than urban is preserved in the event that costs of furnishing DMEPOS 
items and services in rural areas is higher than the costs of 
furnishing DMEPOS items and services in urban areas.
    We propose in Sec.  414.202 that a frontier state, would be defined 
as a state where at least 50 percent of counties in the state have a 
population density of 6 people or less per square mile. In such states, 
the majority of counties where DMEPOS items and services may be needed 
are very sparsely populated and suppliers may therefore have to drive 
considerably longer distances in furnishing these items and services as 
opposed to other states where the beneficiaries live closer to one 
another. The designation of states as frontier states or frontier areas 
is currently used under Medicare Part A to make adjustments to the wage 
index for hospitals in these remote areas in order to ensure access to 
services in these areas. The definition of frontier state that is 
proposed above for the purpose of implementing section 1834(a)(1)(F) 
and (G) of the Act is consistent with the current definition in section 
1886(d)(3)(E)(iii)(II) and (III) of the Act and 42 CFR 412.64(m) of the 
regulations related to implementation of the hospital wage index 
adjustments and prospective payment system for hospitals under Part A. 
We believe that states designated as frontier states have a significant 
amount of area that is sparsely populated and are more likely to be 
geographically removed from (that is, a considerable driving distance 
from) areas where population is more concentrated. However, we solicit

[[Page 40285]]

comments on alternative definitions of frontier states.
    Based on the 2010 Census data, states designated as rural would 
include Vermont, Maine, West Virginia, and Mississippi. Other than one 
CBA that is fully located in Mississippi, one CBA that is partially 
located in Mississippi, and two CBAs that are partially located in West 
Virginia, the RSPAs would not include SPAs that reflect the costs of 
furnishing items and services in these states based on where the CBAs 
are currently located. Current frontier states include North Dakota, 
South Dakota, Montana, and Wyoming, and the RSPAs would not include 
SPAs that reflect the costs of furnishing items and services in any of 
these states based on where the CBAs are currently located. We propose 
that the designation of rural and frontier states could change as the 
U.S. Census information changes. We propose that when a state that is 
not designated as a rural state or frontier becomes a rural state or 
frontier state based on new, updated information from the U.S. Census 
Bureau, that adjustments to the fee schedule amounts in accordance with 
the proposed provision of this section would take effect as soon as 
such changes can be implemented. Likewise, we propose that at any time 
a state that is designated as a rural state or frontier no longer meets 
the proposed definition in this section for rural state or frontier 
state based on new, updated information from the U.S. Census Bureau, 
that adjustments to the fee schedule amounts in accordance with the 
proposed provision of this section would take effect as soon as such 
changes can be implemented. We propose that the changes to the state 
designation would occur based on the decennial Census. The decennial 
Census uses total population of the state to determine whether the 
state is predominately rural or frontier. The U.S. Census Bureau also 
uses current population estimates every 1, 3, and 5 years through the 
American Community Survey but only samples a small percentage of the 
population every year, not the total population. Therefore, we propose 
that the designation of a rural or frontier state occur approximately 
every 10 years when the total population data is available. For the 
current proposed fee schedule adjustments, we propose to use the 2010 
Census Data. The next update would reflect the 2020 Census Data and any 
changes in the designation of a rural or frontier state and 
corresponding fee schedule changes would be implemented after the 2020 
Census Data becomes available. For this and subsequent updates, we 
propose to include a listing of the qualifying rural and frontier 
States in program guidance that is issued quarterly and to provide at 
least 6 months advance notice of any adjustments.
    Some of the comments received on the ANPRM indicated that the costs 
of furnishing DMEPOS items and services in rural areas is significantly 
higher than the costs of furnishing DMEPOS items and services in urban 
areas. Other commenters suggested that the adjustments to the payment 
amounts based on information from CBPs be phased in to give suppliers 
time to adjust to the new payment levels. Although we believe that the 
costs of furnishing items and services in rural areas are different 
than the costs of furnishing items and services in urban areas, there 
is no evidence to support a statement that the difference in costs is 
significant. However, in order to proceed cautiously on this matter in 
the interest of ensuring access to covered DMEPOS items and services, 
we are proposing to phase in the price adjustments, as explained below, 
so that we can monitor the impact of the adjustments as they are 
gradually phased in.
    In summary, we propose that adjustments to payment amounts for 
areas within different regions of the contiguous United States would be 
based on the un-weighted average of SPAs from CBAs that are fully or 
partially located within these regions. The regional amounts would be 
limited by a national ceiling and floor and the adjusted payment 
amounts for all states designated as rural or frontier states would be 
equal to the national ceiling. In addition, we are soliciting public 
comments on whether payment in rural areas of states that are not 
designated as rural or frontier states should be set differently.
d. Areas Outside the Contiguous United States
    Given the unique costs of furnishing DMEPOS items and services in 
remote, isolated areas outside the contiguous United States such as 
Alaska, Guam, Hawaii, Puerto Rico, the United States Virgin Islands and 
other areas, we propose that any SPAs from programs in these areas be 
excluded from the calculation of the RSPAs in section a. In addition, 
we propose that the adjustments to the fee schedule amounts for areas 
outside the contiguous United States would not be based on the RSPAs. 
Rather, we propose that the adjustments to the fee schedule amounts for 
these areas be based on the higher of the average of SPAs for CBAs in 
areas outside the contiguous United States (for example, Honolulu) or 
the national ceiling limit applied to the payment adjustments for areas 
within the contiguous United States. We believe that, to the extent 
that SPAs from non-contiguous areas are available, these amounts should 
be used in making adjustments to the payment amounts for other areas 
outside the contiguous United States since the challenges and costs of 
furnishing DMEPOS items and services in all remote, isolated areas is 
similar. We also believe that the payment adjustments for these areas, 
like those for the proposed rural and frontier states, should not be 
lower than the national ceiling established for items and services 
furnished in the contiguous United States. Areas outside the contiguous 
United States generally have higher shipping fees and other costs. We 
believe the SPAs in Honolulu and other areas outside the contiguous 
United States reflect these costs and could be used to adjust the fee 
schedule amounts for these areas without limiting access to DMEPOS 
items and services. However, in the event that the national ceiling 
limit described in section b above is greater than the average of the 
SPAs for CBPs in areas outside the contiguous United States, we propose 
that the higher national ceiling amount be used in adjusting the fee 
schedule amounts for areas outside the contiguous United States in 
order to better ensure access to DMEPOS items and services.
    We are soliciting comments on these proposals.
2. Methodology for Items and Services Included in Limited Number of 
Competitive Bidding Programs
    In some cases, there may not be a sufficient number of CBAs and 
SPAs available for use in computing RSPAs, and therefore, a different 
methodology for implementing section 1834(a)(1)(F)(ii) of the Act would 
be necessary. For items and services that are subject to competitive 
bidding and have been included in CBP in no more than 10 CBAs, we 
propose that payment amounts for these items in all non-competitive 
bidding areas be adjusted based on 110 percent of the average of the 
SPAs for the areas where CBPs are implemented. Using a straight average 
of the SPAs rather than a weighted average of the SPAs gives SPAs for 
the various CBAs equal weight regardless of the size of the CBA. We 
believe this avoids giving undo weight to SPAs for more heavily 
populated areas. We are proposing the additional 10 percent adjustment 
to the average of the SPAs to account for unique costs such as

[[Page 40286]]

delivering items in remote, isolated locations, but would make this a 
uniform adjustment for program simplification purposes. This issue is 
discussed in more detail below.
    Under the DMEPOS CBP, there may be items and services for which 
implementation of CBPs could generate significant savings for the 
beneficiary and/or program, but which are furnished infrequently in 
most MSAs. In some cases, such items and services could be combined 
with other items and services under larger PCs or included in mail 
order competitions, to the extent that these are feasible options. For 
example, combining infrequently used traction equipment and frequently 
used hospital beds in the same product for bidding purposes would 
ensure that any beneficiary that needs traction equipment in the CBA 
would have access to the item from the suppliers also contracted to 
furnish hospital beds in the area. This would make it feasible to 
include traction equipment in numerous MSAs throughout the country and 
would allow use of the RSPA methodology described above. However, if a 
PC was established just for traction equipment for bidding purposes, 
the volume of items furnished in certain MSAs may not be sufficient to 
generate viable competitions under the program because there may be a 
limited number of suppliers interested in competing to furnish the 
items in local areas. Nonetheless, if significant savings for the 
beneficiary and/or program are possible for the equipment, we are 
mandated to phase the items in under the DMEPOS CBP.
    In addition, for lower volume items within large PCs, such as 
wheelchair accessories, we propose to include these items in a limited 
number of local competitions rather than in all CBAs to reduce the 
burden for suppliers submitting bids under the programs as a whole. In 
these cases, for the purposes of implementing section 1834(a)(1)(G) of 
the Act, we propose that payment amounts for these items in all areas 
where CBPs are not implemented be adjusted based on 110 percent of the 
average of the SPAs for the areas where CBPs are implemented. We are 
proposing the additional 10 percent adjustment to the national average 
price to account for unique costs in certain areas of the country such 
as delivering items in remote, isolated locations. For example, the PC 
for standard mobility in the 9Round 1 CBAs includes 25 HCPCS codes for 
low volume wheelchair accessories that are not included in the PC for 
standard wheelchairs, scooters, and related accessories in the 100 
Round 2 CBAs. We propose that payment amounts for these items in areas 
where CBPs are not implemented be adjusted based on 110 percent of the 
average of the SPAs for the 9Round 1 areas where CBPs are implemented. 
Alternatively, we could include these low volume items in all PCs in 
all 109 CBAs and suppliers would need to develop bid amounts and enter 
bids for these 25 codes for low volume items such as toe loop holders, 
shock absorbers and IV hangers. Including these 25 Healthcare Common 
Procedure Coding System (HCPCS) codes for low volume wheelchair 
accessories in the PCs under the 9 Round 1CBAs means that suppliers 
submitting bids for wheelchairs have 25 bid amounts to develop and 
enter per CBA for these items, or a total of 225 bid amounts to develop 
and enter for these low volume items if bidding for wheelchairs in all 
9 Round 1 CBAs. In contrast, including these codes in the PCs under all 
109CBAs means that suppliers submitting bids for wheelchairs have 2,725 
bid amounts to develop and enter for these low volume items, if bidding 
for wheelchairs in all 109 CBAs. We believe that adjusting fee schedule 
amounts based on SPAs from 10 or fewer CBAs achieve the savings 
mandated by the statute for these items while greatly reducing the 
burden on suppliers and the program in holding competitions for these 
items in all 109 CBAs across the country.
    Finally, if contracts and SPAs for low volume items included in a 
limited number of CBAs expire and the items are not included in future 
CBPs, we propose to use the information from the past competitions to 
adjust the payment amounts for these items nationally based on 110 
percent of the average of the SPAs for the areas where CBPs were 
implemented. Even though the SPAs may no longer be in effect, we 
believe it is reasonable to use the information to reduce excessive 
payment amounts for items and services as long as the SPAs did not 
result in a negative impact on access to quality items and services 
while they were in effect and as long as the amounts are adjusted to 
account for increases in costs over time. For example, 4 codes for 
adjustable wheelchair seat cushions were included in the Round 1 Rebid, 
with SPAs that were approximately 25 percent below the fee schedule 
amounts being in effect in 9 CBAs from January 2011 thru December 2013. 
These items were not bid in future rounds due to the low volume of use 
relative to other wheelchair seat cushions. During the course of the 3-
year contract period when the SPAs were in effect in the 9 areas, there 
were no reports of access problems and there were no negative health 
outcomes as a result of including these items under CBPs. For the 
future, savings for these items could be achieved by including them in 
future competitions or by using the previous SPAs, updated by an 
economic update factor to account for increases in costs. If the 
decision is made not to include these items in future competitions, we 
believe savings can and should still be obtained based on information 
from the previous competitions.
    We are soliciting comments on these proposals.
3. Adjusted Payment Amounts for Accessories Used With Different Types 
of Base Equipment
    There may be situations where the same accessory or supply 
identified by a HCPCS code is used with different types of base 
equipment, and the item (HCPCS code) is included in one or more PCs 
under competitive bidding for use with some, but not all of the 
different types of base equipment it is used with. For these 
situations, we propose to use the weighted average of the SPAs from 
CBPs and PCs where the item is included for use in adjusting the 
payment amounts for the item (HCPCS code). We believe that it would be 
unnecessarily burdensome to have different fee schedule amounts for the 
same item (HCPCS code) when it is used with similar, but different 
types of base equipment. We believe that the costs of furnishing the 
accessory or supply should not vary significantly based on the type of 
base equipment it is used with.
    Therefore, we seek public comments on addressing situations where 
an accessory or supply identified by a HCPCS code is included in one or 
more PCs under competitive bidding for use with more than one type of 
base equipment. In these situations, we propose to calculate the SPA 
for each CBA by weighting the SPAs from each PC in that CBA by national 
allowed services. This would result in the calculation of a single SPA 
for the item for each CBA. The single SPA per code per CBA would then 
be used in applying the payment adjustment methodologies proposed 
above. For example, HCPCS code Exxx1 describes a tray used on a 
wheelchair. Exxx1 was included in a PC for manual wheelchairs in all 
CBAs and in a separate, second PC for power wheelchairs in all CBAs. 
SPAs for Exxx1 under the manual wheelchair PC are different than the 
SPAs for Exxx1 under the power wheelchair PC.

[[Page 40287]]

    Under the proposal, national allowed services would be used to 
compute a weighted average of the SPAs for Exxx1 in each of the CBAs. 
So, rather than having 2 different SPAs for the same code in the same 
CBA, we would have 1 SPA for the code for the CBA. If the item is 
included in only one PC, we propose to use the SPAs for the item from 
that PC in applying the payment adjustment methodologies proposed 
above.
    We are soliciting comments on these proposals.
4. Adjustments to Single Payment Amounts That Result From Unbalanced 
Bidding
    Within the HCPCS there are instances where there are multiple codes 
for an item that are distinguished by the addition of a hierarchal 
feature(s). For example, one code may describe an enteral nutrition 
infusion pump with an alarm and another code may describe a less 
sophisticated pump without an alarm. Under competitive bidding, the 
code with the higher utilization would receive a higher weight and the 
bid for this item would have a greater impact on the composite bid and 
competitiveness of the supplier's overall bid for the PC within the CBP 
than the bid for the less frequently used alternative. This can result 
in unbalanced bidding where the bids and SPAs for the item without the 
additional features is higher than the bids and SPAs for the item with 
the additional features due to the fact that the item with the features 
is utilized more than the item without the features and therefore 
receives a higher weight. We believe that it is not inherently 
reasonable for payment amounts for equipment with fewer features or 
functionality to be higher than payment amounts for equipment with 
additional features or functionality.
    For example, HCPCS code B9000 describes an enteral nutrition 
infusion pump without alarm, whereas code B9002 describes an enteral 
nutrition infusion pump with alarm. Both codes have identical fee 
schedule amounts. Based on paid claims data, only 176 Medicare 
beneficiaries received the pump without the alarm in 2012, whereas 
52,531 Medicare beneficiaries received the pump with the alarm in 2012. 
Both pumps are included in the PC for enteral nutrients, supplies, and 
equipment. As a result of the significantly higher utilization of code 
B9002, this code received a much higher item weight under the CBP than 
code B9000, and, as a result, a supplier could submit a much higher bid 
for B9000 than for B9002 with virtually no impact on their composite 
bid. Under Round 2, unbalanced bidding resulted in SPAs for code B9000 
without the alarm being 6 percent higher on average than the SPAs for 
code B9002 with alarm. Unbalanced bidding also occurred under Round 2 
in the case of standard power wheelchairs, with SPAs for infrequently 
used Group 1, standard weight power wheelchairs (codes K0815 and K0816) 
being 16 percent higher on average than the SPAs for the much more 
frequently used Group 2 versions (codes K0822 and K0823). Based on paid 
claims data, only 474 Medicare beneficiaries received Group 1 power 
wheelchairs described by codes K0815 and K0816 in 2012, whereas 196,968 
Medicare beneficiaries received higher performing Group 2 power 
wheelchairs described by codes K0822 and K0823 in 2012. The long term 
solution for avoiding cases of unbalanced bidding is to eliminate 
duplicate codes in the HCPCS. For the purpose of implementing section 
1834(a)(1)(G) of the Act, and in making adjustments to payment amounts 
under sections 1834(a)(1)(F)(ii), 1834(h)(1)(H)(ii), and 1842(s)(3)(B) 
of the Act, we propose that the payment amounts for infrequently used 
codes that describe items and services with fewer features than codes 
with more features be adjusted so that they are no higher than the 
payment amounts for the more frequently used codes with more features. 
For example, the adjusted fee schedule amounts for code B9000 would be 
set so that they are no higher than the adjusted fee schedule amounts 
for code B9002. We believe that without this provision, unbalanced 
bidding could result in fee schedule amounts for items that essentially 
represent lower levels of service being higher than fee schedule 
amounts for items representing higher levels of service, based on bids 
being higher for infrequently used items with lower weights and less 
features than bids for frequently used items with higher weights and 
more features. This could result in beneficiaries receiving the item 
with fewer features and functionality simply because the supplier has a 
financial incentive to furnish that item. This is especially important 
in light of the fact that use of the inherent reasonableness authority 
provided by section 1842(b)(8) and (9) of the Act cannot be used to 
further adjust payment amounts that are adjusted based on the mandate 
of section 1834(a)(1)(F)(ii) and the authority provided by sections 
1834(h)(1)(H)(ii) and 1842(s)(3)(B) of the Act.
    We seek public comments on this issue and our proposed provision to 
address this issue.
5. National Mail Order Program--Northern Mariana Islands
    While Section 1847(a)(1)(A) of the Act provides that CPBs be 
established throughout the United States, the definition of United 
States at section 210(i) of the Act does not include the Northern 
Mariana Islands. We therefore previously determined that the Northern 
Mariana Islands are not considered an area eligible for inclusion under 
a national mail order CBP. For the purpose of implementing the 
requirements of section 1834(a)(1)(F)(ii) of the Act, we are proposing 
that the payment amounts established under a national mail order CBP 
would be used to adjust the fee schedule amounts for mail order items 
furnished to beneficiaries in the Northern Mariana Islands. We propose 
that the adjusted fee schedule amounts would be equal to 100 percent of 
the amounts established under the national mail order CBP.
    We are soliciting comments on these proposals.
6. Updating Adjusted Payment Amounts
    In accordance with section 1834(a)(1)(F)(iii) of the Act, the 
adjusted payment amounts for DME must be updated as additional items 
are phased in or information is updated. We propose to add regulation 
text indicating that we would revise the adjusted payment amounts for 
DME, enteral nutrients, supplies, and equipment, and OTS orthotics each 
time a SPA is updated following one or more new competitions, which may 
occur at the end of a contract period, as additional items are phased 
in, or as new programs in new areas are phased in. This is required by 
section 1834(a)(1)(F)(iii) for DME. Since we believe it is reasonable 
to assume that updated information from CBPs would better reflect 
current costs for furnishing items and services, we are proposing 
regulations to require similar updates for enteral nutrients, supplies, 
and equipment, and OTS orthotics.
    As we indicated above, if the only SPAs available for an item are 
those that were established under CBP that are no longer in effect, we 
propose to use these SPAs to adjust payment amounts using the 
methodologies described above and we propose to do so following 
application of inflation adjustment factors. We propose that the 
inflation adjustment factor would be based on the percentage change in 
the Consumer Price Index for all Urban Consumers (CPI-U) from the mid-
point of the last

[[Page 40288]]

year the SPAs were in effect to the month ending 6 months prior to the 
date the initial payment adjustments would go into effect. The adjusted 
payment amounts would continue to be updated every 12 months using the 
percentage change in the CPI-U for the 12-month period ending 6 months 
prior to the date the updated payment adjustments would go into effect. 
Use of the CPI-U as the update factor is consistent with how pricing 
amounts for DMEPOS have been updated since October 1, 1985, when the 
CPI-U was used in calculating the IIC for use in calculating reasonable 
charges. The CPI-U was used in updating reasonable charge data for use 
in calculating the initial fee schedule amounts and is used in 
determining the covered item update factors at sections 1834(a)(14), 
1834(h)(4)(A), 1834(i)(1)(B), 1842(s)(1)(B) of the Act. If CBPs are 
subsequently established for the item, we propose that the SPAs 
established under these programs would be used in applying the payment 
adjustment methodologies described above.
    If finalized, the payment amounts that would be adjusted in 
accordance with sections 1834(a)(1)(F)(ii) and (iii) of the Act for 
DME, section 1834(h)(2)(H)(ii) of the Act for orthotics, and section 
1842(s)(2)(B) of the Act for enteral nutrients, supplies, and equipment 
shall be used to limit bids submitted under future competitions of the 
DMEPOS CBP in accordance with regulations at Sec.  414.414(f). Section 
1847(b)(2)(A)(iii) prohibits the awarding of contracts under a CBP 
unless we are sure that total payments made to contract suppliers in 
the CBA are less than the payment amounts that would otherwise be made. 
In order to assure savings under a CBP, the fee schedule amount that 
would otherwise be paid is used to limit the amount a supplier may 
submit as their bid for furnishing the item in the CBA. If finalized, 
the payment amounts that would be adjusted in accordance with sections 
1834(a)(1)(F)(ii) and (iii) of the Act for DME, section 
1834(h)(2)(H)(ii) of the Act for orthotics, and section 1842(s)(2)(B) 
of the Act for enteral nutrients, supplies, and equipment would be the 
payment amounts that would otherwise be made if payments for the items 
and services were not made through implementation of a CBP. Therefore, 
the adjusted fee schedule amounts would become the new bid limits.
    We are soliciting comments on these proposals.
7. Summary of Proposed Methodologies
    To summarize, under the proposed methodology in subsection 1 above 
which applies to items and services included in more than 10 CBAs, 
adjusted fee schedule amounts would be determined based on RSPAs 
limited by a national floor and ceiling. The RSPA would be established 
using the average of the SPAs for an item from all CBAs that are fully 
or partially located in the region. The payment amount for the item, 
with limited exceptions for areas outside the contiguous United States, 
would be equal to its RSPA but not less than 90 percent and not more 
than 110 percent of the national average, which is the average of the 
RSPAs weighted by the number of states in the region. The proposed 
methodology is modeled closely after the regional fee schedule payment 
methodology in effect today for P&O. For the purpose of establishing 
the regional boundaries, we propose to use 8 regions developed by the 
Bureau of Economic Analysis (BEA) within the Department of Commerce: 
New England, Mideast, Great Lakes, Plains, Southeast, Southwest, Rocky 
Mountain, and Far West. For rural and frontier states, we propose that 
the payment amount would be 110 percent of the national average. For 
areas outside the contiguous United States, the payment amount would be 
the greater of the average of the SPAs in the non-contiguous areas or 
110 percent of the national average. As described in subsection 2 
above, we propose a different methodology for low volume items with a 
limited number of SPAs. In addition, we propose to apply update factors 
to SPAs no longer in effect to adjust fee schedule amounts if no other 
data is available. Finally, we propose that adjustments would be made 
to account for SPAs for lower levels of service that are higher than 
SPAs for higher levels of service.
    A summary of the proposed methodologies is provided in Table 37 
below.

Table 37--Summary of Proposed Methodologies for Adjusting Payment in Non-
                                Bid Areas
------------------------------------------------------------------------
     Proposed methodology                     Calculations
------------------------------------------------------------------------
1) Adjustments for Items
 Included in More than 10
 CBAs*
    Regional Adjustments       Adjusted payment equal to the RSPA
     Limited by National        (calculated using the un-weighted
     Parameters for Items       average of SPAs from CBAs that are fully
     Furnished Within the       or partially located with a BEA region)
     Contiguous United States.  limited by a national floor and ceiling.
                                The national ceiling and floor would be
                                set at 110 percent and 90 percent,
                                respectively, of the national weighted
                                RSPA average (average of the RSPAs
                                applicable to each of the 48 contiguous
                                states and DC).
    Adjustments for Rural and  Adjusted payment for designated States
     Frontier States.           based on 110 percent of the national
                                weighted RSPA average.
    Adjustments for Items      Adjusted payment for non-contiguous areas
     Furnished Outside the      (e.g., Alaska, Guam, Hawaii) based on
     Contiguous United States.  the higher of the average of SPAs for
                                CBAs in areas outside the contiguous
                                U.S. or 110 percent of the national
                                weighted RSPA average applied to
                                adjustments within the contiguous U.S.
2) Adjustments for Lower       Adjusted payment based on 110 percent of
 Volume or Other Items          the un-weighted average of the SPAs for
 Included in 10 or Fewer        the areas where CBPs are implemented for
 CBAs*.                         contiguous and non-contiguous areas of
                                the United States.
3) Adjustments for Items       Payment based on adjusted payment
 Where the Only Available SPA   determined under 1) or 2) above and
 is from a CBP No Longer in     adjusted on an annual basis based on the
 Effect.                        CPI-U update factors from the mid-point
                                of the last year the SPAs were in effect
                                to the month ending 6 months prior to
                                the date the initial payment adjustments
                                would go into effect.
4) Adjustments for
 Accessories Used with
 Different Types of Base
 Equipment
    Adjustments for            SPAs for the item from that one Product
     Accessories Included in    Category would be used in determining
     One CBP Product Category.  the adjusted payment amounts under
                                methodologies 1) or 2).
    Adjustments for            A weighted average of the SPAs for the
     Accessories Included in    item in each CBA where the item is
     One or More CBP Product    included in more than one Product
     Category.                  Category would be used to determine the
                                adjusted payment amounts under
                                methodologies 1) or 2).

[[Page 40289]]

 
5) Payment Adjustments to      Fee schedule amounts adjusted to equal
 Northern Mariana Islands       the SPAs under the national mail order
 Using the National Mail        CBP.
 Order SPAs.
------------------------------------------------------------------------
* Note: We are also proposing to adjust the SPAs for a lower level of
  service item to not exceed the SPAs of a higher level of service item
  prior to applying the methodologies in 1) and 2) above in instances
  where the SPA for the lower level of service item exceeds the higher
  level of service item.

VI. Proposed Payment Methodologies and Payment Rules for Durable 
Medical Equipment and Enteral Nutrition Furnished Under the Competitive 
Bidding Program

A. Background

    The payment rules for DME have changed significantly over the years 
since 1965, resulting in the replacement of the original monthly rental 
payment methodology with lump sum purchase and capped rental payment 
rules, as well as separate payment for repairs, maintenance and 
servicing, and replacement of expensive accessories for beneficiary-
owned equipment. In our experience, these payment rules have been 
burdensome to administer and have added program costs associated with 
expensive wheelchair repairs and payment for loaner equipment, and have 
significantly increased costs associated with frequent replacement of 
expensive accessories at regular intervals for items such as CPAP 
devices. We estimate that separate payments for CPAP accessories have 
increased annual expenditures by approximately $200 million. In some 
cases, the costs associated with maintaining DME owned by beneficiaries 
equals or exceeds any savings that might be generated from capping 
rental payments. In the case of repairs, suppliers are not mandated to 
service the equipment they furnish once title transfers to the 
beneficiary--any supplier can provide these services. This could create 
a hardship for the beneficiary since they must find a supplier willing 
to repair the equipment and their separate coinsurance payments could 
be substantial if the repair services are extensive. According to Sec.  
414.408(h)(3) of our regulations, payment on a capped rental basis also 
results in the restart of periods of continuous use for capped rental 
items, and according to Sec.  414.408(i)(2) of our regulations, an 
extension in the rental cap periods for oxygen equipment when a 
beneficiary transitions from a non-contract supplier to a contract 
supplier at the start of a new CBP. These issues were discussed in the 
February 26, 2014, ANPRM noted above (79 FR 10758). It is not clear, 
however, the extent to which the capped rental requirement, combined 
with separate payments for supplies, accessories, repairs, and program 
administration, overall results in net savings or net costs to the 
Medicare program, particularly if we examine the effects of the policy 
on specific DME items and services.
    Under the Social Security Amendments of 1965 (Pub. L. 89-97) 
enacted on July 30, 1965, Medicare Part B covered only rental of DME 
items. The Social Security Amendments of 1967 (Pub. L. 90-248), 
approved January 2, 1968, revised the statute to provide authority for 
making payment for DME on a purchase basis as well as on a rental 
basis. On May 12, 1972, the Government Accountability Office (GAO) 
issued a report to the Congress entitled ``Need for Legislation to 
Authorize More Economical Ways of Providing Durable Medical Equipment 
under Medicare'' (B-164031(4), May 12, 1972) that led to Social 
Security Amendment (section 245) in 1972. Section 245 of the Social 
Security Amendments of 1972 (Pub. L. 92-603) enacted on October 30, 
1972, modified the payment provisions for specific equipment items to 
LCL of reasonable charges to contain the costs of DME. This law allowed 
the Department of Health and Human Services (HHS) to experiment with 
reimbursement approaches and implement any purchase approach found to 
be feasible and economical in order to avoid prolonged rental payments 
for expensive DME. Furthermore, section 16 of the Medicare-Medicaid 
Anti-Fraud and Abuse Amendments (Pub. L. 95-142), enacted on October 
25, 1977, amended section 1833(f) of the Act to read as follows:

    In the case of durable medical equipment to be furnished an 
individual as described in section 1861(s)(6), the Secretary shall 
determine, on the basis of such medical and other evidence as he 
finds appropriate (including certification by the attending 
physician with respect to expected duration of need), whether the 
expected duration of the medical need for the equipment warrants a 
presumption that purchase of the equipment would be less costly or 
more practical than rental. If the Secretary determines that such a 
presumption does exist, he shall require that the equipment be 
purchased, on a lease-purchase basis or otherwise, and shall make 
payment in accordance with the lease-purchase agreement (or in a 
lump sum amount if the equipment is purchased other than on a lease-
purchase basis); except that the Secretary may authorize the rental 
of the equipment notwithstanding such determination if he determines 
that the purchase of the equipment would be inconsistent with the 
purposes of this title or would create an undue financial hardship 
on the individual who will use it.

    This law required HHS to make lease-purchase decisions on a case-
by-case basis based on whether purchase would be less costly or more 
practical than rental and reimburse on the basis of a lump-sum purchase 
or a lease/purchase arrangement. To implement the change in the law, 
HHS issued final regulations (45 FR 44287) on July 1, 1980. This 
regulation provided that the purpose of the lease purchase payment 
arrangement for new and used DME was to reduce program costs caused by 
long and costly rentals of the equipment and reduce beneficiary 
expenses for annual deductibles and coinsurance for unnecessarily long 
rentals. However, the regulations were not implemented until 1985 
because of uncertainty as to whether they would result in program 
savings. During the same time period, amidst growing concerns by the 
agency about prolonged and excessive rentals, Williams College under a 
grant administered by HCFA (now CMS) issued a report entitled 
``Determinants of Current and Future Expenditures on Durable Medical 
Equipment by Medicare and its Program Beneficiaries'' on April 1983. 
This report estimated the excess rentals at about 14 percent of rental 
payments. Following this report, a GAO report titled ``Procedures for 
avoiding excess rental payments for durable medical equipment should be 
modified'' issued on July 30, 1985, showed that excess rentals 
represented about 54 percent of the amounts allowed for lower cost 
items ($120 or less) and 34 percent for higher cost items. In the GAO 
report, excess rental payments represented the difference between total 
Medicare rental payments for an item of equipment and Medicare 
reimbursement for the item if it had been purchased. GAO data showed 
substantially fewer short-term rentals

[[Page 40290]]

than Williams' data (22 percent versus 64 percent for episodes lasting 
1 or 2 months) and substantially more long-term rentals (33 percent. 
versus 8 percent for episodes lasting more than 12 months).
    GAO concluded that savings would result for reimbursing low-cost 
items on a purchase basis because about two-thirds of the rented items 
in its study costing $100 or less would have been cheaper to buy. GAO 
also found that sufficient data was not available to reliably predict 
when purchasing a high cost item would be less costly than renting it. 
The report indicated that purchase price was reached by about month 7, 
with additional monthly rental payments beyond month 7 resulting in 
excess rental payments cost thereafter. Because of the uncertainty with 
respect to the high-cost items, GAO recommended alternative 
reimbursement approaches such as adjustment of the rental rate and 
requirements that suppliers accept whatever percentage is adopted.
    The report further discussed HHS and supplier comments on the GAO 
report draft. HHS also commented that the cap proposal did not address 
the issues associated with ownership of DME after the maximum amount of 
the cap had been reached. The supplier comments included 
recommendations from National Association of Medical Equipment 
Suppliers (NAMES) proposal for considering alternative methods that 
limited rental payments after a specified number of months such as 24 
months for non-oxygen-related DME items (wheelchairs and hospital 
beds). At the end of the 2-year period, any item still being rented 
would be subject to a monthly maintenance fee in lieu of rental based 
on 30 percent of the latest allowable rental charge. Title to the items 
would remain with the supplier, and the item would be returned when no 
longer needed.
    Section 4062 of the Omnibus Budget Reconciliation (OBRA) Act of 
1987 (Pub. L. 100-203), was enacted on December 22, 1987. This 
legislation added section 1834(a) to the Act, which mandated payment 
categories and rules for DME that dictated whether payment would be 
made on a rental and/or purchase basis for items in each category. 
These changes were intended to align payment rates and achieve savings 
in the Medicare program. The new payment categories mandated by section 
1834(a) of the Act were promulgated via regulation at Sec.  414.210. 
Sections 1834(a)(2) through (a)(5) and 1834(a)(7) of the Act set forth 
separate payment categories of DME and describe how the fee schedule 
for each of the following categories is established: Inexpensive or 
other routinely purchased items; Items requiring frequent and 
substantial servicing; Customized items; Oxygen and oxygen equipment; 
and Other items of DME or capped rental items.
    Section 13543 of the Omnibus Budget Reconciliation Act (OBRA) of 
1993 (Pub. L. 103-66), was enacted on August 10, 1993, and amended 
section 1834(a) to reclassify nebulizers, CPAP devices, aspirators or 
suction pumps, and intermittent assist or respiratory assist devices 
from the category of items requiring frequent and substantial servicing 
to the capped rental payment category. It also mandated separate 
payment for accessories used in conjunction with these items. Section 
4315 of the Balanced Budget Act of 1997 (Pub. L. 105-33), enacted on 
August 5, 1997, added section 1842(s) to the Act, to authorize a fee 
schedule for PEN, which was promulgated via regulations at Sec.  
414.100 (66 FR 45173, August 28, 2001). In 42 CFR Part 414, Subpart C 
of the regulations, govern payment on a fee schedule basis for PEN 
nutrients, equipment and supplies. Payment for PEN items and services 
is made in a lump sum for nutrients and supplies that are purchased and 
on a monthly basis for equipment that is rented.
    Section 1847 of the Act establishes the Medicare DMEPOS Competitive 
Bidding Program (CBP) (``Competitive Bidding Program''). Under the CBP, 
Medicare sets payment amounts for selected DMEPOS items and services 
furnished to beneficiaries in CBAs based on bids submitted by qualified 
suppliers and accepted by Medicare. For competitively bid items, these 
new payment amounts, referred to as ``single payment amounts,'' replace 
the fee schedule payment amounts. Section 1847(b)(5) of the Act 
provides that Medicare payment for competitively bid items and services 
is made on an assignment-related basis equal to 80 percent of the 
applicable SPA amount, less any unmet Part B deductible.
    Payment errors and increased costs can occur as a result of paying 
separately for equipment, repairs, accessories, and routine maintenance 
and servicing associated with beneficiary ownership of DME after the 
13-month capped rental period or initial lump sum purchase, which have 
increased the risk for improper payments. The findings published in the 
August 2010 OIG report (OEI-07-08-00550) titled ``A review of claims 
for capped rental durable medical equipment'' reveal that from 2006 to 
2008, Medicare erroneously paid separately for these services. Medicare 
paid $2.2 million for routine maintenance and servicing of capped 
rental DME; from 2006 to 2008, Medicare erroneously allowed nearly $4.4 
million for repairs for beneficiary-owned capped rental DME that failed 
to meet payment requirements; and in 2007, Medicare allowed nearly $27 
million for repair claims of beneficiary-owned capped rental DME that 
failed to meet payment requirements.
    Based upon our experience, the ownership of equipment by 
beneficiary after lump sum purchase or after the end of 13 months 
capped rental period leads to complicated administrative procedures. 
The program must keep track of separate payment, coverage, medical 
necessity, and other rules for a number of related codes for 
replacement supplies and accessories used with the base equipment as 
well as labor and parts associated with repairing patient-owned 
equipment. In addition, claims processing systems must count rental 
months and contractors must identify when legitimate breaks in 
continuous use occur and can result in the start of new capped rental 
periods. This leads to costly and complicated claims processing systems 
edits for processing millions of claims for these items and services. 
Payment on a purchase or capped rental basis results in the need to 
process and pay separately for numerous items that are not DME but are 
related to furnishing DME such as repair of equipment or replacement of 
supplies and accessories used with patient-owned equipment necessary 
for the effective use of DME.

B. Proposed Provisions

    We believe that we have general authority under section 1847(a) and 
(b) of the Act to establish payment rules for DME and enteral nutrition 
equipment that are different than the rules established under section 
1834(a) of the Act for DME, section 1842(s) for enteral nutrients, 
supplies, and equipment, and, section 6112(b) of Omnibus Budget 
Reconciliation (OBRA) Act of 1989 (Pub. L. 101-239) for enteral pumps. 
We believe that lump sum purchase and capping rentals for certain DME 
and enteral nutrition may no longer be necessary to achieve savings 
under the program when competitive bidding can be used to establish a 
reasonable monthly payment. We also believe that payment on a 
continuous rental basis--that is, ongoing monthly payments not subject 
to a cap--could help to ensure that medically necessary DME and enteral 
nutrition equipment is kept in good working order for the entire 
duration of medial need and would make it easier for beneficiaries to 
change

[[Page 40291]]

from one supplier to another since the new supplier would not be faced 
with a finite number of rental payments. Currently, there is no 
requirement that a supplier take responsibility for repairing equipment 
once it is owned by a beneficiary, which may cause difficulties for the 
beneficiary to find a supplier to undertake such services. We believe 
that continuous rental payment would eliminate such issues because the 
supplier of the rented equipment would always be responsible for 
keeping the equipment in good working order. We do not believe that 
continuous monthly rental payments for DME and enteral nutrition would 
negatively impact access to items and services and could potentially be 
implemented in a manner that does not increase program expenditures 
since suppliers would be paid based on bids for furnishing the same 
general items and services they would otherwise provide. In addition, 
since Medicare payment for rental of DME and enteral nutrition 
equipment include payment for maintenance and servicing of the rented 
equipment, the suppliers would be directly responsible for meeting the 
monthly needs of the beneficiary in terms of keeping the rented 
equipment in good working order.
    As indicated in section IV above, CMS issued an ANPRM: Medicare 
Program; Methodology for Adjusting Payment Amounts for Certain Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) using 
Information From Competitive Bidding Programs on February 26, 2014 (79 
FR 10754). As part of this ANPRM, comments were solicited on whether 
payment on a bundled, continuous rental basis for DME and enteral 
nutrition should be adopted under the DMEPOS CBP. Some commenters were 
concerned that services such as replacement of CPAP masks and equipment 
repairs would not be provided if they were not paid for separately. 
Some commenters supported bundling payments for oxygen and enteral 
nutrition. Some commenters suggested that the bundling methodology be 
tested first before it is utilized on a wide scale basis. Thirteen 
commenters that included beneficiaries, beneficiary advocacy 
organizations, occupational therapists, and physical therapists raised 
concerns that access to items such as highly configured wheelchairs and 
speech generated devices might be disrupted under a continuous monthly 
bundled rental payment that includes equipment rental, replacement 
accessories and repairs. They felt that payment on a rental basis would 
result in patients losing access to these devices when they entered 
institutions such as hospitals and skilled nursing facilities where 
separate payment for DME is prohibited by section 1861(n) of the Act.
    For items that continue to be paid for on a lump sum purchase basis 
or a capped rental basis where ownership of equipment transfers to the 
beneficiary following the capped rental period, we solicited comments 
on whether the supplier of the equipment should be responsible for 
repairing the equipment following transfer of title. Some commenters 
were opposed to the idea of making contract suppliers of purchased 
equipment responsible for ongoing repairs of equipment following 
transfer of title to the beneficiary. They stated that it would be a 
significant burden on suppliers to provide ongoing maintenance of 
equipment they furnished on a purchase basis, especially if the 
beneficiary moved out of the area.
    After carefully considering comments received in response to the 
ANPRM, we are proposing to update the regulations to include proposed 
special payment rules described below that would be utilized in paying 
claims for certain DME or enteral nutrition under a limited number of 
CBPs. As explained in more detail in the sections that follow below, we 
propose to revise the regulation by adding a new section at 42 CFR 
414.409 with special payment rules to replace specific payment rules at 
Sec.  414.408 for these items and services in these CBPs. We also 
propose to revise Sec.  414.412 regarding submission of bids for 
furnishing items and services paid in accordance with these special 
payment rules. We seek comments on these proposals.
    We propose to phase-in the special payment rules described in 
sections 1 and 2 below in a limited number of areas for a limited 
number of items initially to determine whether it is in the best 
interest of the Medicare program and its beneficiaries to phase these 
rules in on a larger scale based on evaluation of the rules' effects on 
Medicare program costs, and quality of/access to care. In order to 
monitor the impact of phasing in the special payment rules in no more 
than 12 CBAs, we propose that, at a minimum, we would utilize 
evaluation criteria that are consistent with the current evaluation 
criteria for monitoring the impact of the CBP on utilizers of items and 
services in CBAs. To evaluate the quality of care for beneficiaries 
affected by the special payment rules, we propose that, at a minimum, 
we would utilize health status outcomes based criteria that would 
measure specific indicators such as mortality, morbidity, 
hospitalizations, emergency room and other applicable indicators unique 
to each product category. To evaluate beneficiary access to necessary 
items and services we propose that, at a minimum, we would monitor 
utilization trends for each product category and track beneficiary 
complaints related to access issues. To evaluate the cost of the 
program, we propose that, at a minimum, we would analyze the claims 
data for allowed services and allowed cost for each product category 
and the associated accessories, supplies and repair cost in the 12 CBAs 
and the comparator CBAs. We propose to analyze the effect of the 
proposed payment rules on beneficiary cost sharing.
    We propose that in any competition where these rules are applied, 
suppliers and beneficiaries would receive advance notice about the 
rules at the time the competitions that utilize the rules are 
announced. The combined, total number of CBAs where the proposed rules 
in either section 1 or 2 would apply would be limited to twelve. In 
other words, it would not be twelve CBAs for the rules in section 1 and 
an additional twelve CBAs for the rules in section 2, but 12 CBAs 
total. In addition, we propose that the PCs listed below would be 
phased in to include one or more of the CBAs that would number no more 
than twelve total. In addition, if a determination is made to phase-in 
these rules on a larger scale in additional areas and for additional 
items based on program evaluation results regarding cost, quality, and 
access, the process for phasing in the rules and the criteria for 
determining when the rules would be applied would be addressed in 
future notice and comment rulemaking. This rulemaking would also 
address how the methodology for using these SPAs to adjust fee schedule 
amounts would need to be revised.
    The Affordable Care Act (Patient Protection and Affordable Care Act 
of 2010, Pub. L. 111-148 (March 23, 2010), Sec. 3021) establishes the 
Center for Medicare and Medicaid Innovations (CMMI) which is authorized 
to test models to reduce Medicare and Medicaid expenditures while 
preserving or improving quality for beneficiaries of those two 
programs. The provision includes appropriations of $10 billion for 
fiscal years 2011 through 2019. We solicit comments on the option for 
testing the above special payment rules for DME and enteral nutrition 
using the CMMI demonstration authority in no more than 12 CBAs that 
would allow us to test and evaluate the special payment rules on a 
wider scale and determine

[[Page 40292]]

whether the special payment rules reduce Medicare expenditure while 
preserving or improving the quality for Medicare beneficiaries. 
Regardless of the authority used to phase in or test these special 
payment rules, we would undertake rigorous evaluation to determine the 
rules' effects on program costs, quality, and access.
    We seek comments on the specific proposals below.
1. Payment on a Continuous Rental Basis for Select Items
    We propose to revise the regulation at 42 CFR 414.409 to allow for 
payment on a continuous monthly rental basis under future competitions 
in no more than 12 CBAs for one or more of the following categories of 
items and services: enteral nutrition, oxygen and oxygen equipment, 
standard manual wheelchairs, standard power wheelchairs, CPAP and 
respiratory assist devices, and hospital beds. We believe that 12 CBAs 
represents a limited number of CBAs yet would allow testing in 
different regions of the country. We propose that the SPAs established 
under the special payment rules would be based on bids submitted and 
accepted for furnishing rented DME and enteral nutrition on a monthly 
basis. We propose that the SPAs would represent a monthly payment for 
each month that rented DME or enteral nutrition is medically necessary. 
The SPA for the monthly rental of DME would include payment for each 
item and service associated with the rental equipment including the 
ongoing maintenance and servicing of the rental equipment, and 
replacement of supplies and accessories that are necessary for the 
effective use of the equipment. In the case of enteral nutrition, we 
propose that the monthly SPA would include payment for all nutrients, 
supplies and equipment. Suppliers would be responsible for furnishing 
all items and services in the applicable CBA needed each month based on 
the physician's order. For example, in addition to furnishing the CPAP 
device, the supplier would be responsible for furnishing the 
accessories used with the device such as masks, tubing, headgear, 
humidifiers, etc., as well as all maintenance and servicing of the 
equipment. For wheelchairs, the supplier would be responsible for 
furnishing the type of wheelchair and all options and accessories used 
with the wheelchair that are needed by the patient, as well as well as 
all maintenance and servicing of the equipment. For hospital beds, the 
supplier would be responsible for furnishing the type of hospital bed 
and all accessories used with the hospital bed (for example, 
mattresses, side rails, trapeze bars, etc.) needed by the patient, as 
well as all maintenance and servicing of the equipment. As discussed in 
more detail below, phasing in these rules would help us determine the 
impact on Medicare expenditures as well as beneficiary access to items 
and services and other possible costs and benefits.
    We seek comments on this proposal.
a. Enteral Nutrition
    We propose to implement future competitions for enteral nutrition 
in no more than 12 CBAs, where payment would be based on bids submitted 
for furnishing all enteral nutrients, supplies, and equipment needed on 
a monthly basis. We propose that the suppliers would submit a single 
bid for each CBA for furnishing all items and services related to 
furnishing such enteral nutrients, supplies, and equipment in the 
applicable CBA needed by a beneficiary on a monthly basis. We are 
soliciting comments on whether alternatives to submitting a single bid 
for enteral nutrition should be considered, such as having separate 
categories based on mode of delivery (syringe fed, pump fed, or gravity 
fed) or separate categories based on the type of nutrients delivered. 
We selected the category of enteral nutrition because we believe that 
payment on a separate, piecemeal basis for daily supplies, calories of 
nutrients furnished, and monthly rental of equipment the pumps is 
unnecessary and overly complex. For example, for a pump-fed patient, 
the beneficiary must choose whether they wish to rent the pump or 
purchase the pump. If the beneficiary chooses to rent the pump, the 
supplier is required to continue furnishing the pump until the capped 
rental period is over, but then is allowed to bill for maintenance and 
servicing of the pump once every 6 month, but only if maintenance and 
servicing is needed and furnished. The supplier must also submit claims 
for daily supply kits as well as feeding tubes furnished in addition to 
billing for every 100 calories of enteral nutrient furnished. Finally, 
the supplier must bill for the pole used to hold the pump; however, the 
monthly rental payments for the pole are not subject to the cap on 
rentals that the statute specifically requires for the pump and this is 
confusing. In addition, issues have been raised regarding replacement 
parts and supplies for beneficiary-owned enteral nutrition infusion 
pumps when the manufacturer elects to discontinue the brand and model 
of pump owned by the beneficiary. Neither the beneficiary nor the 
supplier is able to obtain supplies that the manufacturer no longer 
sells and the Medicare rules would generally not allow for the purchase 
of a new pump since this would be duplicate equipment. We seek comments 
on this proposal.
b. Oxygen and Oxygen Equipment
    We propose to implement future competitions for oxygen and oxygen 
equipment in no more than 12 CBAs, where payment would be based on bids 
submitted for furnishing all oxygen and oxygen equipment needed on a 
monthly basis. We propose that the suppliers would submit a single bid 
for each CBA for furnishing all items and services needed on a monthly 
basis, including all rented equipment and related accessories such as 
regulators, flowmeters, nasal cannulas, masks, tubing, humidifier 
bottles, tank stands and carts, and transtracheal catheters, as well as 
all maintenance and servicing of the equipment and delivery of oxygen 
contents. We selected the category of oxygen and oxygen equipment 
because we believe the rental cap for oxygen equipment generates very 
little savings under CBPs. A small percentage of beneficiaries, 
approximately 25 percent based on our review of Medicare claims, reach 
the 36-month cap, which is extended by as much as 9 months at the start 
of a CBP, and the SPAs for oxygen contents furnished after the cap are 
roughly the same as the SPAs for furnishing oxygen and oxygen equipment 
during the 36-month rental cap period. In addition, recent issues 
related to suppliers abandoning beneficiaries after the rental cap has 
resulted in the need to pay for lost oxygen and oxygen equipment, 
eliminating any savings the rental cap might have achieved. Although 
section 1834(a)(5)(F)(ii)(I) of the Act mandates that the supplier 
receiving payment for the 36th month of continuous use must continue to 
furnish the oxygen and oxygen equipment for any period of medical need 
for the duration of the reasonable useful lifetime of the equipment, 
certain suppliers have failed to continue providing oxygen and oxygen 
equipment despite this requirement.
    Section 414.226 provides that for oxygen and oxygen equipment, 
Medicare payments are modality neutral, with the exception that the 
portable oxygen equipment add-on payment for oxygen generating portable 
equipment (OGPE) is higher than the add-on payment for liquid and 
gaseous portable oxygen equipment. The Medicare monthly payment for 
oxygen and oxygen equipment includes payment for stationary equipment

[[Page 40293]]

(concentrators, liquid, or gaseous stationary equipment) as well as 
payment for oxygen contents (stationary and portable). The add-on 
payment is only for the portable oxygen equipment and does not include 
payment for the portable oxygen contents. This fact is often confused 
and the portable oxygen add-on payment is erroneously viewed as a 
payment for portable oxygen contents as well as portable oxygen 
equipment. In a majority of cases, beneficiaries receive both 
stationary oxygen and oxygen equipment and portable oxygen and oxygen 
equipment, so having a separate add-on payment for portable oxygen 
equipment only seems unnecessary. Under our proposal, for oxygen and 
oxygen equipment payment under the select CBPs, we propose to eliminate 
the 36-month cap on equipment payments and eliminate separate add-on 
payments for portable equipment and separate payment for oxygen 
contents. Under our proposal, the contract suppliers would continue to 
be responsible for furnishing equipment consistent with the 
requirements in Sec.  414.420.
    We seek comments on this proposal.
c. Standard Manual Wheelchairs
    We propose to implement future competitions for standard manual 
wheelchairs in no more than 12 CBAs, where payment would be based on 
bids submitted for furnishing standard manual wheelchairs and all 
accessories used in conjunction with the wheelchairs on a monthly 
basis. We propose that the suppliers would submit a single bid for each 
HCPCS code describing the wheelchair for each CBA for furnishing the 
wheelchair and all accessories and services needed on a monthly basis. 
We are soliciting on this proposal as well as comments on whether all 
standard manual wheelchairs should be described under one HCPCS code in 
order to simplify bidding and claims processing procedures. The current 
HCPCS codes for standard manual wheelchairs include standard, hemi (low 
seat), lightweight, high strength lightweight, heavy duty, and extra 
heavy duty wheelchairs described by codes K0001 thru K0004, K0006, and 
K0007 in the HCPCS. In view of comments to the ANPRM expressing concern 
regarding beneficiary impact of bundled arrangements for users of 
highly configured manual wheelchairs, we are requesting comment on what 
safeguards and monitoring approaches we should use to ensure that 
access to these items is not disrupted for individuals transitioning 
between settings and/or residing in remote areas. We seek comments on 
this proposal.
d. Standard Power Wheelchairs
    We propose to implement future competitions for standard power 
wheelchairs in no more than 12 CBAs, where payment would be based on 
bids submitted for furnishing standard power wheelchairs and all 
accessories used in conjunction with the wheelchairs on a monthly 
basis. We propose that the suppliers would submit a single bid for each 
HCPCS code describing the wheelchair for each CBA for furnishing the 
wheelchair and all accessories (including batteries) and services 
needed on a monthly basis. We are soliciting comments on whether all 
standard power wheelchairs should be described under one HCPCS code in 
order to simplify bidding and claims processing procedures. The current 
HCPCS codes for standard power wheelchairs include all group 1 and 
group 2 power wheelchairs that cannot accommodate rehabilitative 
accessories and features described by codes K0813 thru K0829 in the 
HCPCS. In view of comments to the ANPRM expressing concern regarding 
beneficiary impact of bundled arrangements for users of highly 
configured manual wheelchairs, we are requesting comment on what 
safeguards and monitoring approaches we should use to ensure that 
access to these items is not disrupted for individuals transitioning 
between settings and/or residing in remote areas.
    We selected the categories of standard manual and power wheelchairs 
because we believe that payment on a separate, piecemeal basis for 
hundreds of various wheelchair options and accessories is unnecessary 
and overly complex. In addition, issues have been raised regarding 
access to repair of beneficiary-owned wheelchairs following the 13-
month capped rental period. For example, there are hundreds of codes 
for various wheelchair accessories and separate payment for each of 
these items in addition to the payment for the wheelchair. The separate 
billing, processing and payment of these claims would not be necessary 
given that the supplier can factor the costs of accessories into their 
bid for furnishing the rented equipment. In addition, the beneficiary's 
needs may change such that the beneficiary needs a different type of 
accessory from the one that was initially furnished by the supplier. 
Under the current rules, the accessory may not be covered if it is 
similar to the one that was already paid for by Medicare. If payments 
for all types of accessories are included in an ongoing, monthly rental 
amount for the wheelchair, the beneficiary can receive other 
accessories included in the program, provided such accessories are 
medically necessary.
    We seek comments on this proposal.
e. CPAP and Respiratory Assist Devices
    We propose to implement future competitions for CPAP and 
respiratory assist devices in no more than 12 CBAs, where payment would 
be based on bids submitted for furnishing the CPAP or respiratory 
assist device and supplies, accessories, and services needed on a 
monthly basis. We propose that the suppliers would submit a single bid 
for each device for each CBA for furnishing all items and services 
needed on a monthly basis. We are soliciting comments on our proposal 
as well as whether all CPAP and respiratory assist devices should be 
described under one HCPCS code in order to simplify bidding and claims 
processing procedures. We selected the category of CPAP and respiratory 
assist devices because we believe the cost of paying separately for the 
expensive accessories used with these devices may exceed the amount of 
savings achieved from capping the rental payments for the equipment. We 
seek comments on this proposal.
f. Hospital Beds
    We propose to implement future competitions for hospital beds in no 
more than 12 CBAs, where payment would be based on bids submitted for 
furnishing hospital beds and all accessories used in conjunction with 
the hospital beds on a monthly basis. We propose that the suppliers 
would submit a single bid for each HCPCS code describing the hospital 
bed for each CBA for furnishing the hospital bed and all accessories 
and services needed on a monthly basis. We are soliciting comments on 
whether all hospital beds should be described under one HCPCS code in 
order to simplify bidding and claims processing procedures. We selected 
the category of hospital beds to allow us to determine the impact of 
the continuous monthly rental payment rule under CBP on beneficiary 
access, utilization rate and cost for an item that currently does not 
have beneficiary access issues or issues related to excessive cost for 
repair and accessories. We seek comments on this proposal.
g. Transition Rules
    We propose to revise the regulation at 42 CFR 414.409 to include 
supplier transition rules for enteral nutrition, oxygen and oxygen 
equipment, standard manual wheelchairs, standard power wheelchairs, 
CPAP and respiratory

[[Page 40294]]

assist devices, and hospital beds that would be paid in accordance with 
the rules proposed in this section. We also propose to revise the 
regulation at 42 CFR 414.408 to provide a cross reference to proposed 
Sec.  414.409. We propose that changes in suppliers from a non-contract 
supplier to a contract supplier at the beginning of the CBP where the 
proposed payment rules would apply would simply result in the contract 
supplier taking on responsibility for meeting all of the beneficiary's 
monthly needs while receiving payment for each month of service. We 
developed these proposed rules based on that fact that for capped 
rented DME and oxygen and oxygen equipment, since rental caps would not 
apply under the proposed rules, there would be no need to restart or 
extend capped rental periods when a beneficiary transitions from a non-
contract supplier to a contract supplier. We propose that supply 
arrangements for oxygen and oxygen equipment, and rental agreements for 
standard manual wheelchairs, standard power wheelchairs, CPAP devices, 
respiratory assist devices, and hospital beds entered into before the 
start of a CBP and application of the payment rules proposed in this 
section would be allowed to continue so long as the supplier agrees to 
furnish all necessary supplies and accessories used in conjunction with 
the rented equipment and needed on a monthly basis. We propose that 
non-contract suppliers in these cases would have the option to continue 
rental agreements; however, we propose that as part of the process of 
allowing the rental agreements to continue, the grandfathered supplier 
would be paid based on the payment rules proposed in this section and 
based on the SPAs established under the CBPs incorporating the proposed 
rules.
    We solicit comments on this proposed process.
    We propose that in the event that a beneficiary relocates from a 
CBA where the rules proposed in this section apply to an area where 
rental cap rules apply, that a new period of continuous use would begin 
for the capped rental item, enteral nutrition equipment, or oxygen 
equipment as long as the item is determined to be medically necessary. 
We believe these rules that would result in a new period of continuous 
use are necessary to safeguard beneficiary access to covered items and 
services and plan to closely monitor the impact these rules have on 
beneficiary cost sharing before phasing in these rules in more than a 
limited number of CBAs.
    We seek comments on these proposals.
h. Beneficiary-Owned Equipment
    We propose that separate payment for all repairs, maintenance and 
servicing, and replacement of supplies and accessories for beneficiary-
owned DME or enteral nutrition equipment would cease in the CBAs where 
the payment rules proposed under this section are in effect. We propose 
that if the beneficiary has a medical need for the equipment, the 
contract supplier would be responsible for furnishing new equipment and 
servicing that equipment. This option would ensure that beneficiaries 
continue to receive medically necessary equipment, including the 
supplies, accessories, maintenance and servicing that may be needed for 
such equipment. Please note that this would not apply to items which 
are not paid on a bundled, continuous rental basis. We propose to 
revise the regulations at Sec.  414.409 to specify that any beneficiary 
who owns DME or enteral nutrition equipment and continues to have a 
medical need for the items should these rules take effect in a CBA 
where they reside, would have the option to obtain new equipment, if 
medically necessary, and related servicing from a contract supplier. We 
are requesting comment as to whether a transitional process should be 
considered when claims are selected for review to determine whether 
they are reasonable and necessary and other safeguards are required to 
ensure timely delivery of the replacement DME so that individuals' 
mobility and ability to live independently is not adversely impacted by 
delays. While this could potentially increase beneficiary cost sharing, 
it would eliminate issues associated with repair of beneficiary-owned 
equipment. We plan to closely monitor the impact of this proposed 
provision, should it be finalized.
    We seek comments on this proposal, including issues related to the 
ability of low income beneficiaries to afford additional cost sharing, 
and how best to monitor beneficiary impact within the 12 CBAs in which 
these new rules would be phased in.
2. Responsibility for Repair of Beneficiary-Owned Power Wheelchairs 
Furnished Under CBPs
    We propose to revise the regulation at 42 CFR 414.409 to add a new 
payment rule that would apply to future competitions for standard power 
wheelchairs in no more than 12 CBAs where payment is made on a capped 
rental basis and not on the basis of the rules proposed under Sec.  1 
above. In these CBPs, we propose that contract suppliers for power 
wheelchairs would be responsible for all necessary repairs and 
maintenance and servicing of any power wheelchairs they furnish during 
the contract period under the CBP, including repairs and maintenance 
and servicing of power wheelchairs after they have transferred title to 
the equipment to the beneficiary. We propose that this responsibility 
would end when the reasonable useful lifetime established for the power 
wheelchair expires, medical necessity for the power wheelchair ends, 
the contract period ends, or the beneficiary relocates outside the CBA. 
We propose that the contract supplier would not receive separate 
payment for these services and would factor the costs of these services 
into their bids. We believe that based on existing maintenance and 
servicing requirements, suppliers could project the cost of continuing 
to repair and service equipment of various ages once title to the 
equipment has transferred to the beneficiary. As indicated above, under 
existing rules, the supplier that transfers title to the equipment to 
the beneficiary after the 13 month period of continuous use is not held 
responsible for repairing the equipment they furnish after the 
beneficiary takes over ownership of the equipment. Therefore, we 
believe the propose rule would safeguard the beneficiary and better 
ensure that the beneficiary continues to have equipment in good working 
order to meet their needs. We propose that the contract supplier would 
not be responsible for repairing power wheelchairs they did not 
furnish. We propose that services to repair beneficiary-owned equipment 
furnished prior to the start of the contract period would be paid in 
accordance with the standard payment rules at Sec.  414.210(e).
    We seek comments on this proposal.
3. Phasing in the Proposed Payment Rules in CBAs
    We propose that the CBAs where the proposed rules in Sec. Sec.  1 
or 2 above would be applied would be for MSAs with a general population 
of at least 250,000 and a Medicare Part B enrollment population of at 
least 20,000 that are not already included in Round 1 or 2. Based on 
2012 population estimates from the Census Bureau and 2011 Medicare 
enrollment data, there are approximately 80 MSAs that would satisfy 
this criteria. Selecting MSAs not already included in Round 1 or 2 
would allow competitions and rules associated with these competitions 
to begin after the final rule would take effect in areas that are 
comparable to existing CBAs. We propose that the boundaries of the CBAs 
would be established in accordance with the rules set forth at

[[Page 40295]]

Sec. Sec.  414.406 and 414.410. We propose that additional CBPs for the 
items identified in Sec. Sec.  1 and 2 above be established in 
``comparator'' CBAs concurrent with CBPs where the proposed rules would 
be applied. Payment for items and services in the comparator CBAs would 
be made in accordance with the existing payment rules in Sec.  414.408. 
We propose that these additional comparator CBAs and CBPs be 
established to facilitate our analysis of the effect of the payment 
rules proposed in sections 1 and 2 above compared to the effect of the 
existing payment rules in Sec.  414.408. We propose that for each CBP 
where either the rules in section 1 or 2 above are implemented, a 
comparator CBA and CBP would be established. We propose that the 
comparator CBAs be selected so that they are located in the same state 
as the CBA where the special payment rules would apply and are similar 
to the CBAs in which the proposed payment rules would be implemented 
based on a combination of factors that could include geographic 
location (region of the country), general population, beneficiary 
population, patient mix, and utilization of items. We are proposing to 
establish the comparator CBAs and CBPs to enable us to review the 
impact of the proposed payment rules on expenditures, quality, and 
access to items and services in order to determine whether to pursue 
future rulemaking to expand the proposed payment rules to additional 
areas and or items.
    We seek comments on this proposal.
4. Submitting Bids for Items Paid on a Continuous Rental Basis
    In accordance with section 1847(b)(2)(A)(iii) of the Act, before 
contracts can be awarded, a determination must be made that the total 
amounts to be paid to contract suppliers under a CBP are expected to be 
less than the total amounts that would otherwise be paid. In accordance 
with Sec.  414.414(f) of the regulations, under the DMEPOS CBP, bids 
amounts for an item or service are limited to the fee schedule amount 
that would otherwise be paid for the item or service. We propose that 
in order to apply the proposed rental payment rules, we would establish 
the bid limits for enteral nutrition, oxygen and oxygen equipment, 
standard manual wheelchairs, standard power wheelchairs, and hospital 
beds that would be paid in accordance with the proposed payment rules 
in sections 1 and 2 above based on average monthly expenditures per 
beneficiary in an area for the items and services related to furnishing 
the DME. For example, the bid limit for the continuous monthly rental 
of a standard manual wheelchair in a CBA would be based on the total 
payment amounts per month in the area for the wheelchair, repair, 
maintenance and servicing of the wheelchair, and accessories used with 
the wheelchair, divided by the unduplicated number of beneficiaries 
receiving these items and services. We propose to revise Sec.  414.412 
to specify that the supplier's bid for furnishing enteral nutrition, 
oxygen and oxygen equipment, standard manual wheelchairs, standard 
power wheelchairs, and hospital beds on a continuous monthly rental 
basis could not be higher than the average monthly payment made in the 
area for the items and services prior to the start of the competition. 
In the case of CPAP devices and respiratory assist devices, these items 
were paid on a bundled, continuous rental fee schedule basis from 1989 
thru 1993, based on the rules mandated by section 4062(b) of OBRA 87, 
prior to the change by section 13543 of OBRA 93 that moved them from 
the payment class for items requiring frequent and substantial 
servicing to the payment class for capped rental items. Payment on a 
bundled, continuous rental fee schedule basis was mandated by OBRA 87 
from 1989 thru 1993. The fee schedule for 1993 is the most current fee 
schedule where payment was based on a bundled, continuous rental basis. 
We propose to revise Sec.  414.412 to specify that the supplier's bid 
for furnishing CPAP devices and respiratory assist devices on a 
continuous monthly rental basis could not be higher than the 1993 fee 
schedule amounts for these items, increased by the covered item update 
factors provided for these items in section 1834(a)(14) of the Act. We 
seek comments on this proposal.
    We seek public comments on phasing in the proposed rules described 
in section 1 through 4 above.

VII. Scope of Hearing Aid Coverage Exclusion

A. Background

    Section 1862(a)(7) of the Act states notwithstanding any other 
provision of title XVIII, no payment may be made under part A or part B 
for any expenses incurred for items or services ``where such expenses 
are for . . . hearing aids or examinations therefor. . . .'' This 
policy is codified in the regulation at 42 CFR 411.15(d), which 
specifically states that hearing aids or examination for the purpose of 
prescribing, fitting, or changing hearing aids are excluded from 
Medicare coverage. At the time of passage of the Social Security 
Amendments of 1965 (Pub. L. 97, 89th Congress), which added the 
Medicare coverage exclusion for hearing aids at section 1862(a)(7) of 
the Act, all hearing aids utilized functional air and/or bone 
conduction pathways to facilitate hearing.
    In general, to be covered by Medicare, an item or service must fall 
within one or more benefit categories contained within Part A or Part 
B, and must not be otherwise excluded from coverage. With regard to 
section 1862(a)(7) of the Act, we consider that a hearing aid provides 
assistance or ``aid'' to hearing that already exists via a functioning 
ear. Cochlear implants were the first hearing device that was not 
considered a hearing aid and met the benefit category of a prosthetic 
device. Prosthetic devices are a Medicare benefit category defined at 
section 1861(s)(8) of the Act which, in part, states a ``prosthetic 
devices (other than dental) which replace all or part of an internal 
body organ.'' A cochlear implant is considered a prosthetic device 
primarily because it replaces the function of the cochlea. A cochlear 
implant device differs from a hearing aid in that it is an electronic 
instrument, part of which is implanted surgically to directly stimulate 
auditory nerve fibers, and part of which is worn or carried by the 
individual to capture, analyze and code sound. Both cochlear devices 
and brain stem implants, which function in a similar manner, create the 
perception of sound rather than aid hearing that already exists. We 
interpret the statute as excluding devices that provide aid to extant 
hearing (or hearing aids) rather than devices that create the 
perception of sound and hearing, given that devices with technology 
that utilize either air or bone conduction via mechanical stimulation 
to aid extant hearing were primarily utilized when the statute was 
written. Moreover, we believe that prosthetic hearing devices are not 
``hearing aids'' given that such devices do more than ``aid'' in 
hearing and instead replace the function of an internal body organ 
(i.e., a part of the ear).
    Historically, CMS has periodically addressed the scope of the 
Medicare hearing aid coverage exclusion through program instructions 
and national coverage policies or determinations. We briefly discuss 
the relevant changes that have occurred over time with regard to 
Medicare coverage and payment of hearing devices.
    Cochlear implants were the first device covered for Medicare 
payment for adult beneficiaries in October 1986, when no other hearing 
device was being covered under Medicare, and such

[[Page 40296]]

coverage was supported by the Office of Health Technology Assessment's 
``Public Health Service Assessment of Cochlear Implant Devices for the 
Profoundly Hearing Impaired'', dated June 30, 1986 found at https://archive.org/stream/cochlearimplantd00feig/cochlearimplantd00feig_djvu.txt. Medicare coverage was restricted to cochlear implants that 
treated patients with post lingual, profound, bilateral, sensorineural 
deafness who are stimulable and who lack the unaided residual auditory 
ability to detect sound.
    Effective January 1, 2003, we clarified that the hearing aid 
exclusion broadly applied to all hearing aids that utilized functional 
air and/or bone conduction pathways to facilitate hearing (see section 
15903, Hearing Aid Exclusion, Medicare Carriers Manual, Part 3--Claims 
Process (HCFA-Pub. 14-3), which was later moved to section 100, Hearing 
Aids and Cochlear Implants, of Chapter 16, of the Medicare Benefit 
Policy Manual, CMS-Pub. 100-02). Any device that does not produce at 
its output an electrical signal that directly stimulates the auditory 
nerve is a hearing aid for purposes of coverage under Medicare. Devices 
that produce air conduction sound into the external auditory canal, 
devices that produce sound by mechanically vibrating bone, or devices 
that produce sound by vibrating the cochlear fluid through stimulation 
of the round window are considered hearing aids and excluded from 
Medicare coverage.
    Effective April 4, 2005, Medicare's national coverage policy for 
cochlear implants was modified through the NCD process (see section 65-
14 of the Medicare Coverage Issues Manual (HCFA-Pub. 6), which was 
later moved to section 50.3, Cochlear Implantation, of Chapter 1, Part 
1 of the Medicare National Coverage Determinations Manual (CMS-Pub. 
100-03)). Our findings under the NCD, in part, state that ``CMS has 
determined that cochlear implants fall within the benefit category of 
prosthetic devices under section 1861(s)(8) of the Social Security 
Act.'' Medicare is a defined benefit program. An item or device must 
not be statutorily excluded and fall within a benefit category as a 
prerequisite to Medicare coverage. We believe that prosthetic hearing 
devices are not ``hearing aids'' given that such devices do more than 
``aid'' in hearing and instead replace the function of an internal body 
organ (i.e., a part of the ear). Additional changes, regarding coverage 
criteria, have been made to NCD 50.3 over time, however, the NCD 
decision regarding benefit category and Medicare coverage for cochlear 
implantation has remained consistent. The NCD states that a cochlear 
implant device is an electronic instrument, part of which is implanted 
surgically to stimulate auditory nerve fibers, and part of which is 
worn or carried by the individual to capture, analyze, and code sound. 
Cochlear implant devices are available in single-channel and multi-
channel models. The purpose of implanting the device is to provide 
awareness and identification of sounds and to facilitate communication 
for persons who are moderately to profoundly hearing impaired.
    The regulations at 42 CFR 419.66 were revised to add new 
requirements, effective January 1, 2006, for transitional pass-through 
payments for medical devices. The auditory osseointegrated device, 
referred to as a bone anchored hearing aid (BAHA), was determined to be 
a new device category according to the new requirements for 
transitional pass-through payment. Medicare coverage was also expanded 
to cover auditory osseointegrated and auditory brainstem devices as 
prosthetic devices. Currently, section 100 of Chapter 16 of the 
Medicare Benefit Policy Manual (CMS Pub. 100-02) reads as follows:

    Hearing aids are amplifying devices that compensate for impaired 
hearing. Hearing aids include air conduction devices that provide 
acoustic energy to the cochlea via stimulation of the tympanic 
membrane with amplified sound. They also include bone conduction 
devices that provide mechanical energy to the cochlea via 
stimulation of the scalp with amplified mechanical vibration or by 
direct contact with the tympanic membrane or middle ear ossicles.
    Certain devices that produce perception of sound by replacing 
the function of the middle ear, cochlea, or auditory nerve are 
payable by Medicare as prosthetic devices. These devices are 
indicated only when hearing aids are medically inappropriate or 
cannot be utilized due to congenital malformations, chronic disease, 
severe sensorineural hearing loss or surgery.
    The following are considered prosthetic devices:
     Cochlear implants and auditory brainstem implants, that 
is, devices that replace the function of cochlear structures or 
auditory nerve and provide electrical energy to auditory nerve 
fibers and other neural tissue via implanted electrode arrays.
     Osseointegrated implants, that is, devices implanted in 
the skull that replace the function of the middle ear and provide 
mechanical energy to the cochlea via a mechanical transducer.

B. Current Issues

    We have received several benefit category determination requests in 
recent years for the consideration of non-implanted, bone conduction 
hearing aid devices for single-sided deafness, as prosthetic devices 
under the Medicare benefit. We have received similar requests for 
several other types of implanted and non-implanted devices as well. In 
response to these requests, we have re-examined the scope of the 
statutory hearing aid exclusion. Currently, we consider all air or bone 
conduction hearing devices, whether external, internal, or implanted, 
including, but not limited to, middle ear implants, osseointegrated 
devices, dental anchored bone conduction devices, and other types of 
external or non-invasive devices that mechanically stimulate the 
cochlea, as hearing aids. All of these devices provide traditional 
``aid'' to hearing and are excluded in accordance with section 
1862(a)(7) of the Act. In order for an item to be covered by Medicare, 
it must fall into a Medicare benefit category and not be statutorily 
excluded. Not only are these devices statutorily excluded they do not 
fall in a benefit category. Specifically, they do not meet the 
statutory definition of a prosthetic device found at section 1861(s)(8) 
of the Act which, in part, states a ``prosthetic devices (other than 
dental) which replace all or part of an internal body organ.'' They do 
not replace the function of an internal body organ and thus are not 
considered prosthetic devices under Medicare payment policy. In regard 
to BAHA, it is a bone conduction hearing aid device that is 
osseointegrated. There are currently only two hearing devices that are 
not statutorily excluded and are a covered Medicare item that fall into 
the prosthetic benefit category; namely, the cochlear implant and the 
auditory brainstem device. These two devices meet the definition of a 
prosthetic device in that they replace the function of the inner ear 
consistent with the definition of prosthetic devices described in 
section 1861(s)(8) of the Act.

C. Proposed Provisions

    After further considering the statutory Medicare hearing aid 
exclusion under section 1862(a)(7) of the Act, and re-examining the 
different types of external and implanted devices, we propose to 
interpret the term ``hearing aid'' to include all types of air or bone 
conduction hearing aid devices, whether external, internal, or 
implanted, including, but not limited to, middle ear implants, 
osseointegrated devices, dental anchored bone conduction devices, and 
other types of external or non-invasive devices that mechanically 
stimulate the cochlea. We believe, based on our understanding of

[[Page 40297]]

how such devices function, that such devices are hearing aids that are 
not otherwise covered as prosthetic devices, in that they do not 
replace all or part of an internal body organ. Therefore, we propose to 
modify the regulation at Sec.  411.15(d)(1) to specify that the hearing 
aid exclusion encompasses all types of air conduction and bone 
conduction hearing aids (external, internal, or implanted). 
Osseointegrated devices such as the BAHA are bone conduction hearing 
aids that mechanically stimulate the cochlea; therefore, we believe 
that the hearing aid exclusion applies to these devices and propose 
that Medicare should not cover these devices, consistent with our 
interpretation of section 1862(a)(7) of the Act. In addition, an NCD 
was issued for cochlear implant devices with the result that this 
determination and recent requests to expand coverage of hearing devices 
raises serious questions about the intent and scope of the Medicare 
coverage exclusion for hearing aids. It is for these reasons that we 
are addressing the hearing aid coverage exclusion in notice and comment 
rulemaking, and believe that the BAHA device qualifies as a hearing aid 
because it functions like other bone conduction hearing aids that are 
subject to the Medicare statutory coverage exclusion for hearing aids.
    We continue to believe that the hearing aid exclusion does not 
apply to brain stem implants and cochlear implants because these 
devices directly stimulate the auditory nerve, replacing the function 
of the inner ear rather than aiding the conduction of sound as hearing 
aids do. Therefore, we are not proposing any changes to our current 
policy about brain stem implants and cochlear implants and how such 
implants fall outside of the hearing aid statutory exclusion (that is, 
such devices would fall outside the Medicare coverage exclusion for 
hearing aids and remain covered subject to the Medicare NCD 50.3 found 
at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/ncd103c1_Part1.pdf). We propose, however, to modify Sec.  
411.15(d)(2) to specifically note that such devices do not fall within 
the hearing aid exclusion.
    We seek public comment on this proposal.

VIII. Definition of Minimal Self-Adjustment of Orthotics Under 
Competitive Bidding

A. Background

    Section 1847 (a)(1)(A) of the Act mandates the implementation of 
CBPs throughout the United States for awarding contracts for furnishing 
competitively priced items and services, including OTS orthotics 
described in section 1847(a)(2)(C) of the Act (leg, arm, back or neck 
braces described in section 1861(s)(9) of the Act for which payment 
would otherwise be made under section 1834(h)) which require minimal 
self-adjustment for appropriate use and do not require expertise in 
trimming, bending, molding, assembling, or customizing to fit the 
individual. The regulation at 42 CFR 414.402 currently defines 
``minimal self-adjustment'' as ``an adjustment that the beneficiary, 
caretaker for the beneficiary, or supplier of the device can perform 
and does not require the services of a certified orthotist (that is, an 
individual who is certified by either the American Board for 
Certification in Orthotics and Prosthetics, Inc., or the Board for 
Orthotist/Prosthetist Certification) or an individual who has 
specialized training.'' This current definition was proposed in the 71 
FR 25669 (May 1, 2006) Notice for Proposed Rulemaking (NPRM) but did 
not include the term ``individual with specialized training.'' The 
definition was finalized in the 72 FR 18022 (April 10, 2007) Final Rule 
with the term ``individual with specialized training'' added after 
receiving comments that disagreed with the May 2006 definition and 
pointed out that occupational therapists, physical therapists, and 
physicians are licensed and trained to provide orthotics.

B. Current Issues

    Since adoption of the minimal self-adjustment definition there has 
been some concerns raised by industry and other stakeholders regarding 
who is considered an individual with specialized training. We have had 
many inquiries and comments that this term is too ambiguous and left 
open for interpretation. In order to identify OTS orthotics for the 
purpose of implementing CBPs for these items and services in accordance 
with the statute, we need a clearer distinction between OTS orthotics 
and those that require more than minimal self-adjustment and expertise 
in custom fitting. In doing so, we believe it is essential to identify 
the credentials and training a supplier needs to have in order to be 
considered a supplier with expertise in custom fitting; therefore, we 
believe the term ``individual with specialized training'' must be 
clarified. We believe these professionals must have specialized 
training equivalent to a certified orthotist for the provision of 
custom fitted orthotic devices such that these professionals satisfy 
requirements concerning higher education, continuing education 
requirements, licensing, and certification/registration requirements so 
that they meet a minimum professional skill level in order to ensure 
the highest standard of care and safety for Medicare beneficiaries.
    This would also help to prevent any supplier without expertise in 
custom fitting orthotics from potentially circumventing the competitive 
bidding process by furnishing custom fitting they are not qualified to 
provide in the event that they are not awarded a contract for 
furnishing OTS orthotics in their service area as the custom fitted 
devices are not statutorily included in the CBP.
    In addition, for claims processing and payment system purposes 
under the CBP, we need to identify OTS orthotics, which we accomplish 
with codes in the HCPCS. The HCPCS codes are used on claims to identify 
the items and services furnished to the beneficiary, that is, to 
identify orthotics that are furnished OTS and subject to the CBP and to 
identify orthotics that have been custom fitted by suppliers with 
expertise. On February 9, 2012, CMS issued initial guidance identifying 
specific HCPCS codes considered OTS orthotics and provided a 60-day 
comment period posted at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/OTS_Orthotics.html. We received 185 
comments. There was no general consistency between the various 
commenters on which specific HCPCS codes the commenters believed were 
appropriately deemed OTS. Many commenters expressed their support for 
the proposed list while others made numerous useful recommendations to 
improve the OTS list. We considered each comment and performed a 
thorough review of the individual HCPCS codes and devices included in 
the codes to assess appropriate orthotic categorization. Through this 
process we identified HCPCS codes that described items that we believe 
are never furnished OTS, HCPCS codes that described items that are 
always furnished OTS, and HCPCS codes that described items that may or 
may not be furnished OTS, depending on whether more than minimal 
fitting and adjustment of a particular device by an expert is necessary 
for a particular patient. In order to address this issue we decided to 
create HCPCS codes for items that may or may not be custom fitted, 
depending on individual patient's needs, into separate codes that 
described the item when it has been furnished OTS and when it has been 
custom fitted. The new HCPCS codes

[[Page 40298]]

were published and became effective January 1, 2014 and are published 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/OTS_Orthotics.html.

C. Proposed Provisions

    Prefabricated orthotics are either furnished OTS or with custom 
fitting and are identified in the HCPCS. As noted above, with regard to 
minimal self-adjustment, Sec.  414.402 in part identifies an individual 
with expertise in fitting as a certified orthotist or an individual 
with specialized training. Recently a DME Medicare Administrative 
Contractor (MAC) Web site Article entitled ``Correct Coding--
Definitions used for Off-the-Shelf versus Custom Fitted Prefabricated 
Orthotics (Braces)--Revised,'' was published March 27, 2014, and 
included: A physician, a treating practitioner, an occupational 
therapist, or physical therapist in compliance with all applicable 
Federal and State licensure and regulatory requirements. The DME MAC 
published this article following the change in 2014 HCPCS codes for OTS 
and custom fitted orthotics as an education tool for Medicare enrolled 
DMEPOS suppliers. We believe physicians, treating practitioners, 
occupational therapists, and physical therapists are considered 
``individuals with specialized training'' that possess training 
equivalent to a certified orthotist for the provision of custom fitted 
orthotic devices through their individual degree programs and 
continuing education requirements. In addition, physicians, treating 
practitioners, occupational therapists, and physical therapists possess 
equivalent or higher educational degrees, continuing education 
requirements, licensing, and certification and/or registration 
requirements. We believe these professionals meet a minimum 
professional skill level in order to ensure the highest standard of 
care and safety for Medicare beneficiaries. Each of these professionals 
has undergone medical training in various courses such as kinesiology 
and anatomy. For example, through coursework the named medical 
professionals gain a clinical understanding of the human body, proper 
alignment, normal range of motion, agonist and antagonist relationship, 
and biomechanics necessary to modify a custom fitted orthotic device 
properly.
    Clinical providers such as assistants, fitters, and manufacturer 
representatives that work under the supervision of the individual with 
specialized training must do so as required under their governing body 
Code of Ethics and supervision standards as well as state licensure 
requirements. These individuals are not considered to have specialized 
training for the purposes of providing custom fitting; therefore, 
orthotics adjusted by these individuals but not by individuals with 
specialized training would still be considered OTS.
    The current regulation of orthotic provision in the U.S. is 
inconsistent between individual States. There are currently 17 States 
that require licensure in P&O. In States that do require licensure for 
the provision of orthotics, individual states do not all recognize 
certified orthotic fitters and do not provide licensure for this level 
of provider. This inconsistency also prompts us to provide 
clarification on the individuals who are recognized as having 
specialized training for the purposes of determining what constitutes 
minimal self-adjustment of OTS orthotics.
    We propose to update the definition of minimal self-adjustment in 
Sec.  414.402 to codify an individual with specialized training 
includes: a physician defined in section 1861(r) of the Act, a treating 
practitioner defined at section 1861(aa)(5) (physician assistant, nurse 
practitioner, or clinical nurse specialist), an occupational therapist 
defined at 42 CFR 484.4, or physical therapist defined at 42 CFR 484.4, 
who is in compliance with all applicable Federal and State licensure 
and regulatory requirements for reasons discussed above. We seek 
comments on this proposal.

IX. Revision To Change of Ownership Rules To Allow Contract Suppliers 
To Sell Specific Lines of Business

A. Background

    Section 1847(a) of the Act, as amended by section 302(b)(1) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173), requires the Secretary to establish and 
implement CBPs in CBAs throughout the United States for contract award 
purposes for the furnishing of certain competitively priced DMEPOS 
items and services. The programs mandated by section 1847(a) of the Act 
are collectively referred to as the ``Medicare DMEPOS Competitive 
Bidding Program.'' The 2007 DMEPOS competitive bidding final rule 
(Medicare Program; Competitive Acquisition for Certain DMEPOS and Other 
Issues published in the Federal Register on April 10, 2007 (71 FR 
17992)), required CBPs for certain Medicare Part B covered items of 
DMEPOS throughout the United States. The CBP, which was phased in over 
several years, utilizes bids submitted by qualified suppliers to 
establish applicable payment amounts under Medicare Part B for certain 
DMEPOS items for beneficiaries receiving services in designated CBAs.
    CMS awards contracts to those suppliers who meet all of the 
competitive bidding requirements and whose composite bid amounts fall 
at or below the pivotal bid (the bid at which the capacity provided by 
qualified suppliers meets the demand for the item). These qualified 
suppliers will be offered a competitive bidding contract for that PC, 
provided there are a sufficient number of qualified suppliers (there 
must be at a minimum of 2) to serve the area. Contracts are awarded to 
multiple suppliers for each PC in each CBA and will be re-competed at 
least once every 3 years.
    CMS specifies the duration of the contracts awarded to each 
contract supplier in the Request for Bid Instructions. We also conduct 
extensive bidder education where we inform bidders of the requirements 
and obligations of contract suppliers. Each winning supplier is awarded 
a single contract that includes all winning bids for all applicable 
CBAs and PCs. A competitive bidding contract cannot be subdivided. For 
example, if a contract supplier breaches its contract, the entire 
contract is subject to termination. In the Physician Fee Schedule final 
rule published on November 29, 2010, we stated that ``once a supplier's 
contract is terminated for a particular round due to breach of contract 
under the DMEPOS CBP, the contract supplier is no longer a DMEPOS 
contract supplier for any DMEPOS CBP PC for which it was awarded under 
that contract. This termination applies to all areas and PCs because 
there is only one contract that encompasses all CBAs and PCs for which 
the supplier was awarded a contract.'' (75 FR 73578)
    A competitive bidding contract cannot be sold. However, CMS may 
permit the transfer of a contract to an entity that merges with or 
acquires a competitive bidding contract supplier if the new owner 
assumes all rights, obligations, and liabilities of the competitive 
bidding contract pursuant to regulations at 42 CFR 414.422(d).
    For the transfer of a contract to be considered, the CHOW must 
include the assumption of the entire contract, including all CBAs and 
PCs awarded under the contract.

B. Proposed Provisions

    We propose to revise Sec.  414.422(d) to permit transfer of part of 
a competitive bidding contract under specific

[[Page 40299]]

circumstances. We believe requiring a transfer of the entire contract 
to a successor entity in all circumstances may be overly restrictive, 
and may be preventing routine merger and acquisition activity. To 
maintain integrity of the bidding process we award one contract that 
includes all the CBA/PCs combinations for which the supplier qualifies 
for and accepts as a contract supplier. This proposed rule would 
establish an exception to the prohibition against transferring part of 
a contract by allowing a contract supplier to sell a distinct company 
(for example, an affiliate, subsidiary, sole proprietor, corporation, 
or partnership) which furnishes one or more specific PCs or serves one 
or more specific CBAs and transfer the portion of the contract 
initially serviced by the distinct company, including the PC(s), 
CBA(s), and location(s), to a qualified successor entity who meets all 
competitive bidding requirements (i.e., financial standards, licensing, 
and accreditation). The proposed exception would not apply to existing 
contracts but would apply to contracts issued in all future rounds of 
the program, starting with the Round 2 Recompete. As required in Sec.  
414.422(d) we are also requiring a contract supplier that wants to sell 
a distinct company which furnishes one or more specific PCs or serves 
one or more specific CBAs to notify CMS 60 days before the anticipated 
date of a change of ownership. If documentation is required to 
determine if a successor entity is qualified that documentation must be 
submitted within 30 days of anticipated change of ownership, pursuant 
to Sec.  414.422(d)(2)(ii). We propose that CMS would then modify the 
contract of the original contract supplier by removing the affected 
PC(s), CBA(s) and locations from the original contract. For CMS to 
approve the transfer, we propose that several conditions would have to 
be met. First, we propose that every CBA, PC, and location of the 
company being sold must be transferred to the new owner. Second, we 
propose that all CBAs and PC's in the original contract that are not 
explicitly transferred by CMS must remain unchanged in that original 
contract for the duration of the contract period unless transferred by 
CMS pursuant to a subsequent CHOW. Third, we propose that all 
requirements in 42 CFR 414.422(d)(2) must be met. Fourth, we propose 
that the sale of the company must include all of the company's assets 
associated with the CBA and/or PC(s). Finally, we propose that CMS must 
determine that transferring part of the original contract will not 
result in disruption of service or harm to beneficiaries. No transfer 
will be permitted for purposes of this program if we determine that the 
new supplier does not meet the competitive bidding requirements (such 
as financial requirements) and does not possess all applicable licenses 
and accreditation for the product(s). In order for the transfer to 
occur, the contract supplier and successor entity must enter into a 
novation agreement with CMS and the successor entity must accept all 
rights, responsibilities and liabilities under the competitive bidding 
contract. Part of a novation agreement requires successor entity to 
``seamlessly continue to service beneficiaries.'' We believe that these 
proposed conditions are necessary for proper administration of the 
program, to ensure that payments are made correctly and also to ensure 
continued contract accountability and viability along with continuity 
of service and access to beneficiaries. We specifically invite comments 
on whether more or different conditions would be appropriate.
    In addition, we are proposing to update the current CHOW 
regulation, Sec.  414.422(d) to clarify the language to make it easier 
to comprehend. The proposed changes reformat the regulation so that the 
requirements applicable to successor entities and new entities are 
listed separately. These proposed changes to the regulation are 
technical, and not substantive in nature. CMS seeks comments on all 
changes proposed for Sec.  414.422.

X. Proposed Changes to the Appeals Process for Termination of 
Competitive Bidding Contract

    We propose to modify the DMEPOS CBP's appeals process for 
termination of competitive bidding contracts under Sec.  414.423. 
First, we propose to modify the effective date of termination in the 
termination notice CMS sends to a contract supplier found to be in 
breach of contract. Currently, the regulation at 42 CFR 
414.423(b)(2)(vi) indicates that the effective date of termination is 
45 days from the date of the notification letter unless a timely 
hearing request ``has been'' filed or corrective action plan ``has 
been'' submitted within 30 days of the effective date of the 
notification letter (emphasis added). We propose to change these 
references to provide additional clarification. This change would 
emphasize that the contract will automatically be terminated if the 
supplier does not time file a hearing request or submit corrective 
action plan. This proposed change is also being addressed at 42 CFR 
414.423(l). We propose deleting the lead-in sentence, as it does not 
properly lead into the first paragraph. Additionally, we propose 
inserting language from the lead-in sentence in the second paragraph to 
indicate that the contract supplier, ``whose contract has been 
terminated,'' must notify beneficiaries of the termination of their 
contract. Second, we propose to modify the deadline by which a supplier 
whose competitive bidding contract is being terminated must notify 
affected beneficiaries that it is no longer a contract supplier. 
Current regulations at 42 CFR 414.423(l)(2)(i) require a contract 
supplier to provide this notice within 15 days of receipt of a final 
notice of termination. We propose to change the beneficiary 
notification deadline to no later than 15 days prior to the effective 
date of termination. This proposed change is intended to provide 
beneficiaries with the protection of advanced notice prior to a 
contract supplier being terminated from the CBP so they have sufficient 
time to plan/coordinate their current and future DMEPOS needs.

XI. Technical Change Related To Submitting Bids for Infusion Drugs 
Under the DMEPOS Competitive Bidding Program

    The standard payment rules for drugs administered through infusion 
pumps covered as DME are located at section 1842(o)(1)(D) of the Act, 
and mandate that payment for infusion drugs furnished through a covered 
item of DME on or after January 1, 2004, is equal to 95 percent of the 
average wholesale price for such drug in effect on October 1, 2003. The 
regulations implementing section 1842(o)(1)(D) of the Act are located 
at 42 CFR 414.707(a), under Subpart I of Part 414. Section 
1847(a)(2)(A) of the Act mandates the establishment of CBPs for covered 
items defined in section 1834(a)(13), for which payment would otherwise 
be made under section 1834(a), including items used in infusion and 
drugs (other than inhalation drugs) and supplies used in conjunction 
with DME. Section 1847(b)(2)(A)(iii) of the Act prohibits the awarding 
of contracts under a CBP unless the total amounts to be paid to 
contract suppliers are expected to be less than would otherwise be 
paid. The regulations implementing section 1847(b)(2)(A)(iii) of the 
Act with respect to items paid on a fee schedule basis under Subparts C 
and D of Part 414 are located at 42 CFR 414.412(b)(2), and specify that 
``the bids submitted for each item in a PC cannot exceed the payment 
amount that would otherwise apply to the item under Subpart C or 
Subpart D of this part.'' In addition, the regulations regarding the 
conditions for awarding

[[Page 40300]]

contracts under the DMEPOS CBP at 42 CFR 414.414(f) state that ``a 
contract is not awarded under this subpart unless CMS determines that 
the amounts to be paid to contract suppliers for an item under a CBP 
are expected to be less than the amounts that would otherwise be paid 
for the same item under subpart C or subpart D.'' The regulations 
implementing of section 1847(b)(2)(A)(iii) of the Act did not address 
payments for drugs under subpart I, which was an oversight. We 
therefore propose to revise Sec. Sec.  414.412(b)(2) and 414.414(f) to 
include a reference to drugs paid under subpart I in addition to items 
paid under subparts C or D. We propose to revise Sec.  414.412(b)(2) to 
specify that the bid amounts submitted for each drug in a PC cannot 
exceed the payment limits that would otherwise apply to the drug under 
subpart I of part 414. This concerns certain infusion drugs with 
payment limits equal to 95 percent of the average wholesale price for 
the drug in effect on October 1, 2003, in accordance with Sec.  
414.707(a)(3). See http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&SID=7065f17b411e37b3788b6e7fcce21f89&rgn=div8&view=text&node=42:3.0.1.1.1.9.1.3&idno=42. We propose to revise Sec.  414.414(f) to 
specify that a contract is not awarded under this subpart unless CMS 
determines that the amounts to be paid to contract suppliers for 
infusion drugs provided with respect to external infusion pumps under a 
CBP are expected to be less than the amounts that would otherwise be 
paid to suppliers for the same drug under subpart I of part 414. We 
seek comments on this proposal.

XII. Accelerating Health Information Exchange

    HHS believes all patients, their families, and their healthcare 
providers should have consistent and timely access to their health 
information in a standardized format that can be securely exchanged 
between the patient, providers, and others involved in the patient's 
care. (HHS August 2013 Statement, ``Principles and Strategies for 
Accelerating Health Information Exchange''). The Department is 
committed to accelerating health information exchange (HIE) through the 
use of electronic health records (EHRs) and other types of health 
information technology (HIT) across the broader care continuum through 
a number of initiatives including: (1) Alignment of incentives and 
payment adjustments to encourage provider adoption and optimization of 
HIT and HIE services through Medicare and Medicaid payment policies, 
(2) adoption of common standards and certification requirements for 
interoperable HIT, (3) support for privacy and security of patient 
information across all HIE-focused initiatives, and (4) governance of 
health information networks. These initiatives are designed to 
encourage HIE among health care providers, including professionals and 
hospitals eligible for the Medicare and Medicaid EHR Incentive Programs 
and those who are not eligible for the EHR Incentive programs, and are 
designed to improve care delivery and coordination across the entire 
care continuum. For example, the Transition of Care Measure 2 
in Stage 2 of the Medicare and Medicaid EHR Incentive Programs requires 
HIE to share summary records for at least 10 percent of care 
transitions. In addition, to increase flexibility in ONC's regulatory 
certification structure and expand HIT certification, ONC has proposed 
a voluntary 2015 Edition EHR Certification rule to more easily 
accommodate HIT certification for technology used by all health care 
settings to facilitate greater HIE across the entire care continuum.
    We believe that HIE and the use of certified EHRs can effectively 
and efficiently help ESRD facilities and nephrologists improve internal 
care delivery practices, support management of patient care across the 
continuum, and support the reporting of electronically specified 
clinical quality measures (eCQMs). More information on the 2015 Edition 
EHR certification rule can be found at: http://healthit.gov/policy-researchers-implementers/standards-and-certification-regulations.

XIII. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection requirement 
should be approved by OMB, section 3506(c)(2)(A) of the Paperwork 
Reduction Act of 1995 requires that we solicit comment on the following 
issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

B. Requirements in Regulation Text

    In section II.F of this proposed rule, we are proposing changes to 
regulatory text for the ESRD PPS in CY 2015. However, the changes that 
are being proposed do not impose any new information collection 
requirements.

C. Additional Information Collection Requirements

    This proposed rule does not impose any new information collection 
requirements in the regulation text, as specified above. However, this 
proposed rule does make reference to several associated information 
collections that are not discussed in the regulation text contained in 
this document. The following is a discussion of these information 
collections.
1. ESRD QIP
    The information collection requirements associated with the ESRD 
QIP are currently approved under OMB control number 0938-0386.
a. Data Validation Requirements for the PY 2017 ESRD QIP
    Section III.F.9 in this proposed rule outlines our data validation 
proposals for PY 2017. Specifically, we propose to randomly sample 
records from 300 facilities as part of our continuing pilot data-
validation program. Each sampled facility would be required to produce 
approximately 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 these 
validation requirements is the time and effort necessary to submit the 
requested records to a CMS contractor. We estimate that it will take 
each facility approximately 2.5 hours to comply with this requirement. 
If 300 facilities are asked to submit records, we estimate that the 
total combined annual burden for these facilities will be 750 hours 
(300 facilities x 2.5 hours). According to the Bureau of Labor 
Statistics, the mean hourly wage of a registered nurse is $33.13/hour. 
Since we anticipate that nurses (or administrative staff who would be 
paid at a lower hourly wage) would submit this data, we estimate that 
the aggregate cost of the CROWNWeb data validation would be $24,847.50 
(750 hours x $33.13/hour) total or $82.83 ($24,847.50/300 facilities) 
per facility in the sample.

[[Page 40301]]

    Under the proposed feasibility study for validating data reported 
to the NHSN Dialysis Event Module, we propose to randomly select nine 
facilities to provide CMS with a quarterly list of all positive blood 
cultures drawn from their patients during the quarter, including any 
positive blood cultures collected on the day of, or the day following, 
a facility patient's admission to a hospital. A CMS contractor will 
review the lists to determine if dialysis events for the patients in 
question were accurately reported to the NHSN Dialysis Event Module. If 
we determine that additional medical records are needed to validate 
dialysis events, facilities will be required to provide those records 
within 60 days of a request for this information. We estimate that the 
burden associated with this feasibility study will be the time and 
effort necessary for each selected facility to compile and submit to 
CMS a quarterly list of positive blood cultures drawn from its 
patients. We estimate that it will take each participating facility 
approximately two hours per quarter to comply with this submission. If 
nine facilities are asked to provide lists, we estimate the quarterly 
burden for these facilities would be 72 hours per year (9 facilities x 
2 hours/quarter x 4 quarters/year). Again, we estimate the mean hourly 
wage of a registered nurse to be $33.13/hour, and we anticipate nurses 
(or administrative staff who would be paid at a lower hourly wage) 
would be responsible for preparing and submitting the list. Because we 
anticipate nurses (or administrative staff who would be paid at a lower 
hourly rate) would compile and submit these data, we estimate that the 
aggregate annual cost of the feasibility study to validate NHSN data 
would be $2,385.36 (72 hours x $33.13/hour) total or $265.04 per 
facility ($2,385.36/9 facilities).
b. Proposed NHSN Healthcare Personnel Influenza Vaccination Reporting 
Measure for PY 2018
    We are proposing to include, beginning with the PY 2018 ESRD QIP, a 
measure requiring facilities to report healthcare personnel influenza 
vaccination data to NHSN. The NHSN is a secure, Internet-based 
surveillance system which is maintained and managed by CDC. Many 
dialysis facilities already submit NHSN Bloodstream Infection clinical 
measure data to NHSN. Specifically, we are proposing to require 
facilities to submit on an annual basis an HCP Influenza Vaccination 
Summary Form to NHSN, according to the specifications available in the 
NHSN Healthcare Personnel Safety Component Protocol. We estimate the 
burden associated with this measure to be the time and effort necessary 
for facilities to complete and submit the HCP Influenza Vaccination 
Summary Form on an annual basis. We estimate that approximately 5,996 
facilities will treat ESRD patients in PY 2018. We estimate it will 
take each facility approximately 75 minutes to collect and submit the 
data necessary to complete the Healthcare Personnel Influenza 
Vaccination Summary Form on an annual basis. Therefore, the estimated 
total annual burden associated with reporting this measure in PY 2018 
is 7,495 hours [(75/60) hours x 5,996 facilities]. Again, we estimate 
the mean hourly wage of a registered nurse to be $33.13, and we 
anticipate nurses (or administrative staff who would be paid at a lower 
hourly wage) would be responsible for this reporting. In total, we 
believe the cost for all ESRD facilities to comply with the reporting 
requirements associated with the NHSN Healthcare Personnel Influenza 
Vaccination reporting measure would be approximately $248,309 (7,495 
hours x $33.13/hour) total, or $41.37 ($248,309/5,996 facilities) per 
facility.

XIV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XV. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review) and Executive Order 13563 on Improving Regulation and 
Regulatory Review (January 11, 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, harmonizing 
rules, and promoting flexibility. This rule has been designated 
economically significant under section 3(f)(1) of Executive Order 
12866. Accordingly, the rule has been reviewed by the Office of 
Management and Budget. We have prepared a Regulatory Impact Analysis 
that to the best of our ability presents the costs and benefits of the 
proposed rule. We solicit comments on the regulatory impact analysis 
provided.
2. Statement of Need
    This rule proposes a number of routine updates for renal dialysis 
services in CY 2015 and proposes several policy changes to the ESRD 
PPS. The routine updates include proposed updates to the wage index 
values, the wage index budget-neutrality adjustment factor, and the 
outlier payment threshold amounts. The proposed policy changes to the 
ESRD PPS include the revisions to the ESRDB market basket, changes in 
the CBSA delineations, changes to the labor-related share, 
clarifications in the low-volume payment adjustment, and additions and 
corrections to the ICD-10 codes that will be used for the comorbidity 
payment adjustment when compliance with ICD-10 is required beginning 
October 1, 2015. In addition, this rule implements sections 
1881(b)(14)(F)(i) and (I), as amended by section 217 (b)(1) and (2) of 
PAMA, under which the drug utilization adjustment transition is 
eliminated and a 0.0 percent update to the ESRD PPS base rate is 
imposed in its place. This rule also implements the delay in payment 
for oral-only drugs used for the treatment of ESRD under the ESRD PPS 
until January 1, 2024 as required by section 217(a) of PAMA. Failure to 
publish this proposed rule would result in ESRD facilities not 
receiving appropriate payments in CY 2015.
    This rule proposes to implement requirements for the ESRD QIP by 
proposing to adopt measure sets for the PYs 2017 and 2018 programs, as 
directed by section 1881(h) of the Act. Failure to propose requirements 
for the PY 2017 ESRD QIP would prevent continuation of the ESRD QIP 
beyond PY 2016. In addition, proposing requirements for the PY 2018 
ESRD QIP provides facilities with more time to review and fully 
understand new measures before their implementation in the ESRD QIP.
    This proposed rule proposes to establish a methodology for 
adjusting DMEPOS payment amounts using information from the Medicare 
DMEPOS CBP. The proposed rule would also phase in special payment rules 
for certain DME and enteral nutrition in a limited number of areas

[[Page 40302]]

under the Medicare DMEPOS CBP. This proposed rule also proposes to 
clarify the Medicare hearing aid coverage exclusion under section 
1862(a)(7). In addition, this proposed rule would modify the definition 
of minimal self-adjustment at Sec.  414.402 to indicate what 
specialized training is needed by suppliers to provide custom fitting 
services if they are not certified orthotists. Finally, if finalized, 
this proposed rule would provide clarification of the CHOW under the 
Medicare DMEPOS CBP.
3. Overall Impact
    We estimate that the proposed revisions to the ESRD PPS will result 
in an increase of approximately $30 million in payments to ESRD 
facilities in CY 2015, which includes the amount associated with 
updates to outlier threshold amounts, updates to the wage index, 
changes in CBSA delineations, and the labor-related share.
    For PY 2017, we estimate that the proposed requirements related to 
the ESRD QIP will cost approximately $27 thousand total, and the 
payment reductions will result in a total impact of approximately $16 
million across all facilities. For PY 2018, we estimate that the 
proposed requirements related to the ESRD QIP will cost approximately 
$248 thousand total, and the payment reductions will result in a total 
impact of approximately $6.4 million across all facilities, resulting 
in a total impact from the proposed ESRD QIP of approximately $6.6 
million.
    We estimate that the proposed methodology for adjusting DMEPOS 
payment amounts using information from DMEPOS CBPs would save over $7 
billion over FY 2016-2020. The savings would be primarily achieved from 
the reduced payment amounts for items and services.
    We estimate the special payment rules would not have a negative 
impact on beneficiaries and suppliers, or on the Medicare program. 
Contract suppliers are responsible for furnishing items and services 
needed by the beneficiary, and the cost to suppliers for furnishing 
these items and services generally would not change based on whether or 
not the equipment and related items and services are paid for 
separately under a capped rental payment method. Because the supplier's 
bids would reflect the cost of furnishing items in accordance with the 
new payment rules, we expect the overall savings generally would be the 
same as they are under the current payment rules. Furthermore, as 
indicated above, the special payment rules would be phased in under a 
limited number of areas first to determine impact on the program, 
beneficiaries, and suppliers, including their effects on cost, quality, 
and access before expanding to other areas after notice and comment 
rulemaking, if supported by evaluation results. We believe that the 
special payment rules would give beneficiaries more choice and 
flexibility in changing suppliers. We estimate the proposed 
clarification of the statutory Medicare hearing aid coverage exclusion 
leading to withdrawal of coverage for bone anchored hearing aid (BAHA) 
devices would not have a significant fiscal impact on the Medicare 
program because the Medicare program expenditure for BAHA paid under 
Medicare during the period CY2005 through CY 2013 was less than 
9,000,000 per year. This proposed regulation would provide guidance as 
to coverage of DME with regard to the statutory exclusion. The proposed 
rule proposes to specify that cochlear implants and brain stem implants 
are not hearing aids subject to the statutory exclusion and therefore, 
proposes no change to the current Medicare coverage status for these 
items.
    We estimate that the proposed clarification of the definition of 
minimal self-adjustment would have no significant impact on program 
expenditures or access to orthotics. This proposed clarification would 
impact suppliers furnishing custom fitted orthotics that do not have 
the expertise necessary to make more than minimal adjustments to an 
orthotic that a beneficiary or caregiver could be trained to make. The 
impact on these few suppliers will vary according to the caseload of 
custom fitted orthotics provided by an individual supplier. However, we 
believe the majority of custom fitted devices are currently being 
furnished by an individual with expertise.
    We estimate clarifying the CHOW under the Medicare DMEPOS CBP would 
have no significant impact to DMEPOS suppliers.

B. Detailed Economic Analysis

1. CY 2015 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 2014 to estimated payments in CY 2015. To 
estimate the impact among various types of ESRD facilities, it is 
imperative that the estimates of payments in CY 2014 and CY 2015 
contain similar inputs. Therefore, we simulated payments only for those 
ESRD facilities for which we are able to calculate both current 
payments and new payments.
    For this proposed rule, we used the December 2013 update of CY 2013 
National Claims History file as a basis for Medicare dialysis 
treatments and payments under the ESRD PPS. We updated the 2013 claims 
to 2014 and 2015 using various updates. The updates to the ESRD PPS 
base rate are described in section II.B of this proposed rule. Table 38 
shows the impact of the estimated CY 2015 ESRD payments compared to 
estimated payments to ESRD facilities in CY 2014.

                              Table 38--Impact of Proposed Changes in Payments to ESRD Facilities or CY 2015 Proposed Rule
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Effect of 2015
                                                                                                            changes in
                                                                                          Effect of 2015   wage indexes,  Effect of 2015
                                                             Number of       Number of      changes in         CBSA         changes in       Effect of
                      Facility type                         facilities      treatments    outlier policy   designations    payment rate     total 2015
                                                                           (in millions)         %          and labor-       update %        changes %
                                                                                                           related share
                                                                                                                 %
                                                                       A               B               C               D               E               F
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities..........................................           5,996            39.1             0.3             0.0             0.0             0.3
Type:
    Freestanding........................................           5,520            36.6             0.3             0.0             0.0             0.3
    Hospital based......................................             476             2.5             0.3             0.2             0.0             0.5
Ownership Type:

[[Page 40303]]

 
    Large dialysis organization.........................           4,150            27.5             0.3            -0.1             0.0             0.2
    Regional chain......................................             871             5.9             0.2             0.2             0.0             0.4
    Independent.........................................             582             3.6             0.2             0.2             0.0             0.4
    Hospital based \1\..................................             393             2.1             0.3             0.1             0.0             0.4
Geographic Location:
    Rural...............................................           1,212             5.9             0.3            -0.8             0.0            -0.5
    Urban...............................................           4,784            33.3             0.3             0.1             0.0             0.4
Census Region:
    East North Central..................................             979             5.8             0.3            -0.3             0.0             0.0
    East South Central..................................             497             2.9             0.3            -1.2             0.0            -0.9
    Middle Atlantic.....................................             661             4.8             0.3             0.9             0.0             1.1
    Mountain............................................             352             1.9             0.2            -0.1             0.0             0.1
    New England.........................................             177             1.3             0.3             1.3             0.0             1.5
    Pacific \2\.........................................             710             5.4             0.2             1.5             0.0             1.7
    Puerto Rico and Virgin Islands......................              42             0.3             0.3            -3.9             0.0            -3.6
    South Atlantic......................................           1,333             9.1             0.3            -0.6             0.0            -0.3
    West North Central..................................             438             2.0             0.3            -0.2             0.0             0.0
    West South Central..................................             807             5.6             0.3            -0.6             0.0            -0.3
Facility Size:
    Less than 4,000 treatments\3\.......................           1,086             2.7             0.3            -0.3             0.0             0.0
    4,000 to 9,999 treatments...........................           2,226            10.5             0.3            -0.3             0.0             0.0
    10,000 or more treatments...........................           2,523            25.7             0.3             0.1             0.0             0.4
    Unknown.............................................             161             0.3             0.3            -0.1             0.0             0.2
Percentage of Pediatric Patients:
    Less than 2%........................................           5,885            38.7             0.3             0.0             0.0             0.3
    Between 2 and 19%...................................              48             0.4             0.3             0.0             0.0             0.2
    Between 20 and 49%..................................              12             0.0             0.1            -0.4             0.0            -0.3
    More than 50%.......................................              51             0.0             0.0             0.2             0.0             0.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 1,086 ESRD facilities with less than 4,000 treatments, approximately 422 would be expected to qualify for the low-volume adjustment in 2015.
  This estimate is based on actual claims for 2013 plus the number of hospital-based facilities that may newly qualify with a change in policy. The low-
  volume adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these low-volume facilities is a 0.4 percent
  decrease in payments.
Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not additive.

    Column A of the impact table indicates the number of ESRD 
facilities for each impact category and column B indicates the number 
of dialysis treatments (in millions). The overall effect of the 
proposed changes to the outlier payment policy described in section 
II.B.4 of this proposed rule is shown in column C. For CY 2015, the 
impact on all ESRD facilities as a result of the changes to the outlier 
payment policy will be a 0.3 percent increase in estimated payments. 
The estimated impact of the changes to outlier payment policy ranges 
from a 0.0 percent to a 0.3 percent increase. Nearly all ESRD 
facilities are anticipated to experience a positive effect in their 
estimated CY 2015 payments as a result of the proposed outlier policy 
changes.
    Column D shows the effect of the wage index, new CBSA delineations, 
and labor-related share on ESRD facilities and reflects the CY 2015 
wage index values for the ESRD PPS payments. Facilities located in the 
census region of Puerto Rico and the Virgin Islands would receive a 3.9 
percent decrease in estimated payments in CY 2015. Since most of the 
facilities in this category are located in Puerto Rico, the decrease is 
primarily due to the change in the labor-related share. The other 
categories of types of facilities in the impact table show changes in 
estimated payments ranging from a 3.9 percent decrease to a 1.5 percent 
increase due to the update of the wage indexes, CBSA delineations and 
labor-related share.
    Column E shows the effect of the ESRD PPS payment rate update of 
0.0 percent as required by section 1881(b)(14)(F) and (I) as amended by 
section 217 of PAMA.
    Column F reflects the overall impact (that is, the effects of the 
proposed outlier policy changes, the proposed wage index, the proposed 
CBSA delineations, the proposed labor-related share, and the effect of 
the payment rate update. We expect that overall ESRD facilities will 
experience a 0.3 percent increase in estimated payments in 2015. ESRD 
facilities in Puerto Rico and the Virgin Islands are expected to 
receive a 3.6 percent decrease in their estimated payments in CY 2015. 
This larger decrease is primarily due to the negative impact of the 
change in the labor-related share. The other categories of types of 
facilities in the impact table show impacts ranging from a decrease of 
0.9 percent to increase of 1.7 percent in their 2015 estimated 
payments.

[[Page 40304]]

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 2015, we estimate that the proposed ESRD PPS will 
have zero impact on these other providers.
c. Effects on the Medicare Program
    We estimate that Medicare spending (total Medicare program 
payments) for ESRD facilities in CY 2015 will be approximately $9.1 
billion. This estimate takes into account a projected increase in fee-
for-service Medicare dialysis beneficiary enrollment of 3.2 percent in 
CY 2015.
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 
0.3 percent overall increase in the proposed ESRD PPS payment amounts 
in CY 2015, we estimate that there will be an increase in beneficiary 
co-insurance payments of 0.3 percent in CY 2015, which translates to 
approximately $10 million.
e. Alternatives Considered
    For this proposed rule, we proposed to implement a 50/50 blended 
wage index for CY 2015 that would apply to all ESRD facilities. 
Specifically, the proposal would transition all ESRD facilities 
experiencing an impact, or not, due to the implementation of the new 
CBSA delineations. We considered proposing to implement the new CBSA 
delineations without a transition; however we decided to mitigate the 
impact this change would have on ESRD facilities that may experience a 
decrease in payments due to the change.
    In addition, for CY 2015 we proposed to implement a revised 50.673 
percent labor-related share using a 2-year transition. This proposal 
would transition all ESRD facilities from the current labor-related 
share of 41.737 percent to the revised labor-related share of 50.673 
percent. We considered proposing to implement the labor-related share 
without a transition; however we decided to mitigate the impact this 
change would have on ESRD facilities that may experience a decrease in 
payments due to the change.
2. End-Stage Renal Disease Quality Incentive Program
a. Effects of the PY 2017 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. The 
methodology that we are proposing to use to determine a facility's TPS 
for PY 2017 is described in section III.F.5 of this proposed rule. Any 
reductions in ESRD PPS payments as a result of a facility's performance 
under the PY 2017 ESRD QIP would affect the facility's reimbursement 
rates in CY 2017.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 20 percent or 
1,227 of the facilities would likely receive a payment reduction in PY 
2017. Facilities that do not receive a TPS are not eligible for a 
payment reduction.
    In conducting our impact assessment, we have assumed that there 
will be an initial count of 5,996 dialysis facilities paid under the 
ESRD PPS. Table 39 shows the overall estimated distribution of payment 
reductions resulting from the PY 2017 ESRD QIP.

 Table 39--Estimated Distribution of PY 2017 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                        Number of          Percent of
    Payment reduction (percent)         facilities         facilities
------------------------------------------------------------------------
0.0...............................              4,484               78.5
0.5...............................                887               15.5
1.0...............................                264                4.6
1.5...............................                 58                1.0
2.0...............................                 18                0.3
------------------------------------------------------------------------
Note: This table excludes 285 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a Total Performance Score.

To estimate whether or not a facility would receive a payment reduction 
in PY 2017, 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 40.

                       Table 40--Data Used To Estimate PY 2017 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                         Period of time used to  calculate
                                       achievement  thresholds, performance
              Measure                 standards, benchmarks, and  improvement          Performance period
                                                    thresholds
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    % Fistula.....................  Jan 2012--Dec 2012........................  Jan 2013--Dec 2013.
    % Catheter....................  Jan 2012--Dec 2012........................  Jan 2013--Dec 2013.
Kt/V:
    Adult HD......................  Jan 2012--Dec 2012........................  Jan 2013--Dec 2013.
    Adult PD......................  Jan 2012--Dec 2012........................  Jan 2013--Dec 2013.
    Pediatric HD..................  Jan 2012--Dec 2012........................  Jan 2013--Dec 2013.
Hypercalcemia.....................  May 2012--Dec 2012........................  Jan 2013--Dec 2013.

[[Page 40305]]

 
SRR...............................  Jan 2011--Dec 2011........................  Jan 2012--Dec 2012.
----------------------------------------------------------------------------------------------------------------

    Clinical measure topic areas with less than 11 cases for a facility 
were not included in that facility's Total Performance Score. Each 
facility's Total Performance Score was compared to the estimated 
minimum Total Performance Score and the payment reduction table found 
in section III.F.8 of this proposed rule. Facility reporting measure 
scores were estimated using available data from CY 2013. Facilities 
were required to have a score on at least one clinical and one 
reporting measure in order to receive a Total Performance Score.
    To estimate the total payment reductions in PY 2017 for each 
facility resulting from this proposed rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
January 2013 and December 2013 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 2013 through December 2013 times the estimated payment 
reduction percentage). For PY 2017, the total payment reduction for the 
1,227 facilities estimated to receive a reduction is approximately 
$11.9 million ($11,873,127). Further, we estimate that the total costs 
associated with the collection of information requirements for PY 2017 
described in section VIII.1.a of this proposed rule would be 
approximately $27 thousand for all ESRD facilities. As a result, we 
estimate that ESRD facilities will experience an aggregate impact of 
approximately $11.9 million ($27,232 + $11,873,127 = $11,900,359) in PY 
2017, as a result of the PY 2017 ESRD QIP.
    Table 41 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2017. The table 
estimates 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 are proposing to use for the PY 2017 ESRD QIP, the actual 
impact of the PY 2017 ESRD QIP may vary significantly from the values 
provided here.

                                    Table 41--Impact of Proposed QIP Payment Reductions to ESRD Facilities in PY 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Number of
                                                                                                                         facilities          Payment
                                                                    Number of         Number of         Number of        expected to        reduction
                                                                   facilities      treatments 2013   facilities with      receive a      (percent change
                                                                                    (in millions)       QIP score          payment        in total ESRD
                                                                                                                          reduction         payments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities................................................             5,996              39.1             5,711             1,227             -0.14
Facility Type:
    Freestanding..............................................             5,520              36.6             5,289             1,093             -0.13
    Hospital-based............................................               476               2.5               422               134             -0.24
Ownership Type:
    Large Dialysis............................................             4,150              27.5             3,995               786             -0.12
    Regional Chain............................................               871               5.9               836               169             -0.14
    Independent...............................................               582               3.6               534               157             -0.22
    Hospital-based (non-chain)................................               393               2.1               346               115             -0.25
Facility Size:
    Large Entities............................................             5,021              33.5             4,831               955             -0.12
    Small Entities \1\........................................               975               5.7               880               272             -0.23
Rural Status:
    1) Yes....................................................             1,212               5.9             1,167               187             -0.10
    2) No.....................................................             4,784              33.3             4,544             1,040             -0.15
Census Region:
    Northeast.................................................               792               5.8               770               160             -0.14
    Midwest...................................................             1,341               7.7             1,276               314             -0.16
    South.....................................................             2,527              17.5             2,460               504             -0.12
    West......................................................             1,015               7.1               966               159             -0.10
    US Territories \2\........................................               321               1.0               239                90             -0.33
Census Division:
    East North Central........................................               979               5.8               909               249             -0.19
    East South Central........................................               497               2.9               475                92             -0.12
    Middle Atlantic...........................................               661               4.8               632               139             -0.16
    Mountain..................................................               352               1.9               335                55             -0.10
    New England...............................................               177               1.3               168                29             -0.13
    Pacific...................................................               710               5.4               671               119             -0.11
    South Atlantic............................................             1,333               9.1             1,279               314             -0.15
    West North Central........................................               438               2.0               417                81             -0.12
    West South Central........................................               807               5.6               783               125             -0.10
    US Territories \2\........................................                42               0.3                42                24             -0.42
Facility Size ( of total treatments):

[[Page 40306]]

 
    Less than 4,000 treatments................................             1,086               2.7               928               211             -0.17
    4,000-9,999 treatments....................................             2,226              10.5             2,174               423             -0.12
    Over 10,000 treatments....................................             2,523              25.7             2,514               557             -0.14
    Unknown...................................................               161               0.3                95                36             -0.38
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 and CROWNWeb data through December 2013.

b. Effects of the PY 2018 ESRD QIP
    The methodology that we are proposing to use to determine a 
facility's TPS for the PY 2018 ESRD QIP is described in sections 
III.F.6 and III.F.7 of this proposed rule. Any reductions in ESRD PPS 
payments as a result of a facility's performance under the PY 2018 ESRD 
QIP would apply to ESRD PPS payments made to the facility in CY 2018.
    We estimate that, of the total number of dialysis facilities 
(including those not receiving a TPS), approximately 16 percent or 919 
of the facilities would likely receive a payment reduction in PY 2018. 
Facilities that do not receive a TPS are not eligible for a payment 
reduction.
    In conducting our impact assessment, we have assumed that there 
will be 5,996 dialysis facilities paid through the PPS. Table 42 shows 
the overall estimated distribution of payment reductions resulting from 
the PY 2018 ESRD QIP.

 Table 42--Estimated Distribution of PY 2018 ESRD QIP Payment Reductions
------------------------------------------------------------------------
                                                            Percent of
      Payment reduction  (percent)           Number of      facilities
                                            facilities       (percent)
------------------------------------------------------------------------
0.0.....................................           4,989            84.4
0.5.....................................             729            12.3
1.0.....................................             132             2.2
1.5.....................................              35             0.6
2.0.....................................              23             0.4
------------------------------------------------------------------------
Note: This table excludes 88 facilities that we estimate will not
  receive a payment reduction because they will not report enough data
  to receive a Total Performance Score.

    To estimate whether or not a facility would receive a payment 
reduction in PY 2018, 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 43.

                       Table 43-Data Used to Estimate PY 2018 ESRD QIP Payment Reductions
----------------------------------------------------------------------------------------------------------------
                                              Period of time used to
                                               calculate achievement
                 Measure                      thresholds, performance               Performance period
                                            standards, benchmarks, and
                                              improvement thresholds
----------------------------------------------------------------------------------------------------------------
Vascular Access Type:
    % Fistula............................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
    % Catheter...........................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
Kt/V:
    Adult HD.............................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
    Adult PD.............................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
    Pediatric HD.........................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
    Pediatric PD.........................  Jan 2012-Dec 2012...........  Jan 2013-Dec 2013.
Hypercalcemia............................  May 2012-Dec 2012...........  Jan 2013-Dec 2013.
SRR......................................  Jan 2011-Dec 2011...........  Jan 2012-Dec 2012.
STrR.....................................  Jan 2011-Dec 2011...........  Jan 2012-Dec 2012
----------------------------------------------------------------------------------------------------------------

    Clinical measure topic areas with less than 11 cases for a facility 
were not included in that facility's Total Performance Score. Each 
facility's Total Performance Score was compared to an estimated minimum 
Total Performance Score and an estimated payment reduction table that 
were consistent with the proposals outlined in Section III.G.9 of this 
proposed rule. Facility reporting measure scores were estimated using 
available data from CY 2013. Facilities were required to have a score 
on at least one clinical and one reporting measure in order to receive 
a Total Performance Score.
    To estimate the total payment reductions in PY 2018 for each 
facility resulting from this proposed rule, we multiplied the total 
Medicare payments to the facility during the one year period between 
January 2013 and December 2013 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 2013 through December 2013 times the estimated payment 
reduction percentage). For PY 2018, the total payment reduction for all 
of the 919 facilities expected to receive a reduction is approximately 
$7 million ($6,958,521). Further, we estimate that

[[Page 40307]]

the total costs associated with the collection of information 
requirements for PY 2018 described in Section VIII.1.b of this proposed 
rule would be approximately $248 thousand for all ESRD facilities. As a 
result, we estimate that ESRD facilities will experience an aggregate 
impact of approximately $7.2 million ($248,309 + $6,958,521 = 
$7,206,830) in PY 2018, as a result of the PY 2018 ESRD QIP.
    Table 44 below shows the estimated impact of the finalized ESRD QIP 
payment reductions to all ESRD facilities for PY 2018. 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 2018 ESRD QIP, the actual impact of 
the PY 2018 ESRD QIP may vary significantly from the values provided 
here.

                                   Table 44--Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Number of
                                                                                                                         facilities          Payment
                                                                    Number of         Number of         Number of        expected to        reduction
                                                                   facilities     treatments  2013  facilities  with      receive a      (percent change
                                                                                    (in millions)      QIP  score          payment        in total ESRD
                                                                                                                          reduction         payments)
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Facilities................................................             5,996              39.1             5,908               919             -0.10
Facility Type:
    Freestanding..............................................             5,520              36.6             5,455               818             -0.09
    Hospital-based............................................               476               2.5               453               101             -0.17
Ownership Type:
    Large Dialysis............................................             4,150              27.5             4,115               580             -0.08
    Regional Chain............................................               871               5.9               858               127             -0.10
    Independent...............................................               582               3.6               561               123             -0.15
Hospital-based (non-chain):                                                  393               2.1               374                89             -0.19
    Facility Size:............................................
    Large Entities............................................             5,021              33.5             4,973               707             -0.08
    Small Entities \1\........................................               975               5.7               935               212             -0.16
Rural Status:
    (1) Yes...................................................             1,212               5.9             1,190               139             -0.07
    (2) No....................................................             4,784              33.3             4,718               780             -0.10
Census Region:
    Northeast.................................................               792               5.8               784               111             -0.08
    Midwest...................................................             1,341               7.7             1,318               226             -0.10
    South.....................................................             2,527              17.5             2,517               337             -0.07
    West......................................................             1,015               7.1             1,008               109             -0.06
    US Territories \2\........................................               321               1.0               281               136             -0.43
Census Division:
    East North Central........................................               979               5.8               952               202             -0.13
    East South Central........................................               497               2.9               493                67             -0.09
    Middle Atlantic...........................................               661               4.8               650               106             -0.10
    Mountain..................................................               352               1.9               349                43             -0.08
    New England...............................................               177               1.3               172                21             -0.09
    Pacific...................................................               710               5.4               703                90             -0.08
    South Atlantic............................................             1,333               9.1             1,315               232             -0.10
    West North Central........................................               438               2.0               426                53             -0.07
    West South Central........................................               807               5.6               806                90             -0.07
    US Territories \2\........................................                42               0.3                42                15             -0.25
Facility Size (# of total treatments):
    Less than 4,000 treatments................................             1,086               2.7             1,032               215             -0.16
    4,000-9,999 treatments....................................             2,226              10.5             2,225               277             -0.07
    Over 10,000 treatments....................................             2,523              25.7             2,523               352             -0.07
    Unknown...................................................               161               0.3               128                75             -0.59
--------------------------------------------------------------------------------------------------------------------------------------------------------
\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 and CROWNWeb data through December 2013.

3. DMEPOS Provisions
a. Effects of the Proposed Methodology for Adjusting DMEPOS Payment 
Amounts Using Information From Competitive Bidding Programs
    We estimate that the proposed methodology for adjusting DMEPOS 
payment amounts using information from DMEPOS CBPs would save over $7 
billion over FY 2016 through 2020. The savings would be primarily 
achieved from price reductions for items. Therefore, most of the 
economic impact is expected from the reduced prices. We estimate that 
approximately half of the DMEPOS items and services furnished to 
Medicare beneficiaries are furnished to beneficiaries residing outside 
existing CBAs. (See Table 45.)

[[Page 40308]]

          Table 45--Impact of Pricing Items in Non-Competitive Areas Using Competitive Bidding Pricing
----------------------------------------------------------------------------------------------------------------
                                                                 Impact on the federal    Impact on beneficiary
                                                                 government in dollars   cost sharing in dollars
                              FY                                   (to the nearer ten       (to the nearer ten
                                                                        million)                 million)
----------------------------------------------------------------------------------------------------------------
2016..........................................................                     -880                     -270
2017..........................................................                   -1,430                     -470
2018..........................................................                   -1,520                     -510
2019..........................................................                   -1,630                     -540
2020..........................................................                   -1,750                     -580
----------------------------------------------------------------------------------------------------------------

Although these transfers create incentives that very likely cause 
changes in the way society uses its resources, we lack data with which 
to estimate the resulting social costs or benefits.
b. Effects of the Proposed Special Payment Methodologies and Payment 
Rules for Durable Medical Equipment and Enteral Nutrition Furnished 
Under the Competitive Bidding Program
    We believe that the proposed special payment rules would not have a 
significant impact on beneficiaries and suppliers. Contract suppliers 
are responsible for furnishing items and services needed by the 
beneficiary, and the cost to suppliers for furnishing these items and 
services does not change based on whether or not the equipment and 
related items and services are paid for separately under a capped 
rental payment method. Because the supplier's bids would reflect the 
cost of furnishing items in accordance with the new payment rules, we 
expect the overall savings would be generally the same as they are 
under the current payment rules. Furthermore, as indicated above, we 
are proposing that the alterative payment rules would be phased in 
under a limited number of areas first to determine impact on the 
program, beneficiaries, and suppliers. If supported by evaluation 
results, a decision to expand the proposed special payment rules to 
other areas would be addressed in future rulemaking.
c. Effects of the Proposed Clarification of the Scope of the Medicare 
Hearing Aid Coverage Exclusion
    This proposed rule proposes to clarify the scope of the Medicare 
coverage exclusion for hearing aids and proposes to no longer cover 
BAHAs. However, if finalized, this proposed rule would have no 
significant fiscal impact on the Medicare program, because Medicare 
program expenditures for BAHAs during the period CY2005 through CY 2013 
have been insignificant. This proposed clarification would provide 
clear guidance about coverage of DME with regard to the statutory 
hearing aid exclusion. The proposed regulation, if finalized, would 
explicitly except cochlear implants and brain stem implants from the 
hearing aid exclusion, and therefore, Medicare coverage for these 
devices would continue.
    We estimate that the proposed clarification of the scope of the 
Medicare hearing coverage exclusion would save Medicare approximately 
$80 million dollars over five years beginning in January 1, 2015 
through September 30, 2019. The savings would be primarily achieved 
from removing coverage of the BAHA device. (See Table 46.)

 Table 46--Clarification of the Statutory Medicare Hearing Aid Coverage
                                Exclusion
------------------------------------------------------------------------
                                                        Impact to the
                                                     Federal Government
                        FY                             (rounded to the
                                                    nearer $10 millions)
------------------------------------------------------------------------
2015..............................................                   -10
2016..............................................                   -10
2017..............................................                   -20
2018..............................................                   -20
2019..............................................                   -20
------------------------------------------------------------------------

d. Effects of the Proposed Definition of Minimal Self-Adjustment of 
Orthotics Under Competitive Bidding
    The proposed rule would modify the definition of minimal self-
adjustment to indicate that it means an adjustment that the 
beneficiary, caretaker for the beneficiary, or supplier of the device 
can perform and does not require the services of a certified orthotist 
(that is, an individual certified by either the American Board for 
Certification in Orthotics and Prosthetics, Inc., or the Board for 
Orthotist/Prosthetist Certification) or a physician as defined in 
section 1861(r) of the Act, a treating practitioner means a physician 
assistant, nurse practitioner, or clinical nurse specialist as defined 
in section 1861(aa)(5) of the Act, an occupational therapist as defined 
in 42 CFR 484.4, or physical therapist as defined in 42 CFR 484.4 in 
compliance with all applicable Federal and State licensure and 
regulatory requirements. We estimate that the proposed clarification of 
the definition of minimal self-adjustment would have no significant 
impact on program expenditures or access to orthotics. This proposed 
clarification would impact suppliers furnishing custom fitted orthotics 
that do not have the expertise necessary to make more than minimal 
adjustments to an orthotic that a beneficiary or caregiver could be 
trained to make.
e. Effects of the Proposed Revision to Change of Ownership Rules To 
Allow Contract Suppliers To Sell Specific Lines of Business
    This rule would clarify the change of ownership rules so as to not 
interfere with the normal course of business for DME suppliers. This 
rule would establish an exception under the CHOW rules to allow 
transfer of part of a competitive bidding contract when a contract 
supplier sells a distinct line of business to a qualified successor 
entity r under certain specific circumstances. This clarification would 
impact businesses in a positive way by allowing them to conduct 
everyday transactions without interference from our rules and 
regulations.

C. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 47 below, we 
have prepared an accounting statement showing the classification of the 
transfers and costs associated with the various provisions of this 
proposed rule.

[[Page 40309]]

             Table 47--Accounting Statement: Classification of Estimated Transfers and Costs/Savings
----------------------------------------------------------------------------------------------------------------
                Category                                                Transfers
----------------------------------------------------------------------------------------------------------------
                                              ESRD PPS for CY 2015
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.........  $ 30 million.
From Whom to Whom......................  Federal government to ESRD providers.
Increased Beneficiary Co-insurance       $10 million.
 Payments.
From Whom to Whom......................  Beneficiaries to ESRD providers.
----------------------------------------------------------------------------------------------------------------
                                              ESRD QIP for PY 2017
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$11.9 million.
From Whom to Whom......................  Federal government to ESRD providers.
----------------------------------------------------------------------------------------------------------------
                Category                                                  Costs
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ESRD Provider       $27 thousand.
 Costs.
----------------------------------------------------------------------------------------------------------------
                                              ESRD QIP for PY 2018
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$7 million.
From Whom to Whom......................  Federal government to ESRD providers.
Annualized Monetized ESRD Provider       $248 thousand.
 Costs.
----------------------------------------------------------------------------------------------------------------

 
 
----------------------------------------------------------------------------------------------------------------
                    Pricing Items in Non-competitive Areas Using Competitive Bidding Pricing
----------------------------------------------------------------------------------------------------------------
               Category                                                 Transfer
----------------------------------------------------------------------------------------------------------------
   Annualized monetized transfer on             Estimates              Year        Discount rate  Period covered
       beneficiary cost sharing                                           dollar       (percent)
----------------------------------------------------------------------------------------------------------------
                                        -$464.5 million.........            2014               7       2016-2020
                                        -$469.9 million.........            2014               3       2016-2020
----------------------------------------------------------------------------------------------------------------
From Whom to Whom.....................                    Beneficiaries to Medicare providers.
----------------------------------------------------------------------------------------------------------------
                                                                        Transfers
----------------------------------------------------------------------------------------------------------------
Annualized monetized transfer payments          Estimates              Year        Discount rate  Period covered
                                                                          dollar       (percent)
----------------------------------------------------------------------------------------------------------------
                                        -$1,415.4 million.......            2014               7       2016-2020
                                        -$1,430.5 million.......            2014               3       2016-2020
----------------------------------------------------------------------------------------------------------------
From Whom to Whom.....................  Federal government to Medicare providers.
----------------------------------------------------------------------------------------------------------------
                     Clarification of the Statutory Medicare Hearing Aid Coverage Exclusion
----------------------------------------------------------------------------------------------------------------
               Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
Annualized monetized transfer payments          Estimates              Year        Discount rate  Period covered
                                                                          dollar       (percent)
----------------------------------------------------------------------------------------------------------------
                                        -$15.6 million..........            2014               7       2015-2019
                                        -$15.8 million..........            2014               3       2015-2019
----------------------------------------------------------------------------------------------------------------
From Whom to Whom.....................  Federal government to Medicare providers.

XVI. 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 16 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 16 percent 
of ESRD facilities are small entities as that term is used in the RFA 
(which includes

[[Page 40310]]

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 38. Using the definitions in 
this ownership category, we consider the 582 facilities that are 
independent and the 393 facilities that are shown as hospital-based to 
be small entities. The ESRD facilities that are owned and operated by 
LDOs and regional chains would have total revenues of more than $35.5 
million in any year when the total revenues for all locations are 
combined for each business (individual LDO or regional chain), and are 
not, therefore, included as small entities.
    For the ESRD PPS updates proposed in this rule, a hospital-based 
ESRD facility (as defined by ownership type) is estimated to receive a 
0.4 percent increase in payments for CY 2015. An independent facility 
(as defined by ownership type) is also estimated to receive a 0.4 
percent increase in payments for CY 2015.
    We estimate that of the 1,217 ESRD facilities expected to receive a 
payment reduction in the PY 2017 ESRD QIP, 275 of those facilities 
would be ESRD small entity facilities. We present these findings in 
Table 39 (``Estimated Distribution of PY 2017 ESRD QIP Payment 
Reductions'') and Table 41 (``Impact of Proposed QIP Payment Reductions 
to ESRD Facilities for PY 2017'') above. We estimate that the payment 
reductions will average approximately $9,353 per facility across the 
1,217 facilities receiving a payment reduction, and $8,698 for each 
small entity facility. Using our estimates of facility performance, we 
also estimated the impact of payment reductions on ESRD small entity 
facilities by comparing the total payment reductions for the 275 small 
entity facilities with the aggregate ESRD payments to all small 
facilities. We estimate that there are a total of 885 small facilities, 
and that the aggregate ESRD PPS payments to these facilities would 
decrease 0.23 percent in PY 2017.
    We estimate that of the 1,320 ESRD facilities expected to receive a 
payment reduction in the PY 2018 ESRD QIP, 282 are ESRD small entity 
facilities. We present these findings in Table 39 (``Estimated 
Distribution of PY 2018 ESRD QIP Payment Reductions'') and Table 41 
(``Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 
2018'') above. We estimate that the payment reductions will average 
approximately $7,119 per facility across the 895 facilities receiving a 
payment reduction, and $6,294 for each small entity facility. Using our 
estimates of facility performance, we also estimated the impact of 
payment reductions on ESRD small entity facilities by comparing the 
total estimated payment reductions for 209 small entity facilities with 
the aggregate ESRD payments to all small entity facilities. We estimate 
that there are a total of 975 small entity facilities, and that the 
aggregate ESRD PPS payments to these facilities would decrease 0.16 
percent in PY 2018.
    We expect that the proposed methodology for adjusting DMEPOS 
payment amounts using information from DMEPOS CBPs would have a 
significant impact on a substantial number of small suppliers. Although 
suppliers furnishing items and services outside CBAs do not have to 
compete and be awarded contracts in order to continue furnishing these 
items and services, the payment amounts for these items and services 
would be reduced using the methodology established as a result of the 
proposed rule. The statute requires that the methodology for adjusting 
payment amounts take into consideration the costs of furnishing items 
and services in areas where the adjustments will occur and these 
considerations are discussed in the preamble (refer to section IV(A)(5) 
of the preamble). The proposed methodology for making payment 
adjustments would allow for adjustments based on bids in different 
geographic regions to reflect regional variation in costs of furnishing 
items and services and the national floor for adjustments in states 
with unique costs. We believe that suppliers would be able to continue 
furnishing items and services to beneficiaries in areas outside the 
CBAs after the reductions in the payment amounts are applied without a 
significant change in the rate at which they accept assignment of 
Medicare claims for these items and services. Because section 
1834(a)(1)(F)(ii) of the Act mandates that payment amounts for DME 
subject to competitive bidding be adjusted in areas where CBPs are not 
implemented, the only alternative we can consider other than paying 
based on adjusted fee schedule amounts is to implement CBPs in all 
areas. However, this approach would have an even greater impact on 
small suppliers.
    We expect the proposed special payment rules for DME and enteral 
nutrition would not have a significant impact on small suppliers. We 
believe that these rules would benefit affected suppliers since payment 
for rental of DME and enteral nutrition infusion pumps would no longer 
be capped and suppliers would retain ownership to the equipment.
    We expect that the proposal to modify the definition of minimal 
self-adjustment of orthotics would not have a significant impact on 
small suppliers. According to the Medicare Pricing, Data Analysis and 
Coding (PDAC) Contractor from FY 2010 through FY 2013 there were 
approximately 6,000 DMEPOS suppliers with a provider transaction access 
number (PTAN) registered with the National Supplier Clearinghouse to 
supply orthotics. In addition, there are a limited number of applicable 
HCPCS codes (approximately 77) that require a skilled individual's 
expertise. We believe that the majority of businesses providing 
orthotics already employ a ``skilled individual.'' However, for those 
few businesses that do not already have a skilled individual providing 
custom fitted orthotics they could comply with the proposed changes to 
the definition and requirements by hiring a skilled individual. For 
example, according to the Bureau of Labor Statistics Occupational 
Employment Statistics May 2013 the median pay for a certified orthotist 
was $30.27 an hour. The impact will vary according to the caseload of 
custom fitted orthotics provided by an individual supplier.
    We expect that although the proposal which clarifies the scope of 
the Medicare statutory exclusion for hearing aids would withdraw the 
coverage for BAHAs, it would not have a significant impact on small 
suppliers since the volume of allowed services for bone anchored 
hearing aids covered by Medicare is very small (less than 2,000 
nationwide) and would not account for a large percentage of any 
individual supplier's total revenue.
    We expect that the proposed revisions to CHOW rules to allow 
contract suppliers to sell specific lines of business provision would 
have a positive impact on suppliers and no significant negative impact 
on small suppliers.
    Therefore, the Secretary has determined that this proposed rule 
would have a significant economic impact on a substantial number of 
small entities. We solicit comment on the RFA analysis provided.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. Any 
such regulatory impact analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Act, we 
define a small rural hospital as a hospital that is located outside of 
a metropolitan statistical area and has fewer than 100 beds. We do not 
believe this proposed rule will have a significant impact on operations 
of a substantial number of

[[Page 40311]]

small rural hospitals because most dialysis facilities are 
freestanding. While there are 145 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 145 rural hospital-based 
dialysis facilities will experience an estimated 0.1 percent decrease 
in payments. As a result, this proposed rule is not estimated to have a 
significant impact on small rural hospitals. Therefore, the Secretary 
has determined that this proposed rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.

XVII. Unfunded Mandates Reform Act Analysis

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

XVIII. Federalism Analysis

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

XXI. Congressional Review Act

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

XX. Files Available to the Public via the Internet

    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 and is posted on the CMS 
Web site at http://www.cms.gov/ESRDPayment/PAY/list.asp. In addition to 
the Addenda, limited data set (LDS) files are available for purchase at 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/EndStageRenalDiseaseSystemFile.html. Readers who 
experience any problems accessing the Addenda or LDS files should 
contact Stephanie Frilling at (410) 786-4507.

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medical devices, Medicare, Reporting and 
recordkeeping requirements, Rural areas, and X-rays

42 CFR Part 411

    Kidney diseases, Medicare, Physician Referral, and Reporting and 
recordkeeping requirements

42 CFR Part 413

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

42 CFR Part 414

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

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED

0
1. The authority for part 405 continues to read as follows:

    Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 
1881, and 1886(k) of the Social Security Act (42 U.S.C. 405(a), 
1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 1395rr and 
1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 
263a).

Sec.  405.2102  [Amended]

0
2. Section 405.2102 is amended by removing all the definitions, with 
the exception of two definitions, ``Network, ESRD'', and ``Network 
organization''.

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
3. The authority citation for part 411 continues to read as follows:

    Authority:  Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 
of the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-
152, 1395hh, and 1395nn).

0
4. Section 411.15 is amended by revising paragraph (d) to read as 
follows:

Sec.  411.15  Particular services excluded from coverage.

* * * * *
    (d) Hearing aids or examinations for the purpose of prescribing, 
fitting, or changing hearing aids.
    (1) Scope. The scope of the hearing aid exclusion encompasses all 
types of air conduction and bone conduction hearing aids (external, 
internal, or implanted).
    (2) Devices not subject to the hearing aid exclusion. Cochlear 
implants and auditory brainstem implants that replace the function of 
cochlear structures or auditory nerve and provide electrical energy to 
auditory nerve fibers and other neural tissue via implanted electrode 
arrays. These devices produce the perception of sound and do not meet 
the definition of hearing aid.
* * * * *

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

0
5. 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), sec. 632 of Pub. L. 112-240 (126 Stat. 2354), and 
sec. 217 of Pub. L. 113-93.

Sec.  413.174  [Amended]

0
6. In Sec.  413.174, paragraph (f)(6) is amended by removing ``January 
1, 2016'' and by adding in its place ``January 1, 2024.''
0
7. Section 413.232 is amended revising paragraphs (b) introductory text 
and (f) and adding paragraph (h) to read as follows:

Sec.  413.232  Low-volume adjustment.

* * * * *

[[Page 40312]]

    (b) Definition of low-volume facility. A low-volume facility is an 
ESRD facility that, as determined based on the documentation submitted 
pursuant to paragraph (h) of this section:
* * * * *
    (f) Except as provided in paragraph (g) of this section, to receive 
the low-volume adjustment an ESRD facility must provide an attestation 
statement, by November 1st of each year preceding the payment year, to 
its Medicare Administrative Contractor that the facility meets all the 
criteria established in this section. For calendar year 2012, the 
attestation must be provided by January 3, 2012. For calendar year 
2015, the attestation must be provided by December 31, 2014.
* * * * *
    (h) To receive the low-volume adjustment, an ESRD facility must 
include in their attestation provided pursuant to paragraph (f) of this 
section a statement that the ESRD facility meets the definition of a 
low-volume facility in paragraph (b) of this section. To determine 
eligibility for the low-volume adjustment, the Medicare Administrative 
Contractor (MAC) on behalf of CMS relies upon as filed or final settled 
12-consecutive month cost reports for the 3 cost reporting years 
preceding the payment year to verify the number of treatments, except 
that:
    (1) In the case of a hospital-based ESRD facility as defined in 
Sec.  413.174(c), the MAC relies upon the attestation submitted 
pursuant to paragraph (f) of this section and may consider other 
supporting data in addition to the total treatments reported in each of 
the 12-consecutive month cost reports for the 3 cost reporting years 
preceding the payment year to verify the number of treatments that were 
furnished by the individual hospital-based ESRD facility seeking the 
adjustment; and
    (2) In the case of an ESRD facility that has undergone a change of 
ownership that does not result in a new Provider Transaction Access 
Number for the ESRD facility, the MAC relies upon the attestation and 
when the change of ownership results in two non-standard cost reporting 
periods (less than or greater than 12-consecutive months), does one or 
both of the following for the 3 cost reporting years preceding the 
payment year to verify the number of treatments:
    (i) Combines the two non-standard cost reporting periods of less 
than 12 months to equal a full 12-consecutive month period; and/or
    (ii) Combines the two non-standard cost reporting periods that in 
combination may exceed 12-consecutive months and prorates the data to 
equal a full 12-consecutive month period.

Sec.  413.237  [Amended]

0
8. In Sec.  413.237, paragraph (a)(1)(iv) is amended by removing 
``January 1, 2016'' and adding in its place ``January 1, 2024.''

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

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

    Authority:  Secs. 1102, 1871, and 1881(b)(l) of the Social 
Security Act (42 U.S.C. 1302, 1395hh, and 1395rr(b)(l)).
0
10. Section 414.105 is added to read as follows:

Sec.  414.105  Application of Competitive Bidding Information and 
Limitation of Inherent Reasonableness Authority

    (a) For enteral nutrients, equipment and supplies furnished on or 
after January 1, 2011, the fee schedule amounts may be adjusted based 
on information on the payment determined as part of implementation of 
the programs under subpart F using the methodologies set forth at Sec.  
414.210(g).
    (b) In the case of such adjustments, the rules at Sec.  405.502(g) 
and (h) of this chapter shall not be applied.

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

0
11. The heading for subpart D is revised to read as set forth above.
0
12. Section 414.202 is amended by:
0
A. Adding the definition of ``Frontier state''.
0
B. Revising the definition of ``Region''.
0
C. Adding the definition of ``Rural State''.
    The additions and revision read as follows:

Sec.  414.202  Definitions.

* * * * *
    Frontier state means a state where at least 50 percent of counties 
in the state have a population density of 6 people or less per square 
mile.
* * * * *
    Region means, for the purpose of implementing Sec.  414.210(g), 
geographic areas defined by the Bureau of Economic Analysis in the 
United States Department of Commerce for economic analysis purposes, 
and, for the purpose of implementing Sec.  414.228, those contractor 
service areas administered by CMS regional offices.
    Rural State means a state where more than 50 percent of the 
population is rural as determined through census data.
0
13. Section 414.210 is amended by revising paragraph (a) and adding 
paragraph (g) to read as follows:

Sec.  414.210  General payment rules.

    (a) General rule. For items furnished on or after January 1, 1989, 
except as provided in paragraphs (c), (d), and (g) of this section, 
Medicare pays for durable medical equipment, prosthetics and orthotics, 
including a separate payment for maintenance and servicing of the items 
as described in paragraph (e) of this section, on the basis of 80 
percent of the lesser of--
    (1) The actual charge for the item;
    (2) The fee schedule amount for the item, as determined in 
accordance with the provisions of Sec. Sec.  414.220 through 414.232
* * * * *
    (g) Application of Competitive Bidding Information and Limitation 
of Inherent Reasonableness Authority. For items furnished on or after 
January 1, 2011, the fee schedule amounts may be adjusted based on 
information on the payment determined as part of implementation of the 
programs under subpart F, of this part, excluding information on the 
payment determined in accordance with the special payment rules at 
Sec.  414.409. In the case of such adjustments, the rules at Sec.  
405.502(g) and (h) of this chapter shall not be applied
    (1) Payment adjustments for areas within the contiguous United 
States using information from competitive bidding programs. For an item 
or service subject to the programs under subpart F, that payment amount 
for such item or services for areas within the contiguous United States 
shall be established as follows:
    (i) CMS determines a regional price for each state in the 
contiguous United States and the District of Columbia equal to the un-
weighted average of the single payment amount for an item or service 
established in accordance with Sec.  414.416 for competitive bidding 
areas that are fully or partially located in the same region where the 
state or District of Columbia is located.
    (ii) CMS determines a national average price equal to the average 
of the regional prices determined under paragraph (g)(1)(i) of this 
section.
    (iii) A regional price determined under paragraph (g)(1)(i) of this 
section cannot be greater than 110 percent of the national average 
price determined under paragraph (g)(1)(ii) of this section nor less 
than 90 percent of the national average price determined under 
paragraph (g)(1)(ii) of this section. In addition, a regional price 
determined under paragraph (g)(1)(i) of this section

[[Page 40313]]

for a state designated as a rural or frontier state cannot be less than 
110 percent of the national average price determined under paragraph 
(g)(1)(ii) of this section.
    (2) Payment adjustments for areas outside the contiguous United 
States using information from competitive bidding programs. For an item 
or service subject to the programs under subpart F, the fee schedule 
amounts for areas outside the contiguous United States are adjusted 
based on the greater of--
    (i) The average of the single payment amounts for the item or 
service for CBAs outside the contiguous United States.
    (ii) 110 percent of the national average price for the item or 
service determined under paragraph (g)(1)(ii) of this section.
    (3) Payment adjustments for items and services included in no more 
than ten competitive bidding programs. Notwithstanding paragraph (g)(1) 
of this section, for an item or service that is included in ten or 
fewer competitive bidding programs as defined at Sec.  414.402, the fee 
schedule amounts applied for all areas within and outside the 
contiguous United States are adjusted based on 110 percent of the un-
weighted average of the single payment amounts for the item or service.
    (4) Payment adjustments using data on items and services included 
in competitive bidding programs no longer in effect. In the case where 
adjustments to fee schedule amounts are made using any of the 
methodologies described, if the adjustments are based solely on single 
payment amounts from competitive bidding programs that are no longer in 
effect, the adjusted fee schedule amounts shall be increased on an 
annual basis using the percentage change in the Consumer Price Index 
for all Urban Consumers (CPI-U) from the mid-point of the last year the 
single payment amounts were in effect to the month ending 6 months 
prior to the date the initial payment adjustments would go into effect. 
Following the initial adjustment to the fee schedule amounts, the 
adjusted fee schedule amounts would continue to be updated every 12 
months using the percentage change in the CPI-U for the 12-month period 
ending 6 months prior to the date the updated payment adjustments would 
go into effect.
    (5) Adjusted payment amounts for accessories used with different 
types of base equipment. In situations where a HCPCS code that 
describes an item used with different types of base equipment is 
included in more than one product category in a CBA under competitive 
bidding, a weighted average of the single payment amounts for the code 
is computed for each CBA, weighted based on national allowed services 
for the code when used with different equipment. The weighted average 
single payment amount per code per CBA would then be used in applying 
the payment adjustment methodologies proposed in this section.
    (6) Payment adjustments consistent with items and services 
furnished. In the case where payment amounts are established under 
subpart F of this part for an item or service that are greater than the 
payment amounts established under subpart F of this part for a higher 
level item or service (i.e., one with additional features or 
functionality), the payment amounts for the lower level of service are 
adjusted so that they are no greater than the payment amounts for the 
higher level of service before making payment adjustments using any of 
the methodologies above.
    (7) Payment adjustments for mail order items furnished in the 
Northern Mariana Islands. The fee schedule amounts for mail order items 
furnished to beneficiaries in the Northern Mariana Islands are adjusted 
so that they are equal to 100 percent of the single payment amounts 
established under a national mail order competitive bidding program.
    (8) Updating adjusted fee schedule amounts. The adjusted fee 
schedule amounts are revised each time a single payment amount for an 
item or service is updated following one or more new competitions and 
as other items are added to programs established under subpart F of 
this part.
0
14. Section 414.402 is amended by revising the definition of ``Minimal 
self-adjustment'' to read as follows:

Sec.  414.402  Definitions.

* * * * *
    Minimal self-adjustment means an adjustment the beneficiary, 
caretaker for the beneficiary, or supplier of the device can perform 
and does not require the services of a certified orthotist (that is, an 
individual certified by either the American Board for Certification in 
Orthotics and Prosthetics, Inc., or the Board for Orthotist/Prosthetist 
Certification), or a physician as defined in 1861(r) of the Act, a 
treating practitioner which means a physician assistant, nurse 
practitioner, or clinical nurse specialist as defined in section 
1861(aa)(5) of the Act, an occupational therapist as defined in Sec.  
484.4 of this chapter, or physical therapist as defined in Sec.  484.4 
of this chapter who are in compliance with all applicable Federal and 
State licensure and regulatory requirements.
* * * * *
0
15. Section 414.408 is amended by adding paragraph (l) to read as 
follows:

Sec.  414.408  Payment rules.

* * * * *
    (l) Exceptions for certain items and services paid in accordance 
with special payment rules. The payment rules in paragraphs (f) thru 
(i), (j)(2), (j)(3), (j)(7), and (k) of this section do not apply to 
items and services paid in accordance with the special payment rules at 
Sec.  414.409.
0
16. Section 414.409 is added to read as follows:

Sec.  414.409  Special payment rules.

    (a) Payment on a bundled, continuous rental basis. (1) In no more 
than 12 CBAs, in conjunction with competitions that begin on or after 
January 1, 2015, payment is made on a bundled, continuous monthly 
rental basis for enteral nutrients, supplies and equipment, oxygen and 
oxygen equipment, standard manual wheelchairs, standard power 
wheelchairs, CPAP and respiratory assist devices, and hospital beds. 
The CBAs and competitions where these payment rules apply are announced 
in advance of each competition, with the payment rules in this section 
used in lieu of the payment rules at Sec.  414.408(f) thru (i), (j)(2), 
(j)(3), (j)(7), and (k). The single payment amounts are established 
based on bids submitted and accepted for furnishing rented DME and 
enteral nutrition on a monthly basis for each month of medical need 
during the contract period monthly single payment amount would include 
payment for all nutrients, supplies and equipment.
    (2) Payment is made on a continuous monthly rental basis for DME. 
The single payment amount for the monthly rental of DME includes 
payment for the rented equipment, maintenance and servicing of the 
rented equipment, and replacement of supplies and accessories necessary 
for the effective use of the rented equipment. Separate payment for 
replacement of equipment, repair or maintenance and servicing of 
equipment, or for replacement of accessories and supplies necessary for 
the effective use of equipment is not allowed under any circumstances.
    (3) Payment is made on a monthly basis for enteral nutrition. The 
single payment amount includes payment for all nutrients, supplies and 
equipment. Separate payment for replacement of equipment, repair or 
maintenance and servicing of equipment, or for replacement of 
accessories and supplies necessary for the effective use of equipment 
is not allowed under any circumstances.

[[Page 40314]]

    (b) Payment for grandfathered DME items paid on a bundled, 
continuous rental basis. Payment to a supplier that elects to be a 
grandfathered supplier of DME furnished in CBPs where these special 
payment rules apply is made in accordance with Sec.  414.408(a)(1).
    (c) Supplier transitions for DME and enteral nutrition paid on a 
bundled, continuous rental basis. Changes from a non-contract supplier 
to a contract supplier at the beginning of a CBP where payment is made 
on a bundled, continuous monthly rental basis results in the contract 
supplier taking on responsibility for meeting all of the monthly needs 
for furnishing the covered DME or enteral nutrition. In the event that 
a beneficiary relocates from a CBA where these special payment rules 
apply to an area where rental cap rules apply, a new period of 
continuous use begins for the capped rental item, enteral nutrition 
equipment, or oxygen equipment as long as the item is determined to be 
medically necessary.
    (d) Responsibility for repair and maintenance and servicing of 
power wheelchairs. In no more than 12 CBAs where payment for power 
wheelchairs is made on a capped rental basis, for power wheelchairs 
furnished in conjunction with competitions that begin on or after 
January 1, 2015, contract suppliers that furnish power wheelchairs 
under contracts awarded based on these competitions shall continue to 
repair power wheelchairs they furnish following transfer of title to 
the equipment to the beneficiary. The responsibility of the contract 
supplier to repair, maintain and service beneficiary-owned power 
wheelchairs does not apply to power wheelchairs that the contract 
supplier did not furnish to the beneficiary. For power wheelchairs that 
the contract supplier furnishes during the contract period, the 
responsibility of the contract supplier to repair, maintain and service 
the power wheelchair once it is owned by the beneficiary continues 
until the reasonable useful lifetime of the equipment expires, coverage 
for the power wheelchair ends, or the beneficiary relocates outside the 
CBA where the item was furnished. The contract supplier may not charge 
the beneficiary or the program for any necessary repairs or maintenance 
and servicing of a beneficiary-owned power wheelchair it furnished 
during the contract period.
0
17. Section 414.412 is amended by revising paragraph (b)(2) and adding 
paragraphs (b)(3) through (5) to read as follows:

Sec.  414.412  Submission of bids under a competitive bidding program.

* * * * *
    (b) * * *
    (2) The bids submitted for each item or drug in a product category 
cannot exceed the payment amount that would otherwise apply to the item 
under Subpart C, Subpart D, or Subpart I of this part.
    (3) The bids submitted for enteral nutrition, oxygen and oxygen 
equipment, standard manual wheelchairs, standard power wheelchairs, and 
hospital beds paid in accordance with the special payment rules at 
Sec.  414.409(a) cannot exceed the average monthly payment for the 
bundle of items and services that would otherwise apply to the item 
under subpart C or subpart D of this part.
    (4) The bids submitted for continuous positive airway pressure 
(CPAP) devices and respiratory assist devices paid in accordance with 
the special payment rules at Sec.  414.409(a) cannot exceed the 1993 
fee schedule amounts for these items, increased by the covered item 
update factors provided for these items in section 1834(a)(14) of the 
Act.
    (5) Suppliers shall take into consideration the special payment 
rules at Sec.  414.409(d) when submitting bids for furnishing power 
wheelchairs under competitions where these rules apply.
* * * * *
0
18. Section 414.414 is amended by revising paragraph (f) to read as 
follows:

Sec.  414.414  Conditions for awarding contracts.

* * * * *
    (f) Expected savings. A contract is not awarded under this subpart 
unless CMS determines that the amounts to be paid to contract suppliers 
for an item or drug under a competitive bidding program are expected to 
be less than the amounts that would otherwise be paid for the same item 
under subpart C or subpart D or the same drug under subpart I based on 
95 percent of the average wholesale price in effect on October 1, 2003.
* * * * *
0
19. Section 414.422 is amended by revising paragraph (d) to read as 
follows:

Sec.  414.422  Terms of contracts.

* * * * *
    (d) Change of ownership. (1) A contract supplier must notify CMS if 
it is negotiating a change in ownership no later than 60 days before 
the anticipated date of the change.
    (2) CMS may transfer a contract to an entity that merges with, or 
acquires, a contract supplier if the entity meets the following 
requirements:
    (i) A successor entity--
    (A) Meets all requirements applicable to contract suppliers for the 
applicable competitive bidding program;
    (B) Submits to CMS the documentation described under Sec.  
414.414(b) through (d) if documentation has not previously been 
submitted by the successor entity or if the documentation is no longer 
sufficient for CMS to make a financial determination. A successor 
entity is not required to duplicate previously submitted information if 
the previously submitted information is not need to make a financial 
determination. This documentation must be submitted no later than 30 
days prior to the anticipated effective date of the change of 
ownership; and
    (C) Submits to CMS, at least 30 days before the anticipated 
effective date of the change of ownership, a signed novation agreement 
acceptable to CMS stating that it will assume all obligations under the 
contract; or
    (ii) A new entity--
    (A) Meets the requirements of (d)(2)(i)(A) and (B) of this section; 
and
    (B) Contract supplier submits to CMS, at least 30 days before the 
anticipated effective date of the change of ownership, its final draft 
of a novation agreement as described in paragraph (d)(2)(iii) of this 
section for CMS review. The new entity submits to CMS, within 30 days 
after the effective date of the change of ownership, an executed 
novation agreement acceptable to CMS.
    (3) Except as specified in paragraph (d)(4) of this section, CMS 
transfers the entire contract, including all product categories and 
competitive bidding areas, to a new entity.
    (4) For contracts issued in the Round 2 Recompete and subsequent 
rounds in the case of a CHOW where a contract supplier sells a distinct 
company, (e.g., an affiliate, subsidiary, sole proprietor, corporation, 
or partnership) that furnishes a specific product category or services 
a specific CBA, CMS may transfer the portion of the contract performed 
by that company to a successor, if the following conditions are met:
    (i) Every CBA, product category, and location of the company being 
sold must be transferred to the new qualified owner who meets all 
competitive bidding requirements; i.e. financial, accreditation and 
licensure;
    (iii) All CBAs and product categories in the original contract that 
are not explicitly transferred by CMS remain unchanged in that original 
contract for the duration of the contract period unless transferred by 
CMS pursuant to a subsequent CHOW;

[[Page 40315]]

    (iv) All requirements of paragraph (d)(2) of this section are met; 
and
    (v) The sale of the distinct company includes all of the contract 
supplier's assets associated with the CBA and/or product category(s); 
and
    (vi) CMS determines that transfer of part of the original contract 
will not result in disruption of service or harm to beneficiaries.
* * * * *
0
20. Section 414.423 is amended by revising paragraphs (b)(1)(vi), 
(l)(2) introductory text, and (l)(2)(i) to read as follows:

Sec.  414.423  Appeals Process for Termination of Competitive Bidding 
Contract.

* * * * *
    (b) * * *
    (1) * * *
    (vi) The effective date of termination is 45 days from the date of 
the notification letter unless a timely hearing request is filed or a 
corrective action plan (CAP) is submitted within 30 days of the date on 
the notification letter.
* * * * *
    (l) * * *
    (2) A contract supplier whose contract has been terminated must 
notify all beneficiaries who are receiving rented competitive bid items 
or competitive bid items received on a recurring basis, of the 
termination of their contract.
    (i) The notice to the beneficiary from the supplier whose contract 
is terminated must be provided no later than 15 days prior to the 
effective date of termination.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: June 24, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: June 27, 2014.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2014-15840 Filed 7-2-14; 4:15 pm]
BILLING CODE 4120-01-P
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