DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Part 413 

[CMS-3206-P] 

RIN 0938-AP91 

Medicare Program; End-Stage Renal Disease Quality Incentive 

Program 

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

HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule proposes to implement a quality 

incentive program (QIP) for Medicare outpatient end-stage renal 

disease (ESRD) dialysis providers and facilities with payment 

consequences beginning January 1, 2012, in accordance with 

section 1881(h) of the Act (added on July 15, 2008 by section 

153(c) of the Medicare Improvements for Patients and Providers 

Act (MIPPA)). The proposed ESRD QIP would reduce ESRD payments 

by up to 2.0 percent for dialysis providers and facilities that 

fail to meet or exceed a total performance score for performance 

standards established with respect to certain specified 

measures. 

DATES: To be assured consideration, comments must be received 

at one of the addresses provided below, no later than 5 p.m. 

eastern standard time (EST) on September 24, 2010. 
CMS-3206-P 2 

ADDRESSES: In commenting, please refer to file code CMS-3206-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 

instructions under the "More Search Options" tab. 

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-3206-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-3206-P, 

Mail Stop C4-26-05, 

7500 Security Boulevard, 
CMS-3206-P 3 

Baltimore, MD 21244-1850. 

4. By hand or courier. If you prefer, you may deliver (by 

hand or courier) your written comments before the close of the 

comment period to either of the following addresses: 

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. 
CMS-3206-P 4 

If you intend to deliver your comments to the Baltimore 

address, please call telephone number (410) 786-9994 in advance 

to schedule your arrival with one of our staff members. 

Comments mailed to the addresses indicated as appropriate 

for hand or courier delivery may be delayed and received after 

the comment period. 

Submission of comments on paperwork requirements. This 

document does not propose any paperwork requirements in the 

"Collection of Information Requirements" section in this 

document. 

For information on viewing public comments, see the 

beginning of the "SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Lynn Riley, (410) 786-1286 

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. 
CMS-3206-P 5 

 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.

Table of Contents 

I. Background 

A. Evolution of Quality Monitoring Initiatives 

B. Statutory Authority for ESRD QIP 

C. Selection of the ESRD QIP Measures 

II. Provisions of the Proposed Rule 

A. Overview of the Proposed ESRD QIP 

B. Performance Standards for the ESRD QIP Measures 

C. Performance Period for the ESRD QIP Measures 

D. Methodology for Calculating the Total Performance Score for 

the ESRD QIP Measures 

E. Payment Reductions Using the Total Performance Score 

F. Public Reporting Requirements 

1. Introduction 

2. Notifying Providers/Facilities of their QIP Scores 

3. Informing the Public through Facility-Posted Certificates 
CMS-3206-P 6 

4. Informing the Public through Medicare’s Website 

III. Future QIP Considerations 

A. Program Monitoring and Evaluation 

B. QIP Changes and Updates 

IV. Collection of Information Requirements 

V. Response to Comments 

VI. Regulatory Impact Analysis 

A. Overall Impact 

B. Anticipated Effects 

C. Alternatives Considered 

Acronyms 

Because of the many terms to which we refer by acronym in 

this proposed rule, we are listing the acronyms used and their 

corresponding meanings in alphabetical order below: 

CIP Core Indicators Project 

CMS Centers for Medicare & Medicaid Services 

CPM Clinical performance measure 

CROWNWeb Consolidated Renal Operations in a Web-Enabled Network 

DFC Dialysis Facility Compare 

DFR Dialysis Facility Report 

ESA Erythropoiesis stimulating agent 

ESRD End stage renal disease 

FDA Food and Drug Administration 
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Kt/V A measure of dialysis adequacy where K is dialyzer 

clearance, t is dialysis time, and V is total body 

water volume 

LDO Large dialysis organization 

MIPPA Medicare Improvements for Patients and Providers Act 

of 2008 (Pub. L. 110-275) 

NQF National Quality Forum 

PPS Prospective payment system 

QIP Quality incentive program 

REMIS Renal management information system 

RFA Regulatory Flexibility Act 

SIMS Standard information management system 

SSA Social Security Administration 

the Act Social Security Act 

URR Urea reduction ratio 

I. Background 

A. Evolution of Quality Monitoring Initiative

Monitoring the quality of care provided to ESRD patients 

and provider/facility accountability are important components of 

the Medicare ESRD payment system and have been priorities for 

over 30 years. We will describe the evolution of our ESRD 

quality monitoring initiatives by category below. 

1. ESRD Network Organization program: 
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In the End-Stage Renal Disease Amendments of 1978 (Pub.L. 

95-292), Congress required the formation of ESRD Network 

Organizations to further support the ESRD program. CMS 

currently contracts with 18 ESRD Networks throughout the United 

States to perform oversight activities and to assist dialysis 

providers and facilities in providing appropriate care for their 

dialysis patients. The Networks’ responsibilities include 

monitoring the quality of care provided to ESRD patients, 

providing technical assistance to patients who have ESRD and to 

providers/facilities that treat ESRD patients to assist them in 

improving care, addressing patient complaints and/or grievances, 

and emergency preparedness. In 1994, CMS and the ESRD Networks, 

with input from the renal community, established the ESRD Core 

Indicators Project (CIP). The ESRD CIP was CMS’s first 

nationwide population-based study designed to assess and 

identify opportunities to improve the care of patients with 

ESRD. This project established the first consistent clinical 

ESRD database. Information in this database included clinical 

measures thought to be indicative of key components of care 

provided to individuals who required dialysis. The initial Core 

Indicators focused on adult hemodialysis patients who received 

care in dialysis facilities. The Core Indicators included 

measures related to anemia management, adequacy of hemodialysis, 

nutritional status and blood pressure control. On March 1, 
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1999, the ESRD CIP was merged with the ESRD Clinical Performance 

Measures (CPM) Project (described below). 

2. Clinical Performance Measures (CPM) Project: 

Section 4558(b) of the Balanced Budget Act of 1997 required 

CMS to develop and implement, by January 1, 2000, a method to 

measure and report the quality of renal dialysis services 

furnished under the Medicare program. To implement this 

legislation, CMS developed the ESRD Clinical Performance 

Measures (CPM) Project based on the National Kidney Foundation’s 

Dialysis Outcome Quality Initiative (NKF-DOQI) Clinical Practice 

Guidelines. The purpose of collecting and reporting the ESRD 

CPMs was to enable us to provide comparative data to ESRD 

providers/facilities to assist them in assessing and improving 

the care furnished to ESRD patients. 

3. Dialysis Facility Compare (DFC): 

Also in response to the Balanced Budget Act of 1997, CMS 

created Dialysis Facility Compare (DFC) as a new feature on 

www.medicare.gov that was modeled after Nursing Home Compare and 

continues to be used by CMS today. CMS worked with a contractor 

and a consumer workgroup to identify dialysis facility-specific 

measures that could be provided to the public for consumer 

choice and information purposes. This tool was launched in 

January 2001 on the www.medicare.gov/Dialysis website to provide 

information to the public for comparing the quality of dialysis 
CMS-3206-P 10 

facilities across the country, including specific information 

about services available and the quality of care furnished by a 

specific dialysis facility/provider. DFC captures 

administrative and quality related data submitted by dialysis 

facilities and providers. 

The quality measures initially reported on DFC were 

measures of anemia control, adequacy of hemodialysis treatment 

and patient survival. Medicare claims data were used to 

calculate the anemia management and hemodialysis adequacy rates, 

and administrative data (non-clinically based data such as 

demographic data, and data acquired from the Social Security 

Administration (SSA) and obtained from the CMS forms 2728 and 

2746) were used to determine patient survival rates. The anemia 

measure assessed the percentage of Medicare patients receiving 

an erythropoiesis-stimulating agent (ESA) at a given 

provider/facility whose anemia (low red blood cell count) was 

not controlled. More specifically, the anemia measure when DFC 

was launched in January 2001 assessed the percentage of Medicare 

patients whose hematocrit levels were at 33 percent (33 percent 

out of 100 percent) or more (or hemoglobin levels of 11 g/dL or 

more). Since that time, evidence about increased risk of 

certain adverse events associated with the use of ESAs, which 

are used to treat anemia, raised concerns about patients who 

have hemoglobin levels that are too high, as well as patients 
CMS-3206-P 11 

whose hemoglobin levels are too low. The Food and Drug 

Administration (FDA) responded by requiring manufacturers to 

develop a Medication Guide 

(http://www.fda.gov/Drugs/DrugSafety/PublicHealthAdvisories/ucm0

54716.htm) and to ensure that this information is provided to 

patients. The labeling guideline for ESAs states “The dosing 

recommendations for anemic patients with chronic renal failure 

have been revised to recommend maintaining hemoglobin levels 

within 10 g/dL to 12 g/dL”. As a result of this guideline, in 

November 2008 DFC was revised to include two anemia measures: 

one measure shows the percentage of patients whose hemoglobin 

levels are considered too low (that is, below 10 g/dL), and a 

second measure shows the percentage of patients whose hemoglobin 

levels are too high (that is, above 12 g/dL). The dialysis 

adequacy measure assesses the percentage of in-center 

hemodialysis Medicare patients treated by the facility who had 

enough wastes removed from their blood during dialysis. More 

specifically, the measure is the percentage of Medicare patients 

with urea reduction ratio (URR) levels of 65 percent or more. 

The patient survival measure indicates general facility survival 

as better than expected, as expected, or worse than expected. 

These measures are updated annually on the DFC website, usually 

at the end of the year, using Medicare claims data from the 

previous year for the hemodialysis adequacy and anemia measures 
CMS-3206-P 12 

and Medicare administrative data from the past 4 years for the 

patient survival measure. 

4. ESRD Quality Initiative: 

 In 2004, the ESRD Quality Initiative was launched and 

continues today. The objective is to stimulate and support 

significant improvements in the quality of dialysis care. The 

initiative aims to refine and standardize dialysis care 

measures, ESRD data definitions, and data transmission to 

support the needs of the ESRD program; empower patients and 

consumers by providing access to facility service and quality 

information; provide quality improvement support to dialysis 

facilities and providers; assure compliance with conditions of 

coverage; and build strategic partnerships with patients, 

providers/facilities, professionals, and other stakeholders. 

Components of this Quality Initiative include the DFC, and the 

CPM Project. 

5. ESRD Conditions for Coverage: 

 On April 15, 2008, we published in the Federal Register, 

the updated ESRD Conditions for Coverage final rule, which 

contains revised requirements that dialysis providers and 

facilities must meet in order to be approved by Medicare and 

receive payment (73 FR 20370 April 15, 2008). As part of the 

revised requirements, dialysis providers and facilities are each 

required to implement their own quality assessment and 
CMS-3206-P 13 

performance improvement program. In addition, providers and 

facilities are required to submit electronically the CPMs 

developed under the ESRD CPM Project for all Medicare patients 

on an annual basis. The CPMs were updated and expanded in April 

2008. The current CPMs include 26 measures in the areas of 

anemia management; hemodialysis adequacy; peritoneal dialysis 

adequacy; mineral metabolism; vascular access; patient 

education/perception of care/quality of life; and patient 

survival. 

6. CROWNWeb: 

 CMS has developed a new web-based system, Consolidated 

Renal Operations in a Web-Enabled Network (CROWNWeb) for the 

purposes of electronically collecting information about 

patients, facilities, providers, and clinical data to support 

the CPM Project. CROWNWeb supports the mineral metabolism, 

anemia management, hemodialysis adequacy, peritoneal dialysis 

adequacy, survival, and type of vascular access CPMs. Use of 

the CROWNWeb system will increase the efficiency of data 

collection for both CMS and providers/facilities, improve data 

quality, and provide a more stable and accessible platform for 

continual improvements in functionality. In February 2009, for 

Phase one, we began implementing the CROWNWeb system with a 

number of providers/facilities testing the system and expanded 
CMS-3206-P 14 

reporting to additional providers/facilities in July 2009 for 

Phase two. 

 During these initial phases, nearly 200 dialysis 

providers/facilities (representing a cross section of small 

independent facilities and large dialysis organizations (LDOs)) 

were selected to enter data into CROWNWeb. These 

providers/facilities worked closely with CMS, their respective 

ESRD Networks, and CROWNWeb development and support contractors 

to understand the requirements of CROWNWeb, and to refine the 

internal business processes and procedures used to submit data 

effectively and efficiently into the system. 

 The successful launch of both Phase One and Phase Two and 

helpful feedback provided by users has enabled CMS to work on 

additional upgrades to CROWNWeb that address both the technical 

and usability elements of the system. We continue to further 

refine the system as an additional tool for quality improvement. 

7. QIP Conceptual Model: 

 On September 29, 2009, we published in the Federal Register 

(74 FR 49922), the ESRD Prospective Payment System (PPS) 

proposed rule, describing how the Agency proposes to implement 

the new ESRD PPS in 2011. As part of that proposed rule, we 

outlined a conceptual model of the initial ESRD QIP design and 

solicited public comments. We received and reviewed many 
CMS-3206-P 15 

helpful comments regarding the design of the QIP that 

contributed to the development of this proposed rule.

B. Statutory Authority for the ESRD QIP

 Congress required in section 153 of MIPPA that the 

Secretary implement an ESRD quality incentive program (QIP). We 

believe that the QIP is the next step in the evolution of the 

ESRD quality program because it measures provider/facility 

performance rather than simply reporting outcomes data. 

 Specifically, section 1881(h) of the Social Security Act 

(the Act), as added by section 153(c) of MIPPA, requires the 

Secretary to develop a QIP that will result in payment 

reductions to providers of services and dialysis facilities that 

do not meet or exceed a total performance score with respect to 

performance standards established for certain specified 

measures. As provided under this section, the payment 

reductions, which will be up to 2.0 percent of payments 

otherwise made to providers and facilities under section 

1881(b)(14) of the Act, will apply to payment for renal dialysis 

services furnished on or after January 1, 2012. The total 

performance score that providers and facilities must initially 

meet or exceed in order to receive their full payment in 2012 

will be based on a specific performance period prior to this 

date. Under section 1881(h)(1)(C) of the Act, the payment 

reduction will only apply with respect to the year involved for 
CMS-3206-P 16 

a provider/facility and will not be taken into account when 

computing future payment rates for the impacted 

provider/facility. 

 For the ESRD quality incentive program, section 1881(h) of 

the Act generally requires the Secretary to: 

(1) select measures; (2) establish the performance standards 

that apply to the individual measures; (3) specify a performance 

period with respect to a year; 

(4) develop a methodology for assessing the total performance of 

each provider and facility based on the performance standards 

with respect to the measures for a performance period; and (5) 

apply an appropriate payment reduction to providers and 

facilities that do not meet or exceed the established total 

performance score. 

We view the ESRD QIP required by section 1881(h) of the Act 

as the next step in the evolution of the ESRD quality program 

that began more than 30 years ago. Our vision is to implement a 

robust, comprehensive ESRD QIP that builds on the foundation 

that has already been established. 

C. Selection of the ESRD QIP Measures

As required by section 1881(h)(2)(A)(i) of the Act, we 

finalized the measures for the initial year of the QIP to 

include two-anemia management measures that reflect the labeling 

approved by the Food and Drug Administration (FDA) for the 
CMS-3206-P 17 

administration of erythropoesis stimulating agents (ESAs), and 

one-hemodialysis adequacy measure in the Medicare End-Stage 

Renal Disease Prospective Payment System Final Rule (CMS-1418-F) 

published on August 12, 2010. The following are the three 

finalized measures for the initial year of the ESRD QIP: 

• Percentage of Medicare patients with an average 

Hemoglobin <10.0g/dL 

• Percentage of Medicare patients with an average 

Hemoglobin >12.0g/dL 

• Percentage of Medicare patients with an average Urea 

Reduction Ratio (URR) >65 percent. 

 Data for these measures are collected from ESRD claims 

submitted to CMS for payment purposes. We have publicly 

reported anemia and adequacy of hemodialysis data on DFC since 

January 2001. The quality measure selection is limited to these 

three measures for the first year of the QIP because they are 

measures for which we already have complete data available to 

us. We are working to develop additional quality measures that 

we can adopt for the ESRD QIP in subsequent years. 

 The ESRD QIP is the first Medicare program that links any 

provider or facility payments to performance based on outcomes 

as assessed through specific quality measures. The three 

measures that we adopted for the initial year of the ESRD QIP 

are important indicators of patient outcomes because poor 
CMS-3206-P 18 

management of anemia and inadequate dialysis can lead to 

avoidable hospitalizations, decreased quality of life, and 

death. These measures are at the core of medical management of 

ESRD patients. 

 As noted previously, data for these three measures are 

collected through ESRD claims submitted to CMS. The process 

used to ensure accuracy of claims coding and measure calculation 

has been used and refined since our implementation of the DFC. 

A full description of the methodologies used for the calculation 

of the measures can be reviewed at: 

www.dialysisreports.org/pdf/esrd/public/DFRGuide.pdf under the 

“Facility Modality, Hemoglobin, and Urea Reduction Ratio” 

section. 

As we have previously stated, we are committed to adding 

additional quality measures as soon as complete data sources 

become available to us. For example, we are considering the 

possibility of adopting measures such as Kt/V, vascular access 

rates, bone and mineral metabolism, and access infection rates 

to the ESRD QIP for future years. CMS is committed to further 

development of quality measures for future years of the QIP in 

order to better assess the quality of care provided by ESRD 

facilities. 

II. Provisions of the Proposed Rule 

A. Overview of the Proposed ESRD QIP
CMS-3206-P 19 

 This proposed rule proposes to implement a quality 

incentive program for Medicare ESRD dialysis providers and 

facilities with payment reductions beginning January 1, 2012, in 

accordance with the statutory provisions set forth in section 

1881(h) of the Act. This proposed rule was developed based on 

the conceptual model set forth in the September 29, 2009 

proposed rule (74 FR 49922) and on comments received on this 

model. In general, we propose to calculate individual total 

performance scores ranging from 0-30 points for providers and 

facilities based on the three finalized measures. We propose to 

weight the total performance score for each provider/facility 

such that the percentage of Medicare patients with an average 

Hemoglobin <10g/dL measure makes up 50 percent of the score, and 

the other hemoglobin measure and the hemodialysis adequacy 

measure will each be 25 percent of the score. 

Providers/facilities that do not meet or exceed a certain total 

performance score would receive a payment reduction ranging from 

0.5 percent to 2.0 percent. We also propose below how we plan 

to implement the public reporting requirements in section 

1881(h)(6) of the Act. 

B. Performance Standards for the ESRD QIP Measures

Section 1881(h)(4)(A) of the Act requires the Secretary to 

establish performance standards with respect to the measures 

selected for the QIP for a performance period with respect to a 
CMS-3206-P 20 

year. Section 1881(h)(4)(B) of the Act provides that the 

performance standards shall include levels of achievement and 

improvement, as determined appropriate by the Secretary. 

However, for the first performance period, we propose to 

establish a performance standard for the two anemia management 

and one hemodialysis adequacy measures based on the special rule 

in section 1881(h)(4)(E) of the Act. This provision requires 

the Secretary to “initially” use as a performance standard for 

the anemia management and hemodialysis adequacy measures the 

lesser of a provider/facility-specific performance rate in the 

year selected by the Secretary under the second sentence of 

section 1881(b)(14)(A)(ii) of the Act, or a standard based on 

the national performance rate for such measures in a period 

determined by the Secretary. We are not proposing to include in 

this initial performance standard levels of achievement or 

improvement because we do not believe that section 1881(h)(4)(E) 

of the Act requires that we include such levels. In addition, 

we interpret the term “initially” to apply only to the 

performance period applicable for payment consequence calendar 

year 2012. For subsequent performance periods, we plan to 

propose performance standards under section 1881(h)(4)(A) of the 

Act. Such standards will include levels of achievement and 

improvement, as required under section 1881(h)(4)(B) of the Act, 
CMS-3206-P 21 

and are discussed below in section III.B QIP Changes and 

Updates. 

 As stated above, to implement the special rule for the 

anemia management and hemodialysis adequacy measures, we propose 

to select as the performance standard the lesser of the 

performance of a provider or facility on each measure during 

2007 (the year selected by the Secretary under the second 

sentence of section 1881(b)(14)(A)(ii) of the Act, referred to 

as the base utilization year) or the national performance rates 

of all providers/facilities for each measure in 2008. 

 In terms of establishing a performance standard based on 

national performance rates, we propose to adopt a standard that 

is equal to the national performance rates of all dialysis 

providers and facilities based on 2008 data, as calculated and 

reported on the Dialysis Facility Compare website. We propose 

to use 2008 data because it is the most recent year for which 

data is publicly available prior to the beginning of the 

proposed performance period (discussed below). Specifically, 

the rates for the anemia management and hemodialysis adequacy 

measures were posted on DFC in November 2009, and are as 

follows: 

• For the anemia management measure (referred to in this 

proposed rule as "Hemoglobin Less Than 10g/dL") -- the 

national performance percentage of Medicare patients who 
CMS-3206-P 22 

have an average hemoglobin value less than 10.0 g/dL: the 

national performance rate is 2 percent. 

• For the anemia management measure (referred to in this NPRM 

as "Hemoglobin More Than 12g/dL") -- the national 

performance percentage of Medicare patients who have an 

average hemoglobin value greater than 12.0 g/dL: the 

national performance rate is 26 percent. 

• For the proposed hemodialysis adequacy measure (referred to 

in this NPRM as "Hemodialysis Adequacy Measure") -- the 

percentage of Medicare patients who have an average URR 

level above 65 percent: the national performance rate is 96 

percent. 

 This means that, for the purpose of implementing the 

special rule for the anemia management and hemodialysis adequacy 

measures, we propose that the performance standard for each of 

the three measures for the initial performance period with 

respect to 2012 payment would be the lesser of (1) the 

provider/facility-specific rate for each of these measures in 

2007, or (2) the 2008 national average rates for each of these 

measures. 

C. Performance Period for the ESRD QIP Measures

 Section 1881(h)(4)(D) of the Act requires the Secretary to 

establish a performance period with respect to a year, and for 

that performance period to occur prior to the beginning of such 
CMS-3206-P 23 

year. Because we are required under section 1881(h)(1)(A) of 

the Act to implement the payment reduction beginning with renal 

dialysis services furnished on or after January 1, 2012, the 

first performance period would need to occur prior to that date. 

 We propose to select all of CY 2010 as the initial 

performance period for the three finalized measures. We believe 

that this is the performance period that best balances the need 

to collect sufficient data, analyze the data, allows us 

sufficient time to calculate the provider/facility-specific 

total performance scores, determine whether providers and 

facilities meet the performance standards, prepare the pricing 

files needed to implement applicable payment reductions 

beginning on January 1, 2012, and allow providers and facilities 

time to preview their performance scores and inquire about their 

scores prior to finalizing their scores and making performance 

data public (discussed in section II.D. of this proposed rule). 

We emphasize that providers/facilities are already required to 

submit all the necessary data needed to calculate the measures 

as part of their Medicare claims, so this proposal will not 

create any new requirements. We seek public comments about the 

selection of CY 2010 as the initial performance period. 

D. Methodology for Calculating the Total Performance Score for 

the ESRD QIP Measures
CMS-3206-P 24 

Section 1881(h)(3)(A)(i) of the Act requires the Secretary 

to develop a methodology for assessing the total performance of 

each provider and facility based on the performance standards 

with respect to the measures selected for a performance period. 

Section 1881(h)(3)(A)(iii) of the Act states that the 

methodology must also include a process to weight the 

performance scores with respect to individual measures to 

reflect priorities for quality improvement, such as weighting 

scores to ensure that providers/facilities have strong 

incentives to meet or exceed anemia management and dialysis 

adequacy performance standards, as determined appropriate by the 

Secretary. In addition, section 1881(h)(3)(B) of the Act 

requires the Secretary to calculate separate performance scores 

for each measure. Finally, under section 1881(h)(3)(A)(ii) of 

the Act, for those providers and facilities that do not meet (or 

exceed) the total performance score, the Secretary is directed 

to ensure that the application of the scoring methodology 

results in an appropriate distribution of reductions in payments 

to providers and facilities, with providers and facilities 

achieving the lowest total performance scores receiving the 

largest reductions. 

 We propose to calculate the total performance of each 

provider and facility with respect to the measures we have 

adopted for the initial performance period by assigning 
CMS-3206-P 25 

10 points to each of the three measures. That is, if a provider 

or facility meets or exceeds the performance standard for one 

measure, then it would receive 10 points for that measure. We 

propose to award points on a 0 to 10 point scale because this 

scale is commonly used in a variety of settings and we believe 

it can be easily understood by stakeholders. We also believe 

that the scale provides sufficient variation to show meaningful 

differences in performance between providers/facilities. 

 We propose that a provider or facility that does not meet 

or exceed the initial performance standard for a measure based 

on its 2010 data would receive fewer than 10 points for that 

measure, with the exact number of points corresponding to how 

far below the initial performance standard the 

provider/facility’s actual performance falls. Specifically, we 

propose to implement a scoring methodology that subtracts 2 

points for every 1 percentage point the provider or facility’s 

performance falls below the initial performance standard. For 

example, if under the special rule, the initial performance 

standard for a particular provider or facility for the 

Hemoglobin More Than 12g/dL is set under section 

1881(h)(4)(E)(ii) as the 2008 national average rate (26 

percent), then if that provider/facility had 28 percent of 

Medicare patients with hemoglobin levels greater than 12 g/dL 

during 2010 (the initial performance period), the 
CMS-3206-P 26 

provider/facility would receive 6 points for its performance on 

the measure because 28 percent is 2 percentage points below the 

performance standard (see Table 1, which also illustrates how 

the scoring would work if the Hemoglobin Less Than 10g/dL was 

set under section 1881(h)(4)(E)(ii) as the 2008 national average 

rate (2 percent)). However, if the initial performance standard 

for the provider/facility is set under section 1881(h)(4)(E)(i) 

as the provider or facility’s actual performance during 2007 

(for purposes of this example, 30 percent), the 

provider/facility would receive 10 points for this measure so 

long as its performance during 2010 (the initial performance 

period) was not worse than 30 percent (see Table 2, which also 

illustrates how the scoring would work if the Hemoglobin Less 

Than 10g/dL was set under section 1881(h)(4)(E)(i) as the 

facility’s actual performance during 2007 (for purposes of the 

example, 4 percent)). Tables 3 and 4 illustrate how scores 

would be assigned for the Hemodialysis Adequacy Measure. 
CMS-3206-P 27 

Table 1. Proposed Scoring Methodology for Anemia Management 

Measures using National Average Performance Rates in 2008 as the 

Performance Standard for 2010 Facility-Specific Comparison 

Anemia Management Measures 

Percentage of Medicare patients whose 

average hemoglobin levels are less than 

10 g/dL 

 Percentage of Medicare patients whose 

average hemoglobin levels are greater 

than 12 g/dL 

POINTS Percentage Percentage 

10 points 2 percent or less 26 percent or less 

8 points 3 percent 27 percent 

6 points 4 percent 28 percent 

4 points 5 percent 29 percent 

2 points 6 percent 30 percent 

0 point 7 percent or more 31 percent or more 

Note that the bolded rows show the performance standard for the 

applicable measure. 

Table 2. Proposed Scoring Methodology for Anemia Management 

Measures using Facility-Specific Rates in 2007 as the 

Performance Standard and 2010 Facility-Specific Rate for 

Comparison 

Anemia Management Measures 

Percentage of Medicare 

patients whose average 

hemoglobin levels are less 

than 10 g/dL 

 Percentage of Medicare patients whose 

average hemoglobin levels are greater 

than 12 g/dL 

POINTS Percentage Percentage 

4 percent 

(Example of a 2007 facilityspecific score) 

30 percent 

(Example of a 2007 facility-specific 

score) 

10 points 4 percent or less 30 percent or less 

8 points 5 percent 31 percent

6 points 6 percent 32 percent

4 points 7 percent 33 percent

2 points 8 percent 34 percent

0 points 9 percent or more 35 percent or more
CMS-3206-P 28 

Table 3. Proposed Scoring Methodology for Hemodialysis Adequacy 

Measure using National Average Performance Rates in 2008 as the 

Performance Standard for 2010 Facility-Specific Comparison 

Hemodialysis Adequacy Measure 

POINTS 

Percentage of Medicare patients whose 

average URR levels are greater than 65 percent

10 points 96 percent or more 

8 points 95 percent 

6 points 94 percent 

4 points 93 percent 

2 points 92 percent 

0 points 91 percent or less 

Table 4. Proposed Scoring Methodology for Hemodialysis Adequacy 

Measure using Facility-Specific Rates in 2007 as the Performance 

Standard and 2010 Facility-Specific Rate for Comparison 

Hemodialysis Adequacy Measure 

POINTS Percentage of Medicare patients 

whose URR levels are greater than 

65 percent 

92 Percent 

(Example of a 2007 facility-specific 

score) 

10 points 92 percent or more 

8 points 91 percent 

6 points 90 percent 

4 points 89 percent 

2 points 88 percent 

0 points 87 percent or less 

 We note that our proposed methodology -- that is, 

subtracting 2 points for every 1 percentage point the provider 

or facility’s performance falls below the performance standard -

- does not take into account the relative variability in 

performance associated with each measure. For example, based on 
CMS-3206-P 29 

2008 data, a 1 percentage point difference under the Hemoglobin 

Less Than 10 g/dL measure would affect a greater proportion of 

facilities and providers than a 1 percentage point difference 

under the Hemoglobin More Than 12 g/dL measure. The table below 

highlights the variability in performance associated with each 

measure. (We note that lower scores on the anemia measures 

reflect better performance.) 

Table 5: Variation among finalized ESRD QIP measures in 2008 

 Nat’l 

Average 

Median Mode Low 

Range 

High 

Range 

1 SD 2 SD 3 SD 25th

percentile 

50th

percentile 

75th

percentile 

Hgb<10 2% 2% 0% 0% 31% 95% 99% 100% 0% 2% 3% 

Hgb>12 26% 25% 13% 0% 93% 72% 97% 100% 15% 25% 38% 

URR>65 96% 97% 100% 0% 100% 96% 99% 100% 94% 97% 100% 

 Despite this difference in variability in performance among 

the measures, we are proposing to apply the straight-forward 

methodology we have described above in a manner that is 

consistent across all three measures adopted in this rule. In 

designing the scoring methodology for the first year, CMS wanted 

to adopt a clear-cut approach (that is, subtracting two points 

for each percentage point providers and facilities fell below 

their performance standard) consistent with the conceptual model 

published in the End-Stage Renal Disease Prospective Payment 

System Final Rule (CMS-1418-F) on August 12, 2010 in the Federal 

Register. We seek public comment on our proposal to apply the 

score reductions in this manner, as opposed to a methodology 
CMS-3206-P 30 

which takes into account the relative variation in performance 

that exists for each measure. 

We recognize that this straight-forward approach may not be 

appropriate in future years of the QIP as we adopt new measures 

for inclusion in the program that may have a wider variability 

in performance. Moreover, we may need to reevaluate this 

approach for the three measures adopted in this rule, depending 

on how providers and facilities perform in future years on these 

measures. If this approach is finalized, we will continue to 

evaluate the applicability and appropriateness of such an 

approach in future years of the QIP. As we have stated, we want 

to ensure that the performance measures included in the QIP will 

result in meaningful quality improvement for patients at both 

the national and individual facility/provider level. Therefore, 

we seek comment on potential methodologies that would take into 

account variation in performance amongst all measures included 

in the QIP. For example, under one possible methodology, a 

provider or facility’s performance could be awarded 10 points 

for achieving a higher level of performance (for example, the 

90th percentile). The remaining points could then be assigned 

according to a linear distribution, where a provider/facility 

might receive 0 points for a lower level of performance (for 

example, 1 standard deviation below the mean). 
CMS-3206-P 31 

 In calculating the total performance score, section 

1881(h)(3)(A)(iii) of the Act requires the agency to weight the 

performance scores with respect to individual measures to 

reflect priorities for quality improvement, such as weighting 

scores to ensure that providers/facilities have strong 

incentives to meet or exceed the performance standards. In the 

development of our conceptual model, we initially considered 

that the initial scoring method would weight each of the three 

proposed measures equally. After further examination and based 

on the public comments received, we propose to give greater 

weight to the Hemoglobin Less Than 10g/dL measure. Low 

hemoglobin levels below 10g/dL can lead to serious adverse 

health outcomes for ESRD patients such as increased 

hospitalizations, need for transfusions, and mortality. Giving 

more weight to the Hemoglobin Less Than 10g/dL measure ensures 

that providers/facilities are incentivized to continue to 

properly manage and treat anemia. We believe that this is 

important in light of concerns that have been raised that the 

new bundled ESRD payment system could improperly incentivize 

providers/facilities to under treat patients with anemia by 

underutilizing ESAs. 

Specifically, we propose to weight the Hemoglobin Less Than 

10g/dL measure as 50 percent of the total performance score. 

The remaining 50 percent of the total performance score would be 
CMS-3206-P 32 

divided equally between the Hemoglobin More Than 12g/dL measure 

and the Hemodialysis Adequacy Measure. When calculating the 

total performance score for a provider/facility, we would first 

multiply the score achieved by that provider/facility on each 

measure (0-10 points) by that measure’s assigned weight (.50 or 

.25). Then we would add each of the three numbers together, 

resulting in a number (although not necessarily an integer) 

between 0-10. Lastly, this number would be multiplied by the 

number of measures (three) and rounded to the nearest integer 

(if necessary). In rounding, any fractional portion 0.5 or 

greater would be rounded up to the next integer, while 

fractional portions less than 0.5 are rounded down. Thus, a 

score of 27.4 would round to 27, while 27.6 would round to 28. 

An example of how the proposed scoring methodology would 

work follows below. The example assumes that the performance 

standard for Facility A during the initial performance period is 

based on the 2008 national average rates under section 

1881(h)(4)(E)(ii) of the Act (which are set forth above) 

(because Facility A’s base utilization year results were higher 

than the 2008 national average) and that Facility A achieves the 

following results in 2010: 

1. Hemoglobin Less Than 10g/dL: 2 percent.

2. Hemoglobin More Than 12g/dL: 26 percent.

3. Hemodialysis Adequacy: 93 percent. 
CMS-3206-P 33 

 The total performance score for Facility A would be 26 

points. Facility A would receive 10 points for achieving the 

2008 national average rate for the Hemoglobin Less Than 10g/dL 

measure (see Table 1); 10 points for achieving the 2008 national 

average rate for the Hemoglobin More Than 12g/dL measure (see 

Table 1); and 4 points for performing 3 percentage points below 

the 2008 national average rate for the Hemodialysis Adequacy 

Measure in 2010. Next, we would multiply each individual 

measure’s score by its assigned weight: 10 x .5 = 5; 10 x .25 = 

2.5; 4 x .25 = 1. Then, all three scores would be added 

together and multiplied by three: (5 + 2.5 + 1) x 3 = 25.5. 

Finally, we would round Facility A’s score to the nearest whole 

number, resulting in a total performance score of 26 points (see 

Table 6 below). 
CMS-3206-P 34 

Table 6. Proposed Methodology for Calculating the Total 

Performance Score; Example showing National Performance Rate as 

the Performance Standard 

Measure 2008 National 

Average Rates 

2010 

Performance Score Weight Weighted 

Score 

Hemoglobin Less 

Than 10g/dL 2% 2% 10 0.5 5.0 

Hemoglobin More 

Than 12g/dL 26% 26% 10 0.25 2.5 

Hemodialysis 

Adequacy Measure 96% 93% 4 0.25 1.0 

Subtotal 8.5 

x 3 25.5 

Total Performance Score 26 

 It is important to note that this example assumes that 

Facility A’s facility specific performance in 2007 (the base 

utilization year) on each of the three measures was better than 

or equal to the national performance average in 2008. If 

however, Facility A’s performance in 2007 on the Hemodialysis 

Adequacy Measure had been 92 percent, then its performance 

standard for that measure would have been set according to 

section 1881(h)(4)(E)(i), therefore setting a lower performance 

standard for Facility A (see Table 4). In that case, Facility 

A’s score of 93 percent during the performance period would have 

earned it a score of 10 points, resulting in a total performance 

score of 30 points (see Table 7 below). 
CMS-3206-P 35 

Table 7. Proposed Methodology for Calculating the Total 

Performance Score; Example showing Facility-Specific Performance 

during 2007 as a Performance Standard 

Measure 

2007 

Performa

nce 

(FacilitySpecific) 

2008 

National 

Average 

Rates 

2010 

Perform

ance Score Weight Weighted 

Score 

Hemoglobin Less 

Than 10g/dL 1% 2% 2% 10 0.5 5.0 

Hemoglobin More 

Than 12g/dL 25% 26% 26% 10 0.25 2.5 

Hemodialysis 

Adequacy Measure 92% 96% 93% 10 0.25 2.5 

Subtotal 10.0 

x 3 30.0 

Total Performance Score 30 

As we stated above, we believe that this proposed weighting 

methodology will ensure that providers/facilities have the 

incentive to adequately maintain patients’ hemoglobin levels, 

particularly considering concerns about appropriate ESA use that 

could arise when the new bundled ESRD payment system is 

implemented. We believe this proposed weighting methodology is 

appropriate for the initial year of the QIP. However, 

consistent with our desire to improve the quality of care 

provided to ESRD patients, we solicit comments on potential 

weighting methodologies that could be incorporated to the QIP in 

future years as new measures are introduced. 

As previously discussed, we believe this proposed total 

performance score methodology is appropriate for the initial 

performance period in the new ESRD QIP, but recognize that it 
CMS-3206-P 36 

will be important to monitor and potentially reevaluate this 

methodology as provider and facility performance changes and as 

new measures are added in future years of the ESRD QIP. We seek 

public comments about the proposed scoring methodology for the 

ESRD QIP. 

E. Payment Reductions Using the Total Performance Score

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 reductions in payments 

among providers and facilities achieving different levels of 

total performance scores, with providers and facilities 

achieving the lowest total performance scores receiving the 

largest reductions. 

 We propose to implement a sliding scale of payment 

reductions for payment consequence year 2012, where the minimum 

total performance score that providers/facilities would need to 

achieve in order to avoid a payment reduction would be 26 

points. Providers/facilities that score between 21-25 points 

would receive a 0.5 percent payment reduction, between 16-20 

points a 1.0 percent payment reduction, between 11-15 points a 

1.5 percent payment reduction, and between 0-10 points the full 

2.0 percent payment reduction (see Table 8). Applying this 

payment reduction scale to the example of Facility A above, 
CMS-3206-P 37 

Facility A’s total performance score of 26 would result in it 

receiving no payment reduction. 

Table 8. Proposed Payment Reduction Scale 

Total Performance 

Score 

Percent of 

Payment 

Reduction 

26 to 30 Points 0.0 Percent 

21 to 25 Points 0.5 Percent 

16 to 20 Points 1.0 Percent 

11 to 15 Points 1.5 Percent 

0 to 10 Points 2.0 Percent 

In developing the proposed payment reduction scale, we 

carefully considered the size of the incentive to 

providers/facilities to provide high quality care and range of 

total performance scores to which the payment incentive applies, 

recognizing that this would be the first year of a new program. 

Our goal is to avoid situations where small deficiencies in a 

provider/facility’s performance results in a large payment 

reduction. For example, we want to avoid imposing a large 

payment reduction on providers/facilities whose performance on 

one or more measures falls just slightly below the performance 

standard. At the same time, we want poorly performing 

providers/facilities to receive a more significant payment 

reduction. Our analysis suggests that use of payment 

differentials of 0.5 percent for the total performance score 

ranges we are proposing differentiates between 

providers/facilities with fair to good performance and 
CMS-3206-P 38 

providers/facilities with poor performance. We will consider 

smaller differentials between payment levels for future years of 

the QIP, which we believe will further differentiate 

providers/facilities based on their performance. Additionally, 

section 1881(h)(1)(A) of the Act requires that the Secretary 

implement payment reductions of up to 2.0 percent, and section 

1881(h)(3)(A)(ii) requires that the application of the total 

performance score methodology result in an appropriate 

distribution of reductions in payment among 

providers/facilities. Consistent with these requirements, we 

believe that Medicare beneficiaries will be best served if the 

full 2.0 percent payment reduction is initially applied only to 

those providers/facilities whose performance falls well below 

the performance standards. We believe that applying a payment 

reduction of 2.0 percent to providers/facilities whose 

performance falls significantly below the performance standards, 

coupled with applying 0.5 payment differential reductions to 

providers/facilities based on lesser degrees of performance 

deficiencies, will incentivize all providers/facilities to 

improve the quality of their care and avoid a payment reduction 

the following year. We seek public comments about how the 

proposed payment reduction scale will incentivize 

providers/facilities to meet or exceed the performance standards 
CMS-3206-P 39 

for the first year of the QIP, and whether it is an appropriate 

standard to use in future years. 

In general, ESRD facilities are paid monthly by Medicare 

for the ESRD services they furnish to a beneficiary even though 

payment is on a per treatment basis. In finalizing the new 

bundled payment system starting on January 1, 2011, we elected 

to continue the practice of paying ESRD facilities monthly for 

services furnished to a beneficiary in the End-Stage Renal 

Disease Prospective Payment System Final Rule (CMS-1418-F) 

published on August 12, 2010.

In keeping with this practice, we propose to apply any 

payment reduction under the QIP for payment consequence year 

2012 to the monthly payment amount received by ESRD facilities 

and providers. The payment reduction would be applied after any 

other applicable adjustments to an ESRD facility’s payment, 

including case-mix, wage index, outlier, etc, were made. (This 

includes providers/facilities being paid a blended amount under 

the transition and those that had elected to be excluded from 

the transition and receive its payment amount based entirely on 

the payment amount under the ESRD PPS.) 

Section 1833 of the Act governs payments of benefits for 

Part B services and the cost sharing amounts for services that 

are considered medical and other health services. In general, 

many Part B services are subject to a payment structure that 
CMS-3206-P 40 

requires beneficiaries to be responsible for a 20 percent coinsurance after the deductible (and Medicare pays 80 percent). 

With respect to dialysis services furnished by ESRD facilities 

to individuals with ESRD, under section 1881(b)(2)(a) of the 

Act, payment amounts are 80 percent (and 20 percent by the 

individual). 

Under the proposed approach for implementing the QIP 

payment reductions, the beneficiary co-insurance amount would be 

20 percent of the total Medicare ESRD payment, after any payment 

reductions are applied. To the extent a payment reduction 

applies, we note that the beneficiary’s co-insurance amount 

would be calculated after applying the proposed payment 

reduction and would thus lower the co-insurance amount. We seek 

public comment on the impact of this effect.

We propose to incorporate the statutory requirements of the 

QIP payment reduction set forth in proposed §413.177. 

F. Public Reporting Requirements

1. Introduction 

Section 1881(h)(6)(A) of the Act requires the Secretary to 

establish procedures for making information regarding 

performance under the ESRD QIP available to the public, 

including information on the total performance score (as well as 

appropriate comparisons of providers and facilities to the 

national average with respect to such scores) and performance 
CMS-3206-P 41 

scores for individual measures achieved by each provider and 

facility. Section 1881(h)(6)(B) further requires that a 

provider or facility has an opportunity to review the 

information to be made public with respect to it prior to its 

publication. 

In addition, section 1881(h)(6)(C) of the Act requires the 

Secretary to provide each provider and facility with a 

certificate containing its total performance score to post in 

patient areas within their facility. Finally, section 

1881(h)(6)(D) of the Act requires the Secretary to post a list 

of providers/facilities and performance-score data on a CMSmaintained website. 

2. Notifying Providers/Facilities of their QIP Scores 

Section 1881(h)(6)(B) of the Act requires CMS to establish 

procedures that include giving providers/facilities an 

opportunity to review the information that is to be made public 

with respect to the provider or facility prior to such data 

being made public. 

CMS currently uses a secure, web-based tool to share 

confidential, facility-specific quality data with providers, 

facilities, and select others. Specifically, we provide annual 

Dialysis Facility Reports (DFRs) to dialysis 

providers/facilities, ESRD Network Organizations, and State 

Survey Agencies. The DFRs provide valuable facility-specific 
CMS-3206-P 42 

and comparative information on patient characteristics, 

treatment patterns, hospitalizations, mortality, and 

transplantation patterns. In addition, the DFRs contain 

actionable practice patterns such as dose of dialysis, vascular 

access and anemia management. We expect providers and 

facilities to use the data included in the DFRs as part of their 

ongoing clinical quality improvement projects. 

The information contained in DFRs is sensitive and as such, 

most of that information is made available through a secure 

website only to that provider/facility and its ESRD Network 

Organization, State Survey Agency, and the applicable CMS 

Regional Office. However, select measures based on DFR data are 

made available to the public through the DFC website, which 

allows Medicare beneficiaries and others to review and compare 

characteristics and quality information on dialysis providers 

and facilities in the United States. To allow dialysis 

providers/facilities a chance to “preview” these data before 

they are released publicly, we supply draft DFRs to 

providers/facilities in advance of every annual DFC update. 

Dialysis providers and facilities are generally provided 30 days 

to review their facility-specific data and submit comments if 

the provider/facility has any questions or concerns regarding 

the report. A provider/facility’s comment is evaluated and 

researched. If a provider/facility makes us aware of an error 
CMS-3206-P 43 

in any DFR information, a recalculation of the quality 

measurement results for that provider/facility is conducted, and 

the revised results are displayed in the DFC website. 

We propose to use the above-described procedures, including 

the DFRs framework, to allow dialysis providers/facilities to 

preview their quality data under the QIP before they are 

reported publicly. Specifically, the quality data available for 

preview through the web system will include a 

provider/facility’s performance score (both in total and by 

individual quality measure) as well as a comparison of how well 

the provider/facility’s performance scores compare to national 

averages for total performance and individual quality measure 

performance. We believe that adapting these existing procedures 

for purposes of the ESRD QIP will create minimum expense and 

burden for providers/facilities because they will not need to 

familiarize themselves with a new system or process for 

obtaining and commenting upon their preview reports. We also 

note that under these procedures, dialysis providers and 

facilities would have an opportunity to submit performance score 

inquiries and to ask questions of CMS data experts about how 

their performance scores were calculated on a facility-level 

basis. This performance score inquiry process would also give 

providers/facilities the opportunity to submit inquiries, 

including what they believe to be errors in their performance 
CMS-3206-P 44 

score calculations, prior to the public release of the 

performance scores. Any provider/facility that submits an 

inquiry will receive a response. 

While we believe that the DFR process is the most logical 

solution for meeting the data preview requirement at this time, 

we may decide to revise this approach in the future. Should we 

decide to make changes, or should we find a more 

administratively feasible or cost-effective solution, we propose 

to use sub-regulatory processes to revise our approach for 

administering the QIP performance score preview process in a way 

that maintains our compliance with section 1881(h)(6)(B) of the 

Act. We also propose to use sub-regulatory processes to 

determine issues such as the length of the preview period and 

the process we will use to address inquiries received from 

dialysis providers/facilities during the preview period. 

We seek public comments on our proposal to use the DFR 

process and suggestions for other options that will allow 

dialysis providers/facilities to preview the information that is 

to be made public with respect to the provider or facility in 

advance of such information being made public. 

3. Informing the Public through Facility-Posted Certificates 

Section 1881(h)(6)(C) of the Act requires the Secretary to 

provide certificates to dialysis providers and facilities about 

their total performance scores under the QIP. This section also 
CMS-3206-P 45 

requires each provider/facility that receives a QIP certificate 

to display it prominently in patient areas. 

We propose to meet this requirement by providing providers 

and facilities with an electronic file in a generally accessible 

format (for example, Microsoft Word and/or Adobe Acrobat). We 

propose to disseminate these certificates to providers and 

facilities once per year after the preview period for the QIP 

performance scores has been completed. We would use a secure, 

web-based system, similar to the system used to allow facilities 

to preview their QIP performance scores, to disseminate 

certificates. The secure web-based system would allow CMS to 

transmit performance score certificates to providers/facilities 

in a secure manner. CMS will make every effort to synchronize 

the release of the certificates for provider/facility display 

with the release of performance score information on the 

Internet. 

Under our proposal, each provider/facility would be 

required to display the certificate no later than 5 business 

days after CMS sends it. We expect that dialysis 

providers/facilities would have the capability to download and 

print their certificates from the secure website. We propose 

that providers/facilities would be prohibited from altering the 

content of the certificates and that they must print the 

certificates on plain, blank, white or light-colored paper, no 
CMS-3206-P 46 

smaller than 81⁄2 inches by 11 inches (a standard-sized document). 

In addition, providers/facilities may not reduce or otherwise 

change the font size on the certificate. 

Once printed, we propose that each provider/facility must 

post at least one copy of the certificate prominently in a 

patient area of the dialysis provider/facility. Specifically, 

we propose that providers/facilities must post the certificate 

in a conspicuous place where they post other patient-directed 

materials so that it is in plain view for all patients (or their 

parents/guardians or representatives) to inspect. We will 

update the certificates annually with new performance 

information, and providers/facilities must post the updated 

certificate within 5 business days of the day that we transmit 

it. We expect that providers/facilities will take steps to 

prevent certificates from being altered, defaced, stolen, 

marred, or covered by other material. In the event that a 

certificate is stolen or destroyed while it is posted, 

providers/facilities would be responsible for replacing the 

stolen or destroyed certificate with a fresh copy by re-printing 

the certificate file they have received from CMS. The 

provider/facility would also be responsible for answering 

patient questions about the certificate in an understandable 

manner, taking into account that some patients might have 

limited English proficiency. 
CMS-3206-P 47 

We propose to include on the certificate of each 

provider/facility all of the information that we are also making 

available to the public under sections 1881(h)(6)(A) and 

1881(h)(6)(D) with respect to the provider/facility. These data 

elements are: 

• The total performance score achieved by the 

provider/facility under the QIP with respect to the year 

involved; 

• Comparative data that shows how well the 

provider/facility’s total performance score compares to the 

national total performance score average; 

• The performance score that the provider/facility achieved 

on each individual measure with respect to the year 

involved; and 

• Comparative data that shows how well the 

provider/facility’s individual quality measure performance 

scores compare to the national performance score average 

for each quality measure. 

We considered several options for making QIP performance 

score data available via certificates. Regarding the content of 

the certificates, we considered including not just information 

for the ESRD QIP-related quality measures, but additional 

quality measure information that CMS has at its disposal from 

the DFC website that is not related to the QIP, such as risk-
CMS-3206-P 48 

adjusted survival information. Ultimately, we determined that 

an electronic method of disseminating certificates was the 

easiest way for CMS to deliver certificates directly to 

providers/facilities because it is the least burdensome and most 

cost effective way of providing the certificates. We also 

determined that the information posted on the certificates 

should be restricted only to QIP information. We believe that 

limiting the information on the certificate to QIP-specific data 

will make the certificate easier for Medicare beneficiaries to 

read and understand. 

We seek public comments on how to make the information 

contained on the certificate as user friendly and easy to 

understand as possible, and how to make the information 

available to Medicare beneficiaries who may be unable to read 

the certificates due to a physical disability or because of 

limited or no reading proficiency in the English language. We 

are particularly interested in comments on how we can educate 

Medicare beneficiaries and their families about the presence of 

certificates in dialysis providers/facilities and how the 

information can be used to engage in meaningful conversations 

with their dialysis caregivers and the clinical community about 

the quality of America’s kidney dialysis care. 

Furthermore, we seek public comments on the proposal to use 

the DFR distribution process to provide the certificates to 
CMS-3206-P 49 

providers/facilities under section 1881(h)(6)(C) of the Act. 

Specifically, we seek comments on the feasibility and 

advisability of using the DFR system to provide the certificates 

to providers/facilities in a generally available format such as 

Microsoft Word or Adobe Acrobat. 

4. Informing the Public through Medicare’s Website 

Section 1881(h)(6)(D) of the Act requires the Secretary to 

use a CMS-maintained website for the purpose of establishing a 

list of dialysis providers/facilities that furnish renal 

dialysis services to Medicare beneficiaries and that indicates 

the total performance score and the performance score for 

individual measures achieved by the provider or facility. 

We currently use the DFC website (a CMS-maintained website) 

to publish information about the availability of dialysis 

providers/facilities across the United States, as well as data 

about how well each of these providers/facilities has performed 

on existing dialysis-related quality of care measures. DFC is 

part of a larger suite of “Compare” tools, all of which are 

available online at www.medicare.gov. In addition to DFC, CMS 

hosts Nursing Home Compare, Home Health Compare, and Hospital 

Compare, as well as tools that allow users to compare 

prescription drug plans, health plans, and Medigap policies. 

DFC links Medicare beneficiaries with detailed information 

about each of the over 4,700 dialysis providers/facilities 
CMS-3206-P 50 

approved by Medicare, and allows them to compare 

providers/facilities in a geographic region. Users can review 

information about the size of the provider/facility, the types 

of dialysis offered, the provider/facility’s ownership, and 

whether the provider/facility offers evening treatment shifts. 

Beneficiaries can also compare dialysis providers/facilities 

based on three key quality measures--how well patients at a 

provider/facility have their anemia managed, and how well 

patients at a provider/facility have waste removed from their 

blood during dialysis, and whether the patients treated at a 

provider/facility generally live as long as expected. DFC aims 

to help beneficiaries decide which dialysis provider/facility 

would best serve their care needs, as well as to encourage 

conversations among beneficiaries and their caregivers about the 

quality of care at dialysis providers/facilities, thus providing 

an additional incentive for dialysis providers/facilities to 

improve the quality of care they furnish. Lastly, DFC links 

beneficiaries to resources that support family members, as well 

as beneficiary advocacy groups. 

Because DFC is a current component of the Medicare suite of 

Compare tools, we propose to use DFC as the mechanism for 

meeting the web-based public information requirement under 

section 1881(h)(6)(D) of the Act. DFC is a consumer-focused 

tool, and the implementation of the QIP will not change this 
CMS-3206-P 51 

focus. We recognize that sharing information with the public 

about the QIP is not only a statutory requirement: it is also a 

function of open and transparent government. Ultimately, the 

intent of DFC is to provide beneficiaries with the information 

they need to be able to make proper care choices. 

We believe that DFC already provides accurate and trusted 

information about the characteristics of all Medicare-approved 

dialysis providers/facilities, as well as information about the 

quality of care furnished by these providers/facilities. 

Furthermore, CMS already has the information technology 

infrastructure in place to support DFC and its public reporting 

functions; therefore, adding new QIP-related data to the DFC 

website would not create additional significant expenditures or 

overly burden agency resources. 

We propose to update the DFC website once per year at a 

minimum with the following data elements for every 

provider/facility listed on DFC (that is, every Medicareapproved provider/facility): 

• The total performance score achieved by each 

provider/facility under the QIP with respect to the year 

involved; 

• Comparative data that shows how well the 

provider/facility’s total performance score compares to the 

national total performance score average; 
CMS-3206-P 52 

• Scores for each of the individual measures that comprise 

the overall QIP performance score for the provider/facility 

with respect to the year involved; and 

• Comparative data that shows how well the 

provider/facility’s individual quality measure performance 

scores compare to the national performance score average 

for each quality measure. 

We note that this is the same information that we are 

proposing to include on the certificates that we will provide to 

providers/facilities. We seek public comments about whether the 

total performance score and the individual measure performance 

scores should be integrated into the design of the DFC tool 

itself or whether we should alternatively implement section 

1881(h)(6)(D) by making a file available to the public on the 

CMS website (at www.cms.hhs.gov). We are sensitive to the need 

to balance our interest in making QIP performance score 

information public with our need to provide beneficiaries with 

easy-to-understand, non-technical information about 

providers/facilities that they can use to make decisions about 

where to receive dialysis care. 

We also seek public comment on the advisability of using 

DFC as our mechanism for making QIP information available over 

the Internet. We also seek comment on the presentation of QIP 

information on the website and the breadth of detail that we 
CMS-3206-P 53 

should make publicly available regarding QIP performance scores. 

Lastly, we seek comment on how DFC could be redesigned to make 

QIP information useful to Medicare beneficiaries as they compare 

the quality of care available at the nation’s Medicare-approved 

dialysis providers/facilities. 

III. Future QIP Considerations 

A. Program Monitoring and Evaluation

CMS plans to monitor and evaluate the new ESRD Prospective 

Payment System (PPS) and QIP as part of our ongoing effort to 

ensure that Medicare beneficiaries with ESRD receive high 

quality care. The monitoring will focus on whether, following 

implementation of the new PPS and the QIP, we observe changes in 

access to and quality of care, especially within the vulnerable 

populations. We will be evaluating the effects of the new PPS 

and the QIP in areas such as: 

• Access to care for beneficiaries including categories or 

subgroups of beneficiaries 

• Changes in care practices that could adversely impact on 

the quality of care for beneficiaries 

• Patterns of care suggesting particular effects of the new 

PPS, for example, whether there are increases/decreases in 

utilization of injectable ESRD drugs and the use of home 

modalities for certain groups of ESRD beneficiaries 
CMS-3206-P 54 

• Best practices of high-performing providers/facilities that 

might be adopted by other providers/facilities. 

 CMS currently collects detailed claims data on patients’ 

hemoglobin levels and adequacy of dialysis, and also collects 

information on other facets of ESRD care, including treatments 

provided, drugs, hospitalizations, and deaths. In addition, we 

collect beneficiary enrollment data which provide important 

demographic and other information related to Medicare ESRD 

beneficiaries. These data and other data sources will provide 

the basis for early examination of overall trends in care 

delivery, access, and quality. We also will use the data to 

assess more fully the quality of care furnished to Medicare 

beneficiaries under the new PPS, and to help inform possible 

refinements to the PPS and QIP moving forward. We welcome 

public comments about an approach to monitoring and evaluating 

the PPS and the QIP. 

B. Potential QIP Changes and Updates

As noted above, section 1881(h)(4)(B) of the Act provides 

that the performance standards established under section 

1881(h)(4)(A) shall include levels of achievement and 

improvement, as determined appropriate by the Secretary. We 

anticipate that we will propose to adopt performance standards 

under section 1881(h)(4)(A) of the Act that include levels of 

achievement and improvement for the 2013 QIP. 
CMS-3206-P 55 

In addition, we anticipate strengthening the performance 

standard for each measure in future years of the QIP, including 

potentially moving away from using the national performance rate 

as the performance standard and instead identifying absolute 

standards that reflect performance goals widely recognized by 

the ESRD medical community as demonstrating high quality care 

for ESRD patients. For instance, we may seek to raise the 

performance standard for each of the three measures finalized 

for the 2012 QIP above the proposed or finalized level (that is, 

Hemoglobin Less Than 10g/dL – 2 percent; Hemoglobin More Than 

12g/dL – 26 percent; and Hemodialysis Adequacy Measure – 96 

percent). 

Additionally, for these initial three finalized measures, 

we intend to establish the national performance rates of each of 

these measures as “floors” such that the performance standards 

will never be lower than those set for the previous year; even 

if provider/facility performance -- and therefore the national 

performance rate -- fails to improve, or even declines, over 

time, the performance standard to which facilities and providers 

will be held for these measures will not be reduced from one 

year to the next. This will better ensure that the quality of 

ESRD patient care will continue to improve over time. 

Establishing such floors for performance standards, however, 

will in no way prohibit the Secretary from establishing 
CMS-3206-P 56 

performance standards that are higher than the floors if the 

Secretary determines that higher performance standards are 

appropriate. 

In establishing new measures for the QIP in future years, 

we intend that the concept of “floors” described above would be 

established for each new measure and applied to these new 

measures in order to better ensure improvement in quality of 

care, once we have a historical perspective on how the measure 

performs. While we will consider use of national performance 

rates, we also will take into consideration future performance 

measures that reflect performance goals widely recognized by the 

ESRD medical community as demonstrating high quality care for 

ESRD patients, should such a consensus be reached. 

As noted above, section 1881(h)(2)(A) of the Act also 

requires that the measures include, to the extent feasible, 

measures on patient satisfaction, as well as such other measures 

that the Secretary specifies, including iron management, bone 

mineral metabolism (i.e. for calcium and phosphorus), and 

vascular access. CMS is currently developing measures in each 

of the areas specified in section 1881(h)(2)(A) of the Act and 

is also developing additional measures such as Kt/V, access 

infection rate, fluid weight management, and pediatric measures. 

As part of the process of developing these new measures, where 

necessary data are not currently being collected, we intend to 
CMS-3206-P 57 

require providers to submit data needed to establish a baseline 

for each of the measures under consideration, as listed above, 

as soon as is practicable. For most measures, CMS will use a 

collection process that has been determined appropriate by the 

Secretary to obtain this data. For collection of calcium and 

phosphorus levels, however, we intend to collect information on 

facility and provider ESRD claims as soon as practicable. 

Additional detail on submission of the calcium and phosphorus 

levels will be provided as soon as it is available. We 

anticipate proposing additional measures, such as those listed 

above under section 1881(h)(2)(A) of the Act, in future 

rulemaking for the QIP. 

We seek public comments on how we might best incorporate 

both improvement and achievement standards as specified by the 

Act. We also seek comments on performance standards for future 

years of the QIP. We are committed to adopting additional 

quality measures for the QIP as soon is practicable. While we 

are evaluating measures for inclusion in future years of the 

QIP, we also seek public comment on setting performance 

standards for the first year a new measure is included in the 

QIP. 

IV. Collection of Information Requirements 

 Under the Paperwork Reduction Act of 1995, we are required 

to provide 60-day notice in the Federal Register and solicit 
CMS-3206-P 58 

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 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. 

We are soliciting public comment on each of these issues 

for the following sections of this document that contain 

information collection requirements (ICRs): 

Section VIII.C. of the preamble of this proposed rule discusses 

a disclosure requirement. As stated earlier in the preamble, 

section 1881(h)(6)(C) of the Act requires the Secretary to 

provide certificates to dialysis care providers and facilities 

about their total performance scores under the QIP. This 
CMS-3206-P 59 

section also requires each provider and facility that receives a 

QIP certificate to display it prominently in patient areas. 

 To comply with this requirement, CMS will be issuing QIP 

certificates to providers and facilities via a generally 

accessible electronic file format. We propose that each 

provider and facility would prominently display the QIP 

certificate in patient areas. In addition, we propose that each 

provider and facility will take the necessary measures to ensure 

the security of the certificate in the patient areas. Finally, 

we propose that each provider/facility would have staff 

available to answer questions about the certificate in an 

understandable manner, taking into account that some patients 

might have limited English proficiency. 

 The burden associated with the aforementioned requirements 

is the time and effort necessary for providers and facilities to 

print the QIP certificates, display the certificate prominently 

in patient areas, ensure the safety of the certificate, and 

respond to patient inquiries in reference to the certificates. 

We estimate that 4,311 providers and facilities will receive QIP 

certificates and will be required to display them. We also 

estimate that it will take each provider or facility 10 minutes 

to print, prominently display and secure the QIP certificate, 

for a total estimated annual burden of 719 hours. We estimate 

that approximately one-third of ESRD patients will ask a 
CMS-3206-P 60 

question about the QIP certificate. We further estimate that it 

will take each provider/facility 5 minutes to answer each 

patient question about the QIP certificate, or 1.65 hours per 

provider or facility each year. The total estimated annual 

burden associated with this requirement is 7,121 hours. The 

total estimated annual burden for both displaying the QIP 

certificates and answering patient questions about the 

certificates is 7,839 hours. While the total estimated annual 

burden associated with both of these requirements as discussed 

is 7,839 hours, we do not believe that there will be a 

significant cost associated with these requirements because we 

are not requiring facilities to complete new forms. As 

discussed in Section VI. of the preamble of this proposed rule, 

we estimate that the total cost for all ESRD facilities to 

comply with the collection of information requirements would be 

less than $200,000. 

 If you wish to comment on these information collection and 

recordkeeping requirements, please do either of the following: 

 1. Submit your comments electronically as specified in the 

ADDRESSES section of this proposed rule; or 

 2. Submit your comments to the Office of Information and 

Regulatory Affairs, Office of Management and Budget, 

 Attention: CMS Desk Officer, [CMS-3206-P [ ]

 Fax: (202) 395-6974; or 
CMS-3206-P 61 

 Email: OIRA_submission@omb.eop.gov 

V. 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. 

VI. Regulatory Impact Statement 

A. Overall Impact

We have examined the impact of this rule as required by 

Executive Order 12866 on Regulatory Planning and Review, the 

Regulatory Flexibility Act (RFA) (September 19, 1980, 

Pub. L. 96-354), section 1102(b) of the Social Security Act, 

section 202 of the Unfunded Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional Review Act 

(5 U.S.C. 804(2)). 

Executive Order 12866 directs 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 
CMS-3206-P 62 

impacts, and equity). A regulatory impact analysis (RIA) must 

be prepared for major rules with economically significant 

effects ($100 million or more in any 1 year). As explained in 

the analysis that follows, we have determined that this proposed 

rule is not economically significant since it does not have 

effects of $100 million or more. Furthermore, it is not 

considered a major rule under the Congressional Review Act. 

The RFA requires agencies to analyze options for regulatory 

relief of small businesses. For purposes of the RFA, small 

entities include small businesses, nonprofit organizations, and 

small governmental jurisdictions. Most hospitals and most other 

providers or facilities are small entities, either by nature of 

their nonprofit status or by having revenues of $7.0 million to 

$34.5 million in any 1 year. Individuals and States are not 

included in the definition of a small entity. Based on our 

review of 2007-2008 DFC quality performance data, we estimate 

that approximately 19 percent of ESRD facilities are small 

entities according to the Small Business Administration’s (SBA) 

size standard of those dialysis facilities having total revenues 

of $34.5 million or less in any one year, and that 19 percent of 

dialysis facilities are nonprofit organizations. For more 

information on SBA’s size standards, see the SBA website at 

http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sst

d_tablepdf.pdf. (Kidney Dialysis Centers are listed as North 
CMS-3206-P 63 

American Industry Classification System (NAICS) Code 621492 with 

a size standard of $34.5 million.) 

 Using DFC performance data based on Medicare claims from 

2007 and 2008, we consider the 802 independent facilities and 

hospital-based facilities to be small entities. The ESRD 

facilities that are owned and operated by a Large Dialysis 

Organization (LDO) and/or regional chain, comprising 

approximately 3,509 facilities, would have total revenues in 

excess of $34.5 million in any year when the total revenues for 

all locations are combined for each business (individual LDO or 

regional chain). Table 9 below shows the estimated impact of 

the QIP on small entities for payment consequence year 2012. 

The distribution of ESRD providers/facilities by facility size 

(both among facilities considered to be small entities for 

purposes of this analysis and by number of treatments per 

facility), geography (both urban/rural and by region), and by 

facility type (hospital based/freestanding facilities). 

Table 9. Impact of Proposed QIP Payment Reductions to ESRD 

Facilities for CY 2012 Includes estimated impact on small 

entities for Regulatory Flexibility Act (RFA) analysis) 

Facility type 

Number 

of 

facilities 

Number of 

facilities expected 

to receive a 

payment reduction 

Payment 

reduction 

(percent change 

in total ESRD 

payments) 

 

All Facilities 4,311 1,106 -0.19%

 

Type: 

Freestanding 3,916 977 -0.18%
CMS-3206-P 64 

Hospital Based 167 47 -0.25%

Unknown1 228 82 -0.30%

 

Facility Size:2 

Small entities 802 252 -0.27%

Large entities 3,509 854 -0.17%

 

Urban/Rural status: 

Urban 3,159 788 -0.19%

Rural 924 236 -0.18%

Unknown3 228 82 -0.30%

 

Geographic Region: 

Northeast 652 182 -0.22%

South 2,048 521 -0.18%

Midwest 871 237 -0.22%

West 705 158 -0.16%

Other4 35 8 -0.23%

 

Facility Size (# of treatments): 

Less than 3,000 treatments 261 77 -0.28%

3,000-9,999 treatments 2,566 675 -0.20%

Over 10,000 treatments 1,484 354 -0.18%

SOURCE: Analysis of DFC/Medicare claims data (2007-2008) 

for ESRD providers/facilities reporting data on all three 

measures. 

 We note that guidance issued by the Department of Health 

and Human Services interpreting the RFA considers effects to be 

economically significant if they reach a threshold of 3 to 5 

percent or more of total revenue or total costs. Under the 

proposed rule, the maximum payment reduction applied to 

 

1

 Based on DFC self-reported status. 

2

 “Small entities” include hospital-based facilities and non-chain facilities based on DFC self-reported status. 

3

 Based on DFC self-reported status. 

4

 Includes American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands. 
CMS-3206-P 65 

providers/facilities, regardless of its size, is 2.0 percent of 

aggregate Medicare payments for dialysis services. This falls 

below the 3.0 percent threshold for economic significance 

established by HHS. To further ascertain the impact on small 

entities for purposes of the RFA, we projected provider/facility 

performance based on DFC performance data from 2007 and 2008. 

For the 2012 QIP, of the 1,106 ESRD facilities expected to 

receive a payment reduction, 252 small entities would be 

expected to receive a payment reduction (ranging from 0.5 

percent up to 2.0 of total payments). We expect payment 

reductions received would average approximately $18,000 per 

facility, regardless of facility size. Using our projections of 

provider/facility performance, we next estimated the impact of 

expected payment reductions on small entities by comparing the 

total payment reduction for the 252 small entities expected to 

receive a payment reduction with aggregate ESRD payments to all 

small entities. For the entire group of 802 small entities, a 

minor decrease of 0.27 percent in aggregate ESRD payments is 

observed. 

Therefore, we are not preparing an initial analysis for the 

RFA because the Secretary has determined that this proposed rule 

will not have a significant economic impact on a substantial 

number of small entities. 
CMS-3206-P 66 

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. This 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 for Medicare payment regulations and has fewer than 100 

beds. We do not believe this proposed rule has a significant 

impact on operations of a substantial number of small rural 

hospitals because most dialysis facilities are freestanding. 

Therefore, we are not preparing an analysis for section 1102(b) 

of the Act because 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. 

Section 202 of the Unfunded Mandates Reform Act of 1995 

also requires that agencies assess anticipated costs and 

benefits before issuing any rule whose mandates require spending 

in any 1 year of $100 million in 1995 dollars, updated annually 

for inflation. In 2010, that threshold is approximately $135 

million. This rule will not have a consequential effect on 

State, local, or tribal governments in the aggregate, or by the 

private sector of $135 million. 
CMS-3206-P 67 

Executive Order 13132 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. Since this 

regulation does not impose any costs on State or local 

governments, the requirements of Executive Order 13132 are not 

applicable. 

B. Anticipated Effects

 This proposed rule is intended to mitigate possible 

reductions in the quality of ESRD dialysis facility services 

provided to beneficiaries as a result of payment changes under 

the ESRD PPS by implementing a quality incentive program (QIP) 

that would reduce ESRD payments by up to 2 percent to dialysis 

providers/facilities that fail to meet or exceed a total 

performance score with respect to performance standards 

established by the Secretary with respect to certain specified 

measures. The methodology that we are proposing to determine a 

provider/facility’s performance score is described in section VI 

(Methodology for Calculating the Total Performance Score for the 

ESRD QIP Measures). Any reductions in ESRD payment would begin 

on January 1, 2012 for services furnished on or after January 1, 

2012. 

The End-Stage Renal Disease Prospective Payment System 
CMS-3206-P 68 

Final Rule (CMS-1418-F) published on August 12, 2010 estimates 

payments to ESRD facilities in 2012 to be $8.5 billion. The 

calculations used to determine the impact of this proposed rule 

reveal that approximately 27 percent or 1,106 ESRD dialysis 

facilities would likely receive some kind of payment reduction 

for 2012. Again using DFC/Medicare claims data from 2007-2008, 

Table 10 shows the overall estimated distribution of payment 

reductions resulting from the 2012 QIP. 

Table 10. Estimated Distribution of CY 2012 ESRD QIP Payment 

Reductions. 

Payment Reduction Number of ESRD Facilities

No Payment Reduction 3,205

0.5% Payment Reduction 709

1.0% Payment Reduction 183

1.5% Payment Reduction 184

2.0% Payment Reduction 30

To estimate the total payment reductions in 2012 resulting 

from the proposed rule for each facility, we multiplied the 

number of patients treated at each facility receiving a 

reduction times an average of three treatments per week. We 

then multiplied this product by a base rate of $229.63 per 

dialysis treatment (before an adjustor is applied) to arrive at 

a total ESRD payment for each facility: 

((Number of patients treated at each facility X 3 

treatments per week) X base rate) 

Finally, we applied the estimated payment reduction 
CMS-3206-P 69 

percentage expected under the QIP, yielding a total payment 

reduction amount for each facility: 

(Total ESRD payment X estimated payment reduction 

percentage) 

Totaling all of the payment reductions for each of the 

1,106 facilities expected to receive a reduction leads to a 

total payment reduction of approximately $17.3 million for 

payment consequence year 2012. Further, we estimate that the 

total costs associated with the collection of information 

requirements described in Section IV. of the preamble of this 

proposed rule would be less than $200,000 for all ESRD 

facilities. As a result, the estimated aggregate $17.5 million 

impact for 2012 does not reach the $100 million threshold for an 

economically significant rule. 

C. Alternatives Considered

 As stated above, this proposed rule proposes to implement a 

QIP for Medicare ESRD dialysis providers and facilities with 

payment reductions beginning January 1, 2012. Under section 

1881(h) of the Act, after selecting measures, establishing 

performance standards that apply to each of the measures, 

specifying a performance period, and developing a methodology 

for assessing the total performance of each provider and 

facility based on the specified performance standards, the 

Secretary is required to apply an appropriate reduction to ESRD 
CMS-3206-P 70 

providers and facilities that do not meet or exceed the 

established total performance score. In developing the proposed 

QIP, we carefully considered the size of the incentive to 

providers and facilities to provide high-quality care. We also 

selected the measures adopted for the 2012 ESRD QIP because 

these measures are important indicators of patient outcomes and 

quality of care. Poor management of anemia and inadequate 

dialysis, for example, can lead to avoidable hospitalizations, 

decreased quality of life, and death. Thus, we believe the 

measures selected will allow CMS to continue focusing on 

improving the quality of care that Medicare beneficiaries 

receive from ESRD dialysis providers and facilities. 

 We considered alternatives for identifying the performance 

standard, including the mean, median, and mode. However, we 

determined that the national average would be appropriate for 

the first payment year for the reasons listed below: 

• CMS believes that the legislative intent was to set the 

performance standard at the “average”, as this is the 

performance standard that has been publically reported on 

the Dialysis Facility Compare Website (DFC) for the past 

ten years and was the standard in effect when the language 

was crafted; 

• Recognizing however that there was some flexibility, CMS 

reviewed other possible standards and noted that there was 
CMS-3206-P 71 

little difference in the range of performance, with the 

exception of performance for Hemoglobin More Than 12 (Hbg 

<10-0%-3%; Hgb >12-8%-38%; URR 94%-100%). As the bundled 

payment will likely reverse the incentive that may be 

leading to the wider range for the Hgb>12, the differences 

in the performance did not warrant moving from the use of a 

national average for performance. 

• CMS has seen great improvement in the rates for these 

measures over the past several years in part due to public 

reporting and continuous oversight and monitoring. The 

rate for Hemoglobin Less Than 10 has improved and 

maintained improvement, while Hemoglobin More Than 12 

improved from 44% in 2007 to 26% in 2008 as demonstrated 

below. Should it become evident that the rates begin to 

move in the wrong direction due to the bundled payment, 

different performance standards can be proposed through 

future rulemaking. For example, if the national average 

for Hemoglobin Less Than 10 began to drop, CMS could 

propose to require a rate of 2% or less regardless of the 

national average; 

• The national average was also selected because of the rapid 

implementation date for the first year and because the 

period of performance for the first payment year has 

already begun. We anticipate the final rule will be 
CMS-3206-P 72 

published near the end of the performance period. 

Therefore, introduction of a new performance standard after 

the period of performance has nearly ended was not 

appropriate. 

 We also considered alternatives for applying payment 

reductions. Our main alternatives considered varying point 

reductions based on each 1 percentage point a facility or 

provider was below the performance standard. We did not propose 

alternatives that applied payment reductions that accounted for 

the variability seen within each measure, and as noted above, we 

ask for public comment on such alternatives. 

 In accordance with the provisions of Executive Order 12866, 

this regulation was reviewed by the Office of Management and 

Budget. 
CMS-3206-P 73 

List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, Medicare, 

Reporting and recordkeeping requirements. 
CMS-3206-P 74 

For the reasons set forth in the preamble, the Centers for 

Medicare & Medicaid Services propose to amend 42 CFR chapter IV 

as set forth below: 

PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT 

FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 

 1. The authority citation for part 413 continues 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), 1395(g), 

1395I(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 

1395ww); and sec. 124 of Public Law 106-113 (133 stat. 1501A332) 

Subpart H - Payment for End-Stage Renal Disease (ESRD) Services 

and Organ Procurement Costs 

 2. Section 413.177 is added to subpart H to read as 

follows: 

§413.177 Quality Incentive Program Payment. 

 (a) With respect to renal dialysis services as defined 

under §413.171 of this part, in the case of a provider of 

services or a renal dialysis facility that does not meet the 

performance requirements described in section 1881(h)(1)(B) of 

the Act for the performance year, payments otherwise made to the 
CMS-3206-P 75 

provider or facility under this subpart for renal dialysis 

services will be reduced by up to 2.0 percent, as determined 

appropriate by the Secretary. 

 (b) Any payment reduction will apply only to services 

provided in the payment year involved and will not be taken into 

account in computing the single payment amount under this 

subpart for services provided in a subsequent payment year. 
CMS-3206-P 76 

(Catalog of Federal Domestic Assistance Program No. 93.773, 

Medicare--Hospital Insurance; and Program No. 93.774, 

Medicare--Supplementary Medical Insurance Program) 

 Dated: March 18, 2010

 _______________________ 

 Marilyn Tavenner, 

 Acting Administrator and Chief 

 Operating Officer,

 Centers for Medicare & Medicaid

 Services. 

Approved: July 19, 2010

 __________________________ 

 Kathleen Sebelius,

 Secretary.

BILLING CODE 4120-01-P 
CMS-3206-P 77 

[FR Doc. 2010-18465 Filed 07/26/2010 at 4:15 pm; Publication 

Date: 08/12/2010]