34304 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 413 and 414 

[CMS–1691–P] 

RIN 0938–AT28 

Medicare Program; End-Stage Renal 

Disease Prospective Payment System, 

Payment for Renal Dialysis Services 

Furnished to Individuals With Acute 

Kidney Injury, End-Stage Renal 

Disease Quality Incentive Program, 

Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) Competitive Bidding 

Program (CBP) and Fee Schedule 

Amounts, and Technical Amendments 

To Correct Existing Regulations 

Related to the CBP for Certain 

DMEPOS 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

update and make revisions to the EndStage Renal Disease (ESRD) Prospective 

Payment System (PPS) for calendar year 

(CY) 2019. This rule also proposes to 

update the payment rate for renal 

dialysis services furnished by an ESRD 

facility to individuals with acute kidney 

injury (AKI). In addition, it proposes a 

rebasing of the ESRD market basket for 

CY 2019. This proposed rule also 

proposes to update requirements for the 

ESRD Quality Incentive Program (QIP), 

and to make technical amendments to 

correct existing regulations related to 

the CBP for certain DMEPOS. Finally, 

this proposed rule proposes changes to 

bidding and pricing methodologies 

under the Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) competitive bidding program 

(CBP); adjustments to DMEPOS Fee 

Schedule amounts using information 

from competitive bidding for items 

furnished from January 1, 2019 through 

December 31, 2020; new payment 

classes for oxygen and oxygen 

equipment and a new methodology for 

ensuring that new payment classes for 

oxygen and oxygen equipment are 

budget neutral; payment rules for multifunction ventilators or ventilators that 

perform functions of other durable 

medical equipment (DME); and payment 

methodology revisions for mail order 

items furnished in the Northern Mariana 

Islands. This rule also includes a 

request for information related to 

establishing fee schedule amounts for 

new DMEPOS items and services. It also 

includes Requests for Information on 

promoting interoperability and 

electronic healthcare information 

exchange, and improving beneficiary 

access to dialysis facility and DMEPOS 

charge information. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on September 10, 2018. 

ADDRESSES: In commenting, please refer 

to file code CMS–1691–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three ways (please 

choose only one of the ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1691–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–1691–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

ESRDPayment@cms.hhs.gov, for 

issues related to the ESRD PPS and 

coverage and payment for renal dialysis 

services furnished to individuals with 

AKI. 

Delia Houseal, (410) 786–2724, for 

issues related to the ESRD QIP. 

DMEPOS@cms.hhs.gov, for issues 

related to DMEPOS payment policy. 

Julia Howard, (410) 786–8645, for 

issues related to DMEPOS CBP technical 

amendments only. 

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 

website as soon as possible after they 

have been received: http:// 

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the United 

States Government Printing Office. This 

database can be accessed via the 

internet at http://www.gpo.gov/fdsys/. 

Table of Contents 

To assist readers in referencing 

sections contained in this preamble, we 

are providing a Table of Contents. Some 

of the issues discussed in this preamble 

affect the payment policies, but do not 

require changes to the regulations in the 

Code of Federal Regulations (CFR). 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

2. Coverage and Payment for Renal Dialysis 

Services Furnished to Individuals With 

Acute Kidney Injury (AKI) 

3. End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) 

4. Changes to the DMEPOS Competitive 

Bidding Program and Fee Schedule 

Payment Rules 

B. Summary of the Major Provisions 

1. ESRD PPS 

2. Payment for Renal Dialysis Services 

Furnished to Individuals With AKI 

3. ESRD QIP 

4. Changes to the DMEPOS Competitive 

Bidding Program and Fee Schedule 

Payment Rules 

C. Summary of Cost and Benefits 

1. Impacts of the Proposed ESRD PPS 

2. Impacts of the Proposed Payment for 

Renal Dialysis Services Furnished to 

Individuals With AKI 

3. Impacts of the Proposed ESRD QIP 

4. Impacts of the Proposed Changes to the 

DMEPOS Competitive Bidding Program 

and Fee Schedule Payment Rules 

II. Calendar Year (CY) 2019 End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

A. Background 

B. Provisions of the Proposed Rule 

C. Solicitation for Information on 

Transplant and Modality Requirements 

III. CY 2019 Payment for Renal Dialysis 

Services Furnished to Individuals With 

Acute Kidney Injury (AKI) 

A. Background 

B. Annual Payment Rate Update for CY 

2019 

IV. End-Stage Renal Disease Quality 

Incentive Program (ESRD QIP) 

A. Background 

B. Proposed Update to Requirements 

Beginning With the PY 2021 ESRD QIP 

C. Proposed Requirements for the PY 2022 

ESRD QIP 

D. Proposed Requirements Beginning With 

the PY 2024 ESRD QIP 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34305 

V. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

A. Background 

B. Current Method for Submitting Bids and 

Selecting Winners 

C. Current Method for Establishing SPAs 

D. Provisions of the Proposed Rule 

VI. Adjustments to DMEPOS Fee Schedule 

Amounts Based on Information From the 

DMEPOS CBP 

A. Background 

B. Current Issues 

C. Provisions of the Proposed Rule 

VII. New Payment Classes for Oxygen and 

Oxygen Equipment and Methodology for 

Ensuring Annual Budget Neutrality of 

the New Classes 

A. Background 

B. Provisions of the Proposed Rule 

VIII. Payment for Multi-Function Ventilators 

A. Background 

B. Current Issues 

C. Provisions of the Proposed Rule 

IX. Including the Northern Mariana Islands 

in Future National Mail Order CBPs 

A. Background 

B. Current Issues 

C. Provisions of the Proposed Rule 

X. Request for Information on the Gap-Filling 

Process for Establishing Fees for New 

DMEPOS Items 

XI. DMEPOS CBP Technical Amendments 

A. Background 

B. Proposed Technical Amendments 

XII. Burden Reduction on Comorbidities 

A. Background 

B. Proposed Documentation Requirements 

XIII. Requests for Information 

A. Request for Information on Promoting 

Interoperability and Electronic 

Healthcare Information Exchange 

Through Possible Revisions to the CMS 

Patient Health and Safety Requirements 

for Hospitals and Other Medicare- and 

Medicaid-Participating Providers and 

Suppliers 

B. Request for Information on Price 

Transparency: Improving Beneficiary 

Access to Provider and Supplier Charge 

Information 

XIV. Collection of Information Requirements 

XV. Response to Comments 

XVI. Economic Analyses 

A. Regulatory Impact Analysis 

B. Detailed Economic Analysis 

C. Accounting Statement 

XVII. Regulatory Flexibility Act Analysis 

XVIII. Unfunded Mandates Reform Act 

Analysis 

XIX. Federalism Analysis 

XX. Reducing Regulation and Controlling 

Regulatory Costs 

XXI. Congressional Review Act 

XXII. Files Available to the Public via the 

Internet 

Regulations Text 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) 

On January 1, 2011, we implemented 

the End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS), a 

case-mix adjusted, bundled PPS for 

renal dialysis services furnished by 

ESRD facilities as required by section 

1881(b)(14) of the Social Security Act 

(the Act), as added by section 153(b) of 

the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA). 

Section 1881(b)(14)(F) of the Act, as 

added by section 153(b) of MIPPA, and 

amended by section 3401(h) of the 

Patient Protection and Affordable Care 

Act (the Affordable Care Act) (Pub. L. 

111–148), established that beginning 

calendar year (CY) 2012, and each 

subsequent year, the Secretary of the 

Department of Health and Human 

Services (the Secretary) shall annually 

increase payment amounts by an ESRD 

market basket increase factor, reduced 

by the productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) 

of the Act. This rule proposes updates 

and revisions to the ESRD PPS for CY 

2019. 

2. Coverage and Payment for Renal 

Dialysis Services Furnished to 

Individuals With Acute Kidney Injury 

(AKI) 

On June 29, 2015, the President 

signed the Trade Preferences Extension 

Act of 2015 (TPEA) (Pub. L. 114–27). 

Section 808(a) of TPEA amended 

section 1861(s)(2)(F) of the Act to 

provide coverage for renal dialysis 

services furnished on or after January 1, 

2017, by a renal dialysis facility or a 

provider of services paid under section 

1881(b)(14) of the Act to an individual 

with acute kidney injury (AKI). Section 

808(b) of the TPEA amended section 

1834 of the Act by adding a new 

subsection (r) that provides for payment 

for renal dialysis services furnished by 

renal dialysis facilities or providers of 

services paid under section 1881(b)(14) 

of the Act to individuals with AKI at the 

ESRD PPS base rate beginning January 

1, 2017. This rule proposes to update 

the AKI payment rate for CY 2019. 

3. End-Stage Renal Disease Quality 

Incentive Program (ESRD QIP) 

The End-Stage Renal Disease Quality 

Incentive Program (ESRD QIP) is 

authorized under section 1881(h) of the 

Social Security Act (the Act), and is the 

most recent step in fostering improved 

patient outcomes by establishing 

incentives for dialysis facilities to meet 

or exceed performance standards 

established by the Centers for Medicare 

& Medicaid Services (CMS). This 

proposed rule proposes a number of 

updates for the ESRD QIP. 

4. Changes to the DMEPOS Competitive 

Bidding Program and Fee Schedule 

Payment Rules 

i. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP): This rule 

proposes to revise the DMEPOS CBP by 

implementing lead item pricing based 

on maximum winning bid amounts. 

ii. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information from the DMEPOS CBP: 

This rule proposes transitional fee 

schedule adjustments for DMEPOS 

items and services furnished on or after 

January 1, 2019 in areas that are 

currently CBAs and in areas that are 

currently not CBAs. Altogether, this rule 

proposes three different fee schedule 

adjustment methodologies depending 

on the area in which the items and 

services are furnished: (1) One fee 

schedule adjustment methodology for 

DME items and services furnished on or 

after January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019, 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous United States (U.S.); and (3) 

another fee schedule adjustment 

methodology for items and services 

furnished from January 1, 2019, through 

December 31, 2020, in areas that are 

currently not CBAs and are either rural 

areas or non-contiguous areas. 

iii. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes: 

We are proposing to establish new, 

separate payment classes for portable 

gaseous oxygen equipment, portable 

liquid oxygen equipment, and high flow 

portable liquid oxygen contents. We are 

also proposing to establish a new 

methodology for ensuring that all new 

payment classes for oxygen and oxygen 

equipment are budget neutral in 

accordance with section 

1834(a)(9)(D)(ii) of the Act. 

iv. Payment for Multi-Function 

Ventilators: This rule proposes to 

establish new rules to address payment 

for certain ventilators that are subject to 

the payment rules at section 1834(a)(3) 

of the Act but also perform the functions 

of other items of durable medical 

equipment (DME) that are subject to 

payment rules other than those at 

section 1834(a)(3) of the Act. 

v. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs: This rule proposes to amend 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34306 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

§ 414.210(g)(7) to indicate that 

beginning on or after the date that 

contracts take effect for a national mail 

order competitive bidding program that 

includes the Northern Mariana Islands, 

the fee schedule adjustment 

methodology under this paragraph 

would no longer apply. 

B. Summary of the Major Provisions 

1. ESRD PPS 

• Update to the ESRD PPS base rate 

for CY 2019: The proposed CY 2019 

ESRD PPS base rate is $235.82. This 

proposed amount reflects a 

productivity-adjusted market basket 

increase as required by section 

1881(b)(14)(F)(i)(I) of the Act (1.5 

percent), and application of the wage 

index budget-neutrality adjustment 

factor (0.999833), equaling $235.82 

($232.37 × 1.0150 × 0.999833 = 

$235.82). 

• Annual update to the wage index: 

We adjust wage indices on an annual 

basis using the most current hospital 

wage data and the latest core-based 

statistical area (CBSA) delineations to 

account for differing wage levels in 

areas in which ESRD facilities are 

located. For CY 2019, we propose to 

increase the wage index floor, for areas 

with wage index values below the floor, 

to 0.5000 and are proposing to update 

the wage index values to the latest 

available data. 

• Update to the outlier policy: We are 

proposing to update the outlier policy 

using the most current data, as well as 

update the outlier services fixed-dollar 

loss (FDL) amounts for adult and 

pediatric patients and Medicare 

Allowable Payment (MAP) amounts for 

adult and pediatric patients for CY 2019 

using CY 2017 claims data. Based on the 

use of the latest available data, the 

proposed FDL amount for pediatric 

beneficiaries would increase from 

$47.79 to $47.88 and the MAP amount 

would decrease from $37.31 to $35.62, 

as compared to CY 2018 values. For 

adult beneficiaries, the proposed FDL 

amount would decrease from $77.54 to 

$69.73 and the MAP amount would 

decrease from $42.41 to $40.25. The 1 

percent target for outlier payments was 

not achieved in CY 2017. Outlier 

payments represented approximately 

0.8 percent of total payments rather than 

1.0 percent. We believe using CY 2017 

claims data to update the outlier MAP 

and FDL amounts for CY 2019 would 

increase payments for ESRD 

beneficiaries requiring higher resource 

utilization in accordance with a 1 

percent outlier percentage. We are also 

soliciting comment on whether we 

should expand the outlier policy to 

include composite rate drugs and 

supplies. 

• Update to the Drug Designation 

Process: We are proposing to update and 

revise our designation process and 

expand the transitional drug add-on 

payment adjustment (TDAPA) to all 

new drugs, not just those in new 

functional categories, and change the 

basis of determining the TDAPA from 

pricing methodologies under section 

1847A of the Act, (which includes ASP 

+6) to ASP +0. 

• Update to the Low-Volume Payment 

Adjustment: We are proposing revisions 

to the low-volume payment adjustment 

regulations to allow for more flexibility 

with regard to attestation dates and cost 

reporting requirements, as well as 

updating the requirements for eligibility 

with respect to certain changes of 

ownership. 

2. Payment for Renal Dialysis Services 

Furnished to Individuals With AKI 

We are proposing to update the AKI 

payment rate for CY 2019. The proposed 

CY 2019 payment rate is $235.82, which 

is the same as the base rate proposed 

under the ESRD PPS for CY 2019. 

3. ESRD QIP 

This proposed rule proposes a 

number of new requirements for the 

ESRD QIP beginning with PY 2021, 

including the following: 

• We are proposing to update the 

ESRD QIP’s measure removal criteria, 

which we now refer to as ‘‘factors’’, so 

that they are more closely aligned with 

the measure removal factors we have 

adopted, or proposed to adopt for other 

quality reporting and pay for 

performance programs, as well as the 

priorities we have adopted as part of the 

Meaningful Measures Initiative. 

• We are proposing to remove four 

measures: Healthcare Personnel 

Influenza Vaccination, Pain Assessment 

and Follow-Up, Anemia Management, 

and Serum Phosphorus. Removal of 

these measures would align the ESRD 

QIP measure set more closely with the 

priorities we have adopted as part of our 

Meaningful Measures Initiative. 

• We are proposing to make several 

changes to the domains and domain 

weights that we use for purposes of our 

scoring methodology to more closely 

align the ESRD QIP with the priorities 

we have adopted as part of our 

Meaningful Measures Initiative. We are 

proposing to remove the Reporting 

Domain from the Program and to move 

each reporting measure currently in that 

domain (and not being proposed for 

removal) to another domain that is 

better aligned with the focus area of that 

measure. Additionally, we are 

proposing that the Patient and Family 

Engagement/Care Coordination 

Subdomain and the Clinical Care 

Subdomain, both of which are currently 

subdomains in the Clinical Measure 

Domain, would become their own 

domains. As a result, the ESRD QIP 

would be scored using four domains 

instead of three. Furthermore, we are 

proposing new domain and measure 

weights that better align with the 

priority areas we have adopted as part 

of our Meaningful Measures Initiative. 

• We are proposing to update our 

policy governing when newly opened 

facilities must start reporting ESRD QIP 

data. The proposed policy would 

require facilities to begin reporting 

ESRD QIP data beginning with the 

month that begins 4 months after the 

month during which the CMS 

Certification Number (CCN) becomes 

effective (for example, a facility with a 

CCN effective date of January 15th 

would be required to begin reporting 

ESRD QIP data collected in May). The 

proposed policy would provide 

facilities with a longer time period than 

they are given now to learn how to 

properly report ESRD QIP data. 

• We are proposing to increase the 

number of facilities that we select for 

validation under the National 

Healthcare Safety Network (NHSN) data 

validation study from 35 to 150 

facilities, and to increase the number of 

records that each selected facility must 

submit to 20 records for each of the first 

2 quarters of CY 2019 (for a total of 40 

records). This proposal would improve 

the overall accuracy of the study. 

• We are proposing to convert the 

current Consolidated Renal Operations 

in a Web-Enabled Network 

(CROWNWeb) data validation study 

into a permanent program requirement 

using the methodology we first adopted 

for PY 2016 because an analysis 

demonstrated that this methodology 

produced reliable validation results. We 

are also proposing that the 10 point 

deduction for failure to comply with the 

data request, which was first adopted 

for PY 2017, would become a permanent 

program requirement. 

This proposed rule also proposes a 

number of new requirements for the 

ESRD QIP beginning with PY 2022, 

including the following: 

• We are proposing to adopt the 

Percentage of Prevalent Patients 

Waitlisted (PPPW) Measure and to place 

it in the proposed Care Coordination 

Measure Domain (NQF #2988). 

• We are proposing to adopt the 

Medication Reconciliation for Patients 

Receiving Care at Dialysis Facilities 

(MedRec) Measure (NQF #2988) and to 

place it in the Safety Measure Domain. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34307 

• We are proposing to increase the 

number of facilities that we select for 

validation under the NHSN data 

validation study from 150 to 300 

facilities. This proposal would further 

improve the overall accuracy of the 

study. 

This proposed rule also proposes to 

set forth new requirements for the ESRD 

QIP beginning with PY 2024, including 

the following: 

• We are proposing to adopt the 

Standardized First Kidney Transplant 

Waitlist Ratio for Incident Dialysis 

Patients (SWR) Measure and to place it 

within the proposed Patient and Family 

Engagement/Care Coordination Domain 

as a second measure in the proposed 

Transplant measure topic. 

Finally, we are proposing to codify in 

our regulations several previously 

finalized requirements for the ESRD QIP 

by revising § 413.177 and adopting a 

new § 413.178. 

4. Changes to the DMEPOS Competitive 

Bidding Program and Fee Schedule 

Payment Rules 

i. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP): We are 

proposing to revise the DMEPOS CBP by 

implementing lead item pricing based 

on maximum winning bid amounts. We 

are proposing to revise the definition of 

bid to mean an offer to furnish an item 

or items for a particular price and time 

period that includes, where appropriate, 

any services that are directly related to 

the furnishing of the item or items. We 

are proposing to revise the definition of 

composite bid to mean the bid 

submitted by the supplier for the lead 

item in the product category. We are 

proposing to revise the definition of 

lead item to mean the item in a product 

category with multiple items with the 

highest total nationwide Medicare 

allowed charges of any item in the 

product category prior to each 

competition. 

ii. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information from the DMEPOS CBP: We 

are proposing transitional fee schedule 

adjustments for DMEPOS items and 

services furnished on or after January 1, 

2019 in areas that are currently CBAs 

and in areas that are currently not CBAs. 

Altogether, this rule proposes three 

different fee schedule adjustment 

methodologies depending on the area in 

which the items and services are 

furnished: (1) One fee schedule 

adjustment methodology for DME items 

and services furnished on or after 

January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019, 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous United States (U.S.); and (3) 

another fee schedule adjustment 

methodology for items and services 

furnished from January 1, 2019, through 

December 31, 2020, in areas that are 

currently not CBAs and are either rural 

areas or non-contiguous areas. 

iii. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes: 

We are proposing to establish new, 

separate payment classes for portable 

gaseous oxygen equipment, portable 

liquid oxygen equipment, and high flow 

portable liquid oxygen contents. We are 

also proposing to establish a new 

methodology for ensuring that all new 

payment classes for oxygen and oxygen 

equipment are budget neutral in 

accordance with section 

1834(a)(9)(D)(ii) of the Act. 

iv. Payment for Multi-Function 

Ventilators: We are proposing to 

establish new rules to address payment 

for certain ventilators that are subject to 

the payment rules at section 1834(a)(3) 

of the Act but also perform the functions 

of other items of durable medical 

equipment (DME) that are subject to 

payment rules other than those at 

section 1834(a)(3) of the Act. 

v. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs: We intend to include the 

Northern Mariana Islands under 

national mail order competitive bidding 

programs that become effective on or 

after January 1, 2019, so we are 

proposing to amend § 414.210(g)(7) to 

indicate that beginning on or after the 

date that contracts take effect for a 

national mail order competitive bidding 

program that includes the Northern 

Mariana Islands, the fee schedule 

adjustment methodology under this 

paragraph would no longer apply. 

C. Summary of Costs and Benefits 

In section XVI of this proposed rule, 

we set forth a detailed analysis of the 

impacts that the proposed changes 

would have on affected entities and 

beneficiaries. The impacts include the 

following: 

1. Impacts of the Proposed ESRD PPS 

The impact chart in section XV of this 

proposed rule displays the estimated 

change in payments to ESRD facilities in 

CY 2019 compared to estimated 

payments in CY 2018. The overall 

impact of the proposed CY 2019 

changes is projected to be a 1.7 percent 

increase in payments. Hospital-based 

ESRD facilities have an estimated 1.8 

percent increase in payments compared 

with freestanding facilities with an 

estimated 1.7 percent increase. 

We estimate that the aggregate ESRD 

PPS expenditures would increase by 

approximately $220 million in CY 2019 

compared to CY 2018. This reflects a 

$190 million increase from the payment 

rate update and a $30 million increase 

due to the updates to the outlier 

threshold amounts. As a result of the 

projected 1.7 percent overall payment 

increase, we estimate that there would 

be an increase in beneficiary coinsurance payments of 1.7 percent in CY 

2019, which translates to approximately 

$60 million. 

2. Impacts of the Proposed Payment for 

Renal Dialysis Services Furnished to 

Individuals With AKI 

The impact chart in section XVI of 

this proposed rule displays the 

estimated change in proposed payments 

to ESRD facilities in CY 2019 compared 

to estimated payments in CY 2018. The 

overall impact of the proposed CY 2019 

changes is projected to be a 1.5 percent 

increase in payments. Hospital-based 

ESRD facilities and freestanding 

facilities both have an estimated 1.5 

percent increase in payments. 

We estimate that the aggregate 

payments made to ESRD facilities for 

renal dialysis services furnished to AKI 

patients at the proposed CY 2019 ESRD 

PPS base rate would increase by less 

than $1 million in CY 2019 compared to 

CY 2018. 

3. Impacts of the Proposed ESRD QIP 

We estimate that the overall economic 

impact of the ESRD QIP would be 

approximately $219 million in PY 2021. 

The $219 million figure for PY 2021 

includes costs associated with the 

collection of information requirements, 

which we estimate would be 

approximately $181 million. For PY 

2022, we estimate that ESRD facilities 

would experience an overall economic 

impact of approximately $240 million as 

a result of the PY 2022 ESRD QIP. The 

$240 million figure for PY 2022 

includes costs associated with the 

collection of information requirements, 

which we estimate would be 

approximately $202 million. Our 

proposal to add the SWR measure to the 

ESRD QIP measure set in PY 2024 

would not result in additional costs 

associated with the collection of 

information requirements because the 

measure does not use data reported to 

CROWNWeb. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34308 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

4. Impacts of the Proposed Changes to 

the DMEPOS Competitive Bidding 

Program and Fee Schedule Payment 

Rules 

i. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

This rule proposes to base single 

payment amounts on the maximum 

winning bid and to implement lead item 

pricing in the Medicare DMEPOS 

Competitive Bidding Program. The 

impacts of the rule are estimated by 

rounding to the nearer 5 million dollars 

and are expected to cost $10 million in 

Medicare benefit payments for the 5- 

year period beginning January 1, 2019 

and ending September 30, 2023. The 

impacts on beneficiary cost sharing is 

roughly $3 million over this 5-year 

period. The Medicaid impacts for cost 

sharing for the beneficiaries enrolled in 

the Medicare Part B and Medicaid 

programs for the federal and state 

portions are assumed to both be $0 

million. 

ii. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information From the DMEPOS CBP 

This rule proposes transitional fee 

schedule adjustments for DMEPOS 

items and services furnished in areas 

that are currently CBAs and in areas 

currently not CBAs on or after January 

1, 2019. Altogether, this rule proposes 

three different fee schedule adjustment 

methodologies depending on the area in 

which the items and services are 

furnished: (1) One fee schedule 

adjustment methodology for DME items 

and services furnished on or after 

January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019, 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous United States (U.S.); and (3) 

another fee schedule adjustment 

methodology for items and services 

furnished from January 1, 2019, through 

December 31, 2020, in areas that are 

currently not CBAs and are either rural 

areas or non-contiguous areas. 

The estimated impacts for this part of 

the rule are calculated against a baseline 

that assumes payments for items 

furnished in CBAs and non-CBAs are 

made consistent with the rules in place 

as of January 1, 2018, which establish 

payment for items furnished in CBAs 

based on fee schedule amounts fully 

adjusted in accordance with current 

regulations at 42 CFR 414.210(g). The 

impacts are expected to cost $1,050 

million dollars in Medicare benefit 

payments and $260 million dollars in 

Medicare beneficiary cost sharing for 

the 2-year period beginning January 1, 

2019 and ending December 31, 2020. 

The Medicaid impacts for cost sharing 

for the beneficiaries enrolled in the 

Medicare Part B and Medicaid programs 

for the federal and state portions are 

assumed to be $45 million dollars and 

$30 million dollars, respectively. 

Section 503 of the Consolidated 

Appropriations Act of 2016 and section 

5002 of the Cures Act, added section 

1903(i)(27) to the Act, which prohibits 

federal Medicaid reimbursement to 

states for certain DME expenditures that 

are, in the aggregate, in excess of what 

Medicare would have paid for such 

items. The requirement took effect 

January 1, 2018. We note that the costs 

for the Medicaid program and 

beneficiaries could be higher depending 

on how many state agencies adopt the 

higher Medicare adjusted fee schedule 

amounts for rural areas for use in paying 

claims under the Medicaid program. We 

are not able to quantify this impact. 

iii. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes 

This rule proposes to establish new 

payment classes for oxygen and oxygen 

equipment and is estimated to be budget 

neutral to the Medicare program and its 

beneficiaries. 

iv. Payment for Multi-Function 

Ventilators 

This rule proposes to establish new 

rules to address payment for certain 

ventilators that are subject to the 

payment rules at section 1834(a)(3) of 

the Act but also perform the functions 

of other items of durable medical 

equipment (DME) that are subject to 

payment rules other than those at 

section 1834(a)(3) of the Act. The 

impacts are estimated by rounding to 

the nearer 5 million dollars and are 

expected to cost $15 million in 

Medicare benefit payments and $0 

million in Medicare beneficiary cost 

sharing for the 5-year period beginning 

January 1, 2019 and ending September 

30, 2023. The Medicaid impacts for cost 

sharing for the beneficiaries enrolled in 

the Medicare Part B and Medicaid 

programs for the federal and state 

portions are assumed to both be $0 

million. 

v. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs 

This change would not have a fiscal 

impact. 

II. Calendar Year (CY) 2019 End-Stage 

Renal Disease (ESRD) Prospective 

Payment System (PPS) 

A. Background 

1. Statutory Background 

On January 1, 2011, we implemented 

the End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS), a 

case-mix adjusted bundled PPS for renal 

dialysis services furnished by ESRD 

facilities, as required by section 

1881(b)(14) of the Social Security Act 

(the Act), as added by section 153(b) of 

the Medicare Improvements for Patients 

and Providers Act of 2008 (MIPPA). 

Section 1881(b)(14)(F) of the Act, as 

added by section 153(b) of MIPPA and 

amended by section 3401(h) of the 

Patient Protection and Affordable Care 

Act (the Affordable Care Act), 

established that beginning with calendar 

year (CY) 2012, and each subsequent 

year, the Secretary of the Department of 

Health and Human Services (the 

Secretary) shall annually increase 

payment amounts by an ESRD market 

basket increase factor, reduced by the 

productivity adjustment described in 

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

Section 632 of the American Taxpayer 

Relief Act of 2012 (ATRA) (Pub. L. 112– 

240) included several provisions that 

apply to the ESRD PPS. Section 632(a) 

of ATRA added section 1881(b)(14)(I) to 

the Act, which required the Secretary, 

by comparing per patient utilization 

data from 2007 with such data from 

2012, to reduce the single payment for 

renal dialysis services furnished on or 

after January 1, 2014 to reflect the 

Secretary’s estimate of the change in the 

utilization of ESRD-related drugs and 

biologicals (excluding oral-only ESRDrelated drugs). Consistent with this 

requirement, in the CY 2014 ESRD PPS 

final rule we finalized $29.93 as the 

total drug utilization reduction and 

finalized a policy to implement the 

amount over a 3- to 4-year transition 

period (78 FR 72161 through 72170). 

Section 632(b) of ATRA prohibited 

the Secretary from paying for oral-only 

ESRD-related drugs and biologicals 

under the ESRD PPS prior to January 1, 

2016. And section 632(c) of ATRA 

required the Secretary, by no later than 

January 1, 2016, to analyze the case-mix 

payment adjustments under section 

1881(b)(14)(D)(i) of the Act and make 

appropriate revisions to those 

adjustments. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34309 

On April 1, 2014, the Protecting 

Access to Medicare Act of 2014 (PAMA) 

(Pub. L. 113–93) was enacted. Section 

217 of PAMA included several 

provisions that apply to the ESRD PPS. 

Specifically, sections 217(b)(1) and (2) 

of PAMA amended sections 

1881(b)(14)(F) and (I) of the Act and 

replaced the drug utilization adjustment 

that was finalized in the CY 2014 ESRD 

PPS final rule (78 FR 72161 through 

72170) with specific provisions that 

dictated the market basket update for 

CY 2015 (0.0 percent) and how the 

market basket should be reduced in CY 

2016 through CY 2018. 

Section 217(a)(1) of PAMA amended 

section 632(b)(1) of ATRA to provide 

that the Secretary may not pay for oralonly ESRD-related drugs under the 

ESRD PPS prior to January 1, 2024. 

Section 217(a)(2) of PAMA further 

amended section 632(b)(1) of ATRA by 

requiring that in establishing payment 

for oral-only drugs under the ESRD PPS, 

the Secretary must use data from the 

most recent year available. Section 

217(c) of PAMA provided that as part of 

the CY 2016 ESRD PPS rulemaking, the 

Secretary shall establish a process for (1) 

determining when a product is no 

longer an oral-only drug; and (2) 

including new injectable and 

intravenous products into the ESRD PPS 

bundled payment. 

Finally, on December 19, 2014, the 

President signed the Stephen Beck, Jr., 

Achieving a Better Life Experience Act 

of 2014 (ABLE) (Pub. L. 113–295). 

Section 204 of ABLE amended section 

632(b)(1) of ATRA, as amended by 

section 217(a)(1) of PAMA, to provide 

that payment for oral-only renal dialysis 

services cannot be made under the 

ESRD PPS bundled payment prior to 

January 1, 2025. 

2. System for Payment of Renal Dialysis 

Services 

Under the ESRD PPS, a single, pertreatment payment is made to an ESRD 

facility for all of the renal dialysis 

services defined in section 

1881(b)(14)(B) of the Act and furnished 

to individuals for the treatment of ESRD 

in the ESRD facility or in a patient’s 

home. We have codified our definitions 

of renal dialysis services at 42 CFR 

413.171, which is in 42 CFR part 413, 

subpart H, along with other ESRD PPS 

payment policies. The ESRD PPS base 

rate is adjusted for characteristics of 

both adult and pediatric patients and 

accounts for patient case-mix 

variability. The adult case-mix adjusters 

include five categories of age, body 

surface area, low body mass index, 

onset of dialysis, four comorbidity 

categories, and pediatric patient-level 

adjusters consisting of two age 

categories and two dialysis modalities 

(§ 413.235(a) and (b)). 

The ESRD PPS provides for three 

facility-level adjustments. The first 

payment adjustment accounts for ESRD 

facilities furnishing a low volume of 

dialysis treatments (§ 413.232). The 

second adjustment reflects differences 

in area wage levels developed from core 

based statistical areas (CBSAs) 

(§ 413.231). The third payment 

adjustment accounts for ESRD facilities 

furnishing renal dialysis services in a 

rural area (§ 413.233). 

The ESRD PPS provides a training 

add-on for home and self-dialysis 

modalities (§ 413.235(c)) and an 

additional payment for high cost 

outliers due to unusual variations in the 

type or amount of medically necessary 

care when applicable (§ 413.237). 

The ESRD PPS also provides for a 

transitional drug add-on payment 

adjustment (TDAPA) to pay for a new 

injectable or intravenous product that is 

not considered included in the ESRD 

PPS bundled payment, meaning a 

product that is used to treat or manage 

a condition for which there is not an 

existing ESRD PPS functional category 

(§ 413.234). The ESRD PPS functional 

categories represent distinct groupings 

of drugs or biologicals, as determined by 

CMS, whose end action effect is the 

treatment or management of a condition 

or conditions associated with ESRD. 

New injectable or intravenous products 

that are not included in a functional 

category in the ESRD PPS base rate are 

paid for using the TDAPA for a 

minimum of 2 years, until sufficient 

claims data for rate setting analysis are 

available. At that point, utilization 

would be reviewed and the ESRD PPS 

base rate modified, if appropriate, to 

account for these products. The TDAPA 

is based on pricing methodologies under 

section 1847A of the Act (§ 413.234(c)). 

3. Updates to the ESRD PPS 

Policy changes to the ESRD PPS are 

proposed and finalized annually in the 

Federal Register. The CY 2011 ESRD 

PPS final rule was published on August 

12, 2010 in the Federal Register (75 FR 

49030 through 49214). That rule 

implemented the ESRD PPS beginning 

on January 1, 2011 in accordance with 

section 1881(b)(14) of the Act, as added 

by section 153(b) of MIPPA, over a 4- 

year transition period. Since the 

implementation of the ESRD PPS, we 

have published annual rules to make 

routine updates, policy changes, and 

clarifications. 

On November 1, 2017, we published 

a final rule in the Federal Register 

titled, ‘‘Medicare Program; End-Stage 

Renal Disease Prospective Payment 

System, Payment for Renal Dialysis 

Services Furnished to Individuals With 

Acute Kidney Injury, and End-Stage 

Renal Disease Quality Incentive 

Program’’ (82 FR 50738 through 50797) 

(hereinafter referred to as the CY 2018 

ESRD PPS final rule). In that rule, we 

updated the ESRD PPS base rate for CY 

2018, the wage index, and the outlier 

policy, and pricing outlier drugs. For 

further detailed information regarding 

these updates, see 82 FR 50738. 

B. Provisions of the Proposed Rule 

1. Drug Designation Process 

a. Protecting Access to Medicare Act of 

2014 

Section 217(c) of PAMA requires the 

Secretary to implement a drug 

designation process for: (1) Determining 

when a product is no longer an oralonly drug; and (2) including new 

injectable and intravenous products into 

the bundled payment under such 

system. Therefore, in the CY 2016 ESRD 

PPS final rule (80 FR 69013 through 

69027), we finalized a process that 

allows us to recognize when an oralonly renal dialysis service drug or 

biological is no longer oral only and a 

process to include new injectable and 

intravenous products into the ESRD PPS 

bundled payment, and when 

appropriate, modify the ESRD PPS 

payment amount. 

In accordance with section 217(c)(1) 

of PAMA, we established § 413.234(d), 

which provides that an oral-only drug is 

no longer considered oral-only if an 

injectable or other form of 

administration of the oral-only drug is 

approved by the Food and Drug 

Administration (FDA). Additionally, in 

accordance with section 217(c)(2) of 

PAMA, we codified the drug 

designation process at § 413.234(b). As 

discussed in the CY 2016 ESRD PPS 

final rule (80 FR 69017 through 69022), 

effective January 1, 2016, if a new 

injectable or intravenous product is 

used to treat or manage a condition for 

which there is an ESRD PPS functional 

category, the new injectable or 

intravenous product is considered 

included in the ESRD PPS bundled 

payment and no separate payment is 

available. The new injectable or 

intravenous product qualifies as an 

outlier service. The ESRD bundled 

market basket updates the PPS base rate 

annually and accounts for price changes 

of the drugs and biologicals reflected in 

the base rate. 

As we discuss in § 413.234(b)(2), if 

the new injectable or intravenous 

product is used to treat or manage a 

condition for which there is not an 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34310 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

ESRD PPS functional category, the new 

injectable or intravenous product is not 

considered included in the ESRD PPS 

bundled payment and the drug is 

evaluated. First, an existing ESRD PPS 

functional category is revised or a new 

ESRD PPS functional category is added 

for the condition that the new injectable 

or intravenous product is used to treat 

or manage. Next, the new injectable or 

intravenous product is paid for using 

the transitional drug add-on payment 

adjustment (TDAPA). Then, the new 

injectable or intravenous product is 

added to the ESRD PPS bundled 

payment following payment of the 

TDAPA. 

Under § 413.234(c), the TDAPA is 

based on pricing methodologies under 

section 1847A of the Act and is paid 

until sufficient claims data for rate 

setting analysis for the new injectable or 

intravenous product are available, but 

not for less than 2 years. During the time 

a new injectable or intravenous product 

is eligible for the TDAPA, it is not 

eligible as an outlier service. Following 

payment of the TDAPA, the ESRD PPS 

base rate would be modified, if 

appropriate, to account for the new 

injectable or intravenous product in the 

ESRD PPS bundled payment. 

b. Renal Dialysis Drugs and Biologicals 

Reflected in the Base Rate (ESRD PPS 

Functional Categories) 

As discussed above, in the CY 2016 

ESRD PPS final rule (80 FR 69024), we 

finalized the drug designation process 

as being dependent upon the functional 

categories, consistent with our policy 

since the implementation of the PPS in 

2011. We provide a detailed discussion 

(80 FR 69013 through 69015) on how we 

accounted for renal dialysis drugs and 

biologicals in the ESRD PPS base rate 

since its implementation on January 1, 

2011. In the CY 2011 ESRD PPS final 

rule (75 FR 49044 through 49053) we 

explained that in order to identify drugs 

and biologicals that are used for the 

treatment of ESRD and therefore meet 

the definition of renal dialysis services 

(defined at § 413.171) that would be 

included in the ESRD PPS base rate, we 

performed an extensive analysis of 

Medicare payments for Part B drugs and 

biologicals billed on ESRD claims and 

evaluated each drug and biological to 

identify its category by indication or 

mode of action. Categorizing drugs and 

biologicals on the basis of drug action 

allows us to determine which categories 

(and therefore, the drugs and biologicals 

within the categories) would be 

considered used for the treatment of 

ESRD (75 FR 49047). We grouped the 

injectable and intravenous drugs and 

biologicals into functional categories 

based on their action (80 FR 69014). 

This was done with the purpose of 

adding new drugs or biologicals with 

the same functions to the ESRD PPS 

bundled payment as expeditiously as 

possible after the drugs become 

commercially available so that 

beneficiaries have access to them. We 

finalized the definition of an ESRD PPS 

functional category in § 413.234(a) as a 

distinct grouping of drugs or biologicals, 

as determined by CMS, whose end 

action effect is the treatment or 

management of a condition or 

conditions associated with ESRD. 

Using the functional categorization 

approach, we established categories of 

drugs and biologicals that are not 

considered used for the treatment of 

ESRD, categories of drugs and 

biologicals that are always considered 

used for the treatment of ESRD, and 

categories of drugs and biologicals that 

may be used for the treatment of ESRD 

but are also commonly used to treat 

other conditions (75 FR 49049 through 

49051). The drugs and biologicals that 

were identified as not used for the 

treatment of ESRD were not considered 

renal dialysis services and were not 

included in computing the base rate. 

The functional categories of drugs and 

biologicals that are not included in the 

base rate can be found in the CY 2011 

ESRD PPS final rule (75 FR 49049). The 

functional categories of drugs and 

biologicals that were always and may be 

considered used for the treatment of 

ESRD were considered renal dialysis 

services and were included in 

computing the base rate. Subsequent to 

the CY 2011 discussion about the 

always and may be functional categories 

(75 FR 49050 through 49051), we also 

discussed these categories in the CY 

2016 ESRD PPS final rule (80 FR 69015 

through 69018) and clarified the 

medical conditions or symptoms that 

indicate the drugs are used for the 

treatment of ESRD. See Table 1. 

TABLE 1—ESRD PPS FUNCTIONAL CATEGORIES

Category Rationale for association 

Access Management ................................... Drugs used to ensure access by removing clots from grafts, reverse anticoagulation if too much 

medication is given, and provide anesthetic for access placement. 

Anemia Management .................................. Drugs used to stimulate red blood cell production and/or treat or prevent anemia. This category includes ESAs as well as iron. 

Bone and Mineral Metabolism ..................... Drugs used to prevent/treat bone disease secondary to dialysis. This category includes phosphate 

binders and calcimimetics. 

Cellular Management .................................. Drugs used for deficiencies of naturally occurring substances needed for cellular management. 

This category includes levocarnitine. 

Antiemetic .................................................... Used to prevent or treat nausea and vomiting related to dialysis. Excludes antiemetics used for 

purposes unrelated to dialysis, such as those used in conjunction with chemotherapy as these 

are covered under a separate benefit category. 

Anti-infectives .............................................. Used to treat vascular access-related and peritonitis infections. May include antibacterial and 

antifungal drugs. 

Antipruritic .................................................... Drugs in this classification have multiple clinical indications. Use within an ESRD functional category includes treatment for itching related to dialysis. 

Anxiolytic ...................................................... Drugs in this classification have multiple actions. Use within an ESRD functional category includes 

treatment of restless leg syndrome related to dialysis. 

Excess Fluid Management .......................... Drug/fluids used to treat fluid excess/overload. 

Fluid and Electrolyte Management Including Volume Expanders.Intravenous drugs/fluids used to treat fluid and electrolyte needs. 

Pain Management ....................................... Drugs used to treat vascular access site pain and to treat pain medication overdose, when the 

overdose is related to medication provided to treat vascular access site pain. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34311 

1Sheingold, S., Marchetti-Bowick, E., Nguyen, N., 

Yabrof, K.R. (2016, March). Medicare Part B Drugs: 

Pricing and Incentives. Retrieved from https:// 

aspe.hhs.gov/system/files/pdf/187581/ 

PartBDrug.pdf. 

In computing the ESRD PPS base rate, 

we used the payments in 2007 for drugs 

and biologicals included in the always 

functional categories, that is, the 

injectable forms (previously covered 

under Part B) and oral or other forms of 

administration (previously covered 

under Part D) (75 FR 49050). For the 

oral or other forms of administration for 

those drugs that are always considered 

used for the treatment of ESRD, we 

determined that there were oral or other 

forms of injectable drugs only for the 

bone and mineral metabolism and 

cellular management categories. 

Therefore, we included the payments 

made under Part D for oral vitamin D 

(calcitriol, doxercalciferol and 

paricalcitol) and oral levocarnitine in 

our computation of the base rate (75 FR 

49042). 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050 through 49051), we 

explained that drugs and biologicals 

that may be used for the treatment of 

ESRD may also be commonly used to 

treat other conditions. We used the 

payments made under Part B in 2007 for 

these drugs in computing the ESRD PPS 

base rate, which only included 

payments made for the injectable 

version of the drugs. We excluded the 

Part D payments for the oral (or other 

form of administration) substitutes of 

the drugs and biologicals described 

above because they were not furnished 

or billed by ESRD facilities or furnished 

in conjunction with dialysis treatments 

(75 FR 49051). For those reasons, we 

presumed that these drugs and 

biologicals that were paid under Part D 

were prescribed for reasons other than 

for the treatment of ESRD. However, we 

noted that if these drugs and biologicals 

paid under Part D are furnished by an 

ESRD facility for the treatment of ESRD, 

they would be considered renal dialysis 

services and not be billed or paid under 

Part D. 

Table 19 of the CY 2011 ESRD PPS 

final rule (75 FR 49075) provides the 

Medicare allowable payments for all of 

the components of the ESRD PPS base 

rate for CY 2007, inflated to CY 2009, 

including payments for drugs and 

biologicals and the amount each 

contributed to the base rate, except for 

the oral-only renal dialysis drugs where 

payment under the ESRD PPS has been 

delayed. A list of the specific Part B 

drugs and biologicals that were 

included in the final ESRD PPS base 

rate is located in Table C of the 

Appendix of the CY 2011 ESRD PPS 

final rule (75 FR 49205 through 49209). 

A list of the former Part D drugs that 

were included in the final ESRD PPS 

base rate is located in Table D of the 

Appendix of that rule (75 FR 49210). As 

discussed in section II.3.d of this 

proposed rule, the ESRD PPS base rate 

is updated annually by the ESRD 

bundled (ESRDB) market basket. 

c. Section 1847A of the Social Security 

Act (the Act) and Average Sales Price 

(ASP) Methodology Under the ESRD 

PPS 

In the CY 2005 Physician Fee 

Schedule (PFS) final rule, published on 

November 15, 2004 (69 FR 66299 

through 66302) in the Federal Register, 

we discussed that section 303(c) of the 

Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003 (MMA) added section 1847A to the 

Act and established the Average Sales 

Price (ASP) methodology for certain 

drugs and biologicals not paid on a cost 

or prospective payment basis furnished 

on or after January 1, 2005. The ASP 

methodology is based on quarterly data 

submitted to CMS by drug 

manufacturers. The ASP amount is 

based on the manufacturer’s sales to all 

purchasers (with certain exceptions) net 

of all manufacturer rebates, discounts, 

and price concessions. Sales that are 

nominal in amount are exempted from 

the ASP calculation, as are sales 

excluded from the determination of 

‘‘best price’’ in the Medicaid drug rebate 

program. Each drug with a healthcare 

common procedure coding system 

(HCPCS) code has a separately 

calculated ASP. To allow time to submit 

and calculate these data, the ASP is 

updated with a two-quarter lag.1

Section 1847A(b)(1)(A) of the Act 

requires that the Medicare payment 

allowance for a multiple source drug 

included within the same HCPCS code 

be equal to 106 percent of the ASP for 

the HCPCS code. Section 1847A(b)(1)(B) 

of the Act also requires that the 

Medicare payment allowance for a 

single source drug HCPCS code be equal 

to the lesser of 106 percent of the ASP 

for the HCPCS code or 106 percent of 

the wholesale acquisition cost (WAC) of 

the HCPCS code. 

Section 1847A(c)(4) of the Act further 

provides a payment methodology in 

cases were the ASP is unavailable. 

Specifically Pub. 100–04, Chapter 17, 

section 20 (https://www.cms.gov/ 

Regulations-and-Guidance/Guidance/ 

Manuals/downloads/;clm104c17.pdf) 

titled ‘‘Payment Allowance Limit for 

Drugs and Biologicals Not Paid on a 

Cost or Prospective Payment Basis’’, 

provides guidance on how Medicare 

Part B pays for drugs and biologicals 

under section 1847A of the Act and 

notes that, in the case of a drug or 

biological during an initial period (not 

to exceed a full calendar quarter) in 

which data on the prices for sales for the 

drug or biological are not sufficiently 

available from the manufacturer to 

compute an average sales price for the 

drug or biological, the Secretary may 

determine the amount payable under 

this section for the drug or biological 

based on—the wholesale acquisition 

cost; or the methodologies in effect 

under this part on November 1, 2003, to 

determine payment amounts for drugs 

or biologicals. This publication provides 

guidance on how Medicare Part B pays 

for drugs and biologicals under section 

1847A of the Act. 

In the CY 2018 ESRD PPS final rule 

(82 FR 50742 through 50743), we 

discussed how we have used the ASP 

methodology since the implementation 

of the ESRD PPS when pricing ESRDrelated drugs and biologicals previously 

paid separately under Part B (prior to 

the ESRD PPS) for purposes of ESRD 

PPS policies or calculations. We 

adopted § 413.234(c), which requires 

that the TDAPA is based on the pricing 

methodologies available under section 

1847A of the Act (including 106 percent 

of ASP). We also use such pricing 

methodologies for new and existing 

injectable drugs or biologicals that 

qualify as an outlier service. 

d. Proposed Revision to the Drug 

Designation Process Regulation 

As noted above, in prior rulemakings 

we addressed how new drugs and 

biologicals are implemented under the 

ESRD PPS and how we have accounted 

for renal dialysis drugs and biologicals 

in the ESRD PPS base rate since its 

implementation on January 1, 2011. 

Accordingly, the drug designation 

process we finalized is dependent upon 

the functional categories we developed 

and is consistent with the policy we 

have followed since the inception of the 

ESRD PPS. However, since PAMA only 

required the Secretary to establish a 

process for including new injectable and 

intravenous drugs and biologicals, such 

new products were the primary focus of 

the regulation we adopted at § 413.234, 

rather than codifying our full policy for 

other renal dialysis drugs, such as drugs 

and biologicals with other forms of 

administration, including, oral, that by 

law are included under the ESRD PPS 

(though oral-only renal dialysis drugs 

are required to remain outside of the 

ESRD PPS bundle until CY 2025). 

In this proposed rule, we propose to 

revise the drug designation process 

regulations at § 413.234 to reflect that 

the process applies for all new renal 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34312 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

dialysis drugs and biologicals that are 

approved regardless of the form or route 

of administration, that is, new 

injectable, intravenous, oral, or other 

route of administration, or dosage form. 

We note that for purposes of the ESRD 

PPS drug designation process, use of the 

term form of administration is used 

interchangeably with route of 

administration. We are proposing these 

revisions so that the regulation reflects 

our long standing policy for all new 

renal dialysis drugs and biologicals, 

regardless of the form or route of 

administration, with the exception of 

oral-only drugs. Specifically, we 

propose to replace the definition of 

‘‘new injectable or intravenous product’’ 

at § 413.234(a), ‘‘an injectable, 

intravenous, oral or other form or route 

of administration drug or biological that 

is used to treat or manage a condition(s) 

associated with ESRD,’’ with a 

definition for ‘‘new renal dialysis drug 

or biological,’’ to encompass the broader 

scope of the drug designation process. 

Under this definition, a new renal 

dialysis drug or biological ‘‘must be 

approved by the Food and Drug 

Administration (FDA) on or after 

January 1, 2019 under section 505 of the 

Federal Food, Drug, and Cosmetic Act 

or section 351 of the Public Health 

Service Act, commercially available, 

have an HCPCS application submitted 

in accordance with the official HCPCS 

Level II coding procedures, and 

designated by CMS as a renal dialysis 

service under § 413.171. Oral-only drugs 

or biologicals are excluded until January 

1, 2025.’’ 

In our proposal to replace the 

definition of ‘‘new injectable or 

intravenous product’’ in § 413.234(a) 

with the proposed definition of ‘‘new 

renal dialysis drug or biological,’’ we 

have included the clause, ‘‘have an 

HCPCS application submitted in 

accordance with the official HCPCS 

Level II coding procedures.’’ We note 

that this would be a change from the 

existing policy of requiring that the new 

product be assigned an HCPCS code. We 

are proposing that new renal dialysis 

injectable or intravenous products are 

no longer required to be assigned an 

HCPCS code before the TDAPA can 

apply, instead we would require that an 

application has been submitted in 

accordance with the Level II HCPCS 

coding procedures. This would allow 

the application of the TDAPA to the 

ESRD PPS base rate to happen more 

quickly than under our current process 

wherein a lag that occurs when a drug 

or biological is approved but is waiting 

for the issuance of a code. Information 

regarding the HCPCS process is 

available on the CMS website at https:// 

www.cms.gov/Medicare/;Coding/ 

MedHCPCSGenInfo/Application_Form_

and_Instructions.html. 

This proposed definition would also 

address prior concerns that we narrowly 

defined ‘‘new’’ in the context of the 

functional categories (that is, the drug 

designation process primarily addresses 

‘‘new’’ drugs that fall outside of the 

functional categories for purposes of 

being newly categorized and eligible for 

the TDAPA). As noted in section II.B.1.f 

of this proposed rule, even though we 

are maintaining the functional 

categories to determine whether or not 

to potentially adjust or modify the ESRD 

PPS base rate (that is, those renal 

dialysis drugs and biologicals that do 

not fall within an existing category), we 

are proposing to expand the TDAPA 

policy based on whether the renal 

dialysis drug or biological is new, that 

is, any renal dialysis drug or biological 

newly approved on or after January 1, 

2019. 

We solicit comment on the proposed 

revisions to § 413.234(a), (b), and (c). 

e. Basis for Expansion of the TDAPA 

Eligibility Criteria 

In the CY 2016 ESRD PPS final rule 

(80 FR 69017 through 69024), we 

acknowledged that there are unique 

situations identified by the commenters 

during that rulemaking regarding the 

eligibility criteria for the TDAPA. For 

example, commenters stated that they 

believed the drug designation process 

was excessive, could hinder innovation, 

prevent new treatment options from 

entering the marketplace, and CMS 

should contemplate the cost of new 

drugs and biologicals that fall within the 

functional categories. In the following 

paragraphs we have summarized key 

concerns commenters have raised. We 

indicated in the CY 2016 ESRD PPS 

final rule that we anticipated addressing 

these situations in future rulemaking 

and stated that we planned to consider 

the issues of ESRD facility resource use, 

supporting novel therapies, and 

balancing the risk of including new 

drugs for both CMS and the dialysis 

facilities. 

In the CY 2016 ESRD PPS final rule 

(80 FR 69017 through 69024), 

commenters seemed concerned about 

the cost of new drugs that fit into the 

functional categories, rather than the 

process of adding new drugs to existing 

categories. 

In the CY 2016 ESRD PPS final rule 

(80 FR 69020), a drug manufacturer 

suggested that in order to promote 

access to new therapies and encourage 

innovation in ESRD care, the TDAPA 

should apply to all new drugs not just 

those drugs that are used to treat or 

manage a condition for which we have 

not adopted a functional category. They 

pointed out that the functional 

categories are very comprehensive and 

capture every known condition related 

to ESRD. They indicated that under the 

proposed approach, CMS would make 

no additional payment regardless of 

whether the drug has a novel 

mechanism of action, new FDA 

approval, or other distinguishing 

characteristics and argued that such 

distinguishing characteristics provided 

rationale for additional payment. The 

commenter believed the CMS proposal 

sent conflicting messages to 

manufacturers about the importance of 

developing new treatments for this 

underserved patient population. 

An organization of home dialysis 

patients commented (80 FR 69022) with 

a similar concern, noting that the 

functional categories are too broad and 

could prevent people on dialysis from 

receiving needed care, and be 

detrimental to innovation. The 

commenter stated that in the future 

there could be a new medication to help 

with fluid management but patients 

would be shut out of ever having the 

option for a new fluid management 

therapy since there is an existing 

functional category for excess fluid 

management and therefore, these drugs 

are considered to be included in the 

base rate. Therefore, we believe the 

commenter meant that drug 

manufacturers would be less likely to 

develop a new fluid management drug 

knowing it would never qualify for 

additional payment under the ESRD 

PPS. The commenter asked that CMS 

provide additional payment for new 

drugs that fit into the functional 

categories in order to incentivize new 

medications to come to market and to 

ensure they have the opportunity for 

better care, choices and treatment. 

A national dialysis patient advocacy 

organization explained (80 FR 69021) 

that if new products are immediately 

added to the bundle without additional 

payment it would curtail innovation in 

treatments for people on dialysis. They 

believed clinicians should have the 

ability to evaluate the appropriate use of 

a new product and its effect on patient 

outcomes, and that the proposed rule 

did not allow for this. The commenter 

explained that Kidney Disease 

Improving Global Outcomes (KDIGO) 

and Kidney Disease Outcomes Quality 

Initiative (KDOQI) guidelines are often 

updated when evidence of improved 

therapies on patient outcomes are made 

available and that this rigorous and 

evidence-based process is extremely 

important in guiding widespread 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34313 

treatment decisions in nephrology. The 

commenter expressed concern that 

under the proposed rule, reimbursement 

and contracting arrangements could 

instead dictate utilization of a product 

before real world evidence on patient 

outcomes is ever generated. 

The comments we received for the 

drug designation process in the CY 2016 

ESRD PPS rulemaking (80 FR 69017 

through 69024) indicated that 

commenters were also concerned about 

the cost of the new drugs and 

biologicals, and in particular, new drugs 

and biologicals that fall within the 

functional categories, and therefore, 

considered by CMS to be reflected in the 

ESRD PPS base rate. 

A national dialysis organization 

strongly urged (80 FR 69017) CMS to 

adopt the same process for all new 

drugs and biologicals (as opposed to 

only those that do not fall within a 

functional category) unless they are 

substantially the same as drugs or 

biologicals currently paid for under the 

ESRD PPS payment rate. For new drugs 

or biologicals that are substantially the 

same as drugs or biologicals currently 

paid under the ESRD PPS, the 

organization supported incorporating 

them into the PPS on a case-by-case 

basis using notice-and-comment 

rulemaking and foregoing the transition 

period if it can be shown that the PPS 

rate is adequate to cover the cost of the 

drug or biological. The organization 

believed if the rate is inadequate to 

cover the cost of the new drug then the 

TDAPA should apply. An LDO stated 

that, if implemented, the proposed 

process could jeopardize patient access 

to drugs that are clinically superior to 

existing drugs in the same functional 

category. For example, the commenter 

stated, if a new substantially more 

expensive anemia management drug is 

released and is clinically proven to be 

more effective than the current standard 

of care under the proposed rule, the 

ESRD PPS base rate would remain 

stagnant. They continued that it is not 

reasonable for CMS to expect that all 

dialysis facilities would incur frequent 

and substantial losses in order to 

furnish the more expensive, albeit more 

clinically effective, drug. 

A dialysis organization and a 

professional association asked (80 FR 

69019) that CMS consider a passthrough payment, meaning Medicare 

payment in addition to the ESRD PPS 

base rate for all new drugs that are 

considered truly new. They 

recommended a rate of 106 percent of 

ASP, minus the portion of the ESRD 

PPS base rate that CMS determines is 

attributable to the category of drugs that 

corresponds to a truly new drug. An 

LDO stated (80 FR 69020) that defining 

new drugs requires special 

consideration of cost. They suggested a 

similar approach by stating that rather 

than comparing the cost of the new drug 

to the ESRD PPS base rate, we should 

compare it to the cost of the existing 

drugs in the same CMS-defined ‘‘mode 

of action’’ category. In such a case, a 

drug might qualify for payment of the 

TDAPA on the basis that its cost per 

unit or dosage exceeds a specified 

percentage (for example 150 percent) of 

the average cost per unit or dosage of 

the top three most common drugs in the 

same category (based on utilization 

data). This comparison would 

demonstrate that the amount allocated 

to that category in the ESRD PPS base 

rate is insufficient to cover the cost of 

the new drug. 

Other commenters referred (80 FR 

69020) to pathways in other payment 

systems that provide payment for new 

drugs and biologicals to account for 

their associated costs. For example, the 

Outpatient Prospective Payment System 

(OPPS) provides a pass-through 

payment and the Inpatient Prospective 

Payment System (IPPS) provides a new 

technology add-on payment. 

Commenters indicated (80 FR 69020) 

that we should decouple the TDAPA 

from the functional categories and 

provide the additional payment for all 

new injectable and intravenous drugs 

and biologicals and oral equivalents for 

2 to 3 years, similar to the IPPS or the 

OPPS. 

f. Proposed Expansion of the TDAPA 

Eligibility Criteria 

We continue to believe that the drug 

designation process does not prevent 

ESRD facilities from furnishing 

available medically necessary drugs and 

biologicals to ESRD beneficiaries. 

Additionally, our position has been that 

payment is adequate to ESRD facilities 

to furnish new drugs and biologicals 

that fall within existing ESRD PPS 

functional categories. The per treatment 

payment amount is a patient and facility 

level adjusted base rate plus any 

applicable adjustments, such as training 

or outlier. Finally, the ESRD PPS 

includes the ESRDB market basket, 

which updates the PPS base rate 

annually for input price changes for 

providing renal dialysis services and 

accounts for price changes of the drugs 

and biologicals that are reflected in the 

ESRD PPS base rate (80 FR 69019). 

However, in the CY 2016 ESRD PPS 

final rule, we also acknowledged that 

the outlier policy would not fully cover 

the cost of furnishing a new drug (80 FR 

69021) and that newer drugs may be 

more costly. Consequently, due to the 

reasons detailed in the following 

paragraphs, we are reconsidering our 

previous policy on the drug designation 

policy. 

We recognize the unique situations 

identified by the commenters discussed 

in section II.B.1.e of this proposed rule, 

and how they are impacted by the 

eligibility criteria for the TDAPA. 

Concerns regarding inadequate payment 

for renal dialysis services and hindrance 

of high-value innovation, among others, 

are important issues that we 

contemplate while determining 

appropriate payment policies. 

Additionally, subsequent to the 

issuance of the CY 2016 ESRD PPS final 

rule, we continue to hear concerns that 

the drug designation process is 

restrictive in nature; and receive 

requests from the dialysis industry and 

stakeholders that we reconsider the 

applicability of the TDAPA. 

We acknowledge that ESRD facilities 

have unique circumstances with regard 

to implementing new drugs and 

biologicals into their standards of care. 

For example, when new drugs are 

introduced to the market, ESRD 

facilities need to analyze their budget 

and engage in contractual agreements to 

accommodate the new therapies into 

their care plans. Newly launched drugs 

and biologicals can be unpredictable 

with regard to their uptake and pricing 

which makes these decisions 

challenging for ESRD facilities. 

Furthermore, practitioners should have 

the ability to evaluate the appropriate 

use of a new product and its effect on 

patient outcomes. We agree that this 

uptake period would be best supported 

by the TDAPA pathway because it 

would help facilities transition/test new 

drugs and biologicals in their businesses 

under the ESRD PPS. The TDAPA 

provides flexibility and targets payment 

for the use of new renal dialysis drugs 

and biologicals during the period when 

a product is new to the market so that 

we can evaluate if resource use can be 

aligned with payment. As explained in 

section II.B.1.b of this proposed rule, the 

ESRD PPS base rate includes dollars 

allocated for drugs and biologicals that 

fall within a functional category, but 

those dollars may not directly address 

the total resource use associated with 

the newly launched drugs trying to 

compete in the renal dialysis market. 

We believe that we need to be 

conscious of ESRD facility resource use 

and the financial barriers that may be 

preventing uptake of innovative new 

drugs and biologicals that, while are 

already accessible to them, may be 

under-prescribed because the new drugs 

are priced higher than currently utilized 

drugs (as argued by commenters). 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34314 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

Therefore, beginning January 1, 2019, 

we are proposing to add 

§ 413.234(b)(1)(i), (ii) and revise 

§ 413.234(c) to reflect that the TDAPA, 

under the authority of section 

1881(b)(14)(D)(iv) of the Act, would 

apply to all new renal dialysis injectable 

or intravenous products, oral 

equivalents, and other forms of 

administration drugs and biologicals, 

regardless of whether or not they fall 

within a functional category. New renal 

dialysis drugs and biologicals that do 

not fall within an existing functional 

category would continue to be paid 

under the TDAPA and the ESRD PPS 

base rate would be modified, if 

appropriate, to reflect the new 

functional category. We are revising 

§ 413.234(b)(2)(ii) and § 413.234(c)(2), 

removing § 413.234(c)(3), and adding 

§ 413.234(c)(2)(i) to reflect that we 

would continue to provide the TDAPA, 

collect sufficient data, and modify the 

ESRD PPS base rate, if appropriate, for 

these new drugs and biologicals that do 

not fall within an existing functional 

category. 

We propose to revise § 413.234(c)(1) 

to reflect that for new renal dialysis 

drugs and biologicals that fall within a 

functional category, the TDAPA would 

apply for only 2 years. While we are not 

collecting claims data for purposes of 

analyzing utilization to result in a 

change to the base rate, we would still 

monitor renal dialysis service utilization 

for trends and believe that this 

timeframe is adequate for payment. We 

believe that 2 years is a sufficient 

timeframe for facilities to set up system 

modifications, and adjust business 

practices so that there is seamless access 

to these new drugs within the ESRD PPS 

base rate. In addition, when we 

implement policy changes whereby 

facilities need to adjust their system 

modifications or protocols, we have 

provided a transition period. We believe 

that this 2-year timeframe is similar in 

that facilities are making changes to 

their systems and care plan to 

incorporate the new renal dialysis drugs 

and biologicals into their standards of 

care and this could be supported by a 

transition period. Also, the TDAPA for 

2 years would address the stakeholders 

concerns regarding additional payment 

to account for higher cost of more 

innovative drugs that perhaps may not 

be adequately captured by the dollars 

allocated in the ESRD PPS base rate. 

That is, this transitional payment would 

give the new renal dialysis drugs and 

biologicals a foothold in the market so 

that when the timeframe is complete, 

they are able to compete with the 

existing drugs and biologicals under the 

outlier policy, if applicable. Meaning, 

once the timeframe is complete, drugs 

would then qualify as outlier services, if 

applicable, and the facility would no 

longer receive the TDAPA for any one 

particular drug. Instead, in the outlier 

policy space, there is a level playing 

field where drugs could gain market 

share by offering the best practicable 

combination of price and quality. We 

believe that the proposed timeframe is 

long enough to be meaningful but not 

too long as to improperly incentivize 

high cost items without more value, for 

example, substitutions of those drugs 

that already exist in the functional 

category. 

We note that this proposal would 

increase Medicare expenditures, which 

would result in increases to ESRD 

beneficiary cost sharing, since we have 

not previously provided the TDAPA for 

new renal dialysis drugs and biologicals 

in the past. It is our understanding that 

there are new drugs and biologicals in 

the pipelines, for example, we are aware 

that there are new drugs that would fall 

within the anemia management, bone 

and mineral, and pain management 

categories. We would continue to 

monitor the use of the TDAPA and 

carefully evaluate the new renal dialysis 

drugs and biologicals that qualify. We 

would address any concerns through 

future refinements to the TDAPA policy. 

We are also proposing that when a 

new renal dialysis drug or biological 

falls within an existing functional 

category at the end of the TDAPA period 

we would not modify the ESRD PPS 

base rate, but at the end of the 2 years, 

as consistent with the existing outlier 

policy, the drug would be eligible for 

outlier payment. However, as discussed 

in section II.B.1.h of this proposed rule, 

if the new renal dialysis drug or 

biological is considered to be a 

composite rate drug, it would not be 

eligible for an outlier payment. The 

intent of the TDAPA for these drugs is 

to provide a transition period for the 

unique circumstances experienced by 

ESRD facilities and to allow time for the 

uptake of the new drug. We do not 

believe that it would be appropriate to 

add dollars to the ESRD PPS base rate 

for new renal dialysis drugs and 

biologicals that fall within existing 

functional categories and that doing 

such would be in conflict with the 

fundamental principles of a PPS. Under 

a PPS, Medicare makes payments based 

on a predetermined, fixed amount that 

reflects the average patient and the 

facility retains the profit or suffers a loss 

resulting from the difference between 

the payment rate and the facility’s cost 

which creates an incentive for cost 

control. It is not the intent of a PPS to 

add dollars to the base whenever 

something new is made available. We 

believe this proposal, that is, no 

modification to the base rate at the end 

of the TDAPA period for new renal 

dialysis drugs and biologicals that fall 

within an existing functional category 

would maintain the overall goal of a 

bundled PPS, that is, the limitation of 

applying the TDAPA would not 

undermine the bundle since there is no 

permanent adjustment to the base rate. 

This proposal would also strike a 

balance of maintaining the existing 

functional category scheme of the drug 

designation process and not adding 

dollars to the ESRD PPS base rate when 

the base rate may already reflect costs 

associated with such services, while 

still promoting high-value innovation 

and allowing facilities to adjust or factor 

in new drugs through a short-term 

transitional payment. We are proposing 

to add § 413.234(c)(1)(i) to reflect that 

when a new renal dialysis drug or 

biological falls within an existing 

functional category at the end of the 

TDAPA period, we would not modify 

the ESRD PPS base rate. We solicit 

comment on this proposal. 

We are proposing to operationalize 

this proposed policy no later than 

January 1, 2020. This deadline would 

provide us with the appropriate time to 

prepare the necessary changes to our 

claims processing systems. 

We solicit comment on the proposal 

to revise § 413.234(c) and (c)(1) to reflect 

that the TDAPA would apply for all new 

renal dialysis drugs and biologicals 

regardless of whether they fall within a 

functional category. Then, for new renal 

dialysis drug or biological that falls 

within an existing functional category, 

that payment would apply for 2 years 

and there would be no modification to 

the ESRD PPS base rate. We are also 

soliciting comment on the 

appropriateness of the 2-year timeframe 

for the TDAPA for new renal dialysis 

drugs and biologicals that fall within 

existing functional categories. 

g. Proposed Basis of Payment for the 

TDAPA 

Currently, under § 413.234(c), the 

TDAPA is based on pricing 

methodologies under section 1847A of 

the Act, including 106 percent of ASP 

(ASP+6). If we adopt the proposals 

discussed in section II.B.1.f of this 

proposed rule using the same pricing 

methodologies, Medicare expenditures 

would increase, which would result in 

increases of cost sharing for ESRD 

beneficiaries, since we have not 

previously provided the TDAPA for all 

new renal dialysis drugs and biologicals 

in the past. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34315 

The TDAPA is a payment adjustment 

under the ESRD PPS and is not intended 

to be a mechanism for payment for new 

drugs and biologicals under Medicare 

Part B, and under section 

1881(b)(14)(D)(iv) of the Act, we believe 

it may not be appropriate to base the 

TDAPA strictly on section 1847A of the 

Act methodologies. For this proposed 

rule, we considered options for basing 

payment under the TDAPA, for 

example, maintaining the policy as is 

and facility cost of acquiring drugs and 

biologicals. We found that the while 

ASP could encourage certain 

unintended consequences (discussed 

below), it continues to be the best data 

available since it is commonly used to 

facilitate Medicare payment across care 

settings and, as described in section 

II.B.1.c, is based on the manufacturer’s 

sales to all purchasers (with certain 

exceptions) net of all manufacturer 

rebates, discounts, and price 

concessions. 

Further, since the implementation of 

section 1847A of the Act, stakeholders 

and executive policy advisors have 

analyzed this section of the statute and 

issued their respective critiques on the 

purpose of the ASP add-on percentage. 

On March 8, 2016, the Assistant 

Secretary for Planning and Evaluation 

(ASPE) issued an Issue Brief titled, 

‘‘Medicare Part B Drugs: Pricing and 

Incentives’’ (https://aspe.hhs.gov/ 

system/files/pdf/;187581/ 

PartBDrug.pdf). In this brief ASPE 

touches on several concerns they have 

about the ASP methodology. Two of 

those concerns regard the economic 

incentives of cost and value. ASPE 

noted that the ASP methodology for Part 

B drugs falls short of providing value 

based incentives in several ways. 

Specifically, they noted physicians can 

often choose between several similar 

drugs for treating a patient and although 

the current system may encourage 

providers and suppliers to pursue the 

lowest price for drugs that are multiple 

source, payment based on drug specific 

ASP provides little incentive to make 

choices among the therapeutic options 

with an eye towards value and choose 

among the lowest price among all drugs 

available to effectively treat a patient. 

Rationale for the 6 percent add-on has 

been to cover administrative and 

overhead costs, but such costs are not 

proportional to the price of the drug. 

The fixed 6 percent of ASP provides a 

larger ‘‘add-on’’ for higher priced drugs 

than for lower priced drugs, resulting in 

increased profit margins for the 

physicians’ office and hospitals creating 

a perverse incentive to choose the high 

priced drugs as opposed to lower priced 

alternatives of similar effectiveness. 

In MedPAC’s June 2015 Report to 

Congress (http://medpac.gov/docs/ 

default-source/reports/june-2015-reportto-the-congress-medicare-and-thehealth-care-delivery-system.pdf), 

MedPAC provides discussion around 

the meaning of the 6 percent that is 

added to the ASP and provides their 

opinion on its purpose. In their report, 

they state ‘‘There is no consensus on the 

original intent of the 6 percent add-on 

to ASP. A number of rationales have 

been suggested by various stakeholders. 

Some suggest that the 6 percent is 

intended to cover drug storage and 

handling costs. Others contend that the 

6 percent is intended to maintain access 

to drugs for smaller practices and other 

purchasers who may pay above average 

prices for the drugs. Another view is 

that the add-on to ASP was intended to 

cover factors that may create a gap 

between the manufacturers’ reported 

ASP and the average purchase price 

across providers (for example, promptpay discounts). Another rationale for the 

percentage add-on may be to provide 

protection for providers when price 

increases occur and the payment rate 

has not yet caught up.’’ 

Finally, with regard to acquisition 

costs in a 2006 Report to Congress titled, 

‘‘Sales of Drugs and Biologicals to Large 

Volume Producers (https:// 

www.cms.gov/Research-Statistics-Dataand-Systems/;Statistics-Trends-andReports/Reports/Downloads/LVP_RTC_

2_09_06.pdf), the Secretary was tasked 

to submit a Report to Congress (RTC) to 

include recommendations as to whether 

sales to large volume purchasers should 

be excluded from the computation of 

manufacturer’s ASP. The contractor 

made extensive efforts to collect and 

analyze data regarding large volume 

drug purchasers. They were unable to 

obtain data on ASP by type of purchaser 

from the drug manufacturers, and were 

unable to determine net acquisition 

costs. The sensitive and proprietary 

nature of prescription drug pricing data 

made it extremely difficult to obtain the 

data necessary for the report. Given that 

ASP was designed to broadly reflect 

market prices without data on net 

acquisition cost, it is not possible to 

accurately analyze the impact of large 

volume purchasers on overall ASP. In 

2018, we remain unable to obtain 

contractual information regarding drug 

pricing and ESRD PPS, which is 

especially pertinent since the dialysis 

stage is dominated by two large dialysis 

organizations who administer drugs and 

biologicals to the majority of ESRD 

beneficiaries. 

To balance the price controls inherent 

in any PPS we believe that we need to 

take all of these issues into 

consideration to revise the basis for 

TDAPA payment. We are, and will 

continue to be, conscious of ESRD 

facility resource use and recognize the 

financial barriers that may be preventing 

uptake of innovative new drugs and 

biologicals. Therefore, we are proposing 

to revise § 413.234(c) under the 

authority of section 1881(b)(14)(D)(iv) of 

the Act, to reflect that we would base 

the TDAPA payments on 100 percent of 

ASP (ASP+0) instead of the pricing 

methodologies available under section 

1847A of the Act (which includes 

ASP+6). 

This proposal applies to new renal 

dialysis drugs and biologicals that fall 

within an existing functional category 

and to those that do not fall within an 

existing functional category. We believe 

that ASP+0 is a reasonable basis for 

payment for the TDAPA for new renal 

dialysis drugs and biologicals that fall 

within an existing functional category 

because there are already dollars in the 

per treatment base rate for a new drug’s 

respective category. We also believe that 

ASP+0 is a reasonable basis for payment 

for the TDAPA for new renal dialysis 

drugs and biologicals that do not fall 

within the existing functional category 

because the ESRD PPS base rate has 

dollars built in for administrative 

complexities and overhead costs for 

drugs and biologicals. We note that 

there is no clear statement from 

Congress as to why the payment 

allowance is required to be 106 percent 

of ASP (ASP+6) as opposed to any other 

value from 101 to 105 percent, and, as 

MedPAC discussed in their June 2015 

report, there is no consensus amongst 

stakeholders. 

We further believe that moving from 

pricing methodologies available under 

section 1847A of the Act, (which 

includes ASP+6) to ASP+0 for all new 

renal dialysis drugs and biologicals 

regardless of whether they fall within an 

ESRD PPS functional category strikes a 

balance between the increase to 

Medicare expenditures (subsequently 

increasing beneficiary coinsurance) and 

stakeholder concerns discussed in 

section II.B.1.e of this proposed rule. 

That is, we propose to provide the 

TDAPA for new drugs that are within an 

existing functional category, which is an 

expansion from the existing policy. This 

proposal would also aim to promote 

innovation and bring more high-value 

drugs to market. This proposal would 

further address concerns about 

incentivizing use of high cost drugs in 

ESRD facilities, also discussed in 

section II.B.1.e of this proposed rule. We 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34316 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

solicit comment on the proposal to 

revise § 413.234(c) to reflect that we 

would base the TDAPA payments on 

ASP+0. While we propose to change the 

basis of payment for the TDAPA from 

pricing methodologies available under 

section 1847A of the Act, (which 

includes ASP+6) to ASP+0, we are also 

soliciting comment on other add-on 

percentages to the ASP amount, that is, 

ASP+1 to 6 percent for commenters to 

explain why it may be appropriate to 

have a higher percentage. 

There are times when the ASP is not 

available. For example, when a new 

drug or biological is brought to the 

market, sales data is not sufficiently 

available for the manufacturer to 

compute an ASP. Therefore, when the 

ASP is not available, we propose that 

the TDAPA payment would be based on 

100 percent of Wholesale Acquisition 

Cost (WAC) and, when WAC is not 

available, the TDAPA payment would 

be based on the drug manufacturer’s 

invoice. We solicit comment on this 

proposal. 

We note that this proposal to use 

ASP+0 as the basis for the TDAPA 

payments, if adopted, would apply 

prospectively to new drugs and 

biologicals as of January 1, 2019. 

Currently, calcimimetics are eligible for 

the TDAPA and payment for both the 

injectable and oral versions are based on 

pricing methodologies under section 

1847A of the Act. This proposal would 

not affect calcimimetics, which would 

continue to be eligible for the TDAPA 

payment based on ASP+6. 

h. Drug Designation Process for 

Composite Rate Drugs and Biologicals 

In the CY 2016 ESRD PPS final rule, 

we did not discuss composite rate drugs 

and biologicals explicitly in context of 

the drug designation process. Composite 

rate services are discussed in the CY 

2011 ESRD PPS final rule (75 FR 49036, 

49078 through 49079) and are identified 

as renal dialysis services in § 413.171 

and under section 1847(b)(14)(B) of the 

Act. Prior to the implementation of the 

ESRD PPS, certain drugs used in 

furnishing outpatient maintenance 

dialysis treatments were considered 

composite rate drugs and not billed 

separately. Composite rate drug and 

biological policies are discussed in Pub. 

100–02, chapter 11, section 20.3.F 

(https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ 

downloads/bp102c11.pdf). This manual 

lists the drugs and fluids considered in 

the composite rate as heparin, 

antiarrythmics, protamine, local 

anesthetics, apresoline, dopamine, 

insulin, lidocaine, mannitol, saline, 

pressors, heparin antidotes, benadryl, 

hydralazine, lanoxin, solu-cortef, 

glucose, antihypertensives, 

antihistamines, dextrose, inderal, 

levophed, and verapamil. Drugs that are 

used as a substitute for any of these 

items, or are used to accomplish the 

same effect, are also covered under the 

ESRD PPS. 

We used the composite rate payments 

made under Part B in 2007 for dialysis 

in computing the ESRD PPS base rate. 

These are identified on Table 19 of the 

CY 2011 ESRD PPS final rule (75 FR 

49075) as ‘‘Composite Rate Services’’. In 

addition, we note that under § 413.237, 

composite rate drugs and biologicals are 

not permitted to be considered for an 

outlier payment. The outlier policy is 

discussed in section II.B.3.c of this 

proposed rule. 

Composite rate drugs and biologicals 

were also grouped into functional 

categories during the drug 

categorization for the CY 2011 ESRD 

PPS final rule (75 FR 49044 through 

49053). For example, heparin is a 

composite rate drug and falls within the 

Access Management category. However, 

these functional categories exclude 

certain composite rate items given that 

certain drugs and biologicals formerly 

paid for under the composite rate were 

those that were routinely given during 

the time of the patient’s dialysis and not 

always specifically for the treatment of 

their ESRD. For example, an 

antihypertensive composite rate drug 

that falls within the Cardiac 

Management category, which is not an 

ESRD PPS functional category, is not 

considered to be furnished for the 

treatment of ESRD and therefore, not 

included under the ESRD PPS. 

In light of our proposal to expand the 

drug designation process and the 

TDAPA, we also propose, under the 

authority of section 1881(b)(14)(D)(iv) of 

the Act, that it extend to composite rate 

drugs and biologicals that are furnished 

for the treatment of ESRD. Specifically, 

beginning January 1, 2019, we propose 

that if a new renal dialysis drug or 

biological as defined in the proposed 

revision at § 413.234(a) is considered to 

be a composite rate drug or biological 

and falls within an ESRD PPS functional 

category, it would be eligible for the 

TDAPA. We note that composite rate 

drugs and biologicals that are not 

considered to be furnished for the 

treatment of ESRD, and therefore, are 

not included in the ESRD PPS, would 

not be eligible for the TDAPA, for 

example, antihypertensives. We believe 

that the same unique consideration for 

innovation and cost exists for drugs that 

are considered composite rate drugs. 

That is, the ESRD PPS base rate dollars 

allocated for these types of drugs may 

not directly address the costs associated 

with drugs in this category when they 

are newly launched and are finding 

their place in the market. Accordingly, 

we propose that the expanded drug 

designation process and the TDAPA 

policy we proposed in section II.B.1.f of 

this proposed rule, including the 

proposed changes to § 413.234, would 

be applicable to composite rate drugs, 

with one exception. Under our proposal, 

new composite rate drugs would not be 

subject to outlier payments following 

the period that the TDAPA applies, 

since we are not proposing to change 

the current outlier policy under 

§ 413.237, which does not apply to 

composite rate drugs. We are, however, 

soliciting comments on whether we 

should consider applying our outlier 

policy to composite rate drugs in the 

future (see section II.B.3.c of this 

proposed rule). We would continue to 

monitor the use of the TDAPA and 

carefully evaluate the new renal dialysis 

drugs and biologicals that qualify. We 

would address any concerns through 

future refinements to the TDAPA policy. 

We solicit comment on the proposal 

to recognize composite rate drugs and 

biologicals in the same manner as drugs 

that were formerly separately paid 

under Part B when furnished for the 

treatment of ESRD for purposes of the 

proposed revisions to the drug 

designation process and eligibility for 

the TDAPA. 

2. Low-Volume Payment Adjustment 

(LVPA) Revision 

a. Background 

As required by section 

1881(b)(14)(D)(iii) of the Act, the ESRD 

PPS includes a payment adjustment that 

reflects the extent to which costs 

incurred by low-volume facilities in 

furnishing renal dialysis services exceed 

the costs incurred by other facilities 

furnishing such services. We have 

established a low-volume payment 

adjustment (LVPA) factor of 23.9 

percent for ESRD facilities that meet the 

definition of a low-volume facility. 

Under § 413.232(b), a low-volume 

facility is an ESRD facility that, based 

on the submitted documentation—(1) 

Furnished less than 4,000 treatments in 

each of the 3 cost reporting years (based 

on as-filed or final settled 12- 

consecutive month cost reports, 

whichever is most recent) preceding the 

payment year; and (2) Has not opened, 

closed, or received a new provider 

number due to a change in ownership 

in the 3 cost reporting years (based on 

as-filed or final settled 12-consecutive 

month cost reports, whichever is most 

recent) preceding the payment year. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34317 

Under § 413.232(c), for purposes of 

determining the number of treatments 

furnished by the ESRD facility, the 

number of treatments considered 

furnished by the ESRD facility equals 

the aggregate number of treatments 

furnished by the ESRD facility and the 

number of treatments furnished by other 

ESRD facilities that are both under 

common ownership with, and 5 road 

miles or less from, the ESRD facility in 

question. 

For purposes of determining 

eligibility for the LVPA, ‘‘treatments’’ 

means total hemodialysis (HD) 

equivalent treatments (Medicare and 

non-Medicare as well as ESRD and nonESRD). For peritoneal dialysis (PD) 

patients, 1 week of PD is considered 

equivalent to 3 HD treatments. As noted, 

we base eligibility on the 3 years 

preceding the payment year and those 

years are based on cost reporting 

periods. Specifically, under 

§ 413.232(g), the ESRD facility’s cost 

reports for the periods ending in the 3 

years preceding the payment year must 

report costs for 12-consecutive months 

(76 FR 70237). 

In order to receive the LVPA under 

the ESRD PPS, an ESRD facility must 

submit a written attestation statement to 

its Medicare Administrative Contractor 

(MAC) confirming that it meets all of the 

requirements specified § 413.232 and 

qualifies as a low-volume ESRD facility. 

Section 413.232(e) imposes a yearly 

November 1 deadline for attestation 

submissions. This timeframe provides 

60 days for a MAC to verify that an 

ESRD facility meets the LVPA eligibility 

criteria (76 FR 70236). Further 

information regarding the 

administration of the LVPA is provided 

in the Medicare Benefit Policy Manual, 

CMS Pub. 100–02, Chapter 11, section 

60.B.1. 

b. Revisions to the LVPA Requirements 

and Regulations 

We have heard from stakeholders that 

low-volume facilities rely on the lowvolume adjustment and loss of the 

adjustment could result in beneficiary 

access issues. Specifically, stakeholders 

expressed concern that the eligibility 

criteria in the LVPA regulations are very 

explicit and leave little room for 

flexibility in certain circumstances. For 

example, in the CY 2017 ESRD PPS final 

rule (81 FR 77863), a commenter 

suggested refinements to the definition 

of a low-volume facility to address the 

rare change of ownership (CHOW) 

instance wherein the new owner accepts 

the Medicare agreement but the 

ownership change results in a new 

provider number because of a facility’s 

type reclassification. The commenter 

explained that in this example, due to 

the issuance of a new Medicare provider 

billing number or provider transaction 

access number (PTAN) when the 

facility’s type is reclassified, this facility 

would be deemed ineligible for the 

LVPA since our policy requires new 

Medicare provider billing numbers 

qualify for the LVPA, which takes 3 

years. We also discovered that facilities 

that change their fiscal year without 

going through a CHOW become 

ineligible for the adjustment. Finally, 

stakeholders also communicated that 

the strict enforcement of the attestation 

deadline without exception should be 

reevaluated since missing the deadline 

results in the facility losing the LVPA 

and their payments are significantly 

reduced. Thus, in order to be responsive 

to stakeholders and increase flexibility 

with regard to eligibility for the LVPA, 

we are proposing to make changes to the 

LVPA regulation at § 413.232. 

The first proposed revision concerns 

the assignment of a PTAN when a 

facility undergoes a CHOW as described 

in 42 CFR 489.18. A facility is ineligible 

under § 413.232(b)(2) and (g)(2) for the 

LVPA for 3 years if it goes through a 

CHOW that results in a new PTAN. In 

response to a comment we received 

during the CY 2011 ESRD PPS 

rulemaking (75 FR 49123), we explained 

that we believe that a 3-year waiting 

period serves as a safeguard against 

facilities establishing new facilities that 

are purposefully small. We also 

explained that we structured our 

analysis of the ESRD PPS by looking 

across data for 3 years as we believe that 

the 3-year timeframe provided us with 

a sufficient span of time to view 

consistency in business operations. 

However, as we mentioned above, we 

have heard from stakeholders that this 

policy unfairly impacts facilities that 

undergo a CHOW that results in a 

change in facility type (for example, the 

facility type changes from hospitalbased to freestanding). Under this 

scenario, as discussed in the Medicare 

State Operations Manual, Pub. 100–07, 

Chapter 3, Section 3210.4C (https:// 

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ 

downloads/som107c03.pdf) and the 

Medicare Program Integrity Manual, 

Pub. 100–08, Chapter 15, Section 

15.7.7.1 (https://www.cms.gov/ 

Regulations-and-Guidance/Guidance/ 

Manuals/Downloads/pim83c15.pdf), 

CMS requires the issuance of a new 

CMS Certification Number (CCN) and 

provider agreement, which may lead to 

the issuance of a new PTAN, even if the 

new owner has accepted assignment of 

the existing Medicare provider 

agreement, that is, the new owner 

accepts the previous owner’s assets and 

liabilities. 

We agree with the stakeholders that 

the language in the regulation regarding 

PTAN status could restrict LVPA 

eligibility to an otherwise qualified 

ESRD facility from receiving the 

adjustment for 3 years, until the new 

PTAN qualifies for the adjustment. We 

recognize that there are technicalities 

regarding the assignment of a PTAN that 

could cause substantive impacts with 

eligibility for the LVPA that were not 

contemplated at the time the regulation 

was established. The intent of the LVPA 

has always been that if an ESRD facility 

undergoes a CHOW wherein the new 

owner accepts assignment of the 

existing Medicare provider agreement 

that they should continue to be eligible 

for the LVPA since this indicates a 

consistency in business operations. 

We are proposing to expand the 

definition of a low-volume facility in 

§ 413.232(b)(2) to include CHOWs 

where the new owner accepts 

assignment of the existing Medicare 

provider agreement and a new PTAN is 

issued due to a change in facility type. 

This proposal does not extend to 

CHOWs where a new PTAN is issued 

for any other reason. We solicit 

comment on the proposal to revise the 

language at § 413.232(b)(2) to reflect that 

ESRD facilities can meet the definition 

of a low-volume facility when they have 

a CHOW that results in a new PTAN 

due to a change in facility type but 

accepts assignment of the existing 

Medicare provider agreement. We are 

also proposing to amend § 413.232(g)(2), 

which governs the determination of 

LVPA eligibility, to recognize the 

proposed expansion of the low-volume 

facility definition to allow for PTAN 

changes when the facility type changes 

as a result of CHOW. We solicit 

comment on this proposal. 

We are also proposing to allow for an 

extraordinary circumstance exception to 

the November 1 attestation deadline 

under § 413.232(e). We agree with the 

stakeholders that there could be 

unforeseeable factors that contribute to 

a delay in the submission of the 

attestation and we would not want to 

prevent an otherwise qualified ESRD 

facility from receiving the adjustment. 

For example, while a failure to timely 

submit the attestation because of poor 

communication between a facility and 

its respective MAC, or because a facility 

forgets to send the attestation to the 

MAC, would not constitute 

extraordinary circumstances; a natural 

disaster could, because such an event is 

unforeseeable and extraordinary, which 

may understandably delay the timely 

submission of the attestation. We expect 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34318 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

extraordinary exceptions to be rare and 

the determination of acceptability 

would be made on a case-by-case basis. 

We have heard from stakeholders that 

they have lost eligibility for the LVPA 

due to extraordinary circumstances, 

such as natural disasters, that prevented 

them from submitting their attestation 

by the deadline. In those types of 

instances, we believe an exception to 

the attestation deadline could be 

warranted. Therefore, we are proposing 

to add a clause in § 413.232(e) to 

recognize an exception to the filing 

deadline for extraordinary 

circumstances. In order to request an 

extraordinary circumstance exception, 

we also propose that the facility would 

need to submit a narrative explaining 

the rationale for the exception to their 

MAC. We would evaluate and review 

the narrative to determine if an 

exception is justified, and such a 

determination would be final, with no 

appeal. We solicit comment on the 

proposal to revise the language at 

§ 413.232(e) to reflect that CMS would 

allow an exception to the attestation 

deadline of November 1 for 

extraordinary circumstances, if 

determined appropriate. 

In addition, we are also proposing to 

allow ESRD facilities that change their 

fiscal year-end for cost reporting 

purposes outside of a CHOW to qualify 

for the LVPA if they otherwise meet the 

LVPA eligibility criteria. Under 

§ 413.24(f)(3), facilities are able to 

change their cost reporting period when 

they request a change in writing from 

their MAC and meet specific criteria for 

approval. However, the current LVPA 

regulation at § 413.232(g)(2)(ii) does not 

technically address requirements for 

changing cost reporting periods except 

as a result of a CHOW, which has 

prohibited facilities from receiving the 

LVPA if they make a business decision 

to adjust their cost reporting period, 

which could interfere with the normal 

course of business. We recognize that 

there are business decisions an ESRD 

facility could make with regard to cost 

reporting periods that could 

substantively impact eligibility for the 

LVPA that we did not contemplate at 

the time the regulation was adopted. 

Specifically, there could be reasons why 

a cost report does not span 12- 

consecutive months. We did not intend 

for an ESRD facility to lose their LVPA 

eligibility simply because they made a 

decision to change their cost reporting 

period. The requirement that cost 

reports span 12-consecutive months was 

to bring a measure of consistent 

business operations. 

We are proposing to add a new 

paragraph (3) to § 413.232(g) to provide 

direction for MACs in verifying the 

number of treatments when a change in 

a cost reporting period is approved. 

When this occurs, we propose that 

MACs would combine the two nonstandard cost reporting periods of less 

than 12 months to equal a full 12- 

consecutive month period or combine 

the two non-standard cost reporting 

periods that in combination may exceed 

12-consecutive months and prorate the 

data to equal a full 12-consecutive 

month period. This proposal does not 

impact or change requirements for 

reporting, as established by the MACs, 

or those set forth in § 413.24(f)(3). We 

solicit comment on the proposal to add 

proposed § 413.232(g)(3) to change the 

information and cost report timeframes 

MACs would review to determine LVPA 

eligibility. This would apply to ESRD 

facilities that change their cost reporting 

year for purposes outside of a CHOW to 

qualify for the LVPA, provided they 

otherwise meet the LVPA eligibility 

criteria for the purposes of allowing the 

ESRD facility to continue to receive the 

adjustment. 

Finally, we are proposing two 

additional changes to correct and 

further clarify the LVPA regulation. The 

first would correct a cross-reference in 

§ 413.232(b) by changing ‘‘paragraph 

(h)’’ to ‘‘paragraph (g)’’. This error is the 

result of prior changes we made to the 

regulation when we deleted other 

paragraphs, but did not update the 

reference accordingly. The second 

proposed revision, which we are making 

to § 413.232(c)(2), would clarify that the 

reference to miles, are road miles. CMS 

recognizes that the current designation 

of miles under the regulation may not be 

specific enough and could cause 

confusion, and we have issued guidance 

(Medicare Benefit Policy Manual, Pub. 

L. 100–02, Chapter 11, Section 60) 

addressing road miles. Accordingly, we 

are proposing clarifying edits to 

§ 413.232(c)(2). 

3. Proposed CY 2019 ESRD PPS Update 

a. ESRD Bundled (ESRDB) Market 

Basket and Labor-Related Share 

i. Proposed Rebasing of the ESRDB 

Market Basket 

In accordance with section 

1881(b)(14)(F)(i) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, beginning in 2012, the ESRD 

PPS payment amounts are required to be 

annually increased by an ESRD market 

basket increase factor and reduced by 

the productivity adjustment described 

in section 1886(b)(3)(B)(xi)(II) of the 

Act. The application of the productivity 

adjustment may result in the increase 

factor being less than 0.0 for a year and 

may result in payment rates for a year 

being less than the payment rates for the 

preceding year. The statute also 

provides that the market basket increase 

factor should reflect the changes over 

time in the prices of an appropriate mix 

of goods and services used to furnish 

renal dialysis services. 

As required under section 

1881(b)(14)(F)(i) of the Act, CMS 

developed an all-inclusive ESRD 

Bundled (ESRDB) input price index (75 

FR 49151 through 49162) and 

subsequently revised and rebased the 

ESRDB input price index in the CY 2015 

ESRD PPS final rule (79 FR 66129 

through 66136). Effective for CY 2019, 

we are proposing to rebase the ESRDB 

market basket to a base year of CY 2016. 

Although ‘‘market basket’’ technically 

describes the mix of goods and services 

used for ESRD treatment, this term is 

also commonly used to denote the input 

price index (that is, cost categories, their 

respective weights, and price proxies 

combined) derived from a market 

basket. Accordingly, the term ‘‘ESRDB 

market basket,’’ as used in this 

document, refers to the ESRDB input 

price index. 

The ESRDB market basket is a fixedweight, Laspeyres-type price index. A 

Laspeyres-type price index measures the 

change in price, over time, of the same 

mix of goods and services purchased in 

the base period. Any changes in the 

quantity or mix of goods and services 

(that is, intensity) purchased over time 

are not measured. 

The index is constructed in three 

steps. First, a base period is selected (in 

this proposed rule, we are proposing to 

use 2016 as the base period) and total 

base period expenditures are estimated 

for a set of mutually exclusive and 

exhaustive spending categories, with the 

proportion of total costs that each 

category represents being calculated. 

These proportions are called ‘‘cost 

weights’’ or ‘‘expenditure weights.’’ 

Second, each expenditure category is 

matched to an appropriate price or wage 

variable, referred to as a ‘‘price proxy’’. 

In almost every instance, these price 

proxies are derived from publicly 

available statistical series that are 

published on a consistent schedule 

(preferably at least on a quarterly basis). 

Finally, the expenditure weight for each 

cost category is multiplied by the level 

of its respective price proxy. The sum of 

these products (that is, the expenditure 

weights multiplied by their price index 

levels) for all cost categories yields the 

composite index level of the market 

basket in a given period. Repeating this 

step for other periods produces a series 

of market basket levels over time. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34319 

Dividing an index level for a given 

period by an index level for an earlier 

period produces a rate of growth in the 

input price index over that timeframe. 

As noted above, the market basket is 

described as a fixed-weight index 

because it represents the change in price 

over time of a constant mix (quantity 

and intensity) of goods and services 

purchased to provide ESRD services. 

The effects on total expenditures 

resulting from changes in the mix of 

goods and services purchased 

subsequent to the base period are not 

measured. For example, an ESRD 

facility hiring more nurses to 

accommodate the needs of patients 

would increase the volume of goods and 

services purchased by the ESRD facility, 

but would not be factored into the price 

change measured by a fixed-weight 

ESRD market basket. Only when the 

index is rebased would changes in the 

quantity and intensity be captured, with 

those changes being reflected in the cost 

weights. Therefore, we rebase the 

market basket periodically so that the 

cost weights reflect changes between 

base periods in the mix of goods and 

services that ESRD facilities purchase to 

furnish ESRD treatment. 

We are proposing to use CY 2016 as 

the base year for the proposed rebased 

ESRDB market basket cost weights. The 

cost weights for this proposed ESRDB 

market basket are based on the cost 

report data for independent ESRD 

facilities. We refer to the market basket 

as a CY market basket because the base 

period for all price proxies and weights 

are set to CY 2016 (that is, the average 

index level for CY 2016 is equal to 100). 

The major source data for the proposed 

ESRDB market basket is the 2016 

Medicare cost reports (MCRs) (Form 

CMS–265–11), supplemented with 2012 

data from the United States (U.S.) 

Census Bureau’s Services Annual 

Survey (SAS) inflated to 2016 levels. 

The 2012 SAS data is the most recent 

year of detailed expense data published 

by the Census Bureau for North 

American International Classification 

System (NAICS) Code 621492: Kidney 

Dialysis Centers. We also are proposing 

to use May 2016 Bureau of Labor 

Statistics (BLS) Occupational 

Employment Statistics data to estimate 

the weights for the Wages and Salaries 

and Employee Benefits occupational 

blends. We provide more detail on our 

methodology below. 

The terms ‘‘rebasing’’ and ‘‘revising,’’ 

while often used interchangeably, 

actually denote different activities. The 

term ‘‘rebasing’’ means moving the base 

year for the structure of costs of an input 

price index (that is, in this exercise, we 

are proposing to move the base year cost 

structure from CY 2012 to CY 2016) 

without making any other major 

changes to the methodology. The term 

‘‘revising’’ means changing data sources, 

cost categories, and/or price proxies 

used in the input price index. For CY 

2019, we are proposing to rebase the 

ESRD market basket to reflect the 2016 

cost structure of ESRD facilities. We are 

not proposing to revise the index; that 

is, we are not proposing to make any 

changes to the cost categories or price 

proxies used in the index. 

We selected CY 2016 as the new base 

year because 2016 is the most recent 

year for which relatively complete MCR 

data are available. In developing the 

proposed market basket, we reviewed 

ESRD expenditure data from ESRD 

MCRs (CMS Form 265–11) for 2016 for 

each freestanding ESRD facility that 

reported expenses and payments. The 

2016 MCRs are those ESRD facilities 

whose cost reporting period began on or 

after October 1, 2015 and before October 

1, 2016. Of the 2016 MCRs, 

approximately 88 percent of 

freestanding ESRD facilities had a begin 

date on January 1, 2016, approximately 

6 percent had a begin date prior to 

January 1, 2016, and approximately 6 

percent had a begin date after January 1, 

2016. Using this methodology allowed 

our sample to include ESRDs with 

varying cost report years including, but 

not limited to, the federal fiscal or CY. 

We propose to maintain our policy of 

using data from freestanding ESRD 

facilities (which account for over 90 

percent of total ESRD facilities) because 

freestanding ESRD data reflect the 

actual cost structure faced by the ESRD 

facility itself. In contrast, expense data 

for a hospital-based ESRD reflect the 

allocation of overhead from the entire 

institution. 

We developed cost category weights 

for the proposed 2016-based ESRDB 

market basket in two stages. First, we 

derived base year cost weights for nine 

major categories (Wages and Salaries, 

Employee Benefits, Pharmaceuticals, 

Supplies, Lab Services, Housekeeping 

and Operations, Administrative and 

General, Capital-Related Building and 

Fixtures, and Capital-Related 

Machinery) from the ESRD MCRs. 

Second, we are proposing to divide the 

Administrative and General cost 

category into further detail using 2012 

U.S. Census Bureau Services Annual 

Survey (SAS) data for the industry 

Kidney Dialysis Centers NAICS 621492 

inflated to 2016 levels. We apply the 

estimated 2016 distributions from the 

SAS data to the 2016 Administrative 

and General cost weight to yield the 

more detailed 2016 cost weights in the 

proposed market basket. This is similar 

to the methodology we used to break the 

Administrative and General costs into 

more detail for the 2012-based ESRDB 

market basket (79 FR 40217 through 

40221). The only difference is that for 

this proposed rebasing because SAS 

data is not available after 2012 we 

inflated the 2012 expense levels to 2016 

dollars using appropriate price proxies 

and applied this expense distribution to 

the Administrative and General cost 

weight for 2016. 

We are proposing to include a total of 

20 detailed cost categories for the 

proposed 2016-based ESRDB market 

basket, which is the same number of 

cost categories as the 2012-based ESRDB 

market basket. We are proposing to 

continue to assume that 87 percent of 

Professional Fees and 46 percent of 

capital costs are labor-related costs and 

would be included in the proposed 

labor-related share. A more thorough 

discussion of our proposals is provided 

below. 

a. Cost Category Weights 

Using Worksheets A and B from the 

2016 MCRs, we first computed cost 

shares for nine major expenditure 

categories: Wages and Salaries, 

Employee Benefits, Pharmaceuticals, 

Supplies, Lab Services, Housekeeping 

and Operations, Administrative and 

General, Capital-Related Building and 

Equipment, and Capital-Related 

Machinery. Edits were applied to 

include only cost reports that had total 

costs greater than zero. Total costs as 

reported on the MCR include those costs 

reimbursable under the ESRD bundled 

payment system. For example, we 

excluded expenses related to vaccine 

costs from total expenditures since these 

are not reimbursable under the ESRD 

bundled payment. 

In order to reduce potential 

distortions from outliers in the 

calculation of the individual cost 

weights for the major expenditure 

categories for each cost category, values 

less than the 5th percentile or greater 

than the 95th percentile were excluded 

from the major cost weight 

computations. The proposed data set, 

after removing cost reports with total 

costs equal to or less than zero and 

excluding outliers, included 

information from approximately 5,700 

independent ESRD facilities’ cost 

reports from an available pool of 6,410 

cost reports. 

Table 2 presents the proposed 2016- 

based ESRDB and 2012-based ESRDB 

market basket major cost weights as 

derived directly from the MCR data. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34320 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 2—PROPOSED 2016-BASED ESRDB MARKET BASKET MAJOR COST WEIGHTS DERIVED FROM THE MEDICARE

COST REPORT DATA

Cost category 

Proposed 

2016-based 

ESRDB 

market basket 

(percent) 

2012-based 

ESRDB 

market basket 

(percent) 

Wages and Salaries ................................................................................................................................................ 32.6 31.8 

Employee Benefits ................................................................................................................................................... 7.0 6.6 

Pharmaceuticals ...................................................................................................................................................... 12.4 16.5 

Supplies ................................................................................................................................................................... 10.4 10.1 

Lab Services ............................................................................................................................................................ 2.2 1.5 

Housekeeping and Operations ................................................................................................................................ 3.9 3.8 

Administrative and General ..................................................................................................................................... 18.4 17.4 

Capital-related Building and Fixed Equipment ........................................................................................................ 9.2 8.4 

Capital-related Machinery ........................................................................................................................................ 3.8 3.9 

Note: Totals may not sum to 100.0 percent due to rounding. 

We are proposing to disaggregate 

certain major cost categories developed 

from the MCRs into more detail to more 

accurately reflect ESRD facility costs. 

Those categories include: Benefits, 

Professional fees, Telephone, Utilities, 

and All Other Goods and Services. We 

describe below how the initially 

computed categories and weights from 

the cost reports were modified to yield 

the proposed 2016 ESRDB market basket 

expenditure categories and weights 

presented in this proposed rule. 

Wages and Salaries 

The proposed Wages and Salaries cost 

weight is comprised of direct patient 

care wages and salaries and non-direct 

patient care wages and salaries. Direct 

patient care wages and salaries for 2016 

was derived from Worksheet B, column 

5, lines 8 through 17 of the MCR. Nondirect patient care wages and salaries 

includes all other wages and salaries 

costs for non-health workers and 

physicians, which we are proposing to 

derive using the following steps: 

Step 1: To capture the salary costs 

associated with non-direct patient care 

cost centers, we calculated salary 

percentages for non-direct patient care 

from Worksheet A of the MCR. The 

estimated ratios were calculated as the 

ratio of salary costs (Worksheet A, 

columns 1 and 2) to total costs 

(Worksheet A, column 4). The salary 

percentages were calculated for seven 

distinct cost centers: ‘Operations and 

Maintenance’ combined with 

‘Machinery & Rental & Maintenance’ 

(line 3 and 6), Housekeeping (line 4), 

Employee Health and Wellness (EH&W) 

Benefits for Direct Patient Care (line 8), 

Supplies (line 9), Laboratory (line 10), 

Administrative & General (line 11), and 

Pharmaceuticals (line 12). 

Step 2: We then multiplied the salary 

percentages computed in step 1 by the 

total costs for each corresponding 

reimbursable costs center totals as 

reported on Worksheet B. The 

Worksheet B totals were based on the 

sum of reimbursable costs reported on 

lines 8 through 17. For example, the 

salary percentage for Supplies (as 

measured by line 9 on Worksheet A) 

was applied to the total expenses for the 

Supplies cost center (the sum of costs 

reported on Worksheet B, column 7, 

lines 8 through 17). This provided us 

with an estimate of Non-Direct Patient 

Care Wages and Salaries. 

Step 3: The estimated Wages and 

Salaries for each of the cost centers on 

Worksheet B derived in step 2 were 

subsequently summed and added to the 

direct patient care wages and salaries 

costs. 

Step 4: The estimated non-direct 

patient care wages and salaries (see step 

2) were then subtracted from their 

respective cost categories to avoid 

double-counting their values in the total 

costs. 

Using this methodology, we derive a 

proposed Wages and Salaries cost 

weight of 32.6 percent, reflecting an 

estimated direct patient care wages and 

salaries cost weight of 25.1 percent and 

non-direct patient care wages and 

salaries cost weight of 7.5 percent, as 

seen in Table 3. 

The final adjustment made to this 

category is to include Contract Labor 

costs. These costs appear on the MCR; 

however, they are embedded in the 

Other Costs from the trial balance 

reported on Worksheet A, Column 3 and 

cannot be disentangled using the MCRs. 

To avoid double counting of these 

expenses, we propose to remove the 

estimated cost weight for the contract 

labor costs from the Administrative and 

General category (where we believe the 

majority of the contract labor costs 

would be reported) to the Wages and 

Salaries category. We are proposing to 

use data from the SAS (2012 data 

inflated to 2016), which reported 2.3 

percent of total expenses were spent on 

contract labor costs. We allocated 80 

percent of that contract labor cost 

weight to Wages and Salaries. At the 

same time, we subtracted that same 

amount from Administrative and 

General, where the majority of contract 

labor expenses would likely be reported 

on the MCR. The 80 percent figure that 

was used was determined by taking 

salaries as a percentage of total 

compensation (excluding contract labor) 

from the 2016 MCR data. This is the 

same method that was used to allocate 

contract labor costs to the Wages and 

Salaries cost category for the 2012-based 

ESRDB market basket. 

The resulting proposed cost weight 

for Wages and Salaries increases to 34.5 

percent when contract labor wages are 

added. The calculation of the proposed 

Wages and Salaries cost weight for the 

2016-based ESRDB market basket is 

shown in Table 3 along with the similar 

calculation for the 2012-based ESRDB 

market basket. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34321 

TABLE 3—PROPOSED 2016 AND 2012 ESRD WAGES AND SALARIES COST WEIGHT DETERMINATION

Components 

Proposed 

2016 cost 

weight 

(percent) 

2012 cost 

weight 

(percent) 

Source 

Wages and Salaries Direct Patient Care .................................................. 25.1 23.2 MCR. 

Wages and Salaries Non-direct Patient Care ........................................... 7.5 8.6 MCR. 

Contract Labor (Wages) ............................................................................ 1.9 1.8 80% of SAS Contract Labor weight. 

Total Wages and Salaries .................................................................. 34.5 33.7 

Employee Benefits 

The Employee Benefits cost weight 

was derived from the MCR data for 

direct patient care and supplemented 

with data from the SAS (2012 data 

inflated to 2016) to account for nondirect patient care Employee Benefits. 

The MCR data only reflects Employee 

Benefit costs associated with health and 

wellness; that is, it does not reflect 

retirement benefits. 

In order to reflect the benefits related 

to non-direct patient care for employee 

health and wellness, we estimated the 

impact on the benefit weight using SAS. 

Unlike the MCR, data from the SAS 

benefits share includes expenses related 

to the retirement and pension benefits. 

In order to be consistent with the cost 

report definitions we do not want to 

include the costs associated with 

retirement and pension benefits in the 

cost share weights. These costs are 

relatively small compared to the costs 

for the health-related benefits, 

accounting for only 2.7 percent of the 

total benefits costs as reported on the 

SAS. Incorporating the SAS data 

produced an Employee Benefits (both 

direct patient care and non-direct 

patient care) weight that was 1.6 

percentage points higher (8.6 vs. 7.0) 

than the Employee Benefits weight for 

direct patient care calculated directly 

from the MCR. To avoid doublecounting and to ensure all of the market 

basket weights still totaled 100 percent, 

we removed this additional 1.6 

percentage points for Non-Direct Patient 

Care Employee Benefits from the 

Administrative and General cost 

category (where we believe the majority 

of the contract labor costs would be 

reported). 

The final adjustment made to this 

category is to include contract labor 

benefit costs. Once again, these costs 

appear on the MCR; however, they are 

embedded in the Other Costs from the 

trial balance reported on Worksheet A, 

Column 3 and cannot be disentangled 

using the MCR data. Identical to our 

methodology above for allocating 

Contract Labor Costs to Wages and 

Benefits, we applied 20 percent of total 

Contract Labor Costs, as estimated using 

the SAS, to the Benefits cost weight 

calculated from the cost reports. The 20 

percent figure was determined by taking 

benefits as a percentage of total 

compensation (excluding contract labor) 

from the 2016 MCR data. The resulting 

cost weight for Employee Benefits 

increases to 9.1 percent when contract 

labor benefits are added. This is the 

same method that was used to allocate 

contract labor costs to the Benefits cost 

category for the 2012-based ESRDB 

market basket. 

The Table 4 compares the 2012-based 

Benefits cost share derivation as 

detailed in the CY 2015 ESRD proposed 

rule (79 FR 40218) to the proposed 

2016-based Benefits cost share 

derivation. 

TABLE 4—PROPOSED 2016 AND 2012 ESRD EMPLOYEE BENEFITS COST WEIGHT DETERMINATION

Components 

Proposed 

2016 cost 

weight 

(percent) 

2012 cost 

weight 

(percent) 

Source 

Employee Benefits Direct Patient Care ..................................................... 7.0 6.6 MCR. 

Employee Benefits Non-direct Patient Care .............................................. 1.6 1.8 SAS. 

Contract Labor (Benefits) .......................................................................... 0.5 0.5 20% of SAS Contract Labor weight. 

Total Employee Benefits .................................................................... 9.1 8.8 

Pharmaceuticals 

The proposed 2016-based ESRDB 

market basket includes expenditures for 

all drugs, including formerly separately 

billable drugs and ESRD-related drugs 

that were covered under Medicare Part 

D before the ESRD PPS was 

implemented. We calculated a 

Pharmaceutical cost weight from the 

following cost centers on Worksheet B, 

the sum of lines 8 through 17, for the 

following columns: 11 ‘‘Drugs Included 

in Composite Rate’’; 12 ‘‘Erythropoiesis 

stimulating agents (ESAs)’’; 13 ‘‘ESRDRelated Drugs’’. We also added the drug 

expenses reported on line 5 column 10 

‘‘Non-ESRD related drugs’’. The NonESRD related drugs would include 

drugs and biologicals administered 

during dialysis for non-ESRD related 

conditions as well as oral-only drugs. 

Since these are costs to the facility for 

providing ESRD treatment to the 

patient, we propose to continue to 

include them in the Pharmaceutical cost 

weight. Section 1842(o)(1)(A)(iv) of the 

Act requires that influenza, 

pneumococcal, and hepatitis B vaccines 

described in paragraph (A) or (B) of 

section 1861(s)(10) of the Act be paid 

based on 95 percent of average 

wholesale price (AWP) of the drug. 

Since these vaccines are not 

reimbursable under the ESRD PPS, we 

exclude them from the proposed 2016- 

based ESRDB market basket. 

Finally, to avoid double-counting, the 

weight for the Pharmaceuticals category 

was reduced to exclude the estimated 

share of Non-Direct Patient Care Wages 

and Salaries associated with the 

applicable pharmaceutical cost centers 

referenced above. This resulted in a 

proposed ESRDB market basket weight 

for Pharmaceuticals of 12.4 percent. 

ESA expenditures accounted for 10.0 

percentage points of the proposed 

Pharmaceuticals cost weight, and All 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34322 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

2Review of Medicare Payments for Laboratory 

Tests Billed with an AY Modifier by Total Renal 

Laboratories, Inc.; https://oig.hhs.gov/oas/reports/ 

region1/11400505.pdf. 

Other Drugs accounted for the 

remaining 2.4 percentage points. 

The Pharmaceutical cost weight 

decreased 4.1 percentage point from the 

2012-based ESRD market basket to the 

proposed 2016-based ESRD market 

basket (16.5 percent to 12.4 percent). 

Most providers experienced a decrease 

in their Pharmaceutical cost weight 

since 2012. One provider in particular, 

a major dialysis provider, experienced a 

significant pharmaceutical cost weight 

decline in 2016. This provider’s decline 

has an effect on the overall 

Pharmaceutical cost weight in the 

proposed 2016-based ESRDB market 

basket. We wish to note that the 

provider’s decline in the pharmaceutical 

cost weight was found across the board 

in all states where the provider has 

facilities. Given this, we are proposing 

to include this provider’s decline in our 

market basket results treating it as a 

‘real’ change in relative pharmaceutical 

costs. We are not proposing to use an 

alternative methodology, such as 

averaging cost weights from multiple 

years, as proposed for Lab Services. 

Supplies 

We calculated the Supplies cost 

weight using the costs reported in the 

Supplies cost center (Worksheet B, line 

5 and the sum of lines 8 through 17, 

column 7) of the MCR. To avoid doublecounting, the Supplies costs were 

reduced to exclude the estimated share 

of Non-Direct patient care Wages and 

Salaries associated with this cost center. 

The resulting proposed 2016-based 

ESRDB market basket weight for 

Supplies is 10.4 percent, about the same 

as the weight for the 2012-based ESRDB 

market basket. 

Lab Services 

We calculated the Lab Services cost 

weight using the costs reported in the 

Laboratory cost center (Worksheet B, 

line 5 and the sum of line 8 through 17, 

column 8) of the MCR. To avoid doublecounting, the Lab Services costs were 

reduced to exclude the estimated share 

of Non-Direct Patient Care Wages and 

Salaries associated with this cost center. 

The proposed 2016-based ESRDB 

market basket weight for Lab Services is 

estimated at 2.2 percent. 

The 2016 Lab Services expenses 

reported for a main chain provider were 

significantly lower than those reported 

in the 3 years prior (2013–2015) and 

lower than the 2016 Lab Services weight 

for all other providers. We believe the 

lower costs were based on a correction 

to the way that this chain is billing for 

these services, an assumption that is 

supported by the findings of a January 

2016 Health and Human Services Office 

of the Inspector General (OIG) Report.2

Because the recent reported costs from 

this chain reflect these unique 

circumstances, we propose to take a 2- 

year average of Lab Services costs for 

2015 and 2016 for this chain in order to 

smooth out the year-to-year volatility. 

This approach results in a Lab cost 

weight for this chain that is higher than 

it was in 2012, which is then added to 

the 2016 Lab Services costs for all other 

providers, where the cost weight was 

similar in 2012 and 2016. As a result, 

the overall Lab Services cost weight 

increased 0.7 percentage points from the 

2012-based ESRDB market basket to the 

proposed 2016-based ESRD market 

basket. 

Housekeeping and Operations 

We calculated the Housekeeping and 

Operations cost weight using the costs 

reported on Worksheet A, lines 3 and 4, 

column 8, of the MCR. To avoid doublecounting, the weight for the 

Housekeeping and Operations category 

was reduced to exclude the estimated 

share of Non-Direct Patient Care Waged 

and Salaries associated with this cost 

center. These costs were divided by 

total costs to derive a proposed 2016- 

based ESRDB market basket weight for 

Housekeeping and Operations of 3.9 

percent. 

Capital 

We developed a proposed market 

basket weight for the Capital category 

using data from Worksheet B of the 

MCRs. Capital-related costs include 

depreciation and lease expenses for 

buildings, fixtures and movable 

equipment, property taxes, insurance 

costs, the costs of capital improvements, 

and maintenance expense for buildings, 

fixtures, and machinery. Because 

Housekeeping and Operations and 

Maintenance costs are included in the 

Worksheet B cost center for CapitalRelated costs (Worksheet B, column 2), 

we excluded the costs for these two 

categories and developed a separate 

expenditure category for Housekeeping 

and Operations, as detailed above. 

Similar to the methodology used for 

other market basket cost categories with 

a salaries component, we computed a 

share for non-direct patient care Wages 

and Salaries and Benefits associated 

with the Capital-related cost centers. We 

used Worksheet B to develop two 

capital-related cost categories: (1) 

Buildings and Fixtures (Worksheet B, 

the sum of lines 8 through 17, column 

2 less housekeeping & operations as 

derived from expenses reported on 

Worksheet A (see above)), and (2) 

Machinery (Worksheet B, the sum of 

lines 8 through 17, column 4). We 

reasoned this delineation was 

particularly important given the critical 

role played by dialysis machines. 

Likewise, because price changes 

associated with Buildings and 

Equipment could move differently than 

those associated with Machinery, we 

continue to believe that two capitalrelated cost categories are appropriate. 

The resulting proposed 2016-based 

ESRDB market basket weights for 

Capital-related Buildings and Fixtures 

and Capital-related Machinery are 9.2 

and 3.8 percent, respectively. 

Administrative and General 

We computed the proportion of total 

Administrative and General 

expenditures using the Administrative 

and General cost center data from 

Worksheet B, the sum of lines 8 through 

17, (column 9) of the MCRs. 

Additionally, we remove contract labor 

from this cost category and apportion 

these costs to the Wages and Salaries 

and Employee Benefits cost weights. 

Similar to other expenditure category 

adjustments, we then reduced the 

computed weight to exclude Wages and 

Salaries and Benefits associated with 

the Administrative and General cost 

center for Non-direct Patient Care as 

estimated from the SAS data. The 

resulting Administrative and General 

cost weight is 14.5 percent. 

We are proposing to further 

disaggregate the Administrative and 

General cost weight to derive detailed 

cost weights for Electricity, Natural Gas, 

Water and Sewerage, Telephone, 

Professional Fees, and All Other Goods 

and Services. These detailed cost 

weights are derived by inflating the 

detailed 2012 SAS data forward to 2016 

by applying the annual price changes 

from the respective price proxies to the 

appropriate market basket cost 

categories that are obtained from the 

2012 SAS data. We repeat this practice 

for each year to 2016. We then calculate 

the cost shares that each cost category 

represents of the 2012 data inflated to 

2016. These resulting 2016 cost shares 

were applied to the Administrative and 

General cost weight derived from the 

MCR (net of contract labor and 

additional benefits) to obtain the 

detailed cost weights for the proposed 

2016-based ESRD market basket. This 

method is similar to the method used 

for the 2012-based ESRDB market 

basket. 

Table 5 lists all of the cost categories 

and cost weights in the proposed 2016- 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34323 

based ESRDB market basket compared 

to the 2012-based ESRDB market basket. 

TABLE 5—COMPARISON OF THE PROPOSED 2016-BASED AND THE 2012-BASED ESRDB MARKET BASKET COST

CATEGORIES AND WEIGHTS

Proposed 2016 cost category 

Proposed 

2016 cost 

weights 

(percent) 

2012 cost 

weights 

(percent) 

Total ......................................................................................................................................................................... 100.0 100.0 

Compensation .......................................................................................................................................................... 43.6 42.5 

Wages and Salaries ......................................................................................................................................... 34.5 33.7 

Employee Benefits ............................................................................................................................................ 9.1 8.8 

Utilities ..................................................................................................................................................................... 2.0 1.8 

Electricity .......................................................................................................................................................... 1.1 1.0 

Natural Gas ...................................................................................................................................................... 0.1 0.1 

Water and Sewerage ........................................................................................................................................ 0.8 0.8 

Medical Materials and Supplies ............................................................................................................................... 24.9 28.1 

Pharmaceuticals ............................................................................................................................................... 12.4 16.5 

ESAs .......................................................................................................................................................... 10.0 12.9 

Other Drugs (except ESAs) ...................................................................................................................... 2.4 3.6 

Supplies ............................................................................................................................................................ 10.4 10.1 

Lab Services ..................................................................................................................................................... 2.2 1.5 

All Other Goods and Services ................................................................................................................................. 16.4 15.3 

Telephone & Internet Services ......................................................................................................................... 0.5 0.5 

Housekeeping and Operations ......................................................................................................................... 3.9 3.8 

Professional Fees ............................................................................................................................................. 0.7 0.6 

All Other Goods and Services .......................................................................................................................... 11.3 10.4 

Capital Costs ........................................................................................................................................................... 13.0 12.2 

Capital Related-Building and Fixtures .............................................................................................................. 9.2 8.4 

Capital Related-Machinery ............................................................................................................................... 3.8 3.9 

Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying one decimal and, therefore, 

the detail may not add to the total due to rounding. 

b. Proposed Price Proxies for the 2016- 

Based ESRDB Market Basket 

After developing the cost weights for 

the proposed 2016-based ESRDB market 

basket, we are proposing to select the 

most appropriate wage and price 

proxies currently available to represent 

the rate of price change for each 

expenditure category. We based the 

proposed price proxies on Bureau of 

Labor Statistics (BLS) data and group 

them into one of the following BLS 

categories: 

(1) Employment Cost Indexes. 

Employment Cost Indexes (ECIs) 

measure the rate of change in 

employment wage rates and employer 

costs for employee benefits per hour 

worked. These indexes are fixed-weight 

indexes and strictly measure the change 

in wage rates and employee benefits per 

hour. ECIs are superior to Average 

Hourly Earnings (AHE) as price proxies 

for input price indexes because they are 

not affected by shifts in occupation or 

industry mix, and because they measure 

pure price change and are available by 

both occupational group and by 

industry. The industry ECIs are based 

on the NAICS and the occupational ECIs 

are based on the Standard Occupational 

Classification System (SOC). 

(2) Producer Price Indexes. Producer 

Price Indexes (PPIs) measure price 

changes for goods sold in other than 

retail markets. PPIs are used when the 

purchases of goods or services are made 

at the wholesale level. 

(3) Consumer Price Indexes. 

Consumer Price Indexes (CPIs) measure 

change in the prices of final goods and 

services bought by consumers. CPIs are 

only used when the purchases are 

similar to those of retail consumers 

rather than purchases at the wholesale 

level, or if no appropriate PPIs were 

available. 

We evaluated the price proxies using 

the criteria of reliability, timeliness, 

availability, and relevance: 

Reliability. Reliability indicates that 

the index is based on valid statistical 

methods and has low sampling 

variability. Widely accepted statistical 

methods ensure that the data were 

collected and aggregated in a way that 

can be replicated. Low sampling 

variability is desirable because it 

indicates that the sample reflects the 

typical members of the population. 

(Sampling variability is variation that 

occurs by chance because only a sample 

was surveyed rather than the entire 

population.) 

Timeliness. Timeliness implies that 

the proxy is published regularly, 

preferably at least once a quarter. The 

market baskets are updated quarterly, 

and therefore, it is important for the 

underlying price proxies to be up-todate, reflecting the most recent data 

available. We believe that using proxies 

that are published regularly (at least 

quarterly, whenever possible) helps to 

ensure that we are using the most recent 

data available to update the market 

basket. We strive to use publications 

that are disseminated frequently, 

because we believe that this is an 

optimal way to stay abreast of the most 

current data available. 

Availability. Availability means that 

the proxy is publicly available. We 

prefer that our proxies are publicly 

available because this helps to ensure 

that our market basket updates are as 

transparent to the public as possible. In 

addition, this enables the public to be 

able to obtain the price proxy data on 

a regular basis. 

Relevance. Relevance means that the 

proxy is applicable and representative 

of the cost category weight to which it 

is applied. The CPIs, PPIs, and ECIs that 

we have selected to propose in this 

provision meet these criteria. Therefore, 

we believe that they continue to be the 

best measure of price changes for the 

cost categories to which they would be 

applied. 

Table 7 lists all price proxies for the 

proposed 2016-based ESRDB market 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34324 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

basket. We note that we are proposing 

to use the same proxies as those used in 

the 2012-based ESRDB market basket. 

Below is a detailed explanation of the 

price proxies used for each cost category 

weight. 

Wages and Salaries 

We are proposing to continue using a 

blend of ECIs to proxy the Wages and 

Salaries cost weight in the proposed 

2016-based ESRDB market basket, and 

to continue using four occupational 

categories and associated ECIs based on 

full-time equivalents (FTE) data from 

ESRD MCRs and ECIs from BLS. We 

calculated occupation weights for the 

blended Wages and Salaries price proxy 

using 2016 FTE data from the MCR data 

and associated 2016 Average Mean 

Wage data from the Bureau of Labor 

Statistics’ Occupational Employment 

Statistics. This is similar to the 

methodology used in the 2012-based 

ESRDB market basket to derive these 

occupational wages and salaries 

categories. 

Health Related 

We are proposing to continue using 

the ECI for Wages and Salaries for All 

Civilian Workers in Hospitals (BLS 

series code #CIU1026220000000I) as the 

price proxy for health-related 

occupations. Of the two health-related 

ECIs that we considered (‘‘Hospitals’’ 

and ‘‘Health Care and Social 

Assistance’’), the wage distribution 

within the Hospital NAICS sector (622) 

is more closely related to the wage 

distribution of ESRD facilities than it is 

to the wage distribution of the Health 

Care and Social Assistance NAICS 

sector (62). 

The Wages and Salaries—Health 

Related subcategory weight within the 

Wages and Salaries cost category 

accounts for 79.9 percent of total Wages 

and Salaries in 2016. The ESRD 

Medicare Cost Report FTE categories 

used to define the Wages and Salaries— 

Health Related subcategory include 

‘‘Physicians,’’ ‘‘Registered Nurses,’’ 

‘‘Licensed Practical Nurses,’’ ‘‘Nurses’ 

Aides,’’ ‘‘Technicians,’’ and 

‘‘Dieticians’’. 

Management 

We are proposing to continue using 

the ECI for Wages and Salaries for 

Private Industry Workers in 

Management, Business, and Financial 

(BLS series code #CIU2020000110000I). 

We believe this ECI is the most 

appropriate price proxy to measure the 

wages and salaries price growth of 

management personnel at ESRD 

facilities. 

The Wages and Salaries— 

Management subcategory weight within 

the Wages and Salaries cost category is 

6.7 percent in 2016. The ESRD Medicare 

Cost Report FTE category used to define 

the Wages and Salaries—Management 

subcategory is ‘‘Management.’’ 

Administrative 

We are proposing to continue using 

the ECI for Wages and Salaries for 

Private Industry Workers in Office and 

Administrative Support (BLS series 

code #CIU2020000220000I). We believe 

this ECI is the most appropriate price 

proxy to measure the wages and salaries 

price growth of administrative support 

personnel at ESRD facilities. 

The Wages and Salaries— 

Administrative subcategory weight 

within the Wages and Salaries cost 

category is 7.7 percent in 2016. The 

ESRD MCR FTE category used to define 

the Wages and Salaries—Administrative 

subcategory is ‘‘Administrative.’’ 

Services 

We propose using the ECI for Wages 

and Salaries for Private Industry 

Workers in Service Occupations (BLS 

series code #CIU2020000300000I). We 

believe this ECI is the most appropriate 

price proxy to measure the wages and 

salaries price growth of all other nonhealth related, non-management, and 

non-administrative service support 

personnel at ESRD facilities. 

The Services subcategory weight 

within the Wages and Salaries cost 

category is 5.7 percent in 2016. The 

ESRD Medicare Cost Report FTE 

categories used to define the Wages and 

Salaries—Services subcategory are 

‘‘Social Workers’’ and ‘‘Other.’’ 

Table 6 lists the four ECI series and 

the corresponding weights used to 

construct the proposed ECI blend for 

Wages and Salaries compared to the 

2012-based weights for the 

subcategories. We believe this ECI blend 

is the most appropriate price proxy to 

measure the growth of wages and 

salaries faced by ESRD facilities. 

TABLE 6—PROPOSED ECI BLEND FOR WAGES AND SALARIES IN THE PROPOSED 2016-BASED AND 2012-BASED ESRDB 

MARKET BASKETS

Cost category ECI series 

Proposed 

2016 weight 

(percent) 

2012 Weight 

(percent) 

Health Related ................................. ECI for Wages and Salaries for All Civilian Workers in Hospitals ........... 79.9 79.0 

Management .................................... ECI for Wages and Salaries for Private Industry Workers in Management, Business, and Financial.6.7 8.0 

Administrative .................................. ECI for Wages and Salaries for Private Industry Workers in Office and 

Administrative Support.

7.7 7.0 

Services ........................................... ECI for Wages and Salaries for Private Industry Workers in Service Occupations.5.7 6.0 

Employee Benefits 

We are proposing to continue using 

an ECI blend for Employee Benefits in 

the proposed 2016-based ESRDB market 

basket where the components match 

those of the proposed Wage and Salaries 

ECI blend. The proposed occupation 

weights for the blended Benefits price 

proxy are the same as those proposed 

for the wages and salaries price proxy 

blend as shown in Table 5. BLS does not 

publish ECI for Benefits price proxies 

for each Wage and Salary ECI; however, 

where these series are not published, 

they can be derived by using the ECI for 

Total Compensation and the relative 

importance of wages and salaries with 

total compensation as published by BLS 

for each detailed ECI occupational 

index. 

Health Related 

We are proposing to continue using 

the ECI for Benefits for All Civilian 

Workers in Hospitals to measure price 

growth of this subcategory. This is 

calculated using the ECI for Total 

Compensation for All Civilian Workers 

in Hospitals (BLS series code 

#CIU1016220000000I) and the relative 

importance of Wages and Salaries 

within Total Compensation as 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34325 

published by BLS. We believe this 

constructed ECI series is technically 

appropriate for the reason stated above 

in the Wages and Salaries price proxy 

section. 

Management 

We are proposing to continue using 

the ECI for Benefits for Private Industry 

Workers in Management, Business, and 

Financial to measure price growth of 

this subcategory. This ECI is calculated 

using the ECI for Total Compensation 

for Private Industry Workers in 

Management, Business, and Financial 

(BLS series code #CIU2010000110000I) 

and the relative importance of wages 

and salaries within total compensation. 

We believe this constructed ECI series is 

technically appropriate for the reason 

stated above in the Wages and Salaries 

price proxy section. 

Administrative 

We are proposing to continue using 

the ECI for Benefits for Private Industry 

Workers in Office and Administrative 

Support to measure price growth of this 

subcategory. This ECI is calculated 

using the ECI for Total Compensation 

for Private Industry Workers in Office 

and Administrative Support (BLS series 

code #CIU2010000220000I) and the 

relative importance of Wages and 

Salaries within Total Compensation. We 

believe this constructed ECI series is 

technically appropriate for the reason 

stated above in the wages and salaries 

price proxy section. 

Services 

We are proposing to continue using 

the ECI for Total Benefits for Private 

Industry Workers in Service 

Occupations (BLS series code 

#CIU2030000300000I) to measure price 

growth of this subcategory. We believe 

this ECI series is technically appropriate 

for the reason stated above in the Wages 

and Salaries price proxy section 

We feel the proposed benefits ECI 

blend continues to be the most 

appropriate price proxy to measure the 

growth of benefits prices faced by ESRD 

facilities. Table 7 lists the four ECI 

series and the corresponding weights 

used to construct the proposed benefits 

ECI blend. 

TABLE 7—PROPOSED ECI BLEND FOR BENEFITS IN THE PROPOSED 2016-BASED AND 2012-BASED ESRDB MARKET

BASKETS

Cost category ECI series 

Proposed 

2016 weight 

(percent) 

2012 Weight 

(percent) 

Health Related ................................. ECI for Benefits for All Civilian Workers in Hospitals ............................... 79.9 79.0 

Management .................................... ECI for Benefits for Private Industry Workers in Management, Business, 

and Financial.

6.7 8.0 

Administrative .................................. ECI for Benefits for Private Industry Workers in Office and Administrative Support.7.7 7.0 

Services ........................................... ECI for Benefits for Private Industry Workers in Service Occupations .... 5.7 6.0 

Electricity 

We propose to continue using the PPI 

Commodity for Commercial Electric 

Power (BLS series code #WPU0542) to 

measure the price growth of this cost 

category. 

Natural Gas 

We propose to continue using the PPI 

Commodity for Commercial Natural Gas 

(BLS series code #WPU0552) to measure 

the price growth of this cost category. 

Water and Sewerage 

We propose to continue using the CPI 

U.S. city average for Water and 

Sewerage Maintenance (BLS series code 

#CUUR0000SEHG01) to measure the 

price growth of this cost category. 

Pharmaceuticals 

We propose to continue using the PPI 

Commodity for Biological Products, 

Excluding Diagnostic, for Human Use 

(which we will abbreviate as PPI– 

BPHU) (BLS series code #WPU063719) 

as the price proxy for the ESA drugs in 

the market basket. We propose to 

continue using the PPI Commodity for 

Vitamin, Nutrient, and Hematinic 

Preparations (which we will abbreviate 

as PPI–VNHP) (BLS series code 

#WPU063807) for all other drugs 

included in the bundle other than ESAs. 

The PPI–BPHU measures the price 

change of prescription biologics, and 

ESAs would be captured within this 

index, if they are included in the PPI 

sample. Since the PPI relies on 

confidentiality with respect to the 

companies and drugs/biologicals 

included in the sample, we do not know 

if these drugs are indeed reflected in 

this price index. However, we believe 

the PPI–BPHU is an appropriate proxy 

to use because although ESAs may be a 

small part of the fuller category of 

biological products, we can examine 

whether the price increases for the ESA 

drugs are similar to the drugs included 

in the PPI–BPHU. We did this by 

comparing the historical price changes 

in the PPI–BPHU and the ASP for ESAs 

and found the cumulative growth to be 

consistent over the past 4 years. We will 

continue to monitor the trends in the 

prices for ESA drugs as measured by 

other price data sources to ensure that 

the PPI–BPHU is still an appropriate 

price proxy. 

Additionally, since the non-ESA 

drugs used in the treatment of ESRD are 

mainly vitamins and nutrients, we 

believe that the PPI–VNHP continues to 

be the best available proxy for these 

types of drugs. While this index does 

include over-the-counter drugs as well 

as prescription drugs, a comparison of 

trends in the prices for non-ESA drugs 

shows similar growth to the proposed 

PPI–VNHP. 

Supplies 

We propose to continue using the PPI 

Commodity for Surgical and Medical 

Instruments (BLS series code 

#WPU1562) to measure the price growth 

of this cost category. 

Lab Services 

We propose to continue using the PPI 

Industry for Medical Laboratories (BLS 

series code #PCU621511621511) to 

measure the price growth of this cost 

category. 

Telephone Service 

We propose to continue using the CPI 

U.S. city average for Telephone Services 

(BLS series code #CUUR0000SEED) to 

measure the price growth of this cost 

category. 

Housekeeping and Operations 

We propose to continue using the PPI 

Commodity for Cleaning and Building 

Maintenance Services (BLS series code 

#WPU49) to measure the price growth of 

this cost category. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34326 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

Professional Fees 

We propose to continue using the ECI 

for Total Compensation for Private 

Industry Workers in Professional and 

Related (BLS series code # 

CIU2010000120000I) to measure the 

price growth of this cost category. 

All Other Goods and Services 

We propose to continue using the PPI 

Commodity for Final demand—Finished 

Goods Less Foods and Energy (BLS 

series code #WPUFD4131) to measure 

the price growth of this cost category. 

Capital-Related Building and Equipment 

We propose to continue using the PPI 

Industry for Lessors of Nonresidential 

Buildings (BLS series code 

#PCU531120531120) to measure the 

price growth of this cost category. 

Capital-Related Machinery 

We propose to continue using the PPI 

Commodity for Electrical Machinery 

and Equipment (BLS series code 

#WPU117) to measure the price growth 

of this cost category. 

Table 8 shows all the proposed price 

proxies and cost weights for the 

proposed 2016-based ESRDB Market 

Basket. 

TABLE 8—PROPOSED PRICE PROXIES AND ASSOCIATED COST WEIGHTS FOR THE 2016-BASED ESRDB MARKET BASKET

Cost category Price proxy 

Proposed 

2016 cost 

weight 

Total ESRDB market basket ..................... ....................................................................................................................................... 100.0 

Compensation ........................................... ....................................................................................................................................... 43.6 

Wages and Salaries .......................... ....................................................................................................................................... 34.5 

Health-related ............................. ECI for Wages and Salaries for All Civilian Workers in Hospitals .............................. 27.6 

Management ............................... ECI for Wages and Salaries for Private Industry Workers in Management, Business, and Financial.2.3 

Administrative ............................. ECI for Wages and Salaries for Private Industry Workers in Office and Administrative Support.2.7 

Services ...................................... ECI for Wages and Salaries for Private Industry Workers in Service Occupations ... 2.0 

Employee Benefits ............................. ....................................................................................................................................... 9.1 

Health-related ............................. ECI for Total Benefits for All Civilian workers in Hospitals ......................................... 7.3 

Management ............................... ECI for Total Benefits for Private Industry workers in Management, Business, and 

Financial.

0.6 

Administrative ............................. ECI for Total Benefits for Private Industry workers in Office and Administrative Support.0.7 

Services ...................................... ECI for Total Benefits for Private Industry workers in Service Occupations ............... 0.5 

Utilities ...................................................... ....................................................................................................................................... 2.0 

Electricity ........................................... PPI Commodity for Commercial Electric Power .......................................................... 1.1 

Natural Gas ....................................... PPI Commodity for Commercial Natural Gas .............................................................. 0.1 

Water and Sewerage ......................... CPI–U for Water and Sewerage Maintenance ............................................................ 0.8 

Medical Materials and Supplies ................ ....................................................................................................................................... 24.9 

Pharmaceuticals ................................ ....................................................................................................................................... 12.4 

ESAs ........................................... PPI Commodity for Biological Products, Excluding Diagnostics, for Human Use ...... 10.0 

Other Drugs ................................ PPI Commodity for Vitamin, Nutrient, and Hematinic Preparations ............................ 2.4 

Supplies ............................................. PPI Commodity for Surgical and Medical Instruments ................................................ 10.4 

Lab Services ...................................... PPI Industry for Medical Laboratories ......................................................................... 2.2 

All Other Goods and Services .................. ....................................................................................................................................... 16.4 

Telephone Service ............................. CPI–U for Telephone Services .................................................................................... 0.5 

Housekeeping and Operations .......... PPI Commodity for Cleaning and Building Maintenance Services ............................. 3.9 

Professional Fees .............................. ECI for Total Compensation for Private Industry Workers in Professional and Related.0.7 

All Other Goods and Services ........... PPI for Final demand—Finished Goods less Foods and Energy ............................... 11.3 

Capital Costs ............................................ ....................................................................................................................................... 13.0 

Capital Related Building and Equipment.PPI Industry for Lessors of Nonresidential Buildings .................................................. 9.2 

Capital Related Machinery ................ PPI Commodity for Electrical Machinery and Equipment ............................................ 3.8 

Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying one decimal and therefore, 

the detail may not add to the total due to rounding. 

ii. Proposed CY 2019 ESRD Market 

Basket Update, Adjusted for Multifactor 

Productivity 

Under section 1881(b)(14)(F) of the 

Act, beginning in CY 2012, ESRD PPS 

payment amounts shall be annually 

increased by an ESRD market basket 

percentage increase factor reduced by 

the productivity adjustment. We 

propose to use the 2016-based ESRDB 

market basket as described in this 

proposed rule to compute the CY 2019 

ESRDB market basket increase factor 

and labor-related share. Consistent with 

historical practice, we estimate the 

ESRDB market basket update based on 

IHS Global Inc.’s (IGI) forecast using the 

most recently available data. IGI is a 

nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

the market baskets. 

a. Market Basket Update 

Using this methodology and the IGI 

forecast for the first quarter of 2018 of 

the proposed 2016-based ESRDB market 

basket (with historical data through the 

fourth quarter of 2017), and consistent 

with our historical practice of 

estimating market basket increases 

based on the best available data, the 

proposed CY 2019 ESRDB market basket 

increase factor is 2.2 percent. 

b. Multifactor Productivity (MFP) 

Under section 1881(b)(14)(F)(i) of the 

Act, as amended by section 3401(h) of 

the Affordable Care Act, for CY 2012 

and each subsequent year, the ESRD 

market basket percentage increase factor 

shall be reduced by the productivity 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34327 

adjustment described in section 

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

multifactor productivity (MFP) is 

derived by subtracting the contribution 

of labor and capital input growth from 

output growth. The detailed 

methodology for deriving the MFP 

projection was finalized in the CY 2012 

ESRD PPS final rule (76 FR 70232 

through 70235). The most up-to-date 

MFP projection methodology is 

available on the CMS website at http:// 

www.cms.gov/Research-Statistics-Dataand-Systems/Statistics-Trends-andReports/MedicareProgramRatesStats/ 

MarketBasketResearch.html. We are not 

proposing any changes to the 

methodology for the projection of the 

MFP adjustment. 

Using IGI’s first quarter 2018 forecast, 

the proposed MFP adjustment for CY 

2019 (the 10-year moving average of 

MFP for the period ending CY 2019) is 

projected to be 0.7 percent. 

c. Market Basket Update Adjusted for 

Multifactor Productivity (MFP) 

As a result of these provisions, the 

proposed CY 2019 ESRD market basket 

increase is 1.5 percent. This market 

basket increase is calculated by starting 

with the proposed 2016-based ESRDB 

market basket percentage increase factor 

of 2.2 percent for CY 2019, and reducing 

it by the MFP adjustment (the 10-year 

moving average of MFP for the period 

ending CY 2019) of 0.7 percentage 

point. We are also proposing that if 

more recent data are subsequently 

available (for example, a more recent 

estimate of the market basket increase or 

MFP adjustment), we would use such 

data to determine the market basket 

increase and MFP adjustment in the CY 

2019 ESRD PPS final rule. 

The CY 2019 ESRDB increase factor 

would be the same if we used the 2012- 

based ESRDB market basket. That is, the 

CY 2019 ESRDB market basket increase 

factor is 2.2 percent using the 2012- 

based ESRDB market basket. Table 9 

shows the increase factors under the 

proposed 2016-based ESRDB and 2012- 

based ESRDB market basket. 

TABLE 9—HISTORICAL AND PROJECTED INCREASE FACTORS UNDER THE PROPOSED 2016-BASED AND 2012-BASED

ESRDB MARKET BASKET

Calendar year 

(CY) 

Proposed 

2016-Based 

ESRDB 

market basket 

2012-Based 

ESRDB 

market basket 

Historical Data: 

CY 2015 ............................................................................................................................................................ 2.0 2.2 

CY 2016 ............................................................................................................................................................ 1.9 2.0 

CY 2017 ............................................................................................................................................................ 1.4 1.3 

Forecast: 

CY 2018 ............................................................................................................................................................ 1.9 1.9 

CY 2019 ............................................................................................................................................................ 2.2 2.2 

Source: IHS Global Inc. 1st quarter 2018 forecast with historical data through 4th quarter 2017. 

iii. Proposed Labor-Related Share for 

ESRD PPS 

We define the labor-related share 

(LRS) as those expenses that are laborintensive and vary with, or are 

influenced by, the local labor market. 

The labor-related share of a market 

basket is determined by identifying the 

national average proportion of operating 

costs that are related to, influenced by, 

or vary with the local labor market. The 

labor-related share is typically the sum 

of Wages and Salaries, Benefits, 

Professional Fees, Labor-related 

Services, and a portion of Capital from 

a given market basket. 

We propose to use the proposed 2016- 

based ESRDB market basket cost 

weights to determine the proposed 

labor-related share for ESRD facilities. 

Therefore, effective for CY 2019, we are 

proposing a labor-related share of 52.3 

percent, slightly higher than the current 

50.673 percent that was based on the 

2012-based ESRD market basket, as 

shown in Table 10 below. We propose 

to move the labor-related share to a one 

decimal level of precision rather than 

the three decimal level of precision used 

previously. CMS is migrating all 

payment system labor-related shares to 

a one decimal level of precision. These 

figures represent the sum of Wages and 

Salaries, Benefits, Housekeeping and 

Operations, 87 percent of the weight for 

Professional Fees (details discussed 

below), and 46 percent of the weight for 

Capital-related Building and Equipment 

expenses (details discussed below). We 

used the same methodology for the 

2012-based ESRD market basket. 

TABLE 10—PROPOSED CY 2019 LABOR-RELATED SHARE AND CY 2018 LABOR-RELATED SHARE

Cost category 

Proposed CY 

2019 ESRD 

labor-related 

share 

CY 2018 

ESRD 

labor-related 

share 

Wages and salaries ................................................................................................................................................. 34.5 33.650 

Employee Benefits ................................................................................................................................................... 9.1 8.847 

Housekeeping and Operations ................................................................................................................................ 3.9 3.785 

Professional Fees (Labor-Related) .......................................................................................................................... 0.6 0.537 

Capital Labor-Related .............................................................................................................................................. 4.2 3.854 

Total Labor-Related Share ............................................................................................................................... 52.3 50.673 

The labor-related share for 

Professional Fees reflects the proportion 

of ESRD facilities’ professional fees 

expenses that we believe vary with local 

labor market (87 percent). We 

conducted a survey of ESRD facilities in 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34328 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

2008 to better understand the 

proportion of contracted professional 

services that ESRD facilities typically 

purchase outside of their local labor 

market. These purchased professional 

services include functions such as 

accounting and auditing, management 

consulting, engineering, and legal 

services. Based on the survey results, we 

determined that, on average, 87 percent 

of professional services are purchased 

from local firms and 13 percent are 

purchased from businesses located 

outside of the ESRD’s local labor 

market. Thus, we are proposing to 

include 87 percent of the cost weight for 

Professional Fees in the labor-related 

share (87 percent is the same percentage 

as used in prior years). 

The labor-related share for capitalrelated expenses reflects the proportion 

of ESRD facilities’ capital-related 

expenses that we believe varies with 

local labor market wages (46 percent of 

ESRD facilities’ Capital-related Building 

and Equipment expenses). Capitalrelated expenses are affected in some 

proportion by variations in local labor 

market costs (such as construction 

worker wages) that are reflected in the 

price of the capital asset. However, 

many other inputs that determine 

capital costs are not related to local 

labor market costs, such as interest 

rates. The 46-percent figure is based on 

regressions run for the inpatient 

hospital capital PPS in 1991 (56 FR 

43375). We use a similar methodology 

to calculate capital-related expenses for 

the labor-related shares for 

rehabilitation facilities (70 FR 30233), 

psychiatric facilities, long-term care 

facilities, and skilled nursing facilities 

(66 FR 39585). 

b. The Proposed CY 2019 ESRD PPS 

Wage Indices 

i. Annual Update of the Wage Index 

Section 1881(b)(14)(D)(iv)(II) of the 

Act provides that the ESRD PPS may 

include a geographic wage index 

payment adjustment, such as the index 

referred to in section 1881(b)(12)(D) of 

the Act, as the Secretary determines to 

be appropriate. In the CY 2011 ESRD 

PPS final rule (75 FR 49200), we 

finalized an adjustment for wages at 

§ 413.231. Specifically, CMS adjusts the 

labor-related portion of the base rate to 

account for geographic differences in 

the area wage levels using an 

appropriate wage index which reflects 

the relative level of hospital wages and 

wage-related costs in the geographic 

area in which the ESRD facility is 

located. We use the Office of 

Management and Budget’s (OMB’s) 

CBSA-based geographic area 

designations to define urban and rural 

areas and their corresponding wage 

index values (75 FR 49117). OMB 

publishes bulletins regarding CBSA 

changes, including changes to CBSA 

numbers and titles. The bulletins are 

available online at https:// 

www.whitehouse.gov/omb/bulletins/. 

For CY 2019, we would update the 

wage indices to account for updated 

wage levels in areas in which ESRD 

facilities are located using our existing 

methodology. We use the most recent 

pre-floor, pre-reclassified hospital wage 

data collected annually under the 

inpatient PPS. The ESRD PPS wage 

index values are calculated without 

regard to geographic reclassifications 

authorized under sections 1886(d)(8) 

and (d)(10) of the Act and utilize prefloor hospital data that are unadjusted 

for occupational mix. The proposed CY 

2019 wage index values for urban areas 

are listed in Addendum A (Wage 

Indices for Urban Areas) and the 

proposed CY 2019 wage index values 

for rural areas are listed in Addendum 

B (Wage Indices for Rural Areas). 

Addenda A and B are located on the 

CMS Web site at https://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/ESRDpayment/End-StageRenal-Disease-ESRD-PaymentRegulations-and-Notices.html. 

We have also adopted methodologies 

for calculating wage index values for 

ESRD facilities that are located in urban 

and rural areas where there is no 

hospital data. For a full discussion, see 

CY 2011 and CY 2012 ESRD PPS final 

rules at 75 FR 49116 through 49117 and 

76 FR 70239 through 70241, 

respectively. For urban areas with no 

hospital data, we compute the average 

wage index value of all urban areas 

within the state and use that value as 

the wage index. For rural areas with no 

hospital data, we compute the wage 

index using the average wage index 

values from all contiguous CBSAs to 

represent a reasonable proxy for that 

rural area. We apply the statewide urban 

average based on the average of all 

urban areas within the state to 

Hinesville-Fort Stewart, Georgia (78 FR 

72173), and we apply the wage index for 

Guam to American Samoa and the 

Northern Mariana Islands (78 FR 

72172). A wage index floor value is 

applied under the ESRD PPS as a 

substitute wage index for areas with 

very low wage index values. Currently, 

all areas with wage index values that 

fall below the floor are located in Puerto 

Rico. However, the wage index floor 

value is applicable for any area that may 

fall below the floor. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49116 through 49117), we 

finalized a decision to reduce the wage 

index floor by 0.05 for each of the 

remaining years of the ESRD PPS 

transition, that is, until CY 2014. We 

applied a 0.05 reduction to the wage 

index floor for CYs 2012 and 2013, 

resulting in a wage index floor of 0.5500 

and 0.5000, respectively (CY 2012 ESRD 

PPS final rule, 76 FR 70241). We 

continued to apply and reduce the wage 

index floor by 0.05 in CY 2013 (77 FR 

67459 through 67461). Although we 

only intended to provide a wage index 

floor during the 4-year transition in the 

CY 2014 ESRD PPS final rule (78 FR 

72173), we decided to continue to apply 

the wage index floor and reduce it by 

0.05 per year for CY 2014 and for CY 

2015. 

In the CY 2016 ESRD PPS final rule 

(80 FR 69006 through 69008), however, 

we decided to maintain a wage index 

floor of 0.4000, rather than further 

reduce the floor by 0.05. We needed 

more time to study the wage indices that 

are reported for Puerto Rico to assess the 

appropriateness of discontinuing the 

wage index floor (80 FR 69006). 

In the CY 2017 proposed rule (81 FR 

42817), we presented the findings from 

analyses of ESRD facility cost report and 

claims data submitted by facilities 

located in Puerto Rico and mainland 

facilities. We solicited public comments 

on the wage index for CBSAs in Puerto 

Rico as part of our continuing effort to 

determine an appropriate policy. We 

did not propose to change the wage 

index floor for CBSAs in Puerto Rico, 

but we requested public comments in 

which stakeholders could provide 

useful input for consideration in future 

decision-making. Specifically, we 

solicited comment on the suggestions 

that were submitted in the CY 2016 

ESRD PPS final rule (80 FR 69007). 

After considering the public comments 

we received regarding the wage index 

floor, we finalized a wage index floor of 

0.4000 in the CY 2017 ESRD PPS final 

rule (81 FR 77858). 

In the CY 2018 final rule (82 FR 

50747), we finalized a policy to 

permanently maintain the wage index 

floor of 0.4000, because we believed it 

was appropriate and provided 

additional payment support to the 

lowest wage areas. It also obviated the 

need for an additional budget-neutrality 

adjustment that would reduce the ESRD 

PPS base rate, beyond the adjustment 

needed to reflect updated hospital wage 

data, in order to maintain budget 

neutrality for wage index updates. 

ii. Wage Index Floor for CY 2019 and 

Subsequent Years 

For CY 2019 and subsequent years, 

we are proposing to increase the wage 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34329 

index floor to 0.5. This wage floor 

increase is responsive to stakeholder 

comments, safeguards access to care in 

areas at the lowest end of the current 

wage index distribution, and is 

supported by data, as discussed below, 

which supports a higher wage index 

floor. Stakeholders, particularly those 

located in Puerto Rico, have expressed 

the adverse impact the low wage index 

floor value has on a facility, such as 

closure and the resulting impact on 

access to care. Also, natural disasters 

(for example, hurricanes, floods) 

common to this geographic area can 

cause significant infrastructure issues, 

create limited resources, and create 

conditions that may accelerate kidney 

failure in patients predisposed to 

chronic kidney disease, all of which 

have a significant impact on renal 

dialysis services. These negative effects 

of natural disasters on the local 

economy impact wages and salaries. For 

example, there is the potential of the 

outmigration of qualified staff that 

would cause a facility the need to 

change their hiring practices or increase 

the wages that they would otherwise 

pay had their not been a natural 

disaster. 

In response to the CY 2018 ESRD 

proposed rule, commenters described 

the economic and healthcare crisis in 

Puerto Rico and recommended that 

CMS use the U.S. Virgin Islands wage 

index for payment rate calculations in 

Puerto Rico as a proxy for CY 2018. 

Commenters indicated that the 

primary issue is that Puerto Rico 

hospitals report comparatively lower 

wages that are not adjusted for 

occupational mix and, as indicated in 

the CY 2017 ESRD PPS proposed rule 

(81 FR 42817), in Puerto Rico, only 

registered nurses (RNs) can provide 

dialysis therapy in the outpatient 

setting. This staffing variable artificially 

lowers the reportable index values even 

though the actual costs of dialysis 

service wages in Puerto Rico are much 

higher than the data CMS is relying 

upon. In addition, several commenters 

stated that non-labor costs, including 

utilities and shipping costs and the CY 

2015 change in the labor-share based on 

the rebased and revised ESRDB market 

basket compound the issue even further. 

One organization stated that it does 

not believe maintaining the current 

wage index for Puerto Rico for CY 2018 

is enough to offset the poor economic 

conditions, high operational costs and 

epidemiologic burden of ESRD on the 

island. 

Since we did not propose to change 

the wage index floor or otherwise 

change the wage indexes for Puerto 

Rico, we maintained the wage index 

floor of 0.4000 for CY 2018. We noted 

that the current wage index floor and 

labor-related share have been in effect 

since CY 2015 and neither the floor nor 

the labor share has been reduced since 

then. More importantly, the wage index 

is solely intended to reflect differences 

in labor costs and not to account for 

non-labor cost differences, such as 

utilities or shipping costs (82 FR 50747). 

With regard to staffing in Puerto Rico 

facilities, we noted that ESRD facilities 

there utilize RNs similarly to ESRD 

facilities on the mainland, that is, 

facilities utilize dialysis technicians and 

aides to provide dialysis services with 

oversight by an RN and that hourly 

wages for RNs and dialysis support staff 

were approximately half of those 

salaries in mainland ESRD facilities. For 

those reasons, we do not agree that the 

hospital-reported data is unreliable, and 

we believe using that data is more 

appropriate than applying the wage 

index value for the Virgin Islands where 

salaries are considerably higher. 

Even though we did not propose a 

change in the wage index floor for CY 

2018, we continued to analyze the cost 

of furnishing dialysis care in Puerto 

Rico, staffing in Puerto Rico ESRD 

facilities and hospital wage data. While 

we found the analyses to be 

inconclusive for the CY2018 ESRD PPS 

final rule (82 FR 50746), in light of the 

recent natural disasters that profoundly 

impacted delivery of ESRD care in 

Puerto Rico, we revisited the analyses 

and concluded that we should propose 

a new wage index floor. We conducted 

various analyses to test the 

reasonableness of the current wage 

index floor value of 0.4000. The details 

of these analyses and our proposal are 

provided below. 

a. Analysis of Puerto Rico Cost Reports 

We performed an analysis using cost 

reports and wage information specific to 

Puerto Rico from the BLS (https:// 

www.bls.gov/oes/2015/may/oes_

pr.htm). The analysis used data from 

cost reports for freestanding facilities 

and hospital-based facilities in Puerto 

Rico for CYs 2013 through 2015 are as 

follows: 

• The analysis utilized data from cost 

reports for freestanding facilities and for 

hospital-based facilities. Note that the 

available variables differ between these 

two sources. For freestanding facilities, 

data were obtained regarding treatment 

counts, costs, salaries, benefits, and 

FTEs by labor category. For hospitalbased facilities, a more limited set of 

variables are available for treatment 

counts and FTEs. 

• We annualized cost report data for 

each facility in order to create one cost 

report record per facility per calendar. If 

cost report forms were submitted at a 

non-calendar-year cycle, multiple cost 

report records were proportionated and 

combined in order to create an 

annualized cost report record. 

• We calculated weighted means 

across all facilities for each variable. 

The means were weighted by treatment 

counts, where facilities with more 

treatment counts contributed more to 

the value of the overall mean. 

Using this data, we calculated 

alternative wage indices for Puerto Rico 

that combined labor quantities (FTEs) 

from cost reports with BLS wage 

information to create two regular 

Laspeyres price indexes. The Laspeyres 

index can be thought of as a price index 

in which there are two prices for goods 

(prices for labor FTEs in Puerto Rico 

and the mainland U.S.), where the 

distribution of goods (labor share of 

FTEs) is held constant (across Puerto 

Rico and the U.S.). The first index used 

quantity weights from the overall U.S. 

use of labor inputs. The second index 

used quantity weights from the PR use 

of labor inputs. 

The alternative wage indices derived 

from the analysis indicate that Puerto 

Rico’s wage index likely lies between 

0.5100 and 0.5500. Both of these values 

are above the current wage index floor 

and suggest that the current 0.4000 wage 

index floor may be too low. 

b. Statistical Analysis of the Distribution 

of the Wage Index 

We also performed a statistical outlier 

analysis to identify the upper and lower 

boundaries of the distribution of the 

current wage index values and remove 

outlier values at the edges of the 

distribution. 

In the general sense, an outlier is an 

observation that lies an abnormal 

distance from other values in a 

population. In this case, the population 

of values is the various wage indices 

within the CY 2019 wage index. The 

lower and upper quartiles (the 25th and 

75th percentiles) are also used. The 

lower quartile is Q1 and the upper 

quartile is Q3. The difference (Q3¥Q1) 

is called the interquartile range (IQR). 

The IQR is used in calculating the inner 

and outer fences of a data set. The inner 

fences are needed for identifying mild 

outlier values in the edges of the 

distribution of a data set. Any values in 

the data set that are outside of the inner 

fences are identified as an outlier. The 

standard multiplying value for 

identifying the inner fences is 1.5. 

First, we identified the Q1 and Q3 

quartiles of the CY 2018 wage index, 

which are as follows: Q1 = 0.8303 and 

Q3 = 0.9881. Next, we identified the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34330 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

IQR: IQR = 0.9881¥0.8303 = 0.578. 

Finally, we identified the inner fence 

values as shown below. 

Lower inner fence: Q1¥1.5 * IQR = 

0.8303¥(1.5 × 0.1578) = 0.5936 

Upper inner fence: Q3 + 1.5 * IQR = 

.881 + (1.5 × 0.1578) = 1.2248 

This statistical outlier analysis 

demonstrates that any wage index 

values less than 0.5936 are considered 

outlier values, and 0.5936 as the lower 

boundary also may suggest that the 

current wage index floor could be 

appropriately reset at a higher level. 

Based on these analyses, we are 

proposing a wage index floor of 0.5000. 

We believe this increase from the 

current 0.4000 wage index floor value 

minimizes the impact to the base rate 

while providing increased payment to 

areas that need it. We considered the 

various wage index floor values based 

on our analyses. While the statistical 

analysis supports our decision to 

propose a higher wage index floor, the 

cost report analysis is more definitive as 

it is based on reported wages using an 

alternative data source. As a result, we 

considered wage index floor values 

between 0.4000 and 0.5500 and are 

proposing 0.5000 in an effort to strike a 

balance between providing additional 

payments to affected areas while 

minimizing the impact on the base rate. 

We believe the proposed 25 percent 

increase from the current 0.4000 value 

would help to address stakeholder 

requests for a higher wage index floor, 

minimize patient access issues, and 

would have a lower impact to the base 

rate than if we proposed a higher wage 

index floor value. 

The wage index floor directly affects 

the base rate and currently, only rural 

Puerto Rico and four urban CBSAs in 

Puerto Rico receive the wage index floor 

of 0.4000. The next lowest wage index 

is in the Wheeling, West Virginia CBSA 

with a value of 0.6599. Under this 

proposal, all CBSAs in Puerto Rico 

would receive the wage index floor of 

0.5000. Though the proposed wage 

index value currently affects CBSAs in 

Puerto Rico, we note that, consistent 

with our established policy, any CBSA 

that falls below the floor would be 

eligible to receive the floor. We solicit 

comment on the proposal to increase the 

wage index floor from 0.4000 to 0.5000 

for CY 2019 and beyond. 

iii. Application of the Wage Index 

Under the ESRD PPS 

A facility’s wage index is applied to 

the labor-related share of the ESRD PPS 

base rate. In section II.B.3.b of this 

proposed rule, we are proposing the 

labor-related share of 52.3 percent, 

which is based on the proposed 2016- 

based ESRDB market basket. Thus, for 

CY 2019, the labor-related share to 

which a facility’s wage index would be 

applied is 52.3 percent. 

iv. New Urban Core-Based Statistical 

Area (CBSA) 

On August 15, 2017, OMB issued 

OMB Bulletin No. 17–01, which 

provided updates to and superseded 

OMB Bulletin No. 15–01 that was issued 

on July 15, 2015. The attachments to 

OMB Bulletin No. 17–01 provide 

detailed information on the update to 

statistical areas since July 15, 2015, and 

are based on the application of the 2010 

Standards for Delineating Metropolitan 

and Micropolitan Statistical Areas to the 

U.S. Census Bureau population 

estimates for July 1, 2014 and July 1, 

2015. In OMB Bulletin No. 17–01, OMB 

announced that one Micropolitan 

Statistical Area now qualifies as a 

Metropolitan Statistical Area. The new 

urban CBSA is as follows: 

• Twin Falls, Idaho (CBSA 46300). 

This CBSA is comprised of the principal 

city of Twin Falls, Idaho in Jerome 

County, Idaho and Twin Falls County, 

Idaho. 

The OMB bulletin is available on the 

OMB Web site at https:// 

www.whitehouse.gov/sites/ 

whitehouse.gov/files/omb/bulletins/ 

2017/b-17-01.pdf. We did not have 

sufficient time to include this change in 

the computation of the proposed CY 

2019 wage index, rate setting, and 

Addenda associated with this proposed 

rule. This new CBSA may affect the 

budget neutrality factors and wage 

indexes, depending on the impact of the 

overall payments of the hospital located 

in this new CBSA. In this proposed rule, 

we are providing an estimate of this new 

area’s wage index based on the average 

hourly wage, unadjusted for 

occupational mix, for new CBSA 46300 

and the national average hourly wages 

from the wage data for the proposed CY 

2019 wage index. Currently, provider 

130002 is the only hospital located in 

Twin Falls County, Idaho, and there are 

no hospitals located in Jerome County, 

Idaho. Thus, the proposed wage index 

for CBSA 46300 is calculated using the 

average hourly wage data for one 

provider (provider 130002). 

Taking the estimated unadjusted 

average hourly wage of $35.833564813 

of the new CBSA 46300 and dividing by 

the national average hourly wage of 

$42.990625267 results in the proposed 

estimated wage index of 0.8335 for 

CBSA 46300. 

In the final rule, we would 

incorporate this change into the final CY 

2019 ESRD PPS wage index, rate setting 

and Addenda associated with the final 

rule. Thus, for CY 2019, we would use 

the OMB delineations that were adopted 

beginning with CY 2015 to calculate the 

area wage indexes, with updates as 

reflected in OMB Bulletin Nos. 13–01, 

15–01, and 17–01. 

c. Proposed CY 2019 Update to the 

Outlier Policy 

Section 1881(b)(14)(D)(ii) of the Act 

requires that the ESRD PPS include a 

payment adjustment for high cost 

outliers due to unusual variations in the 

type or amount of medically necessary 

care, including variability in the amount 

of erythropoiesis stimulating agents 

(ESAs) necessary for anemia 

management. Some examples of the 

patient conditions that may be reflective 

of higher facility costs when furnishing 

dialysis care would be frailty, obesity, 

and comorbidities, such as cancer. The 

ESRD PPS recognizes high cost patients, 

and we have codified the outlier policy 

and our methodology for calculating 

outlier payments at § 413.237. The 

policy provides that the following ESRD 

outlier items and services are included 

in the ESRD PPS bundle: (1) ESRDrelated drugs and biologicals that were 

or would have been, prior to January 1, 

2011, separately billable under 

Medicare Part B; (2) ESRD-related 

laboratory tests that were or would have 

been, prior to January 1, 2011, 

separately billable under Medicare Part 

B; (3) medical/surgical supplies, 

including syringes, used to administer 

ESRD-related drugs that were or would 

have been, prior to January 1, 2011, 

separately billable under Medicare Part 

B; and (4) renal dialysis services drugs 

that were or would have been, prior to 

January 1, 2011, covered under 

Medicare Part D, including ESRDrelated oral-only drugs effective January 

1, 2025. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49142), we stated that for 

purposes of determining whether an 

ESRD facility would be eligible for an 

outlier payment, it would be necessary 

for the facility to identify the actual 

ESRD outlier services furnished to the 

patient by line item (that is, date of 

service) on the monthly claim. Renal 

dialysis drugs, laboratory tests, and 

medical/surgical supplies that are 

recognized as outlier services were 

originally specified in Attachment 3 of 

Change Request 7064, Transmittal 2033 

issued August 20, 2010, rescinded and 

replaced by Transmittal 2094, dated 

November 17, 2010. Transmittal 2094 

identified additional drugs and 

laboratory tests that may also be eligible 

for ESRD outlier payment. Transmittal 

2094 was rescinded and replaced by 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34331 

Transmittal 2134, dated January 14, 

2011, which was issued to correct the 

subject on the Transmittal page and 

made no other changes. 

Furthermore, we use administrative 

issuances and guidance to continually 

update the renal dialysis service items 

available for outlier payment via our 

quarterly update CMS Change Requests, 

when applicable. We use this separate 

guidance to identify renal dialysis 

service drugs that were or would have 

been covered under Medicare Part D for 

outlier eligibility purposes and in order 

to provide unit prices for calculating 

imputed outlier services. In addition, 

we also identify through our monitoring 

efforts items and services that are either 

incorrectly being identified as eligible 

outlier services or any new items and 

services that may require an update to 

the list of renal dialysis items and 

services that qualify as outlier services, 

which are made through administrative 

issuances. 

Under § 413.237, an ESRD facility is 

eligible for an outlier payment if its 

actual or imputed MAP amount per 

treatment for ESRD outlier services 

exceeds a threshold. The MAP amount 

represents the average incurred amount 

per treatment for services that were or 

would have been considered separately 

billable services prior to January 1, 

2011. The threshold is equal to the 

ESRD facility’s predicted ESRD outlier 

services MAP amount per treatment 

(which is case-mix adjusted and 

described below) plus the fixed-dollar 

loss (FDL) amount. In accordance with 

§ 413.237(c) of our regulations, facilities 

are paid 80 percent of the per treatment 

amount by which the imputed MAP 

amount for outlier services (that is, the 

actual incurred amount) exceeds this 

threshold. ESRD facilities are eligible to 

receive outlier payments for treating 

both adult and pediatric dialysis 

patients. 

In the CY 2011 ESRD PPS final rule 

and at § 413.220(b)(4), using 2007 data, 

we established the outlier percentage, 

which is used to reduce the per 

treatment base rate to account for the 

proportion of the estimated total 

payments under the ESRD PPS that are 

outlier payments, at 1.0 percent of total 

payments (75 FR 49142 through 49143). 

We also established the FDL amounts 

that are added to the predicted outlier 

services MAP amounts. The outlier 

services MAP amounts and FDL 

amounts are different for adult and 

pediatric patients due to differences in 

the utilization of separately billable 

services among adult and pediatric 

patients (75 FR 49140). As we explained 

in the CY 2011 ESRD PPS final rule (75 

FR 49138 through 49139), the predicted 

outlier services MAP amounts for a 

patient are determined by multiplying 

the adjusted average outlier services 

MAP amount by the product of the 

patient-specific case-mix adjusters 

applicable using the outlier services 

payment multipliers developed from the 

regression analysis to compute the 

payment adjustments. 

For CY 2019, we propose that the 

outlier services MAP amounts and FDL 

amounts would be derived from claims 

data from CY 2017. Because we believe 

that any adjustments made to the MAP 

amounts under the ESRD PPS should be 

based upon the most recent data year 

available in order to best predict any 

future outlier payments, we propose the 

outlier thresholds for CY 2019 would be 

based on utilization of renal dialysis 

items and services furnished under the 

ESRD PPS in CY 2017. We recognize 

that the utilization of ESAs and other 

outlier services have continued to 

decline under the ESRD PPS, and that 

we have lowered the MAP amounts and 

FDL amounts every year under the 

ESRD PPS. 

In the CY 2018 ESRD PPS final rule 

(82 FR 50748), we stated that based on 

the CY 2016 claims data, outlier 

payments represented approximately 

0.78 percent of total payments. For this 

proposed rule, as discussed below, CY 

2017 claims data show outlier payments 

represented approximately 0.80 percent 

of total payments. 

i. CY 2019 Update to the Outlier 

Services Medicare Allowable Payment 

(MAP) Amounts and Fixed Dollar Loss 

(FDL) Amounts 

For CY 2019, we propose to update 

the outlier services MAP amounts and 

FDL amounts to reflect the utilization of 

outlier services reported on 2017 claims. 

For this proposed rule, the outlier 

services MAP amounts and FDL 

amounts were updated using 2017 

claims data. The impact of this update 

is shown in Table 11, which compares 

the outlier services MAP amounts and 

FDL amounts used for the outlier policy 

in CY 2017 with the updated proposed 

estimates for this rule. The estimates for 

the proposed CY 2019 outlier policy, 

which are included in Column II of 

Table 11, were inflation adjusted to 

reflect projected 2019 prices for outlier 

services. 

TABLE 11—OUTLIER POLICY: IMPACT OF USING UPDATED DATA TO DEFINE THE OUTLIER POLICY

Column I 

Final outlier policy for CY 2018 

(based on 2016 data, price 

inflated to 2018)* 

Column II 

Proposed outlier policy 

for CY 2019 

(based on 2017 data, price 

inflated to 2019) 

Age <18 Age >=18 Age <18 Age >=18 

Average outlier services MAP amount per treatment ..................................... 37.41 44.27 34.33 41.97 

Adjustments ..................................................................................................... ........................ ........................ ........................ ........................

Standardization for outlier services ................................................................. 1.0177 0.9774 1.0588 0.9786 

MIPPA reduction .............................................................................................. 0.98 0.98 0.98 0.98 

Adjusted average outlier services MAP amount ............................................. $37.31 $42.41 $35.62 $40.25 

Fixed-dollar loss amount that is added to the predicted MAP to determine 

the outlier threshold ..................................................................................... $47.79 $77.54 $47.88 $69.73 

Patient-months qualifying for outlier payment ................................................. 9.0% 7.4% 9.2% 8.0% 

* Note that Column I was obtained from Column II of Table 1 from the CY 2018 ESRD PPS final rule (82 FR 50749). 

As demonstrated in Table 11, the 

estimated FDL amount per treatment 

that determines the CY 2019 outlier 

threshold amount for adults (Column II; 

$69.73) is lower than that used for the 

CY 2018 outlier policy (Column I; 

$77.54). The lower threshold is 

accompanied by a decrease in the 

adjusted average MAP for outlier 

services from $42.41 to $40.25. For 

pediatric patients, there is a slight 

increase in the FDL amount from $47.79 

to $47.88. There is a corresponding 

decrease in the adjusted average MAP 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34332 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

for outlier services among pediatric 

patients, from $37.31 to $35.62. 

We estimate that the percentage of 

patient months qualifying for outlier 

payments in CY 2019 will be 8.0 percent 

for adult patients and 9.2 percent for 

pediatric patients, based on the 2017 

claims data. The pediatric outlier MAP 

and FDL amounts continue to be lower 

for pediatric patients than adults due to 

the continued lower use of outlier 

services (primarily reflecting lower use 

of ESAs and other injectable drugs). 

ii. Outlier Percentage 

In the CY 2011 ESRD PPS final rule 

(75 FR 49081) and under 

§ 413.220(b)(4), we reduced the per 

treatment base rate by 1 percent to 

account for the proportion of the 

estimated total payments under the 

ESRD PPS that are outlier payments as 

described in § 413.237. Based on the 

2017 claims, outlier payments 

represented approximately 0.80 percent 

of total payments, slightly below the 1 

percent target due to declines in the use 

of outlier services. Recalibration of the 

thresholds using 2017 data is expected 

to result in aggregate outlier payments 

close to the 1 percent target in CY 2019. 

We believe the update to the outlier 

MAP and FDL amounts for CY 2019 

would increase payments for ESRD 

beneficiaries requiring higher resource 

utilization and move us closer to 

meeting our 1 percent outlier policy 

because we are using more current data 

for computing the MAP and FDL which 

is more in line with current outlier 

services utilization rates. We note that 

recalibration of the FDL amounts in this 

proposed rule would result in no change 

in payments to ESRD facilities for 

beneficiaries with renal dialysis items 

and services that are not eligible for 

outlier payments, but would increase 

payments to ESRD facilities for 

beneficiaries with renal dialysis items 

and services that are eligible for outlier 

payments, as well as co-insurance 

obligations for beneficiaries with renal 

dialysis services eligible for outlier 

payments. 

iii. Solicitation on the Expansion of the 

Outlier Policy 

Currently, former separately payable 

Part B drugs, laboratory services, and 

supplies are eligible for the outlier 

payment. In the interest of promoting 

innovation, ensuring appropriate 

payment for all drugs and biologicals, 

and as a complement to the TDAPA 

proposals, we are soliciting comment on 

whether we should expand the outlier 

policy to include composite rate drugs 

and supplies. With the proposed 

expansion to the drug designation 

process discussed in section II.B.1.f of 

this proposed rule, such expansion of 

the outlier policy could promote 

appropriate payment for composite rate 

drugs once the TDAPA period has 

ended. Additionally, with regard to 

composite rate supplies, an expansion 

of the outlier policy could promote use 

of new innovative devices or items that 

would otherwise be considered in the 

bundled payment. If commenters 

believe such an approach is appropriate, 

we are requesting they provide input on 

how we would effectuate such a shift in 

policy. For example, the reporting of 

these services may be challenging since 

they have never been reported on ESRD 

claims previously. We are particularly 

interested in feedback about how such 

items might work under the existing 

outlier framework or whether specific 

changes to the policy to accommodate 

such items are needed. We will consider 

all comments and address by making 

proposals, if appropriate, in future 

rulemaking. 

d. Proposed Impacts to the CY 2019 

ESRD PPS Base Rate 

i. ESRD PPS Base Rate 

In the CY 2011 ESRD PPS final rule 

(75 FR 49071 through 49083), we 

established the methodology for 

calculating the ESRD PPS per-treatment 

base rate, that is, ESRD PPS base rate, 

and the determination of the pertreatment payment amount, which are 

codified at § 413.220 and § 413.230. The 

CY 2011 ESRD PPS final rule also 

provides a detailed discussion of the 

methodology used to calculate the ESRD 

PPS base rate and the computation of 

factors used to adjust the ESRD PPS 

base rate for projected outlier payments 

and budget neutrality in accordance 

with sections 1881(b)(14)(D)(ii) and 

1881(b)(14)(A)(ii) of the Act, 

respectively. Specifically, the ESRD PPS 

base rate was developed from CY 2007 

claims (that is, the lowest per patient 

utilization year as required by section 

1881(b)(14)(A)(ii) of the Act), updated to 

CY 2011, and represented the average 

per treatment MAP for composite rate 

and separately billable services. In 

accordance with section 1881(b)(14)(D) 

of the Act and our regulation at 

§ 413.230, per-treatment payment 

amount is the sum of the ESRD PPS base 

rate, adjusted for the patient specific 

case-mix adjustments, applicable 

facility adjustments, geographic 

differences in area wage levels using an 

area wage index, and any applicable 

outlier payment and training adjustment 

add-on. 

ii. Annual Payment Rate Update for CY 

2019 

We are proposing an ESRD PPS base 

rate for CY 2019 of $235.82. This update 

reflects several factors, described in 

more detail as follows: 

• Market Basket Increase: Section 

1881(b)(14)(F)(i)(I) of the Act provides 

that, beginning in 2012, the ESRD PPS 

payment amounts are required to be 

annually increased by the ESRD market 

basket percentage increase factor. The 

latest CY 2019 projection for the 

proposed ESRDB market basket is 2.2 

percent. In CY 2019, this amount must 

be reduced by the productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act, as 

required by section 1881(b)(14)(F)(i)(II) 

of the Act. As discussed above, the 

proposed MFP adjustment for CY 2019 

is 0.7 percent, thus yielding a proposed 

update to the base rate of 1.5 percent for 

CY 2019. Therefore, the proposed ESRD 

PPS base rate for CY 2019 before 

application of the wage index budgetneutrality adjustment factor would be 

$235.86 ($232.37 × 1.0150 = $235.86). 

• Wage Index Budget-Neutrality 

Adjustment Factor: We compute a wage 

index budget-neutrality adjustment 

factor that is applied to the ESRD PPS 

base rate. For CY 2019, we are not 

proposing any changes to the 

methodology used to calculate this 

factor, which is described in detail in 

the CY 2014 ESRD PPS final rule (78 FR 

72174). We computed the proposed CY 

2019 wage index budget-neutrality 

adjustment factor using treatment 

counts from the 2017 claims and 

facility-specific CY 2018 payment rates 

to estimate the total dollar amount that 

each ESRD facility would have received 

in CY 2018. The total of these payments 

became the target amount of 

expenditures for all ESRD facilities for 

CY 2019. Next, we computed the 

estimated dollar amount that would 

have been paid for the same ESRD 

facilities using the ESRD wage index for 

CY 2019. The total of these payments 

becomes the new CY 2019 amount of 

wage-adjusted expenditures for all 

ESRD facilities. The wage index budgetneutrality factor is calculated as the 

target amount divided by the new CY 

2019 amount. When we multiplied the 

wage index budget-neutrality factor by 

the applicable CY 2019 estimated 

payments, aggregate payments to ESRD 

facilities would remain budget neutral 

when compared to the target amount of 

expenditures. That is, the wage index 

budget-neutrality adjustment factor 

ensures that wage index adjustments do 

not increase or decrease aggregate 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34333 

3R.E. Patzer, L. Plantinga, J. Krisher, S.O. Pastan, 

‘‘Dialysis facility and network factors associated 

with low kidney transplantation rates among U.S. 

dialysis facilities,’’ American Journal of 

Transplantation, 2014 Jul; 14(7):1562–72; and 

Sudeshna Paul, Laura C. Plantinga, Stephen O. 

Pastan, Jennifer C. Gander, Sumit Mohan, and 

Rachel E. Patzer, ‘‘Standardized Transplantation 

Referral Ratio to Assess Performance of Transplant 

Referral among Dialysis Facilities,’’ Clinical Journal 

of the American Society of Nephrology, January 

2018. 

4Mehrotra, R., Soohoo, M., Rivara, M.B., 

Himmelfarb, J., Cheung, A.K., Arah, O.A., 

Nissenson, A.R., Ravel, V., Streja, E., Kuttykrishnan, 

S., Katz, R., Molnar, M., Kalantar-Zadeh, K., ‘‘Racial 

and Ethnic Disparities in Use of and Outcomes with 

Home Dialysis in the United States,’’ Journal of the 

American Society of Nephrology December 10, 

2015. 

Medicare payments with respect to 

changes in wage index updates. 

The CY 2019 proposed wage index 

budget-neutrality adjustment factor is 

0.999833. This application would yield 

a CY 2019 ESRD PPS proposed base rate 

of $235.82 ($235.75 × 0.999833 = 

$235.82). 

In summary, we are proposing a CY 

2019 ESRD PPS base rate of $235.82. 

This amount reflects a proposed market 

basket increase of 1.5 percent and the 

proposed CY 2019 wage index budgetneutrality adjustment factor of 0.999833. 

C. Solicitation for Information on 

Transplant and Modality Requirements 

When an individual is faced with 

failing kidneys, life-extending treatment 

is available. The most common 

treatment is dialysis, but the best 

treatment is receiving a kidney 

transplant from a living or deceased 

donor. Dialysis, either HD or PD, can 

sustain life by removing impurities and 

extra fluids but cannot do either job as 

consistently or efficiently as a 

functioning kidney. Dialysis also carries 

risks of its own, including anemia, bone 

disease, hypotension, hypertension, 

heart disease, muscle cramps, itching, 

fluid overload, nerve damage, 

depression, and infection. Timely 

transplantation, despite requiring a 

major surgery and ongoing medication, 

offers recipients a longer, higher quality 

of life, without the ongoing risks of 

dialysis. Unfortunately, the number of 

people waiting for healthy donor 

kidneys far exceeds the number of 

available organs. In 2015, the most 

recent year for which complete data is 

available, 18,805 kidney transplants 

were performed in the U.S., while over 

80,000 individuals remained on waiting 

lists (https://www.usrds.org/2017/view/ 

v2_06.aspx). That same year, there were 

124,114 newly reported cases of ESRD 

and over 703,243 prevalent cases of 

ESRD (https://www.usrds.org/2017/ 

view/v2_01.aspx). 

In recognition of the superiority of 

transplantation but the need for dialysis, 

CMS has required for nearly 10 years 

that Medicare-certified dialysis facilities 

evaluate all patients for transplant 

suitability and make appropriate 

referrals to local transplant centers (73 

FR 20370). Specifically, dialysis 

facilities must: 

• Inform every patient about all 

treatment modalities, including 

transplantation (§ 494.70(a)(7)). 

• Evaluate every patient for 

suitability for a transplantation referral 

(§ 494.80(b)(10)). 

• Document any basis for non-referral 

in the patient’s medical record 

(§ 494.80(b)(10)). 

• Develop plans for pursuing 

transplantation for every patient who is 

a transplant referral candidate 

(§ 494.90(a)(7)(ii)). 

• Track the results of each kidney 

transplant center referral 

(§ 494.90(c)(1)). 

• Monitor the status of any facility 

patients who are on the transplant 

waitlist (§ 494.90(c)(2)). 

• Communicate with the transplant 

center regarding patient transplant 

status at least annually, and when there 

is a change in transplant candidate 

status (§ 494.90(c)(3)). 

• Educate patients, family members, 

or caregivers or both about 

transplantation, as established in a 

patient’s plan of care (§ 494.90(d)). 

Despite these requirements, the 

percentage of prevalent dialysis patients 

wait-listed for a kidney has recently 

declined (https://www.usrds.org/2017/ 

view/v2_06.aspx, Figure 6.2), meaning 

that fewer people have the opportunity 

to be matched with a donor kidney. 

Some individuals do receive kidneys 

directly from suitable friends or family 

members, but still must be placed on the 

waiting list. Organ Procurement and 

Transplantation Network (OPTN) policy 

requires that all transplant recipients, 

including recipients of organs from 

living donors, be registered and added 

to the OPTN waiting list. Until a 

dialysis patient is referred to a 

transplant center, he or she is not able 

to be placed on the waiting list, and is 

ineligible to receive a kidney. While 

dialysis facilities have no control over 

the total supply of kidneys made 

available for transplantation, 

transplantation education, referral, and 

waitlist tracking are appropriate and 

necessary services for them to furnish. 

Unfortunately, there are performance 

gaps and disparities between dialysis 

facilities in providing these services.3

Therefore, as discussed in section 

IV.C.1.a. of section IV ‘‘End-Stage Renal 

Disease Quality Incentive Program 

(ESRD QIP)’’ of this proposed rule, we 

are proposing a reporting measure under 

the ESRD QIP that would track the 

percentage of patients at each dialysis 

facility who are on the kidney or 

kidney-pancreas transplant waiting list. 

We are also soliciting input on other 

ways to increase kidney transplant 

referrals and improve the tracking 

process for patients on the waitlist: 

• Are there ways to ensure facilities 

are meeting the Conditions for Coverage 

(CfC) requirements, in addition to the 

survey process? 

• Are the current dialysis facility CfC 

requirements addressing transplantation 

support services adequately, or should 

additional requirements be considered? 

We welcome your input. 

With regard to other treatment for 

failed kidneys, HD performed in an 

outpatient dialysis center is most 

common, followed by HD performed at 

home, and PD (almost always performed 

at home). Just as we are concerned about 

disparities in access to transplantation, 

we are also concerned about disparities 

in access to dialysis modality options. 

Although ESRD disproportionately 

affects racial and ethnic minority 

patients, minority individuals are far 

less likely to be treated with home 

dialysis than white patients.4 Home 

dialysis modalities necessitate a higher 

level of self-care than in-center care, and 

are not appropriate for or desired by 

every dialysis patient. We are 

concerned, however that not all dialysis 

patients are aware of, or given the 

opportunity to learn about, home 

modalities or their benefits—primarily 

greater independence and flexibility. 

Individuals performing home dialysis 

treatments are able to schedule their 

treatments at times most convenient for 

them, allowing them to coordinate with 

family and work schedules, and 

eliminate the need for thrice weekly 

transportation to and from a dialysis 

facility. The transportation savings are 

especially valuable to rural individuals, 

who might have to travel hours each 

week for regular treatments in a facility. 

We take this opportunity to remind 

dialysis facilities of their 

responsibilities regarding modality 

education and options. Some dialysis 

facilities do not support home 

modalities, but all facilities are required 

to make appropriate referrals if a patient 

elects to pursue home treatments. 

Specifically, dialysis facilities must: 

• Inform every patient about all 

treatment modalities, including 

transplantation, home dialysis 

modalities (home HD, intermittent PD, 

continuous ambulatory PD, continuous 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34334 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

5Meaningful Measures webpage: https:// 

www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/QualityInitiativesGenInfo/ 

MMF/General-info-Sub-Page.html. 

6Remarks by Administrator Seema Verma at the 

Health Care Payment Learning and Action Network 

(LAN) Fall Summit, as prepared for delivery on 

October 30, 2017. Available at: https:// 

www.cms.gov/Newsroom/MediaReleaseDatabase/ 

Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html. 

cycling PD), and in-facility HD 

(§ 494.70(a)(7)). 

• Ensure all patients are provided 

access to resource information for 

dialysis modalities not offered by the 

facility, including information about 

alternative scheduling options for 

working patients (§ 494.70(a)(7)). 

• Assess every patient’s abilities, 

interests, preferences, and goals, 

including the desired level of 

participation in the dialysis care 

process; the preferred modality 

(hemodialysis or peritoneal dialysis), 

and setting, (for example, home 

dialysis), and the patient’s expectations 

for care outcomes (§ 494.80(a)(9)). 

• Identify a plan for every patient’s 

home dialysis or explain why the 

patient is not a candidate for home 

dialysis (§ 494.90(a)(7)(i)). 

• Provide education and training, as 

applicable, to patients and family 

members or caregivers or both, in 

aspects of the dialysis experience, 

dialysis management, infection 

prevention and personal care, home 

dialysis and self-care, quality of life, 

rehabilitation, transplantation, and the 

benefits and risks of various vascular 

access types (§ 494.90(d)). 

Persons with failed kidneys often 

begin dialysis with no prior exposure to 

nephrology care or knowledge of 

treatment options. The practitioners and 

professionals who care for them are best 

suited to provide the necessary 

information to support informed, shared 

decision-making. Patient education is 

not a one-time incident, but an ongoing 

aspect of all health care services and 

settings. We welcome your suggestions 

on ways to ensure that dialysis facilities 

are meeting these obligations, and to 

ensure equal access to dialysis 

modalities. 

III. CY 2019 Payment for Renal Dialysis 

Services Furnished to Individuals With 

Acute Kidney Injury (AKI) 

A. Background 

The Trade Preferences Extension Act 

of 2015 (TPEA), Public Law 114–27, was 

enacted on June 29, 2015, and amended 

the Act to provide coverage and 

payment for dialysis furnished by an 

ESRD facility to an individual with 

acute kidney injury (AKI). Specifically, 

section 808(a) of the TPEA amended 

section 1861(s)(2)(F) of the Act to 

provide coverage for renal dialysis 

services furnished on or after January 1, 

2017, by a renal dialysis facility or a 

provider of services paid under section 

1881(b)(14) of the Act to an individual 

with AKI. Section 808(b) of the TPEA 

amended section 1834 of the Act by 

adding a new paragraph (r) to provide 

payment, beginning January 1, 2017, for 

renal dialysis services furnished by 

renal dialysis facilities or providers of 

services paid under section 1881(b)(14) 

of the Act to individuals with AKI at the 

ESRD PPS base rate, as adjusted by any 

applicable geographic adjustment 

applied under section 

1881(b)(14)(D)(iv)(II) of the Act and 

adjusted (on a budget neutral basis for 

payments under section 1834(r) of the 

Act) by any other adjustment factor 

under section 1881(b)(14)(D) of the Act 

that the Secretary elects. 

In the CY 2017 ESRD PPS final rule, 

we finalized several coverage and 

payment policies in order to implement 

subsection (r) of section 1834 of the Act 

and the amendments to section 

1881(s)(2)(F) of the Act, including the 

payment rate for AKI dialysis (81 FR 

77866 through 77872, and 77965). We 

interpret section 1834(r)(1) of the Act as 

requiring the amount of payment for 

AKI dialysis services to be the base rate 

for renal dialysis services determined 

for a year under the ESRD base rate as 

set forth in § 413.220, updated by the 

ESRD bundled market basket percentage 

increase factor minus a productivity 

adjustment as set forth in 

§ 413.196(d)(1), adjusted for wages as set 

forth in § 413.231, and adjusted by any 

other amounts deemed appropriate by 

the Secretary under § 413.373. We 

codified this policy in § 413.372 (81 FR 

77965). 

B. Annual Payment Rate Update for CY 

2019 

1. CY 2019 AKI Dialysis Payment Rate 

The payment rate for AKI dialysis is 

the ESRD PPS base rate determined for 

a year under section 1881(b)(14) of the 

Act, which is the finalized ESRD PPS 

base rate, including market basket 

adjustments, wage adjustments and any 

other discretionary adjustments, for 

such year. We note that ESRD facilities 

have the ability to bill Medicare for nonrenal dialysis items and services and 

receive separate payment in addition to 

the payment rate for AKI dialysis. 

As discussed in section II.B.3.d of this 

proposed rule, the CY 2019 proposed 

ESRD PPS base rate is $235.82, which 

reflects the proposed ESRD bundled 

market basket and multifactor 

productivity adjustment. Accordingly, 

we are proposing a CY 2019 per 

treatment payment rate of $235.82 for 

renal dialysis services furnished by 

ESRD facilities to individuals with AKI. 

This payment rate is further adjusted by 

the wage index as discussed below. 

2. Geographic Adjustment Factor 

Under section 1834(r)(1) of the Act 

and § 413.372, the amount of payment 

for AKI dialysis services is the base rate 

for renal dialysis services determined 

for a year under section 1881(b)(14) of 

the Act (updated by the ESRD bundled 

market basket and multifactor 

productivity adjustment), as adjusted by 

any applicable geographic adjustment 

factor applied under section 

1881(b)(14)(D)(iv)(II) of the Act. 

Accordingly, we apply the same wage 

index under § 413.231 that is used 

under the ESRD PPS and discussed in 

section II.B.3.f of this proposed rule. 

The AKI dialysis payment rate is 

adjusted by the wage index for a 

particular ESRD facility in the same way 

that the ESRD PPS base rate is adjusted 

by the wage index for that facility (81 

FR 77868). Specifically, we apply the 

wage index to the labor-related share of 

the ESRD PPS base rate that we utilize 

for AKI dialysis to compute the wage 

adjusted per-treatment AKI dialysis 

payment rate. As stated above, we are 

proposing a CY 2019 AKI dialysis 

payment rate of $235.82, adjusted by the 

ESRD facility’s wage index. 

IV. End-Stage Renal Disease Quality 

Incentive Program (ESRD QIP) 

A. Background 

For a detailed discussion of the ESRD 

QIP’s background and history, including 

a description of the Program’s 

authorizing statute and the policies that 

we have adopted in previous final rules, 

we refer readers to the calendar year 

(CY) 2018 ESRD Prospective Payment 

System (PPS) final rule (82 FR 50756 

through 50757). 

1. Improving Patient Outcomes and 

Reducing Burden Through the 

Meaningful Measures Initiative 

Regulatory reform and reducing 

regulatory burden are high priorities for 

the Centers for Medicare & Medicaid 

Services (CMS). To reduce the 

regulatory burden on the healthcare 

industry, lower health care costs, and 

enhance patient care, in October 2017, 

we launched the Meaningful Measures 

Initiative.5 This initiative is one 

component of our agency-wide Patients 

Over Paperwork Initiative,6 which is 

aimed at evaluating and streamlining 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34335 

7See, for example, United States Department of 

Health and Human Services. ‘‘Healthy People 2020: 

Disparities. 2014.’’ Available at: http:// 

www.healthypeople.gov/2020/about/foundationhealth-measures/Disparities; or National Academies 

of Sciences, Engineering, and Medicine. Accounting 

for Social Risk Factors in Medicare Payment: 

Identifying Social Risk Factors. Washington, DC: 

National Academies of Sciences, Engineering, and 

Medicine 2016. 

8 Department of Health and Human Services 

Office of the Assistant Secretary for Planning and 

Evaluation (ASPE), ‘‘Report to Congress: Social Risk 

Factors and Performance Under Medicare’s ValueBased Purchasing Programs.’’ December 2016. 

Available at: https://aspe.hhs.gov/pdf-report/reportcongress-social-risk-factors-and-performanceunder-medicares-value-based-purchasingprograms. 

regulations with a goal to reduce 

unnecessary cost and burden, increase 

efficiencies, and improve beneficiary 

experience. The Meaningful Measures 

Initiative is aimed at identifying the 

highest priority areas for quality 

measurement and quality improvement 

in order to assess the core quality of care 

issues that are most vital to advancing 

our work to improve patient outcomes. 

The Meaningful Measures Initiative 

represents a new approach to quality 

measures that will foster operational 

efficiencies and will reduce costs, 

including collection and reporting 

burden, while producing quality 

measurement that is more focused on 

meaningful outcomes. 

The Meaningful Measures Initiative 

has the following objectives: 

• Address high-impact measure areas 

that safeguard public health; 

• Patient-centered and meaningful to 

patients; 

• Outcome-based where possible; 

• Fulfill each program’s statutory 

requirements; 

• Minimize the level of burden for 

health care providers (for example, 

through a preference for EHR-based 

measures where possible, such as 

electronic clinical quality measures); 

• Significant opportunity for 

improvement; 

• Address measure needs for 

population based payment through 

alternative payment models; and 

• Align across programs and/or with 

other payers. 

In order to achieve these objectives, 

we have identified 19 Meaningful 

Measures areas and mapped them to six 

overarching quality priorities as shown 

in Table 12. 

TABLE 12—QUALITY PRIORITY ASSOCIATED WITH MEANINGFUL MEASURE AREAS

Quality priority Meaningful measure area 

Making Care Safer by Reducing Harm Caused in the Delivery of Care Healthcare-Associated Infections. 

Preventable Healthcare Harm. 

Strengthen Person and Family Engagement as Partners in Their Care Care is Personalized and Aligned with Patient’s Goals. 

End of Life Care According to Preferences. 

Patient’s Experience of Care. 

Patient Reported Functional Outcomes. 

Promote Effective Communication and Coordination of Care ................. Medication Management. 

Admissions and Readmissions to Hospitals. 

Transfer of Health Information and Interoperability. 

Promote Effective Prevention and Treatment of Chronic Disease .......... Preventive Care. 

Management of Chronic Conditions. 

Prevention, Treatment, and Management of Mental Health. 

Prevention and Treatment of Opioid and Substance Use Disorders. 

Risk Adjusted Mortality. 

Work with Communities to Promote Best Practices of Healthy Living .... Equity of Care. 

Community Engagement. 

Make Care Affordable .............................................................................. Appropriate Use of Healthcare. 

Patient-focused Episode of Care. 

Risk Adjusted Total Cost of Care. 

By including Meaningful Measures in 

our programs, we believe that we can 

also address the following cross-cutting 

measure criteria: 

• Eliminating disparities; 

• Tracking measurable outcomes and 

impact; 

• Safeguarding public health; 

• Achieving cost savings; 

• Improving access for rural 

communities; and 

• Reducing burden. 

We believe that the Meaningful 

Measures Initiative will improve 

outcomes for patients, their families, 

and health care providers while 

reducing burden and costs for clinicians 

and providers as well as promoting 

operational efficiencies. 

2. Accounting for Social Risk Factors in 

the ESRD QIP 

In the fiscal year (FY) 2018 Inpatient 

Prospective Payment System (IPPS)/ 

Long-Term Care Hospital Prospective 

Payment System (LTCH PPS) final rule 

(82 FR 38237 through 38239), we 

discussed the importance of improving 

beneficiary outcomes including 

reducing health disparities. We also 

discussed our commitment to ensuring 

that medically complex patients, as well 

as those with social risk factors, receive 

excellent care. We discussed how 

studies show that social risk factors, 

such as being near or below the poverty 

level as determined by the Department 

of Health and Human Services, 

belonging to a racial or ethnic minority 

group, or living with a disability, can be 

associated with poor health outcomes 

and how some of this disparity is 

related to the quality of health care.7

Among our core objectives, we aim to 

improve health outcomes, attain health 

equity for all beneficiaries, and ensure 

that complex patients as well as those 

with social risk factors receive excellent 

care. Within this context, reports by the 

Office of the Assistant Secretary for 

Planning and Evaluation (ASPE) and the 

National Academy of Medicine have 

examined the influence of social risk 

factors in CMS value-based purchasing 

(VBP) programs.8 As we noted in the FY 

2018 IPPS/LTCH PPS final rule (82 FR 

38237), ASPE’s report to Congress found 

that, in the context of VBP programs, 

dual eligibility was the most powerful 

predictor of poor health care outcomes 

among those social risk factors that they 

examined and tested. In addition, as we 

noted in the FY 2018 IPPS/LTCH PPS 

final rule (82 FR 38237), the National 

Quality Forum (NQF) undertook a 2- 

year trial period in which certain new 

measures and measures undergoing 

maintenance review have been assessed 

to determine if risk adjustment for social 

risk factors is appropriate for these 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34336 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

9Available at: http://www.qualityforum.org/SES_

Trial_Period.aspx. 

10Available at: http://www.qualityforum.org/ 

WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=

86357. 

measures.9 The trial period ended in 

April 2017 and a final report is available 

at: http://www.qualityforum.org/SES_

Trial_Period.aspx. The trial concluded 

that ‘‘measures with a conceptual basis 

for adjustment generally did not 

demonstrate an empirical relationship’’ 

between social risk factors and the 

outcomes measured. This discrepancy 

may be explained in part by the 

methods used for adjustment and the 

limited availability of robust data on 

social risk factors. NQF has extended 

the socioeconomic status (SES) trial,10

allowing further examination of social 

risk factors in outcome measures. 

In the FY 2018 IPPS/LTCH PPS and 

CY 2018 ESRD PPS proposed rules for 

our quality reporting and VBP programs, 

we solicited feedback on which social 

risk factors provide the most valuable 

information to stakeholders and the 

methodology for illuminating 

differences in outcomes rates among 

patient groups within a hospital or 

provider that would also allow for a 

comparison of those differences, or 

disparities, across providers. Feedback 

we received across our quality reporting 

programs included encouraging CMS to 

explore whether factors that could be 

used to stratify or risk adjust the 

measures (beyond dual eligibility); 

considering the full range of differences 

in patient backgrounds that might affect 

outcomes; exploring risk adjustment 

approaches; and offering careful 

consideration of what type of 

information display would be most 

useful to the public. 

We also sought public comment on 

confidential reporting and future public 

reporting of some of our measures 

stratified by patient dual eligibility. In 

general, commenters noted that 

stratified measures could serve as tools 

for hospitals to identify gaps in 

outcomes for different groups of 

patients, improve the quality of health 

care for all patients, and empower 

consumers to make informed decisions 

about health care. Commenters 

encouraged us to stratify measures by 

other social risk factors such as age, 

income, and educational attainment. 

With regard to VBP programs, 

commenters also cautioned to balance 

fair and equitable payment while 

avoiding payment penalties that mask 

health disparities or discouraging the 

provision of care to more medically 

complex patients. Commenters also 

noted that VBP program measure 

selection, domain weighting, 

performance scoring, and payment 

methodology must account for social 

risk. 

As a next step, CMS is considering 

options to improve health disparities 

among patient groups within and across 

hospitals by increasing the transparency 

of disparities as shown by quality 

measures. We also are considering how 

this work applies to other CMS quality 

programs in the future. We refer readers 

to the FY 2018 IPPS/LTCH PPS final 

rule (82 FR 38403 through 38409) for 

more details, where we discuss the 

potential stratification of certain 

Hospital Inpatient Quality Reporting 

(IQR) Program outcome measures. 

Furthermore, we continue to consider 

options to address equity and disparities 

in our value-based purchasing 

programs. 

We plan to continue working with 

ASPE, the public, and other key 

stakeholders on this important issue to 

identify policy solutions that achieve 

the goals of attaining health equity for 

all beneficiaries and minimizing 

unintended consequences. 

3. Proposal To Update Regulation Text 

for the ESRD QIP 

We are proposing to codify a number 

of previously adopted requirements for 

the ESRD QIP in our regulations by 

revising § 413.177 and adopting a new 

§ 413.178. Codification of these 

requirements would make it easier for 

the public to locate these requirements. 

Proposed § 413.178 would codify the 

following: 

• Definitions of key terms used in the 

ESRD QIP; 

• Rules for determining the 

applicability of the ESRD QIP to 

facilities, including new facilities; 

• Measure selection; 

• Rules governing performance 

scoring, including how we calculate the 

total performance score; 

• Our process for making ESRD QIP 

performance information available to 

the public; and 

• The limitation on administrative 

and judicial review. 

Revised § 413.177(a) would codify 

that an ESRD facility that does not earn 

enough points under the ESRD QIP to 

meet or exceed the minimum total 

performance score established for a 

payment year would receive up to a 2 

percent reduction to its otherwise 

applicable payment amount under the 

ESRD PPS for renal dialysis services 

furnished during that payment year. 

We welcome public comments on the 

proposed regulation text. 

B. Proposed Update to Requirements 

Beginning With the PY 2021 ESRD QIP 

1. Proposal To Update the PY 2021 

Measure Set 

In this proposed rule, we are 

proposing to refine and update the 

criteria for removing measures from the 

ESRD QIP measure set, and for 

consistency with the terminology we are 

adopting for other CMS quality 

reporting and value-based purchasing 

programs, we now refer to these criteria 

as factors. We are also proposing to 

remove four of the reporting measures 

that we previously finalized for the PY 

2021 ESRD QIP measure set. Table 13 

summarizes the proposed revisions to 

the PY 2021 ESRD QIP measure set, and 

we discuss the measure removal 

proposals in section IV.B.1.c of this 

proposed rule. 

TABLE 13—PROPOSED REVISIONS TO THE PREVIOUSLY FINALIZED PY 2021 ESRD QIP MEASURE SET

NQF # Measure title and description Measure continuing in PY 2021 

0258 ................................................ In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) Survey Administration, a clinical 

measure.

Measure assesses patients’ self-reported experience of care through 

percentage of patient responses to multiple testing tools.

Yes. 

2496 ................................................ Standardized Readmission Ratio (SRR), a clinical measure ................

Ratio of the number of observed unplanned 30-day hospital readmissions to the number of expected unplanned 30-day readmissions.

Yes. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34337 

TABLE 13—PROPOSED REVISIONS TO THE PREVIOUSLY FINALIZED PY 2021 ESRD QIP MEASURE SET—Continued 

NQF # Measure title and description Measure continuing in PY 2021 

2979 ................................................ Standardized Transfusion Ratio (STrR), a clinical measure .................

Risk-adjusted TrR for all adult Medicare dialysis patients. 

Number of observed eligible red blood cell transfusion events occurring in patients dialyzing at a facility to the number of eligible transfusions that would be expected.

Yes. 

N/A .................................................. A measure of dialysis adequacy where K is dialyzer clearance, t is dialysis time, and V is total body water volume (Kt/V) Dialysis Adequacy Comprehensive, a clinical measure.

Percentage of all patient months for patients whose delivered dose of 

dialysis (either hemodialysis or peritoneal dialysis) met the specified threshold during the reporting period.

Yes. 

2977 ................................................ Hemodialysis Vascular Access: Standardized Fistula Rate clinical 

measure.

Measures the use of an AV fistula as the sole means of vascular access as of the last hemodialysis treatment session of the month.

Yes. 

2978 ................................................ Hemodialysis Vascular Access: Long-Term Catheter Rate clinical 

measure.

Measures the use of a catheter continuously for 3 months or longer 

as of the last hemodialysis treatment session of the month.

Yes. 

1454 ................................................ Hypercalcemia, a clinical measure ........................................................

Proportion of patient-months with 3-month rolling average of total uncorrected serum or plasma calcium greater than 10.2 mg/dL.

Yes. 

1463 * .............................................. Standardized Hospitalization Ratio (SHR), a clinical measure .............

Risk-adjusted SHR of the number of observed hospitalizations to the 

number of expected hospitalizations.

Yes. 

0255 ................................................ Serum Phosphorus, a reporting measure. Percentage of all adult 

(≥18 years of age) peritoneal dialysis and hemodialysis patients included in the sample for analysis with serum of plasma phosphorus 

measured at least once within month.

Proposed for Removal. 

N/A .................................................. Anemia Management Reporting, a reporting measure. Number of 

months for which facility reports erythropoiesis-stimulating agent 

(ESA) dosage (as applicable) and hemoglobin/hematocrit for each 

Medicare patient, at least once per month.

Proposed for Removal. 

Based on NQF #0420 ..................... Pain Assessment and Follow-Up, a reporting measure. Facility reports in CROWNWeb one of six conditions for each qualifying patient once before August 1 of the performance period and once before February 1 of the year following the performance period.Proposed for Removal. 

Based on NQF #0418 ..................... Clinical Depression Screening and Follow-Up, a reporting measure ...

Facility reports in CROWNWeb one of six conditions for each qualifying patient treated during performance period.

Yes. 

Based on NQF #0431 ..................... National Healthcare Safety Network (NHSN) Healthcare Personnel 

Influenza Vaccination, a reporting measure. Facility submits 

Healthcare Personnel Influenza Vaccination Summary Report to 

the Centers for Disease Control and Prevention’s (CDC’s) NHSN 

system, according to the specifications of the Healthcare, Personnel Safety Component Protocol by May 15 of the performance 

period.

Proposed for Removal. 

N/A .................................................. Ultrafiltration Rate, a reporting measure ...............................................

Number of months for which a facility reports elements required for 

ultrafiltration rates for each qualifying patient.

Yes. 

Based on NQF #1460 ..................... NHSN Bloodstream Infection (BSI) in Hemodialysis Patients, a clinical measure.

The Standardized Infection Ratio (SIR) of BSIs will be calculated 

among patients receiving hemodialysis at outpatient hemodialysis 

centers.

Yes. 

N/A .................................................. NHSN Dialysis Event reporting measure ..............................................

Number of months for which facility reports NHSN Dialysis Event 

data to CDC.

Yes. 

a. Proposal To Refine and Update the 

Factors Used for ESRD QIP Measure 

Removal 

Under our current policy, we consider 

an ESRD QIP measure for removal or 

replacement if: (1) Measure performance 

among the majority of ESRD facilities is 

so high and unvarying that meaningful 

distinctions in improvements or 

performance can no longer be made; (2) 

performance or improvement on a 

measure does not result in better or the 

intended patient outcomes; (3) a 

measure no longer aligns with current 

clinical guidelines or practice; (4) a 

more broadly applicable (across settings, 

populations, or conditions) measure for 

the topic becomes available; (5) a 

measure that is more proximal in time 

to desired patient outcomes for the 

particular topic becomes available; (6) a 

measure that is more strongly associated 

with desired patient outcomes for the 

particular topic becomes available; or 

(7) collection or public reporting of a 

measure leads to negative or unintended 

consequences (77 FR 67475). In the CY 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34338 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

2015 ESRD PPS final rule, we adopted 

statistical criteria for determining 

whether a clinical measure is topped 

out, and adopted a policy under which 

we could retain an otherwise topped-out 

measure if we determined that its 

continued inclusion in the ESRD QIP 

measure set would address the unique 

needs of a specific subset of the ESRD 

population (79 FR 66174). In the CY 

2013 ESRD PPS final rule (77 FR 67475), 

we finalized that we would generally 

remove an ESRD QIP measure using 

notice and comment rulemaking, unless 

we determined that the continued 

collection of data on the measure raised 

patient safety concerns. In that case, we 

stated that we would promptly remove 

the measure and publish the 

justification for the removal in the 

Federal Register during the next 

rulemaking cycle. In addition, we stated 

that we would immediately notify ESRD 

facilities and the public through the 

usual communication channels, 

including listening sessions, memos, 

email notification, and Web postings. 

In order to align with terminology we 

are adopting for use across a number of 

quality reporting and pay for 

performance programs, we will now 

refer to these criteria as ‘‘factors’’ rather 

than ‘‘criteria.’’ We are also proposing to 

update these measure removal factors so 

that they are more closely aligned with 

the factors we have adopted or proposed 

to adopt for other quality reporting and 

pay for performance programs, as well 

as the priorities we have adopted as part 

of our Meaningful Measures Initiative. 

Specifically, we are proposing to 

combine current Factors 4 and 5 

(proposed new Factor 4), and we are 

proposing to adjust the numbering of 

subsequent factors to account for this 

change. We are also proposing to add a 

new factor for measures where it is not 

feasible to implement the measure 

specifications; we would refer to this 

new factor as Factor 7. Proposed Factors 

1 through 7 are as follows: 

• Factor 1. Measure performance 

among the majority of ESRD facilities is 

so high and unvarying that meaningful 

distinctions in improvements or 

performance can no longer be made (for 

example, the measure is topped-out). 

• Factor 2. Performance or 

improvement on a measure does not 

result in better or the intended patient 

outcomes. 

• Factor 3. A measure no longer 

aligns with current clinical guidelines 

or practice. 

• Factor 4. A more broadly applicable 

(across settings, populations, or 

conditions) measure for the topic or a 

measure that is more proximal in time 

to desired patient outcomes for the 

particular topic becomes available. 

• Factor 5. A measure that is more 

strongly associated with desired patient 

outcomes for the particular topic 

becomes available. 

• Factor 6. Collection or public 

reporting of a measure leads to negative 

or unintended consequences. 

• Factor 7. It is not feasible to 

implement the measure specifications. 

We believe these proposed updates 

would better ensure that we use a 

consistent approach across our quality 

reporting and value-based purchasing 

programs when considering measures 

for removal, and that they reflect the 

considerations we have long used when 

evaluating measures for removal from 

the ESRD QIP. However, even if one or 

more of the measure removal factors 

applies, we might nonetheless choose to 

retain the measure for certain specified 

reasons. Examples of such instances 

could include when a particular 

measure addresses a gap in quality that 

is so significant that removing the 

measure could result in poor quality, or 

in the event that a given measure is 

statutorily required. Furthermore, 

consistent with other quality reporting 

programs, we propose to apply these 

factors on a case-by-case basis. 

We welcome comment on these 

proposals. 

b. Proposed New Measure Removal 

Factor 

In this proposed rule, we are 

proposing to adopt an additional factor 

to consider when evaluating measures 

for removal from the ESRD QIP measure 

set: Factor 8, the costs associated with 

a measure outweigh the benefit of its 

continued use in the Program. 

As we discuss in section IV.A.1 of this 

proposed rule, with respect to our new 

‘‘Meaningful Measures Initiative,’’ we 

are engaging in efforts to ensure that the 

ESRD QIP measure set continues to 

promote improved health outcomes for 

beneficiaries while minimizing the 

overall costs associated with the 

Program. We believe these costs are 

multifaceted and include not only the 

burden associated with reporting, but 

also the costs associated with 

implementing and maintaining the 

Program. We have identified several 

different types of costs, including, but 

not limited to: (1) Provider, supplier and 

clinician information collection burden 

and related cost and burden associated 

with the submission/reporting of quality 

measures to CMS; (2) provider, supplier 

and clinician cost associated with 

complying with other quality 

programmatic requirements; (3) 

provider, supplier and clinician cost 

associated with participating in 

multiple quality programs, and tracking 

multiple similar or duplicative 

measures within or across those 

programs; (4) CMS cost associated with 

the Program oversight of the measure, 

including measure maintenance and 

public display; and (5) provider, 

supplier and clinician cost associated 

with compliance with other federal and/ 

or state regulations (if applicable). For 

example, it may be needlessly costly 

and/or of limited benefit to retain or 

maintain a measure which our analyses 

show no longer meaningfully supports 

Program objectives (for example, 

informing beneficiary choice). It may 

also be costly for health care providers 

to track confidential feedback preview 

reports and publicly reported 

information on a measure where we use 

the measure in more than one Program. 

CMS may also have to expend 

unnecessary resources to maintain the 

specifications for the measure, as well 

as the tools needed to collect, validate, 

analyze, and publicly report the 

measure data. Furthermore, 

beneficiaries may find it confusing to 

see public reporting on the same 

measure in different Programs. 

When these costs outweigh the 

evidence supporting the continued use 

of a measure in the ESRD QIP, we 

believe it may be appropriate to remove 

the measure from the Program. 

Although we recognize that one of the 

main goals of the ESRD QIP is to 

improve beneficiary outcomes by 

incentivizing health care providers to 

focus on specific care issues and making 

public data related to those issues, we 

also recognize that those goals can have 

limited utility where, for example, the 

publicly reported data are of limited use 

because they cannot be easily 

interpreted by beneficiaries to influence 

their choice of providers. In these cases, 

removing the measure from the ESRD 

QIP may better accommodate the costs 

of Program administration and 

compliance without sacrificing 

improved health outcomes and 

beneficiary choice. 

We are proposing that we would 

remove measures based on this factor on 

a case-by-case basis. We might, for 

example, decide to retain a measure that 

is burdensome for health care providers 

to report if we conclude that the benefit 

to beneficiaries justifies the reporting 

burden. Our goal is to move the Program 

forward in the least burdensome manner 

possible, while maintaining an 

appropriately sized set of meaningful 

quality measures and continuing to 

incentivize improvement in the quality 

of care provided to patients. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34339 

We are inviting public comment on 

our proposal to adopt an additional 

measure removal factor, ‘‘the costs 

associated with a measure outweigh the 

benefit of its continued use in the 

Program,’’ beginning with PY 2021. 

c. Proposed Removal of Four Reporting 

Measures 

We have undertaken efforts to review 

the existing ESRD QIP measure set in 

the context of the Meaningful Measures 

Initiative described in section IV.A.1 of 

this proposed rule. Based on that 

analysis and our evaluation of the 

Program’s measures, we are proposing 

to remove four measures previously 

adopted for the ESRD QIP, starting with 

PY 2021. If these proposals are 

finalized, facilities would no longer be 

required to report data specific to these 

measures beginning with January 1, 

2019 dates of service. The four measures 

we are proposing to remove from the 

ESRD QIP measure set are: 

• Healthcare Personnel Influenza 

Vaccination. 

• Pain Assessment and Follow-Up. 

• Anemia Management. 

• Serum Phosphorus. 

Proposed Removal of the Healthcare 

Personnel Influenza Vaccination 

Reporting Measure From the ESRD QIP 

Measure Set 

In the CY 2015 ESRD PPS final rule, 

we adopted the Healthcare Personnel 

Influenza Vaccination reporting 

measure in the ESRD QIP measure set 

beginning with PY 2018 because we 

recognize that influenza immunization 

is an important public health issue and 

that vaccinating healthcare personnel 

against influenza can help to protect 

healthcare personnel and their patients 

(79 FR 66206 through 66208). We 

continue to believe that the Healthcare 

Personnel Influenza Vaccination 

measure provides the benefit of 

protecting patients against influenza. 

However, our analysis of CY 2016 data 

indicates that ESRD facility performance 

on the measure was consistently high; 

98 percent of ESRD facilities received 

the highest possible score on the 

measure (10 points) and the remaining 

2 percent received no score on the 

measure because they did not report the 

required data. This finding indicates 

that influenza vaccination of healthcare 

personnel in ESRD facilities is a 

widespread practice and that there is 

little room for improvement on this 

measure. Accordingly, we are proposing 

to remove this measure from the ESRD 

QIP measure set beginning with PY 

2021 under Factor 1 (measure 

performance among the majority of 

ESRD facilities is so high and unvarying 

that meaningful distinctions in 

improvements or performance can no 

longer be made). 

Proposed Removal of the Pain 

Assessment and Follow-Up Reporting 

Measure From the ESRD QIP Measure 

Set 

In the CY 2015 ESRD PPS final rule, 

we adopted the Pain Assessment and 

Follow-Up reporting measure beginning 

with PY 2018 (79 FR 66203 through 

66206) because patients with ESRD 

frequently experience pain that has a 

debilitating impact on their daily lives, 

and research has shown a lack of 

effective pain management strategies in 

place in dialysis facilities. We continue 

to believe that effective pain 

management is an important component 

of the care received by ESRD patients. 

However, our analysis of CY 2016 data 

indicates that with respect to that year, 

90 percent of ESRD facilities received 

the highest possible score on the 

measure (10 points) and 1 percent of 

ESRD facilities received no score on the 

measure. This finding indicates that 

documentation of pain management 

using a standardized tool, as well as 

documentation of a follow-up plan 

where pain is present, are widespread 

practices in ESRD facilities and that 

there is little room for improvement on 

the measure. Accordingly, we are 

proposing to remove this measure from 

the ESRD QIP measure set based on our 

proposed Factor 1 (measure 

performance among the majority of 

ESRD facilities is so high and unvarying 

that meaningful distinctions in 

improvements or performance can no 

longer be made). 

Proposed Removal of the Anemia 

Management Reporting Measure From 

the ESRD QIP Measure Set 

In the CY 2013 ESRD PPS final rule, 

we adopted the Anemia Management 

reporting measure beginning with the 

PY 2015 ESRD QIP (77 FR 67491 

through 67495) because we believe that 

it is important to monitor hemoglobin 

levels in patients to ensure that anemia 

is properly treated. Additionally, the 

measure’s adoption fulfilled the 

statutory requirement at section 

1881(h)(2)(A)(i) of the Act that the ESRD 

QIP include measures on anemia 

management that reflect labeling 

approved by the Food and Drug 

Administration (FDA) for such 

management. Additionally, in the CY 

2015 ESRD PPS final rule (79 FR 66192 

through 66197), we adopted the NQFendorsed Standardized Transfusion 

Ratio (STrR) measure beginning with PY 

2018 to ensure that patients with ESRD 

are not negatively affected by 

underutilization of ESAs, with the result 

that these patients have lower achieved 

hemoglobin levels and more frequently 

need red-blood-cell transfusions. We 

stated that there is a strong association 

between achieved hemoglobin levels 

and subsequent transfusion events, and 

that facilities have a direct role in 

determining achieved hemoglobin as a 

result of their anemia management 

practices (79 FR 66194). We also noted 

that the STrR measure meets the 

requirement at section 1881(h)(2)(A)(i) 

of the Act for the ESRD QIP to adopt 

measures of anemia management that 

reflect the labeling approved by the 

Food and Drug Administration for such 

management. 

Our analysis of CY 2016 data 

indicates that ESRD facility performance 

on the Anemia Management reporting 

measure was consistently high; 96 

percent of ESRD facilities received the 

highest possible score on the measure 

(10 points). This finding indicates that 

facility tracking of hemoglobin values 

and, as applicable, ESA dosages, is 

widely performed among ESRD facilities 

and that there is little room for 

improvement on the measure. 

We are therefore proposing to remove 

the Anemia Management reporting 

measure from the ESRD QIP measure set 

based on Factor 1 (measure performance 

among the majority of ESRD facilities is 

so high and unvarying that meaningful 

distinctions in improvements or 

performance can no longer be made). 

Proposed Removal of the Serum 

Phosphorus Reporting Measure From 

the ESRD QIP Measure Set 

In the CY 2014 ESRD PPS final rule, 

we adopted the Hypercalcemia measure 

beginning with the PY 2016 ESRD QIP 

(78 FR 72200 through 72203) as a 

measure of bone mineral metabolism. 

Specifically, this measure assesses the 

number of patients with uncorrected 

serum calcium greater than 10.2 mg/dL 

for a 3-month rolling average. In the CY 

2017 ESRD PPS final rule (81 FR 77876 

through 77879), we finalized two 

modifications to the measure’s technical 

specifications, as recommended during 

the measure maintenance process at the 

NQF, beginning with PY 2019. First, we 

added plasma as an acceptable substrate 

in addition to serum calcium. Second, 

we amended the denominator definition 

to include patients regardless of 

whether any serum calcium values were 

reported at the facility during the 3- 

month study period. These changes 

ensure that, beginning with PY 2019, 

the measure aligns with the NQFendorsed measure. 

In the CY 2017 ESRD PPS final rule, 

we adopted a second measure of bone 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34340 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

mineral metabolism, beginning with PY 

2020: The Serum Phosphorus reporting 

measure (81 FR 77911 through 77912). 

This measure evaluates the extent to 

which facilities monitor and report 

patient phosphorus levels. 

While we consider both the 

Hypercalcemia measure and the Serum 

Phosphorus measure to be measures of 

bone mineral metabolism, the two 

measures track different minerals. 

Hypercalcemia measures calcium levels 

and Serum Phosphorus measures 

phosphorus levels. Numerous studies 

have associated disorders of mineral 

metabolism with morbidity, including 

fractures, cardiovascular disease, and 

mortality. Overt symptoms of these 

abnormalities often manifest in only the 

most extreme states of calciumphosphorus dysregulation (81 FR 

77911). 

As a result of the NQF’s 2017 reendorsement of the Hypercalcemia 

measure, as well as the Hypercalcemia 

measure’s focus on clinical factors that 

are more directly under the facility’s 

control, we now consider the 

Hypercalcemia measure to be a superior 

measure of bone mineral metabolism 

compared with Serum Phosphorus. In 

addition, of the two measures, the 

Hypercalcemia measure is more focused 

on outcomes; the Serum Phosphorus is 

a reporting measure while the 

Hypercalcemia measure is a clinical 

measure. Finally, the Hypercalcemia 

measure is an outcome-based measure 

specific to the conditions treated with 

oral-only drugs, which is a statutory 

requirement for the ESRD QIP measure 

set. Based on the limited benefit 

provided to the Program by the Serum 

Phosphorus measure as well as its 

reporting burden, we are proposing to 

remove the Serum Phosphorus reporting 

measure from the ESRD QIP measure set 

based on Factor 5 (that is, a measure 

that is more strongly associated with 

desired patient outcomes for the 

particular topic becomes available). 

We seek comments on these 

proposals. We note that we are not 

proposing any changes to the PY 2021 

performance period or performance 

standards, and we refer readers to the 

CY ESRD PPS 2018 final rule (82 FR 

50778 through 50779) for a discussion 

of those policies. 

2. Estimated Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2021 ESRD QIP 

In the CY 2018 ESRD PPS final rule 

(82 FR 50763 through 50764) we 

finalized that for PY 2021, the 

performance standards, achievement 

thresholds, and benchmarks for the 

clinical measures would be set at the 

50th, 15th, and 90th percentile, 

respectively, of national performance in 

CY 2017, because this would give us 

enough time to calculate and assign 

numerical values to those performance 

standards prior to the beginning of the 

performance period for that payment 

year. At this time, we do not have the 

necessary data to assign numerical 

values to those performance standards, 

achievement thresholds, and 

benchmarks because we do not yet have 

complete data from CY 2017. 

Nevertheless, we are able to estimate 

these numerical values based on the 

most recent data available. In Table 14, 

we have provided the estimated 

numerical values for all finalized PY 

2021 ESRD QIP clinical measures, and 

we note that we have not proposed in 

this proposed rule to remove any of 

those measures. We will publish 

updated values for the clinical 

measures, using CY 2017 data that 

facilities submitted in the first part of 

CY 2018, in the CY 2019 ESRD PPS final 

rule. 

TABLE 14—ESTIMATED NUMERICAL VALUES FOR THE PERFORMANCE STANDARDS FOR THE PY 2021 ESRD QIP CLINICAL

MEASURES USING THE MOST RECENTLY AVAILABLE DATA

Measure Achievement 

threshold Benchmark Performance standard 

Vascular Access Type: 

Standardized Fistula Rate ........................................................................................................ 0.518 0.752 0.628 

Long-Term Catheter Rate ........................................................................................................ 19.23% 5.47% 12.02% 

Kt/V Composite ............................................................................................................................ 91.09% 98.56% 95.64% 

Hypercalcemia ............................................................................................................................. 2.41% 0.00% 0.86% 

Standardized Transfusion Ratio .................................................................................................. 1.683 0.200 0.846 

Standardized Readmission Ratio ................................................................................................ 1.273 0.630 0.998 

NHSN BSI .................................................................................................................................... 1.598 0 0.740 

SHR measure .............................................................................................................................. 1.249 0.670 0.967 

ICH CAHPS: Nephrologists’ Communication and Caring ........................................................... 57.36% 78.09% 67.04% 

ICH CAHPS: Quality of Dialysis Center Care and Operations ................................................... 53.14% 71.52% 61.22% 

ICH CAHPS: Providing Information to Patients .......................................................................... 73.31% 86.83% 79.79% 

ICH CAHPS: Overall Rating of Nephrologists ............................................................................. 49.33% 76.57% 62.22% 

ICH CAHPS: Overall Rating of Dialysis Center Staff .................................................................. 48.84% 77.42% 62.26% 

ICH CAHPS: Overall Rating of the Dialysis Facility .................................................................... 52.24% 82.48% 66.82% 

Data sources: VAT measures: 2016 CROWNWeb; SRR, STrR, SHR: 2016 Medicare claims; Kt/V: 2016 CROWNWeb; Hypercalcemia: 2016 

CROWNWeb; NHSN: 2016 CDC, ICH CAHPS: CMS 2015 and 2016. 

In previous rulemaking, we have 

finalized that if final numerical values 

for the performance standard, 

achievement threshold, and/or 

benchmark are worse than they were for 

that measure in the previous year of the 

ESRD QIP, then we would substitute the 

previous year’s performance standard, 

achievement threshold, and/or 

benchmark for that measure. In the CY 

2017 ESRD PPS final rule, we finalized 

an update to that policy because in 

certain cases, it may be appropriate to 

re-baseline the National Healthcare 

Safety Network (NHSN) Bloodstream 

Infection (BSI) clinical measure, such 

that expected infection rates are 

calculated on the basis of a more recent 

year’s data (81 FR 77886). In such cases, 

numerical values assigned to 

performance standards may appear to 

decline, even though they represent 

higher standards for infection 

prevention. For PY 2021 and future 

payment years, we propose to continue 

use of this policy for the reasons 

explained above. 

3. Proposed Change to the Scoring 

Methodology Previously Finalized for 

the PY 2021 ESRD QIP 

As described in section IV.A.1 of this 

proposed rule, CMS has established the 

Meaningful Measures Initiative to help 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34341 

guide and focus measure development 

efforts across settings. In order to align 

the ESRD QIP more closely with the 

priorities of that initiative, we proposed 

in section IV.B.1.c of this proposed rule 

to remove four reporting measures from 

the ESRD QIP measure set, beginning 

with PY 2021. In this section, we are 

proposing to make changes to the 

measure domains and weights. 

a. Proposed Revision To Measure 

Domains Beginning With the PY 2021 

ESRD QIP 

To more closely align with the 

Meaningful Measures Initiative, we are 

proposing to eliminate the Reporting 

Domain and to reorganize the Clinical 

Domain into three distinct domains: 

Patient & Family Engagement Domain 

(currently part of the Patient and Family 

Engagement/Care Coordination 

Subdomain), Care Coordination Domain 

(currently part of the Patient and Family 

Engagement/Care Coordination 

Subdomain), and Clinical Care Domain 

(currently the Clinical Care Subdomain). 

Adopting these topics as separate 

domains would result in a measure set 

that is more closely aligned with the 

priority areas in the Meaningful 

Measures Initiative. The proposed 

Clinical Care Domain would align with 

the Meaningful Measure Initiative 

priority to promote effective prevention 

and treatment of chronic disease. The 

proposed Patient & Family Engagement 

Domain would align with the 

Meaningful Measures Initiative priority 

to strengthen person and family 

engagement as partners in their care. 

The proposed Care Coordination 

Domain would align with the 

Meaningful Measures Initiative priority 

to promote effective communication and 

coordination of care. We are also 

proposing to continue use of the Patient 

Safety Domain. The Patient Safety 

Domain would align with the 

Meaningful Measures Initiative priority 

to make care safer by reducing harm 

caused in the delivery of care. We are 

also proposing to eliminate the 

Reporting Measure Domain from the 

ESRD QIP measure set, beginning in the 

PY 2021 Program, because there would 

no longer be any measures in that 

domain if our measure removal 

proposals in section IV.B.1.c of this 

proposed rule and our proposals in 

section IV.B.3.b of this proposed rule to 

reassign the Ultrafiltration Rate, and 

Clinical Depression Screening and 

Follow-Up Reporting measures to the 

Clinical Care Measure Domain and the 

Care Coordination Measure Domain, 

respectively, are finalized. 

b. Proposed Revisions to the PY 2021 

Domain and Measure Weights Used To 

Calculate the Total Performance Score 

(TPS) 

We are proposing to update the 

domain weights to reflect our proposed 

removal of the Reporting Domain and 

our proposed reorganization of the 

Clinical Domain into three distinct 

domains, as shown in Table 15. We 

believe that this proposed domain 

weighting best aligns the ESRD QIP’s 

measure set with our preferred 

emphasis on clinical outcomes by 

assigning the two largest weights in the 

Program to the domains most focused 

on clinical outcomes (Clinical Care 

Domain and the Care Coordination 

Domain). Of those two domains, we are 

proposing to assign the Clinical Care 

Domain the highest weight because it 

contains the largest number of 

measures. We are proposing to assign 

the remaining two domains a smaller 

share of the total performance score 

(TPS) (both 15 percent) because they are 

more focused on measures of clinical 

processes and less on measures of 

patient outcomes. We continue to 

believe that the measures in the Patient 

& Family Engagement and Safety 

domains address important clinical 

topics, but we have concluded that 

placing more weighting on measures 

more directly tied to clinical outcomes 

is the most appropriate method to 

structure the ESRD QIP’s measure 

domains. 

We are also proposing to adjust the 

PY 2021 measure weights that were 

finalized in the CY 2018 ESRD PPS final 

rule (82 FR 50781 through 50783), as 

shown in Table 15. This proposal is also 

intended to reflect our preferred 

emphasis on weighting measures that 

directly impact clinical outcomes more 

heavily. We also took into consideration 

the degree to which a facility can 

influence a measure rate by assigning a 

higher weight to measures where a 

facility has greater influence compared 

to measures where a facility has less 

influence. 

TABLE 15—PROPOSED DOMAIN AND

MEASURE WEIGHTING FOR THE PY 

2021 ESRD QIP 

Proposed measures/ 

measure topics 

by domain 

Proposed 

measure 

weight as 

percent 

of TPS 

Patient & Family Engagement Measure Domain: 

ICH CAHPS measure .... 15.00 

.

15.00 

TABLE 15—PROPOSED DOMAIN AND

MEASURE WEIGHTING FOR THE PY 

2021 ESRD QIP—Continued 

Proposed measures/ 

measure topics 

by domain 

Proposed 

measure 

weight as 

percent 

of TPS 

Care Coordination Measure 

Domain: 

SRR measure ................ 14.00 

SHR measure ................ 14.00 

Clinical Depression and 

Follow-Up reporting 

measure ..................... 2.00 

30 

Clinical Care Measure Domain: 

Kt/V Dialysis Adequacy 

Comprehensive measure .............................. 6.00 

Vascular Access Type 

measure topic * .......... 6.00 

Hypercalcemia measure 3.00 

STrR measure ............... 22.00 

Ultrafiltration Rate reporting measure ......... 3.00 

40 

Safety Measure Domain: 

NHSN BSI measure ...... 9.00 

NHSN Dialysis Event reporting measure ......... 6.00 

15 

* The VAT Measure Topic is weighted for 

each facility based on the number of eligible 

patients for each of the two measures in the 

topic, with each measure score multiplied by 

the respective percentage of patients within 

the topic to reach a weighted topic score that 

will be unique for each facility (76 FR 70265, 

70275). 

As shown in Table 15, we are 

proposing to decrease the weight of the 

following measures: In-Center 

Hemodialysis Consumer Assessment of 

Healthcare Providers and Systems (ICH 

CAHPS) measure (18.75 to 15 percent), 

Kt/V Dialysis Adequacy Comprehensive 

measure (13.5 to 6 percent), and 

Vascular Access Type (VAT) measure 

topic (13.5 to 6 percent). We are also 

proposing to increase the weights of the 

following measures: Standardized 

Readmission Ratio (SRR) measure (11.25 

to 14 percent), Standardized 

Hospitalization Ratio (SHR) measure 

(8.25 to 14 percent), Clinical Depression 

and Follow-Up measure (1.66 to 2 

percent), Hypercalcemia measure (1.5 to 

3 percent), STrR measure (8.25 to 22 

percent), and Ultrafiltration reporting 

measure (1.66 to 3 percent). We are 

proposing these changes to reflect our 

continued evaluation of the ESRD QIP’s 

measures and their contribution to the 

TPS in light of the proposed domain 

structure and weights as well as the 

proposed removal of the four reporting 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34342 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

measures. We note that we are not 

proposing any changes to the two 

measures included in the Safety 

Measure Domain: NHSN BSI and NSHN 

Dialysis Event measures. We continue to 

believe that the Safety domain 

appropriately contains these two NHSN 

measures and we believe their assigned 

weights—9 percent and 6 percent 

respectively—reflect the importance 

that we place on measures of patient 

safety for the PY 2021 ESRD QIP. 

We seek comment on our proposed 

domain and measure weighting 

proposals. 

Proposals To Update the Eligibility 

Requirement for Receiving a TPS for a 

PY and Reassign Measure Weights 

In the CY 2017 ESRD PPS final rule 

(81 FR 77888 through 77889), we 

finalized that to be eligible to receive a 

TPS, a facility must be eligible to be 

scored on at least one measure in the 

Clinical Measure Domain and at least 

one measure in the Reporting Domain. 

We are proposing to revise this policy 

due to our proposed removal of the 

Reporting Domain from the ESRD QIP 

measure set and our proposal to 

increase the number of domains overall 

from three to four. We are proposing 

that to be eligible to receive a TPS, a 

facility must be eligible to be scored on 

at least one measure in any two out of 

the four domains in the ESRD QIP 

measure set. The proposed approach is 

consistent with our previously finalized 

policy because it would allow facilities 

to receive a TPS with as few as two 

measure scores. The proposed approach 

also enables us to maximize the number 

of facilities that can participate, while 

ensuring that ESRD facilities are scored 

on a sufficient number of measures to 

create a sufficiently-reliable TPS. 

Because of this proposed eligibility 

requirement to receive a TPS, we 

concluded that we must also consider 

how to reassign measure weights in 

those cases where facilities do not 

receive a score on every measure but 

receive scores on enough measures to 

receive a TPS. We considered two 

alternatives to address this issue: (1) 

Redistribute the weights of missing 

measures evenly across the remaining 

measures (that is, we would divide up 

the missing measure weights equally 

across the remaining measures), and (2) 

redistribute the weights of missing 

measures proportionately across the 

remaining measures, based on their 

weights as a percentage of TPS (that is, 

when dividing up missing measure 

weights, we would shift a larger share 

of the weights to measures with higher 

assigned weights; measures with lower 

weights would gain a smaller portion of 

the missing measure weights). 

While the first policy alternative is 

administratively simpler to implement, 

this option would not maintain the 

Meaningful Measures Initiative 

priorities in the measure weights as 

effectively, and therefore, we are 

proposing the second policy alternative. 

As discussed earlier, we are proposing 

an approach for reweighting the 

domains and measures in the ESRD QIP 

for PY 2021 based on the priorities 

identified in the Meaningful Measures 

Initiative. Under this approach, we are 

proposing to assign a higher weight to 

measures that focus on outcomes and a 

lower weight to measures that focus on 

clinical processes. If we adopted the 

first policy alternative, measures that we 

consider a lower priority would 

represent a much larger share of TPS 

relative to measures that we consider a 

higher priority, in situations where a 

facility is missing one or more measure 

scores. Under the second policy 

alternative, when a facility is not scored 

on a measure, the weight of lower 

priority measures relative to higher 

priority measures would be more 

consistent with the weights assigned to 

the complete measure set. We note that 

this proposal, if finalized, would be 

effective for PY 2021; we use the PY 

2022 measure set for the following 

example. If a facility was ineligible to 

receive a score on all of the measures in 

both the Clinical Care Measure Domain 

and the Safety Measure Domain in PY 

2022, the weight of the Clinical 

Depression and Follow-Up Measure— 

the lowest weighted measure remaining 

in the measure set would increase from 

2.5 percent of the TPS to 13.5 percent 

of the TPS under the first policy 

alternative and would increase from 2.5 

percent of the TPS to 5.6 percent of the 

TPS under the second policy 

alternative. Under the same scenario, 

the weight of the ICH CAHPS measure— 

the highest weighted remaining in the 

measure set would increase from 15 

percent to 26 percent under the first 

policy alternative and would increase 

from 15 percent to 33.33 percent under 

the second policy alternative. 

Therefore, based on these 

considerations, we are proposing that in 

cases where a facility does not receive 

a score on one or more measures but 

receives scores on enough measures to 

receive a TPS, we would redistribute the 

weights of any measures for which the 

facility does not receive a score to the 

remaining measures proportionately 

based on their measures weight as a 

percent of the TPS. This redistribution 

would occur across all measures, 

regardless of their domain, and would 

be effective beginning PY 2021. We have 

concluded that this policy would more 

effectively maintain the Meaningful 

Measure Initiative’s priorities in the 

ESRD QIP’s measure weights in 

situations where a facility does not 

receive a score on one or more 

measures. We believe that this 

proportional reweighting would ensure 

ESRD QIP TPSs are calculated in a fair 

and equitable manner. 

We seek comment on this proposal. 

4. Proposed Update to the Requirement 

To Begin Reporting Data for the ESRD 

QIP 

In the CY 2013 ESRD PPS final rule, 

we finalized our current policy to begin 

counting the number of months in 

which a facility is open on the first day 

of the month after the facility’s CMS 

Certification Number (CCN) Open Date 

(77 FR 67512 through 67513). In 

response to comments suggesting that 

facilities be required to begin reporting 

on the first day of the third month after 

its CCN Open Date, we agreed that a 

facility needs time to ensure that its 

systems are in place to report the data, 

and we adopted policies that would 

allow new facilities to be exempted 

from scoring on individual measures 

based on their CCN Open Date. Despite 

these policies, we have continued to 

receive feedback that new facilities need 

additional time to deploy their 

information systems and enroll in 

CROWNWeb and NHSN. This feedback 

was presented both through the 

rulemaking process (80 FR 69066), and 

during the period in which facilities 

preview their scores. In response to this 

continued feedback, we have taken 

another look at our eligibility policies 

for new facilities, keeping in mind that 

program requirements have become 

more complex over time, and have 

concluded that our existing policy may 

not provide new facilities with 

sufficient time to enroll in CROWNWeb 

and the NHSN, or otherwise prepare to 

report the data needed for the ESRD 

QIP. 

Accordingly, for PY 2021 and beyond, 

we are proposing to update this policy. 

The proposed policy would require 

facilities to collect data for purposes of 

the ESRD QIP beginning with services 

furnished on the first day of the month 

that is 4 months after the month in 

which the CCN becomes effective. For 

example, if a facility has a CCN effective 

date of January 15, 2019, that facility 

would be required to begin collecting 

data for purposes of the ESRD QIP 

beginning with services furnished on 

May 1, 2019. The proposed policy 

would provide facilities with a longer 

time period than they are given now to 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34343 

become familiar with the processes for 

collecting and reporting ESRD QIP data 

before those data are used for purposes 

of scoring. We believe this policy 

appropriately balances our desire to 

incentivize prompt participation in the 

ESRD QIP with the practical challenges 

facing new ESRD facilities as they begin 

operations. 

We welcome public comments on this 

proposal. 

5. Estimated Payment Reduction for the 

PY 2021 ESRD QIP 

Under our current policy, a facility 

will not receive a payment reduction in 

connection with its performance under 

the PY 2021 ESRD QIP if it achieves a 

minimum TPS that is equal to or greater 

than the total of the points it would 

have received if: (1) It performs at the 

performance standard for each clinical 

measure; and (2) it receives the number 

of points for each reporting measure that 

corresponds to the 50th percentile of 

facility performance on each of the PY 

2019 reporting measures (82 FR 50787 

through 50788). 

We were unable to calculate a 

minimum a TPS for PY 2021 in the CY 

2018 ESRD PPS final rule because we 

were not yet able to calculate the 

performance standards for each of the 

clinical measures. We therefore stated in 

the CY 2018 ESRD PPS final rule (82 FR 

50787 through 50788) that we would 

publish the minimum TPS for the PY 

2021 ESRD QIP in the CY 2019 ESRD 

PPS final rule. 

Based on the estimated performance 

standards proposed in section IV.B.2 of 

this proposed rule, we estimate that a 

facility must meet or exceed a minimum 

TPS of 57 for PY 2021. For all of the 

clinical measures, these data come from 

CY 2017. We are proposing that a 

facility that achieves a TPS below the 

minimum TPS that we set for PY 2021 

would receive payment reduction based 

on the estimated TPS ranges indicated 

in Table 16. 

TABLE 16—ESTIMATED PAYMENT REDUCTION SCALE FOR PY 2021 

BASED ON THE MOST RECENTLY

AVAILABLE DATA

Total performance score Reduction 

(%) 

100–57 .................................. 0 

56–47 .................................... 0.5 

46–37 .................................... 1.0 

36–27 .................................... 1.5 

26–0 ...................................... 2.0 

We intend to finalize the minimum 

TPS for PY 2021, as well as the payment 

reduction ranges for that PY, in the CY 

2019 ESRD PPS final rule. 

We see comment on these proposals. 

6. Data Validation Proposals for PY 2021 

and Subsequent Years 

One of the critical elements of the 

ESRD QIP’s success is ensuring that the 

data submitted to calculate measure 

scores and TPSs are accurate. The ESRD 

QIP currently includes two validation 

studies for this purpose: The 

CROWNWeb pilot data validation study 

(OMB Control Number 0938–1289) and 

the NHSN dialysis event validation 

study (OMB Control Number 0938– 

1340). 

Since the PY 2016 ESRD QIP, we have 

validated data submitted to 

CROWNWeb for each payment year by 

sampling no more than 10 records from 

300 randomly selected facilities (78 FR 

72223 through 72224). In the CY 2018 

ESRD PPS final rule, we finalized that 

for PY 2020, we would continue 

validating these data using the same 

methodology, but also finalized that we 

would deduct 10 points from a facility’s 

TPS for PY 2020 if the facility was 

selected for validation but did not 

submit the requested records within 60 

calendar days of receiving a request (82 

FR 50766 through 50767). 

Since we issued the CY 2018 ESRD 

PPS final rule, we have considered 

whether it is appropriate to continue to 

refer to this validation of CROWNWeb 

data as a study. We analyzed the 

CROWNWeb data that we used for 

purposes of the PY 2016 validation 

study to determine how reliable the 

current methodology is, and our 

analysis showed an overall match rate of 

92.2 percent among the facilities 

selected for participation. Additionally, 

based on our statistical analyses, we 

have concluded that the validation 

study is well-powered when we sample 

10 records per facility from 300 

facilities, meaning that a validation 

study implemented with those sampling 

requirements will meet our needs when 

assessing the accuracy and 

completeness of facilities’ CROWNWeb 

data submissions. 

This analysis indicates that our 

validation methodology produces 

reliable results and can be used to 

ensure that accurate ESRD QIP data are 

reported to CROWNWeb. Therefore, we 

are proposing to validate the 

CROWNWeb data submitted for the 

ESRD QIP, beginning with CY 2019 data 

submitted for PY 2021, using the 

methodology we first adopted for the PY 

2016 ESRD QIP and updated for the PY 

2020 ESRD QIP. Under this 

methodology, we would sample no 

more than 10 records from 300 

randomly selected facilities each year, 

and we would deduct 10 points from a 

facility’s TPS if the facility was selected 

for validation but did not submit the 

requested records. 

With respect to data submitted to the 

NSHN, we have been developing and 

testing a protocol for validating those 

data on a statistically relevant scale. For 

PY 2020, our methodology for this 

feasibility study is to randomly select 35 

facilities and require that each of those 

facilities submit 10 patient records 

covering 2 quarters of data reported in 

CY 2018. Our selection process targets 

facilities for NHSN validation by 

identifying which facilities that are at 

risk for under-reporting. For additional 

information on this methodology, we 

refer readers to the CY 2018 ESRD PPS 

final rule (82 FR 50766 through 50767). 

We have continued to work with the 

Centers for Disease Control and 

Prevention (CDC) to determine the most 

appropriate sample size for achieving 

reliable validation results through this 

NSHN dialysis event validation study. 

Based on recent statistical analyses 

conducted by the CDC, we have 

concluded that to achieve the most 

reliable results for a payment year, we 

would need to review approximately 

6,072 charts submitted by 303 facilities. 

This sample size would produce results 

with a 95 percent confidence level and 

a 1 percent margin of error. Based on 

these results and our desire to ensure 

that dialysis event data reported to the 

NHSN for purposes of the ESRD QIP is 

accurate, we are proposing to increase 

the sample sizes used for the NHSN 

dialysis event validation study, over a 2 

year period, to 300 facilities and 20 

records per quarter for each of the first 

2 quarters of the CY for each facility 

selected to participate in the study. 

Specifically, for PY 2021, we are 

proposing to increase the number of 

facilities that we would select for 

validation to 150, and then for PY 2022, 

to increase that number to 300. With 

respect to the number of patient records 

that each selected facility would be 

required to submit to avoid a 10 point 

deduction to its TPS for that payment 

year, we are proposing that for both PY 

2021 and PY 2022, each selected facility 

must submit 20 patient records per 

quarter for each of the first 2 quarters of 

the CY, within 60 calendar days of 

receiving a request. We are also 

proposing to continue targeted 

validation. 

We seek comments on these 

proposals. We also seek comments on 

potential future policy proposals that 

would encourage accurate, 

comprehensive reporting to the NHSN, 

such as introducing a penalty for 

facilities that do not meet an established 

reporting or data accuracy threshold, 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34344 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

11Tonelli M, Wiebe N, Knoll G, et al. Systematic 

review: Kidney transplantation compared with 

dialysis in clinically relevant outcomes. American 

Journal of Transplantation 2011 Oct; 11(10): 2093– 

2109. 12Schold JD, Buccini LD, Goldfarb DA, et al. 

Association between kidney transplant center 

performance and the survival benefit of 

transplantation versus dialysis. Clin J Am Soc 

Nephrol. 2014 Oct 7; 9(10):1773–80. 

13Patzer RE, Plantinga L, Krisher J, Pastan SO. 

Dialysis facility and network factors associated with 

low kidney transplantation rates among United 

States dialysis facilities. Am J Transplant. 2014 Jul; 

14(7):1562–72. 

introducing a bonus for facilities that 

perform above an established reporting 

or data accuracy threshold, developing 

targeted education on NHSN reporting, 

or requiring that a facility selected for 

validation that does not meet an 

established reporting or data accuracy 

threshold be selected again the next 

year. 

C. Proposed Requirements for the PY 

2022 ESRD QIP 

1. Proposed Continuing and New 

Measures for the PY 2022 ESRD QIP 

If our proposal to remove four 

measures beginning with the PY 2021 

ESRD QIP is finalized, the PY 2021 

ESRD QIP measure set would have 12 

measures. In the CY 2013 ESRD PPS 

final rule, we finalized that once a 

quality measure is selected and 

finalized for the ESRD QIP through 

rulemaking, the measure would 

continue to remain part of the Program 

for all future years, unless we remove or 

replace it through rulemaking or 

notification (if the measure raises 

potential safety concerns) (77 FR 

67475). In addition to continuing all of 

the measures included in the PY 2021 

ESRD QIP, we are proposing to adopt 

two new measures beginning with the 

PY 2022 ESRD QIP: Percentage of 

Prevalent Patients Waitlisted clinical 

measure and the Medication 

Reconciliation for Patients Receiving 

Care at Dialysis Facilities reporting 

measure. 

a. Proposed Percentage of Prevalent 

Patients Waitlisted (PPPW) Clinical 

Measure 

We are proposing to add one new 

transplant clinical measure to the ESRD 

QIP measure set beginning with PY 

2022: (1) Percentage of Prevalent 

Patients Waitlisted (PPPW). The 

proposed new PPPW measure would 

align the ESRD QIP more closely with 

a Meaningful Measures Initiative 

priority area—increased focus on 

effective communication and 

coordination. The proposed measure 

assesses the percentage of patients at 

each dialysis facility who were on the 

kidney or kidney-pancreas transplant 

waitlist. 

Background 

The benefits of kidney transplantation 

over dialysis as a modality for renal 

replacement therapy for patients with 

ESRD are well established. Although no 

clinical trials comparing the two have 

ever been done due to ethical 

considerations, a large number of 

observational studies have been 

conducted demonstrating improved 

survival and quality of life with kidney 

transplantation.11 Despite the benefits of 

kidney transplantation, the total number 

of transplants performed in the U.S. has 

stagnated since 2006.12 There is also 

wide variability in transplant rates 

across ESRD networks.13 Given the 

importance of kidney transplantation to 

patient survival and quality of life, as 

well as the variability in waitlist rates 

among facilities, a measure to encourage 

facilities to coordinate care with 

transplant centers to waitlist patients is 

warranted. 

This measure emphasizes shared 

accountability between dialysis 

facilities and transplant centers. 

Data Sources 

The proposed PPPW measure uses 

CROWNWeb data to calculate the 

denominator, including the risk 

adjustment and exclusions. The Organ 

Procurement and Transplant Network 

(OPTN) is the data source for the 

numerator (patients who are waitlisted.) 

The OPTN is a public-private 

partnership established by the National 

Organ Transplant Act in 1984. The 

private nonprofit organization, United 

Network for Organ Sharing (UNOS) 

handles administration of the waitlist 

under a contract with the federal 

government. The Nursing Home 

Minimum Dataset and Questions 17u 

and 22 on the Medical Evidence Form 

CMS–2728 are used to identify ESRD 

patients who were admitted to a skilled 

nursing facility (SNF) because those 

patients are excluded from the measure. 

A separate CMS file that contains final 

action claims submitted by hospice 

providers is used to identify ESRD 

patients who have been admitted to 

hospice because those patients are also 

excluded from the measure. 

Outcome 

The PPPW measure tracks the 

percentage of patients attributed to each 

dialysis facility during a 12-month 

period who were on the kidney or 

kidney-pancreas transplant waitlist. The 

measure is a directly standardized 

percentage, in that each facility’s 

percentage of kidney transplant patients 

on the kidney transplant waitlist is 

based on the number of patients one 

would expect to be waitlisted for a 

facility with patients of similar age and 

co-morbidities. 

Cohort 

The PPPW measure includes ESRD 

patients who are under the age of 75 on 

the last day of each month and who are 

attributed to the dialysis facility. We 

create a treatment history file using a 

combination of Medicare dialysis 

claims, the Medical Evidence Form 

CMS–2728, and data from CROWNWeb 

as the data source for the facility 

attribution. This file provides a 

complete history of the status, location, 

and dialysis treatment modality of an 

ESRD patient from the date of the first 

ESRD service until the patient dies or 

until the measurement period ends. For 

each patient, a new record is created 

each time he or she changes facility or 

treatment modality. Each record 

represents a time period associated with 

a specific modality and dialysis facility. 

Each patient-month is assigned to only 

one facility. A patient could be counted 

up to 12 times in a 12-month reporting 

period, and home dialysis is included. 

Inclusion and Exclusion Criteria 

The PPPW measure excludes patients 

75 years of age or older on the last day 

of each month. Additionally, patients 

who are admitted to a SNF or hospice 

during on the date that the monthly 

count takes place are excluded from the 

denominator for that month. An eligible 

monthly patient count takes place on 

the last day of each month during the 

performance period. 

Risk Adjustment 

The PPPW measure is adjusted for 

patient age. The measure is a directly 

standardized percentage, in the sense 

that each facility’s percentage of 

patients on the waitlist is adjusted to the 

national age distribution. Further 

information on the risk adjustment 

model can be found in the PPPW 

Methodology Report (https:// 

www.cms.gov/Medicare/QualityInitiatives-Patient-AssessmentInstruments/ESRDQIP/061_Technical

Specifications.html). We assume a 

logistic regression model for the 

probability that a prevalent patient is 

waitlisted. 

2017 Measures Application Partnership 

Review 

We submitted the PPPW measure to 

the Measures Application Partnership in 

2017 for consideration as part of the prerulemaking process, and Measures 

Application Partnership’s final 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34345 

14Cardone KE, Bacchus S, Assimon MM, Pai AB, 

Manley HJ. Medication-related problems in CKD. 

Adv Chronic Kidney Dis. 2010;17(5):404–412. 

15Parker WM and Cardone KE. Medication 

Management Services in a Dialysis Center: Patient 

and Dialysis Staff Perspectives. Albany College of 

Pharmacy and Health Services. January 2015. 

Available at: http://www.acphs.edu. Accessed 

March 22, 2016. 

recommendations may be found at 

http://www.qualityforum.org/WorkArea/ 

linkit.aspx?LinkIdentifier=id&ItemID=

86972. 

The Measures Application 

Partnership expressed conditional 

support for the PPPW measure for 

inclusion in the ESRD QIP. The 

Measures Application Partnership 

acknowledged that the measure 

addresses an important quality gap in 

dialysis facilities, but discussed a 

number of factors that it believed should 

be balanced when implementing the 

measure. The Measures Application 

Partnership reiterated the critical need 

to help patients receive kidney 

transplants to improve their quality of 

life and reduce their risk of mortality. 

The Measures Application Partnership 

also noted that there are disparities in 

the receipt of kidney transplants and 

there is a need to incentivize dialysis 

facilities to educate patients about 

waitlisting processes and requirements. 

The Measures Application Partnership 

also acknowledged that a patient’s 

suitability to be waitlisted may not be 

within the control of a dialysis facility 

or transplant centers. The Measures 

Application Partnership also noted the 

need to ensure that the measure is 

appropriately risk-adjusted and 

recommended that CMS explore 

whether it would be appropriate to 

adjustment the measure for social risk 

factors and proper risk model 

performance. The Measures Application 

Partnership conditionally supported the 

measure with the condition that CMS 

submit it to the NQF for consideration 

of endorsement. Specifically, the 

Measures Application Partnership 

recommended that this measure be 

reviewed by NQF’s Scientific Methods 

Panel as well the Renal Standing 

Committee. The Measures Application 

Partnership recommended that as part 

of the endorsement process, the NQF 

examine the validity of the measure, 

particularly the risk adjustment model 

and if it appropriately accounts for 

social risk. Finally, the Measures 

Application Partnership noted the need 

for the Disparities Standing Committee 

to provide guidance on potential health 

equity concerns. 

In response to these 

recommendations, we have submitted 

the measure to the NQF for 

consideration of endorsement, and our 

understanding is that it will be 

evaluated by all of the committees that 

the Measures Application Partnership 

suggested. We note further that access to 

transplantation is a known area of 

disparity and has a known performance 

gap, and the Measures Application 

Partnership coordinating committee 

expressed strong support for the 

measure. 

For additional information on the 

Measures Application Partnership’s 

evaluation of measures for the ESRD 

QIP, we refer readers to Measures 

Application Partnership’s website at: 

http://www.qualityforum.org/WorkArea/ 

linkit.aspx?LinkIdentifier=

id&ItemID=86972. 

Based on the benefits of kidney 

transplantation over dialysis as a 

modality for renal replacement therapy 

for patients with ESRD, and taking into 

account the Measures Application 

Partnership’s conditional endorsement 

and our submission of the measure to 

the NQF for consideration of 

endorsement, we propose to adopt the 

PPPW measure beginning with the PY 

2022 ESRD QIP. We note also that there 

are currently no NQF-endorsed 

transplant measures that we could have 

considered, and that we believe we 

should adopt this measure under 

section 1881(h)(2)(B)(ii) of the Act due 

to its clinical significance for the ESRD 

patient population. 

We welcome comments on this 

proposal. 

b. Proposed New Medication 

Reconciliation for Patients Receiving 

Care at Dialysis Facilities (MedRec) 

Reporting Measure 

We are proposing to adopt the New 

Medication Reconciliation for Patients 

Receiving Care at Dialysis Facilities 

(MedRec) reporting measure for the 

ESRD QIP measure set, beginning with 

PY 2022. The MedRec measure assesses 

whether a facility has appropriately 

evaluated a patient’s medications, an 

important safety concern for the ESRD 

patient population because those 

patients typically take a large number of 

medications. Inclusion of the MedRec 

measure in the ESRD QIP measure set 

would align with the Meaningful 

Measure Initiative priority area of 

making care safer by reducing harm 

caused by care delivery. 

Medication management is a critical 

safety issue for all patients, but 

especially for patients with ESRD, who 

are often prescribed 10 or more 

medications simultaneously, take an 

average of 17 to 25 doses per day, have 

numerous comorbid conditions, have 

multiple healthcare providers and 

prescribers, and undergo frequent 

medication regimen changes.14

Medication-related problems contribute 

significantly to the approximately $40 

billion in public and private funds spent 

annually on ESRD care in the U.S.; for 

patients with chronic kidney disease 

alone, this figure is $10 billion.15 We 

believe that medication management 

practices focusing on medication 

documentation, review, and 

reconciliation could systematically 

identify and resolve medication-related 

problems, improve ESRD patient 

outcomes, and reduce total costs of care. 

Data Sources 

The proposed MedRec measure is 

calculated using administrative claims 

and electronic clinical data from 

CROWNWeb, and facility medical 

records. For additional information on 

the measure, we refer readers to the 

measure steward’s website; the Kidney 

Care Quality Alliance (KCQA): http:// 

kidneycarepartners.com/wp-content/ 

uploads/2014/11/tbKCQA_NQF

endorsedSpecs10-26-17.pdf. The KCQA 

is funded by Kidney Care Partners 

(KCP), a coalition of patient advocates, 

dialysis professionals, care providers, 

and manufacturers, and was established 

in 2005 as an independent organization 

for the purpose of developing quality 

measures for use in the dialysis setting 

of care. 

Outcome 

The outcome of the MedRec measure 

is the provision of medication 

reconciliation services and their 

documentation by an eligible 

professional for patients attributed to 

dialysis facilities each month. 

Cohort 

The MedRec measure includes all 

patients attributed to a dialysis facility 

during each month of the performance 

period. The numerator is the number of 

patient-months for which medication 

reconciliation was performed and 

documented by an eligible professional 

during the reporting period. The 

denominator statement is the total 

number of eligible patient-months for all 

patients attributed to a dialysis facility 

during the reporting period. 

Inclusion and Exclusion Criteria 

The MedRec measure excludes incenter patients who receive less than 7 

hemodialysis treatments in the facility 

during the reporting month. 

Risk Adjustment 

The MedRec measure is not riskadjusted because it is process measure. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34346 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

16Available at: https://www.qualityforum.org/ 

Publications/2018/02/2018_Considerations_for_

Implementing_Measures_Final_Report_-_

Hospitals.aspx. 

2017 Measures Application Partnership 

Review 

We submitted the MedRec measure to 

the Measures Application Partnership in 

2017 for consideration as part of the prerulemaking process, and the Measures 

Application Partnership addressed the 

measure in its February 2018 Hospital 

Workgroup report.16 The Measures 

Application Partnership supported the 

measure for the ESRD QIP, noting that 

the measure is NQF-endorsed and 

addresses both patient safety and care 

coordination. The Measures Application 

Partnership also noted that the topic of 

medication reconciliation is currently a 

gap area in the ESRD QIP’s measure set 

and that the measure has broad support 

across stakeholders. The Measures 

Application Partnership emphasized 

that medication reconciliation is an 

important issue for ESRD patients who 

see multiple clinicians and may require 

numerous medications. The Measures 

Application Partnership noted that 

administration of the wrong medication 

can have grave consequences for an 

ESRD patient. 

For additional information on the 

Measures Application Partnership’s 

evaluation of measures for the ESRD 

QIP, we refer readers to the Measures 

Application Partnership’s website at: 

https://www.qualityforum.org/Setting_

Priorities/Partnership/Measure_

Applications_Partnership.aspx. 

We agree with the Measures 

Application Partnership’s assessment 

that the MedRec measure is appropriate 

for the ESRD QIP because medication 

reconciliation is currently a gap area in 

the Program’s measure set and is an 

important issue for ESRD patients who 

receive care from multiple clinicians 

and providers and may require 

numerous medications. ESRD patients 

can be significantly harmed by 

medication administration errors. We 

continue to believe that care 

coordination is a critical quality 

improvement topic. We therefore, 

propose to adopt the MedRec measure 

beginning with the PY 2022 ESRD QIP 

and to place the measure into the 

Patient Safety Domain. We note further 

that, as required by section 

1881(h)(2)(B)(i) of the Act, CMS is 

required to use endorsed measures in 

the ESRD QIP unless the exception at 

section 1881(h)(2)(B)(ii) of the Act 

applies. The MedRec measure is 

endorsed by NQF as #2988. 

2. Proposed Performance Period for the 

PY 2022 ESRD QIP 

We propose to establish CY 2020 as 

the performance period for the PY 2022 

ESRD QIP for all measures. We continue 

to believe that a 12-month performance 

period provides us sufficiently reliable 

quality measure data for the ESRD QIP. 

We welcome comment on this 

proposal. 

3. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the PY 2022 ESRD QIP 

and Subsequent Years 

Section 1881(h)(4)(A) of the Act 

provides that ‘‘the Secretary shall 

establish performance standards with 

respect to measures elected . . . for a 

performance period with respect to a 

year.’’ Section 1881(h)(4)(B) of the 

Social Security Act (the Act) further 

provides that the ‘‘performance 

standards . . . shall include levels of 

achievement and improvement, as 

determined appropriate by the 

Secretary.’’ We use the performance 

standards to establish the minimum 

score a facility must achieve to avoid a 

Medicare payment reduction. 

a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for Clinical Measures in the 

PY 2022 ESRD QIP 

For the same reasons stated in the CY 

2013 ESRD PPS final rule (77 FR 67500 

through 76502), we are proposing for PY 

2022 to set the performance standards, 

achievement thresholds, and 

benchmarks for the clinical measures 

(including the proposed PPPW measure) 

at the 50th, 15th, and 90th percentile, 

respectively, of the national 

performance in CY 2018. We are also 

proposing to apply these performance 

standards to all clinical measures we 

use for the ESRD QIP in future payment 

years. We welcome comment on these 

proposals. 

At this time, we do not have the 

necessary data to assign numerical 

values to the proposed performance 

standards for the clinical measures 

because we do not yet have data from 

CY 2018 or the first period of CY 2019. 

We intend to publish these numerical 

values, using data from CY 2018 and the 

first portion of CY 2019, in the CY 2019 

ESRD PPS final rule. 

b. Proposed Performance Standards for 

the PY 2022 Reporting Measures 

In the CY 2016 ESRD PPS final rule, 

we finalized performance standards for 

the Screening for Clinical Depression 

and Follow-Up reporting measure (79 

FR 66209). In the CY 2017 ESRD PPS 

final rule, we finalized performance 

standards for the Ultrafiltration Rate 

reporting measure (81 FR 77916) and 

the NHSN Dialysis Event reporting 

measure (81 FR 77916). We propose to 

continue use of these performance 

standards for these reporting measures 

for the PY 2022 and future payment 

years. 

For the proposed MedRec reporting 

measure, we propose to set the 

performance standard for PY 2022 and 

future payment years as successfully 

reporting the following data elements 

for the measure to CROWNWeb, for 

each qualifying patient, on a monthly 

basis, during the performance period: 

(1) The date that the facility completed 

the medication reconciliation, (2) the 

type of clinician who completed the 

medication reconciliation, and (3) the 

name of the clinician. 

We welcome comments on these 

proposals. 

4. Proposals for Scoring the PY 2022 

ESRD QIP and Subsequent Years 

a. Proposal To Score Facility 

Performance on Clinical Measures 

Based on Achievement 

In the CY 2014 ESRD PPS final rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on achievement (78 FR 72215). We 

propose to use this methodology for 

scoring achievement for each clinical 

measure, including the proposed PPPW 

measure, for the PY 2022 ESRD QIP and 

for future program years. 

b. Proposal To Score Facility 

Performance on Clinical Measures 

Based on Improvement 

In the CY 2014 ESRD PPS final rule, 

we finalized a policy for scoring 

performance on clinical measures based 

on improvement (78 FR 72215 through 

72216). For the PY 2022 ESRD QIP, we 

propose to continue that policy, 

defining the improvement threshold as 

the facility’s performance on the 

measure during the baseline period 

(which for PY 2022, would be CY 2019). 

The facility’s improvement score would 

be calculated by comparing its 

performance on the measure during CY 

2020 (the proposed performance period) 

to the improvement threshold and 

benchmark. We also propose to use this 

same methodology for scoring the PPPW 

measure proposed in section IV.C.1.a of 

this proposed rule. Finally, we propose 

to continue this policy for subsequent 

years of the ESRD QIP. 

c. Scoring Facility Performance on 

Reporting Measures 

In the CY 2015 ESRD PPS final rule, 

we finalized policies for scoring 

performance on the Clinical Depression 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34347 

Screening and Follow-Up reporting 

measures in the ESRD QIP (79 FR 66210 

through 66211). In the CY 2017 ESRD 

PPS final rule, we finalized policies for 

scoring performance on the 

Ultrafiltration Rate reporting measure 

(81 FR 77917). We propose to continue 

use of these policies for the two 

continuing reporting measures for the 

PY 2022 ESRD QIP and subsequent 

years. 

For the PY 2022 ESRD QIP, we 

propose to score facilities with a CCN 

Open Date before January 1st of the 

performance period year (which, for the 

PY 2022 ESRD QIP, would be 2020) on 

the proposed MedRec measure using a 

formula similar to the one previously 

finalized for the Ultrafiltration Rate 

reporting measure (81 FR 77917): 

((# patient-months successfully 

reporting data)/(# eligible patientmonths)*12)–2) 

As with the Ultrafiltration Rate 

reporting measure, we would round the 

result of this formula (with half rounded 

up) to generate a measure score from 0– 

10. We also propose to score facilities 

using this methodology for subsequent 

years of the ESRD QIP. 

We welcome public comment on all 

of these scoring proposals. 

d. Scoring the ICH CAHPS Clinical 

Measure 

In the CY 2015 ESRD PPS final rule, 

we finalized a policy for scoring 

performance on the ICH CAHPS clinical 

measure based on both achievement and 

improvement (79 FR 66209 through 

66210). We are proposing to use this 

scoring methodology for the PY 2022 

ESRD QIP and subsequent years. 

We welcome comments on this 

scoring proposal. 

5. Proposals for Weighting the Measure 

Domains, and for Weighting the TPS for 

PY 2022 

For PY 2022, we are proposing to 

continue use of the domain weights 

proposed for PY 2021 in section IV.B.3 

of this proposed rule, and to update the 

individual measure weights in the Care 

Coordination Domain and Safety 

Domain to reflect the introduction of 

one new proposed measure in each of 

those domains. We are proposing to 

assign the proposed PPPW measure to 

the Care Coordination Domain, with a 

weight of 4 percent of the TPS. To 

accommodate the addition of the PPPW 

measure to the Care Coordination 

Domain without having to adjust the 

domain’s overall weight, we are 

proposing to reduce the weight of two 

continuing measures in the Care 

Coordination Domain as follows: The 

SRR measure from 14 to 12 percent and 

the SHR measure from 14 to 12 percent. 

We are proposing to assign the proposed 

MedRec measure to the Safety Domain, 

with a weight of 4 percent of the TPS 

(see Table 17). To accommodate the 

addition of the new MedRec measure to 

the Safety Domain without having to 

adjust the domain’s overall weight, we 

are proposing to reduce the weight of 

two continuing measures in the Safety 

Domain as follows: The NHSN BSI 

clinical measure from 9 to 8 percent and 

the NHSN Dialysis Event measure from 

6 to 3 percent. To assign these proposed 

measure weights, we used the same 

rationale as proposed for PY 2021. 

TABLE 17—PROPOSED REVISIONS TO MEASURE WEIGHTS FOR THE PY 2022 ESRD QIP 

Measures/measure topics by subdomain Measure weight within the domain 

(proposed for PY 2022) 

Measure weight as percent of TPS 

(proposed for PY 2022) 

CARE COORDINATION MEASURE DOMAIN 

SRR measure .......................................................................................... 40.00% ........................................... 12.00%. 

SHR measure .......................................................................................... 40.00 .............................................. 12.00. 

PPPW measure ....................................................................................... 13.33 .............................................. 4.00. 

Clinical Depression and Follow-Up reporting measure .......................... 6.67 ................................................ 2.00. 

TOTAL: CARE COORDINATION MEASURE DOMAIN .................. 100% of Care Coordination Measure Domain.30% of TPS. 

SAFETY MEASURE DOMAIN 

MedRec measure .................................................................................... 26.67 .............................................. 4.00. 

NHSN BSI clinical measure .................................................................... 53.33 .............................................. 8.00. 

NHSN Dialysis Event reporting measure ................................................ 20.00 .............................................. 3.00. 

TOTAL: SAFETY MEASURE DOMAIN ........................................... 100% of Safety Measure Domain. 15% of TPS. 

In section IV.B.3.b of this proposed 

rule, we propose that to be eligible to 

receive a TPS, a facility must be eligible 

to be scored on at least one measure in 

two of the four measure domains. If that 

proposal is finalized, we would apply it 

to PY 2022 and subsequent payment 

years. 

We seek comments on these 

proposals. 

6. Eligibility Proposals for the PY 2022 

ESRD QIP and Subsequent Payment 

Years 

Our policy is to score facilities on 

clinical and reporting measures for 

which they have a minimum number of 

qualifying patients during the 

performance period (77 FR 67510 

through 67512). We propose to continue 

use of these minimum data policies for 

the PY 2022 ESRD QIP measure set and 

in subsequent years. We are also 

proposing to use these same minimum 

data policies for the proposed PPPW 

measure and proposed MedRec measure 

for the PY 2022 ESRD QIP and 

subsequent years. 

We seek comment on these proposals. 

7. Payment Reductions for the PY 2022 

ESRD QIP 

Section 1881(h)(3)(A)(ii) of the Act 

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution 

across facilities, such that facilities 

achieving the lowest TPSs receive the 

largest payment reductions. For 

additional information on payment 

reduction policies, we refer readers to 

the CY 2018 ESRD PPS final rule (82 FR 

50787 through 50788). 

Because we are not yet able to 

calculate the performance standards for 

each of the clinical measures, we are 

also not able to calculate a proposed 

minimum TPS at this time. In the CY 

2020 ESRD PPS proposed rule, we will 

propose the minimum TPS, based on CY 

2018 data. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34348 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

17Meier-Kriesche, Herwig-Ulf, and Bruce Kaplan. 

‘‘Waiting time on dialysis as the strongest 

modifiable risk factor for renal transplant outcomes: 

A Paired Donor Kidney Analysis1.’’ Transplantation 

74.10 (2002): 1377–1381; Meier-Kriesche, H. U., 

Port, F. K., Ojo, A. O., Rudich, S. M., Hanson, J. A., 

Cibrik, D. M., Leichtman, A. B & Kaplan, B. (2000). 

Effect of waiting time on renal transplant outcome. 

Kidney international, 58(3), 1311–1317. 

D. Proposed Requirements Beginning 

With the PY 2024 ESRD QIP 

1. Proposed New Standardized First 

Kidney Transplant Waitlist Ratio for 

Incident Dialysis Patients Clinical 

Measure 

We are proposing to add one new 

transplant measure to the ESRD QIP 

measure set beginning with PY 2024: 

Standardized First Kidney Transplant 

Waitlist Ratio for Incident Dialysis 

Patients (SWR). The proposed new SWR 

measure would align the ESRD QIP 

more closely with the Meaningful 

Measures Initiative priority area of 

increased focus on effective 

communication and coordination. The 

SWR Measure assesses the number of 

patients who are placed on the 

transplant waitlist or receive a living 

donor kidney within one year of the 

date when dialysis is initiated. We 

believe this measure would encourage 

facilities to more rapidly evaluate 

patients for transplant and coordinate 

the waitlisting of those patients.17

Because the proposed SWR measure is 

limited to patients in their first year of 

dialysis, it is more limited in scope than 

the proposed PPPW measure, which 

includes patients who have been on 

dialysis for longer than 1 year. We are 

proposing to introduce the SWR 

measure for PY 2024 rather than PY 

2022 because the proposed SWR 

measure is calculated using 3 years of 

data. 

Data Sources 

The SWR Measure is calculated using 

administrative claims and electronic 

clinical data. CROWNWeb is the 

primary source used to attribute patients 

to dialysis facilities and dialysis claims 

are used as an additional source. 

Information regarding onset of ESRD, 

the first ESRD treatment date, death, 

and transplant is obtained from 

CROWNWeb (including the Medical 

Evidence Form CMS–2728 and the 

Death Notification Form CMS–2746) 

and Medicare claims, as well as the 

Organ Procurement and Transplant 

Network. 

Outcome 

The SWR Measure tracks the number 

of incident patients attributed to the 

dialysis facility under the age of 75 

listed on the kidney or kidney-pancreas 

transplant waitlist or who received 

living donor transplants within the first 

year of initiating dialysis. Similar to the 

PPPW measure, the SWR measure 

emphasizes shared accountability 

between dialysis facilities and 

transplant centers. 

Cohort 

The SWR measure includes patients 

under the age of 75 and attributed to the 

dialysis facility using CROWNWeb data 

and Medicare claims who are listed on 

the kidney or kidney-pancreas 

transplant waitlist or who received 

living donor transplants within the first 

year of initiating dialysis. Patients are 

attributed to the dialysis facility listed 

on the Medical Evidence Form CMS– 

2728. 

Inclusion and Exclusion Criteria 

The SWR measure excludes patients 

at the facility who were 75 years of age 

or older at initiation of dialysis and 

patients at the facility who were listed 

on the kidney or kidney-pancreas 

transplant waitlist prior to the start of 

dialysis. Additionally, patients who are 

admitted to a SNF or hospice at the time 

of initiation of dialysis are excluded. 

Risk Adjustment 

The SWR measure is adjusted for 

incident comorbidities and age. Incident 

comorbidities were selected for 

adjustment into the SWR model based 

on demonstration of a higher associated 

mortality (hazard ratio above 1.0) and 

statistical significance (p-value in first 

year mortality model). More details 

about the risk adjustment model can be 

found in the SWR Methodology Report 

(https://www.cms.gov/Medicare/ 

Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_Technical

Specifications.html). 

2017 Measures Application Partnership 

Review 

We submitted the SWR measure to the 

Measures Application Partnership in 

2017 for consideration as part of the prerulemaking process. 

In its report (available on its website 

at: http://www.qualityforum.org/ 

WorkArea/linkit.aspx?LinkIdentifier=

id&ItemID=86972), the Measures 

Application Partnership acknowledged 

that the SWR measure addresses an 

important quality gap for dialysis 

facilities and discussed a number of 

factors that it believed should be 

balanced when implementing the 

measure. The Measures Application 

Partnership reiterated the critical need 

to help patients receive kidney 

transplants to improve their quality of 

life and reduce their risk of mortality. 

The Measures Application Partnership 

also noted there are disparities in the 

receipt of kidney transplants and there 

is a need to incentivize dialysis facilities 

to educate patients about waitlist 

processes and requirements. The 

Measures Application Partnership also 

acknowledged concerns and public 

comment about the locus of control of 

the measure, where dialysis facilities 

may not be able to as adequately 

influence a patient’s suitability to be 

waitlisted as well as the transplant 

center. The Measures Application 

Partnership also noted the need to 

ensure the measure is appropriately 

risk-adjusted and recommended the 

exploration of adjustment for social risk 

factors and proper risk model 

performance. The Measures Application 

Partnership ultimately conditionally 

supported the measure with the 

condition that it is submitted for NQF 

review and endorsement. Specifically, 

the Measures Application Partnership 

recommended that this measure be 

reviewed by the NQF Scientific 

Methods Panel as well the Renal 

Standing Committee. The Measures 

Application Partnership recommended 

the endorsement process examine the 

validity of the measure, particularly the 

risk adjustment model and if it 

appropriately accounts for social risk. 

Finally, the Measures Application 

Partnership noted the need for the 

Disparities Standing Committee to 

provide guidance on potential health 

equity concerns. Our understanding is 

that the NQF endorsement process 

covers all of the Measure Application 

Partnership’s conditions, and we have 

submitted the measure for endorsement. 

For additional information on the 

Measures Application Partnership’s 

evaluation of measures for the ESRD 

QIP, we refer readers to Measures 

Application Partnership’s website at: 

http://www.qualityforum.org/WorkArea/ 

linkit.aspx?LinkIdentifier=id&ItemID=

86972. 

Based on the benefits of kidney 

transplantation over dialysis as a 

modality for renal replacement therapy 

for patients with ESRD, and taking into 

account the Measures Application 

Partnership’s conditional endorsement 

and our submission of the measure for 

NQF endorsement, we propose to adopt 

the SWR measure beginning with the PY 

2024 ESRD QIP. We also propose to 

place this measure in the Transplant 

Waitlist measure topic in the Care 

Coordination Domain, along with the 

PPPW measure proposed in section 

IV.C.1.a of this proposed rule, and to 

score the two measures accordingly as a 

measure topic. We note also that there 

are currently no NQF-endorsed 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34349 

transplant measures that we could have 

considered, and we believe that we 

should adopt this measure under 

section 1881(h)(2)(B)(ii) of the Act due 

to its clinical significance for the ESRD 

patient population. 

We welcome comments on these 

proposals. 

2. Proposed Performance Period for the 

SWR Measure 

Because the SWR measure is 

calculated using 36 months of data, we 

propose to establish a 36-month 

performance period for the proposed 

SWR measure. With respect to PY 2024 

ESRD QIP, this period would be CY 

2019 through 2021. We believe that a 

36-month performance period for the 

SWR measure would enable us to 

calculate sufficiently reliable measure 

data for the ESRD QIP. 

a. Proposed Performance Standards, 

Achievement Thresholds, and 

Benchmarks for the SWR Measure in the 

PY 2024 ESRD QIP 

If our proposal in section IV.D.1 of 

this proposed rule is finalized, then we 

would score the proposed SWR measure 

using a 36-month performance period 

for purposes of achievement and a 

corresponding 36-month baseline period 

for purposes of improvement. For the 

PY 2024 ESRD QIP, these periods would 

be CY 2017 through 2019 for 

achievement and CY 2018 through 2020 

for improvement. 

At this time, we do not have the 

necessary data to assign numerical 

values to the performance standards for 

the SWR measure, because we do not 

yet have data from CY 2017 through CY 

2020. 

V. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

A. Background 

Section 1847(a) of the Social Security 

Act (the Act), as amended by section 

302(b)(1) of the Medicare Prescription 

Drug, Improvement, and Modernization 

Act of 2003 (MMA) (Pub. L. 108–173), 

requires the Secretary of the Department 

of Health and Human Services (the 

Secretary) to establish and implement 

competitive bidding programs in 

competitive bidding areas (CBAs) 

throughout the United States (U.S.) for 

contract award purposes for the 

furnishing of certain competitively 

priced DMEPOS items and services. The 

competitive bidding programs of the 

Medicare Durable Medical Equipment 

Prosthetics Orthotics and Supplies 

(DMEPOS) Competitive Bidding 

Program (CBP), mandated by section 

1847(a) of the Act, are collectively 

referred to as ‘‘DMEPOS CBP’’. A final 

rule published on April 10, 2007 in the 

Federal Register, titled ‘‘Competitive 

Acquisition for Certain DMEPOS and 

Other Issues’’, (72 FR 17992), referred to 

as ‘‘2007 DMEPOS final rule’’, 

established competitive bidding 

programs for certain Medicare Part B 

covered items of DMEPOS throughout 

the U.S. The competitive bidding 

programs, which were phased in over 

several years, utilize bids submitted by 

DMEPOS suppliers to establish 

applicable payment amounts under 

Medicare Part B for certain DMEPOS 

items and services. Section 1847(a)(2) of 

the Act describes the items and services 

subject to the DMEPOS CBP: 

• Off-the-shelf (OTS) orthotics for 

which payment would otherwise be 

made under section 1834(h) of the Act. 

• Enteral nutrients, equipment and 

supplies described in section 

1842(s)(2)(D) of the Act. 

• Certain DME and medical supplies, 

which are covered items (as defined in 

section 1834(a)(13) of the Act) for which 

payment would otherwise be made 

under section 1834(a) of the Act. 

The DMEPOS CBP was modeled after 

successful demonstration programs from 

the late 1990s and early 2000s, 

discussed in the proposed rule 

published on May 1, 2006 in the 

Federal Register, titled ‘‘Competitive 

Acquisition for Certain Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) and Other Issues’’ 

(71 FR 25654) referred to as ‘‘2006 

DMEPOS proposed rule’’. We received 

substantial advice in the development of 

the DMEPOS CBP from the Program 

Advisory and Oversight Committee 

(PAOC), which was mandated through 

section 1847(c) of the Act, as amended 

by section 302(b)(1) of the MMA, to 

establish a committee to provide advice 

to the Secretary with respect to the 

following functions: 

• The implementation of the 

Medicare DMEPOS CBP. 

• The establishment of financial 

standards for entities seeking contracts 

under the Medicare DMEPOS CBP, 

taking into account the needs of small 

providers. 

• The establishment of requirements 

for collection of data for the efficient 

management of the Medicare DMEPOS 

CBP. 

• The development of proposals for 

efficient interaction among 

manufacturers, providers of services, 

suppliers (as defined in section 1861(d) 

of the Act), and individuals. 

• The establishment of quality 

standards for DMEPOS suppliers under 

section 1834(a)(20) of the Act. 

As authorized under section 

1847(c)(2) of the Act, the PAOC 

members were appointed by the 

Secretary of the Department of Health 

and Human Services (the Secretary) and 

represented a broad mix of relevant 

industry, consumer, and government 

parties. The representatives had 

expertise in a variety of subject matter 

areas, including DMEPOS, competitive 

bidding methodologies and processes, 

and rural and urban marketplace 

dynamics. 

In the DMEPOS CBP, suppliers bid for 

contracts for furnishing multiple items 

and services, identified by Healthcare 

Common Procedure Coding System 

(HCPCS) codes, under several different 

product categories. Section 1847(a)(1)(B) 

and (D) of the Act mandated the phase 

in of the DMEPOS CBP in nine of the 

largest MSAs (Round 1), followed by 91 

additional large MSAs (Round 2), and 

finally in additional areas, which do not 

necessarily need to be tied to MSAs. 

Round 1 and Round 2 CBAs that 

included more than one state have been 

subdivided into state-specific CBAs. 

The CBP is currently operating in 130 

CBAs throughout the nation, and those 

CBAs contain approximately half of the 

enrolled Medicare Part B population. 

The other half of the Medicare Part B 

population resides in areas where the 

CBP has not yet been phased in, 

including approximately 275 MSAs. In 

addition, CMS phased in a national mail 

order program for diabetic testing 

supplies in 2013. In the Round 1 2017 

and Round 2 Recompete competitions, 

the product categories currently 

include: Enteral Nutrients, Equipment 

and Supplies; General Home Equipment 

and Related Supplies and Accessories 

(including hospital beds, pressure 

reducing support surfaces, commode 

chairs, patient lifts, and seat lifts); 

Nebulizers and Related Supplies; 

Negative Pressure Wound Therapy 

(NPWT) Pumps and Related Supplies 

and Accessories; Respiratory Equipment 

and Related Supplies and Accessories 

(including oxygen and oxygen 

equipment, continuous positive 

pressure airway devices, and respiratory 

assist devices); Standard Mobility 

Equipment and Related Accessories 

(including walkers, standard manual 

wheelchairs, and standard power 

wheelchairs); and Transcutaneous 

Electrical Nerve Stimulation (TENS) 

Devices and Supplies. Since there are 

multiple items in each product category, 

a ‘‘composite’’ bid is calculated for each 

supplier to determine which supplier’s 

bids would result in the greatest savings 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34350 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

to Medicare for the product category. A 

supplier’s composite bid for a product 

category is calculated by multiplying a 

supplier’s bid for each item in a product 

category by the item’s weight and taking 

the sum of these numbers across items. 

The weight of an item is based on the 

annual utilization of the individual item 

compared to other items within that 

product category based on recent 

Medicare national claims data. Item 

weights are used to reflect the relative 

market importance of each item in the 

product category. Item weights ensure 

that the composite bid is directly 

comparable to the costs that Medicare 

would pay if it bought the expected 

bundle of items in the product category 

from the supplier. The sum of each 

supplier’s weighted bids for every item 

in a product category is the supplier’s 

composite bid for that product category. 

Each supplier submits a bid amount 

for each item in the product category, 

and multiple contracts must be awarded 

for each product category in each CBA. 

Section 1847(b)(5) of the Act mandates 

a single payment amount (SPA) for each 

item based on winning bids from 

multiple suppliers, so various options 

for calculating the SPA were addressed 

in the 2006 DMEPOS proposed rule (71 

FR 25679). The methods of using the 

minimum winning bid amount for each 

item, the maximum winning bid amount 

for each item, the median of the 

winning bid amounts for each item, and 

an average adjusted price based on the 

method used during the demonstrations 

were considered during this rulemaking. 

The SPA calculation method using the 

median of the winning bids was 

finalized in the 2007 DMEPOS final rule 

(72 FR 18044) based on the rationale 

that the median of winning bids 

represents the bid amounts of the 

winning suppliers as a whole, whereas 

the minimum and maximum bids did 

not; it is a simpler method than the 

average adjusted price method; and it is 

consistent with the longstanding 

Medicare payment rules for DMEPOS 

that established allowed payment 

amounts based on average reasonable 

charges rather than minimum or 

maximum charges. 

To implement section 522(a) of the 

Medicare Access and Children’s Health 

Insurance Program Reauthorization Act 

of 2015 (Pub. L. 114–10) (MACRA), we 

published a final rule on November 4, 

2016 in the Federal Register, titled 

‘‘End-Stage Renal Disease Prospective 

Payment System, Coverage and Payment 

for Renal Dialysis Services Furnished to 

Individuals With Acute Kidney Injury, 

End-Stage Renal Disease Quality 

Incentive Program, Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies Competitive Bidding Program 

Bid Surety Bonds, State Licensure and 

Appeals Process for Breach of Contract 

Actions, Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

Competitive Bidding Program and Fee 

Schedule Adjustments, Access to Care 

Issues for Durable Medical Equipment; 

and the Comprehensive End-Stage Renal 

Disease Care Model’’ (81 FR 77834), 

referred to as ‘‘2016 ESRD PPS final 

rule’’. 

Section 1847(a)(1)(G) of the Act, as 

added by section 522(a) of MACRA, 

requires bidding entities to secure a bid 

surety bond by the deadline for bid 

submission. Section 1847(a)(1)(G) of the 

Act provides that, with respect to 

rounds of competitions under section 

1847 of the Act beginning not earlier 

than January 1, 2017 and not later than 

January 1, 2019, a bidding entity may 

not submit a bid for a CBA unless, as of 

the deadline for bid submission, the 

entity has (1) obtained a bid surety 

bond, in the range of $50,000 to 

$100,000, in a form specified by the 

Secretary consistent with paragraph (H) 

of section 1847(a)(1) of the Act, and (2) 

provided the Secretary with proof of 

having obtained the bid surety bond for 

each CBA in which the entity submits 

its bid(s). We believe that section 522(a) 

of MACRA was drafted under the 

assumption that the next round of 

competitive bidding would have been 

implemented at some point between 

January 1, 2017 and January 1, 2019. We 

have interpreted section 522(a) of 

MACRA as applying to the next round 

of competitive bidding even though the 

next round of competition will begin 

after the time period specified in the 

statute. Section 1847(a)(1)(H)(i) of the 

Act provides that in the event that a 

bidding entity is offered a contract for 

any product category for a CBA, and its 

composite bid for such product category 

and area was at or below the median 

composite bid rate for all bidding 

entities included in the calculation of 

the single payment amount(s) for the 

product category and CBA, and the 

entity does not accept the contract 

offered, the bid surety bond(s) for the 

applicable CBAs will be forfeited and 

the Secretary will collect on the bid 

surety bond(s). In instances where a 

bidding entity does not meet the bid 

bond forfeiture conditions for any 

product category for a CBA as specified 

in section 1847(a)(1)(H)(i) of the Act, 

then the bid surety bond liability 

submitted by the entity for the CBA will 

be returned to the bidding entity within 

90 days of the public announcement of 

the contract suppliers for such product 

category and area. As aforementioned, 

this requirement was implemented as 

part of the CY 2016 ESRD PPS final rule 

(81 FR 77834), so § 414.412(h) now 

requires that bidding entities obtain bid 

surety bonds, and if an entity is offered 

a contract for any product category for 

a CBA, and its composite bid for such 

product category and area is at or below 

the median composite bid rate for all 

bidding entities included in the 

calculation of the single payment 

amounts for the product category/CBA 

combination, and the entity does not 

accept the contract offered, the bid 

surety bond for the applicable CBA will 

be forfeited and CMS will collect on the 

bid surety bond via Electronic Funds 

Transfer from the respective bonding 

company. Further detailed conditions of 

the surety bonds were also clarified in 

the final rule (81 FR 77931). The bid 

bond requirement is mentioned here in 

the background section of this proposed 

rule because bid bond forfeiture is tied 

to composite bids under the DMEPOS 

CBP, and this rule proposes to change 

how composite bids are defined and to 

implement lead item pricing under the 

DMEPOS CBP. 

Section 1847(b)(5) of the Act provides 

that Medicare payment for 

competitively bid items and services is 

made on an assignment-related basis 

and is equal to 80 percent of the 

applicable SPA, less any unmet Part B 

deductible described in section 1833(b) 

of the Act. Section 1847(b)(2)(A)(iii) of 

the Act prohibits the Secretary from 

awarding a contract to an entity unless 

the Secretary finds that the total 

amounts to be paid to contractors in a 

CBA are expected to be less than the 

total amounts that would otherwise be 

paid. The DMEPOS CBP also includes 

provisions to ensure beneficiary access 

to quality DMEPOS items and services. 

Section 1847(b)(2)(A) of the Act directs 

the Secretary to award contracts to 

entities only after a finding that the 

entities meet applicable quality and 

financial standards and beneficiary 

access to a choice of multiple suppliers 

in the area is maintained, that is, more 

than one contract supplier is available 

for the product category in the area. 

Sections 1847(b)(6)(A)(i) and 

(b)(6)(A)(ii) of the Act provide that 

payment will not be made under 

Medicare Part B for items and services 

furnished under the CBP unless the 

supplier has submitted a bid to furnish 

those items and has been awarded a 

contract. Therefore, in order for a 

supplier that furnishes competitively 

bid items in a CBA to receive payment 

for those items, the supplier must have 

submitted a bid to furnish those 

particular items and must have been 

awarded a contract. In past rounds of 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34351 

competition, CMS has allowed a 60-day 

bidding window for suppliers to prepare 

and submit their bids. Our regulation at 

§ 414.412 specifies the rules for 

submission of bids under the DMEPOS 

CBP. Each bid submission is evaluated 

and contracts are awarded to qualified 

suppliers in accordance with the 

requirements of section 1847(b)(2) of the 

Act and § 414.414, which specifies 

conditions for awarding contacts. Under 

the Round 2 and Round 1 Recompete 

competitions, 92 percent of suppliers 

accepted contract offers at the SPAs set 

through the competitions. In addition, 

CMS reviewed all contract suppliers 

based on financial standards when 

evaluating their bids. This process 

includes review of tax records, credit 

reports, and other financial data, which 

leads to the calculation of a score, 

similar to processes used by lenders 

when evaluating the viability of a 

company. All contract suppliers met the 

financial standards established for the 

program. Before awarding contracts, 

each bid is screened and evaluated to 

ensure that it is bona fide so that CMS 

can verify that the supplier can provide 

the product to the beneficiary for the bid 

amount, and those that fail are excluded 

from the competition. Approximately 94 

percent of bids screened as part of the 

Round 2 and Round 1 Recompete 

competitions were determined to be 

bona fide. 

Section 1847(b)(6)(D) of the Act 

requires that appropriate steps be taken 

to ensure that small suppliers of items 

and services have an opportunity to be 

considered for participation in the 

DMEPOS CBP. We have established a 

number of provisions to ensure that 

small suppliers are given an opportunity 

to participate in the DMEPOS CBP. For 

example, under § 414.414(g)(1)(i), we 

have established a 30 percent target for 

small supplier participation; thereby 

ensuring efforts are made to award at 

least 30 percent of contracts to small 

suppliers. Also, CMS worked in 

coordination with the Small Business 

Administration and based on advice 

from the PAOC to develop an 

appropriate definition of ‘‘small 

supplier’’ for this program. Under 

§ 414.402, a small supplier is one that 

generates gross revenues of $3.5 million 

or less in annual receipts, including 

Medicare and non-Medicare revenue. 

Under § 414.418, small suppliers may 

join together in ‘‘networks’’ in order to 

submit bids that meet the various 

program requirements. A majority of the 

bids used in establishing SPAs come 

from small suppliers with a history of 

furnishing items in the CBAs. 

B. Current Method for Submitting Bids 

and Selecting Winners 

In the DMEPOS CBP, CMS awards 

contracts to suppliers for furnishing 

multiple items and services needed in a 

given CBA that fall under a product 

category (for example, respiratory 

equipment). The product categories are 

mostly large and include multiple items 

used for different purposes (for 

example, the respiratory equipment 

category includes oxygen equipment 

and positive pressure airway devices 

and multiple related accessories) based 

on past feedback from stakeholders to 

promote easy access for beneficiaries 

and referral agents to receive all items 

in a product category from one location, 

and to prevent instances where a 

supplier wins a contract for one product 

category but loses the competitions for 

several other product categories. 

Because multiple bids for individual 

items are submitted when competing to 

become a contract supplier for the 

product category of items and services 

as a whole, it is necessary to calculate 

a composite bid for each bidding 

supplier to determine the lowest bids 

for the category as a whole. In 

accordance with § 414.402, a composite 

bid means the sum of a supplier’s 

weighted bids for all items within a 

product category for purposes of 

allowing a comparison across bidding 

suppliers. Using a composite bid is a 

way to aggregate a supplier’s bids for 

individual items within a product 

category into a single bid for the whole 

product category. 

In order to compute a composite bid, 

a weight must be applied to each item 

in the product category. The weight of 

an item is based on the beneficiary 

utilization or demand of the individual 

item compared to other items within 

that product category based on historic 

Medicare claims. Item weights are used 

to reflect the relative market importance 

of each item in the product category. 

Table 18 depicts the calculation of the 

item weights for a supplier’s bid. The 

expected volume for items A, B, and C 

are 5, 3, and 2 units, respectively, for a 

total volume of 10 units. The item 

weight for item A is 0.5 (5/10), the 

weight for item B is 0.3 (3/10), etc. The 

total item weight for the supplier’s bid 

is 1. 

TABLE 18—ITEM WEIGHTS

Item A B C Total 

Units ................................................................................................................. 5 3 2 10 

Item Weight ...................................................................................................... 0.5 0.3 0.2 1 

The composite bid for a supplier 

equals the item weight multiplied by the 

item bid summed across all items in the 

product category. For example, supplier 

1 bid $1.00 for item A, $4.00 for item 

B and $1.00 for item C. The composite 

bid for Supplier 1 = (0.5 * $1.00) + (0.3 

* $4.00) + (0.2 * $1.00) = 1.90. Table 19 

shows the expected cost of the bundle 

based on each supplier’s bids. The 

expected costs are directly proportional 

to the composite bids; the factor of 

proportionality is equal to the total 

number of units (10) in the product 

category. The composite bid is used to 

determine the expected costs for all of 

the items in the product category based 

upon expected volume. 

TABLE 19—COMPOSITE BIDS BY SUPPLIER

Item A B C Composite bid 

Product 

category bid 

(cost of 

bundle) 

Units ..................................................................................... 5 3 2 

Item weight ........................................................................... 0.5 0.3 0.2 

Supplier 1 bid ....................................................................... $1.00 $4.00 $1.00 $1.90 $19.00 

Supplier 2 bid ....................................................................... 3.00 5.00 3.00 3.60 36.00 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34352 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 19—COMPOSITE BIDS BY SUPPLIER—Continued 

Item A B C Composite bid 

Product 

category bid 

(cost of 

bundle) 

Supplier 3 bid ....................................................................... 3.00 4.00 3.00 3.30 33.00 

Supplier 4 bid ....................................................................... 2.00 2.00 2.00 2.00 20.00 

Supplier 5 bid ....................................................................... 2.00 4.00 2.00 2.60 26.00 

Supplier 6 bid ....................................................................... 2.00 3.00 2.00 2.30 23.00 

Supplier 7 bid ....................................................................... 3.00 3.00 2.00 2.80 28.00 

Supplier 8 bid ....................................................................... 3.00 4.00 2.00 3.10 31.00 

Supplier 9 bid ....................................................................... 2.00 3.00 3.00 2.50 25.00 

Supplier 10 bid ..................................................................... 3.00 4.00 1.00 2.90 29.00 

Supplier 11 bid ..................................................................... 3.00 2.00 3.00 2.70 27.00 

After computing composite bids for 

each supplier, a pivotal bid is 

established for each product category in 

each CBA. In accordance with 

§ 414.402, pivotal bid means the lowest 

composite bid based on bids submitted 

by suppliers for a product category that 

includes a sufficient number of 

suppliers to meet beneficiary demand 

for items in that category. As explained 

in the 2007 DMEPOS final rule (72 FR 

18039), demand for items and services 

is projected using Medicare claims data 

for allowed services during the previous 

two years, trended forward to the 

contract period. Table 20 shows the 

pivotal bid is the point where expected 

combined capacity of the bidders is 

sufficient to meet expected demands of 

beneficiaries for items in a product 

category. In Table 20, the projected 

demand is 1,800 units, therefore the 

composite bid for supplier 7 represents 

the pivotal bid, since the cumulative 

capacity of 1,845 would exceed the 

projected demand of 1,800. As a result 

of the determination of the pivotal bid, 

suppliers 1, 4, 6, 9, 5, 11 and 7 are 

selected as winning suppliers for the 

product category in the CBA. However, 

suppliers 10, 8, 3, and 2 are not selected 

as winning suppliers for the product 

category in the CBA and are eliminated 

from the competition. 

TABLE 20—DETERMINING THE PIVOTAL BID FOR PRODUCT CATEGORY POINT WHERE BENEFICIARY DEMAND (1,800) IS

MET BY SUPPLIER CAPACITY

Supplier No.1 Composite bid Supplier 

capacity 

Cumulative 

capacity Result 

1 ....................................................................................................................... $1.90 250 250 Winning bid. 

4 ....................................................................................................................... 2.00 300 550 Winning bid. 

6 ....................................................................................................................... 2.30 0 550 Winning bid. 

9 ....................................................................................................................... 2.50 300 850 Winning bid. 

5 ....................................................................................................................... 2.60 360 1,210 Winning bid. 

11 ..................................................................................................................... 2.70 275 1,485 Winning bid. 

7 ....................................................................................................................... 2.80 360 1,845 Pivotal bid. 

10 ..................................................................................................................... 2.90 200 2,045 Losing bid. 

8 ....................................................................................................................... 3.10 300 2,345 Losing bid. 

3 ....................................................................................................................... 3.30 200 2,545 Losing bid. 

2 ....................................................................................................................... 3.60 25 2,570 Losing bid. 

1By ascending composite bid. 

C. Current Method for Establishing SPAs 

For competitively bid items and 

services furnished in a CBA, the SPAs 

replace the Medicare allowed amounts 

established using the lower of the 

supplier’s actual charge or the payment 

amount recognized under sections 

1834(a)(2) through (7), 1834(h), and 

1842(s) of the Act. We discussed various 

options for determining the SPA for 

individual items under the DMEPOS 

CBP during the notice and comment 

rulemaking conducted in 2006 and 2007 

(71 FR 25653 and 72 FR 17992, 

respectively), including using the 

minimum winning bid, using the 

highest winning bid, using the median 

of winning bids, and using an average 

adjusted price methodology similar to 

the methodology used in competitive 

bidding demonstrations mandated by 

section 4319 of the Balanced Budget Act 

of 1997 (BBA) (Pub. L. 105–33). A 

detailed discussion of the various 

options considered for determining the 

SPA for individual items under the 

DMEPOS CBP can be found in the 2007 

DMEPOS final rule (72 FR 17992, 18044 

through 18047). Through rulemaking, 

we finalized using the median of bids 

submitted for each item by winning 

bidders in each CBA as the methodology 

for establishing the SPA for each item in 

each CBA. 

Under the current methodology for 

establishing SPAs at § 414.416, for 

individual items within each product 

category in each CBA, the median of the 

winning bids for each item is used to 

establish the SPA for that item in each 

CBA. The individual items are 

identified by the appropriate HCPCS 

codes. In cases where there is an even 

number of winning bids for an item, the 

SPA is equal to the average (mean) of 

the two bid prices in the middle of the 

array. Table 21 illustrates this method. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34353 

TABLE 21—MEDIAN OF THE WINNING BIDS METHODOLOGY

Item A B C Composite 

bid 

Supplier 1 bid ................................................................................................... $1.00 $4.00 $1.00 $1.90 

Supplier 4 bid ................................................................................................... 2.00 2.00 2.00 2.00 

Supplier 6 bid ................................................................................................... 2.00 3.00 2.00 2.30 

Supplier 9 bid ................................................................................................... 2.00 3.00 3.00 2.50 

Supplier 5 bid ................................................................................................... 2.00 4.00 2.00 2.60 

Supplier 11 bid ................................................................................................. 3.00 2.00 3.00 2.70 

Supplier 7 bid (pivotal bid) ............................................................................... 3.00 3.00 2.00 2.80 

Median/SPA ..................................................................................................... 2.00 3.00 2.00 ........................

We stated in 2007 that we believed 

that setting the SPA based on the 

median of the winning bids satisfies the 

statutory requirement that SPAs are to 

be based on bids submitted and 

accepted. We believed that this 

methodology results in a single payment 

for an item under a competitive bidding 

program that is representative of all 

acceptable bids, not just the highest or 

the lowest of the winning bids for that 

item. The median is also not influenced 

by outliers at the extremes of the data 

set. This methodology also has the 

advantage of being easily understood by 

bidding suppliers. 

We received several comments on 

determining the SPA as a part of the 

rulemaking process for the 2007 

DMEPOS final rule (72 FR 18046). Most 

of the commenters disagreed with the 

median bid methodology and supported 

the average adjusted price methodology. 

Numerous commenters suggested that 

CMS use the average adjusted price 

methodology that was used during the 

BBA demonstrations because suppliers 

were paid at least as much as they bid 

in aggregate, and commenters believed 

that the average adjusted price 

methodology would provide sufficient 

protections to encourage small suppliers 

to bid. Several commenters indicated 

that if contract suppliers with bids 

above the median amount cannot 

furnish items and services at payment 

amounts set below their bid amounts, 

demand for items and services might 

not be met and access to necessary items 

and services would be impaired. The 

commenters raised concerns that all 

bids would be equal in terms of 

establishing the median amount, and 

bids from small suppliers that only 

furnish a small percentage of the overall 

demand for items and services would 

have the same weight as bids from 

suppliers that would be responsible for 

furnishing the majority of the items and 

services. Other commenters suggested 

that the use of the median bid favors 

large chain suppliers that deliver a large 

volume of items and services. 

The average adjusted price 

methodology for establishing the SPA 

for an item was discussed in the 2007 

DMEPOS final rule (72 FR 18045). This 

methodology involved using the average 

of the winning bids adjusted up to the 

point where the adjusted bids for each 

supplier in the winning range equals the 

level of the pivotal bid. This type of 

methodology was used during the 

competitive bidding demonstrations 

mandated by section 4319 of the BBA. 

The first step of the methodology is to 

calculate the average of the winning 

bids per individual item. The second 

step is to calculate the average of the 

composite bids for the winning 

suppliers by taking the sum of the 

composite bids for all winning suppliers 

in the applicable CBA and dividing by 

the number of winning suppliers. The 

third step determines an adjustment 

factor by dividing the composite bid for 

the pivotal bidder by the average 

composite bid, and using this factor to 

increase every winner’s overall bids for 

a product category to the level of the 

pivotal bidder’s composite bid. The 

fourth step multiplies the average of the 

winning bids per item by the adjustment 

factor to adjust all bids up to the point 

of the pivotal bid, so that all winners 

would be paid for furnishing all items 

and services in the product category (the 

composite payment) equal to the 

composite bid of the pivotal bidder. 

This amount would become the SPA for 

the individual item. This is the price 

that all contract suppliers within a CBA 

would be paid for that product as 

illustrated in Table 22. 

TABLE 22—AVERAGE ADJUSTED PRICE METHODOLOGY

Item A B C 

Average 

composite 

bid 

Composite 

bid 1

Item weight ........................................................................... 0.5 0.3 0.2 

Supplier 1 bid ....................................................................... $1.00 $4.00 $1.00 ........................ $1.90 

Supplier 4 bid ....................................................................... 2.00 2.00 2.00 ........................ 2.00 

Supplier 6 bid ....................................................................... 2.00 3.00 2.00 ........................ 2.30 

Supplier 9 bid ....................................................................... 2.00 3.00 3.00 ........................ 2.50 

Supplier 5 bid ....................................................................... 2.00 4.00 2.00 ........................ 2.60 

Supplier 11 bid ..................................................................... 3.00 2.00 3.00 ........................ 2.70

Supplier 7 bid (pivotal bid) ................................................... 3.00 3.00 2.00 ........................ 2.80 

Average of winning bids ...................................................... 2.14 3.00 2.14 $2.40 ........................

Adjustment factor 2 ............................................................... 1.167 1.167 1.167 ........................ ........................

Average adjusted price/SPA ................................................ 2.50 3.50 2.50 ........................ ........................

1Sum of item bids multiplied by item weights. 

2The adjustment factor is equal to the pivotal bid ($2.80 in this example) divided by the average composite bid ($2.40 in this example). The 

SPA is established by multiplying the average of the winning bids for each item by the adjustment factor. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34354 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

This methodology, similar to the one 

used under the BBA demonstrations 

from October 1, 1999 through December 

31, 2002, results in payment to all 

winning suppliers at the pivotal bid (or 

highest winning composite bid) level. 

Under the BBA demonstrations, the 

adjustment factor varied by supplier and 

was based on the pivotal composite bid 

divided by the individual, winning 

supplier’s composite bid, and the 

average of the prices was calculated 

after the bids were adjusted rather than 

before they were adjusted. Both versions 

of the average adjusted price 

methodology result in pricing at the 

pivotal bid level. For example, in Table 

22 the methodology used under the BBA 

demonstrations would have resulted in 

SPAs of $2.46, $3.58, and $2.48 for 

items A, B, and C, respectively. 

However, when factoring in the 

expected percentage of total services 

made up by each item in the product 

category (item weight), both versions of 

the average adjusted price methodology 

result in payment at the pivotal bid 

level: 

Table 22: (0.5 * $2.50) + (0.3 * $3.50) 

+ (0.2 * $2.50) = $2.80 

BBA demonstrations: (0.5 * $2.46) + (0.3 

* $3.58) + (0.2 * $2.48) = $2.80 

Using either version, the overall 

payment for the product category equals 

or exceeds the individual composite 

bids of $1.90, $2.00, $2.30, $2.50, $2.60, 

$2.70 and $2.80. We chose not to 

propose this approach because we 

believed that this approach is not 

reflective of all of the winning bids 

accepted. In addition, we stated that we 

were concerned that this methodology 

may be confusing and overly 

complicated (72 FR 18046). 

Two additional methodologies for 

determining the SPA for individual 

items under the DMEPOS CBP include 

the minimum bid methodology ($1.00, 

$2.00, and $1.00 in the example above) 

and the maximum bid methodology 

($3.00, $4.00, and $3.00 in the example 

above). More detailed explanations of 

these methods can be found in the 2007 

DMEPOS final rule (72 FR 17992, pages 

18044 through 18047). We did not 

support either methodology because 

they only reflect the bid of a single 

supplier and may be an outlier in the 

overall bid for the item. A methodology 

that uses a straight mean is most 

affected by outliers, since all values in 

a sample are given the same weight 

when calculating mean. A value that is 

far removed from the mean is going to 

likely skew results. 

D. Provisions of the Proposed Rule 

We believe that two proposed reforms 

to the DMEPOS CBP would simplify the 

program, eliminate the possibility for 

price inversions, and ensure the long 

term sustainability of the program. 

1. Lead Item Pricing for all Product 

Categories Under the DMEPOS CBP 

In the 2016 ESRD PPS final rule (81 

FR 77945), we established alterative 

rules for submitting bids and 

determining SPAs for certain groupings 

of similar items with different features 

under the DMEPOS CBP. As discussed 

in the rule, price inversions result under 

the CBP when different item weights are 

assigned to similar items with different 

features within the product category. To 

prevent this from occurring under future 

competitions, we established an 

alternative ‘‘lead item’’ bidding method 

for submitting bids and determining 

single payment amounts for certain 

groupings of similar items (for example, 

walkers) with different features (wheels, 

folding, etc.) under the DMEPOS CBP. 

Under this alternative bidding method, 

one item in the grouping of similar 

items would be the lead item for the 

grouping for bidding purposes. The item 

in the grouping with the highest total 

national allowed services (paid units of 

service) during a specified base period 

would be considered the lead item of 

the grouping. CMS established a method 

for calculating SPAs for items within 

each grouping of similar items based on 

the SPAs for lead items within each 

grouping of similar items (81 FR 42878). 

Under § 414.416(b)(3), in the case of 

competitions where bids are submitted 

for an item that is a combination of 

codes for similar items within a product 

category as identified under 

§ 414.412(d)(2), the single payment 

amount for each code within the 

combination of codes is equal to the 

single payment amount for the lead item 

or code with the highest total 

nationwide allowed services multiplied 

by the ratio of the average of the 2015 

fee schedule amounts for all areas (that 

is, all states, the District of Columbia 

(DC), Puerto Rico, and the U.S. Virgin 

Islands) for the code to the average of 

the 2015 fee schedule amounts for all 

areas for the lead item. Beginning in 

2016, the fee schedule amounts used to 

pay claims in non-CBAs were adjusted 

based on information from the CBP. 

Thus, the 2015 fee schedule amounts 

were the last fee schedule amounts that 

were not adjusted based on SPAs for 

low weight items (for example, hospital 

beds without side rails) that in some 

cases were higher than the SPAs for 

other similar items in the same product 

category with more features (for 

example, hospital beds with side rails). 

The relative difference in the cost of the 

items (for example, hospital beds with 

side rails cost more than hospital beds 

without side rails) is reflected in the 

unadjusted fee schedule amounts in that 

the unadjusted fee schedule amounts for 

hospital beds with side rails are higher 

than the fee schedule amounts for 

hospital beds without side rails, and not 

in the adjusted fee schedule amounts, 

where the adjusted fee schedule 

amounts for hospital beds with side 

rails are not higher than the fee 

schedule amounts for hospital beds 

without side rails. For this reason, we 

use the unadjusted fee schedule 

amounts for 2015 to determine the 

relative difference in the cost of 

different items (for example, hospital 

beds with side rails compared to 

hospital beds without side rails). 

Under the CBP, in all rounds since 

2011, we found price inversions for 

groupings of similar items within the 

following categories: Standard power 

wheelchairs, walkers, hospital beds, 

enteral infusion pumps, TENS devices, 

support surface mattresses and overlays 

and seat lift mechanisms. We consider 

the price of an item inverted when a 

more complicated item is cheaper than 

a simple version. For instance, when a 

walker without wheels costs more than 

a walker with wheels. The detailed 

method, examples, and responses to 

public comments regarding lead item 

bidding were explained in the 2016 

ESRD PPS final rule (81 FR77945 

through 77949). We are now proposing 

to establish a similar lead item pricing 

methodology for all items and all 

product categories under the DMEPOS 

CBP. We propose that the methodology 

would now apply to all items in the 

product category rather than groupings 

of items within a product category. We 

also propose that the lead item would be 

identified based on total national 

allowed charges rather than total 

national allowed services. We believe 

that lead item pricing would address all 

price inversions we have already 

identified as well as potential future 

price inversions for other items. The 

lead item pricing methodology proposed 

in this rule is therefore similar to, but 

different than the lead item bidding 

methodology we finalized in previous 

rulemaking. This would not be an 

alternative bidding method, but would 

replace the current bidding method, 

where bids are submitted for each item 

in the product category, for all items. 

Since the bid for the lead item would be 

used to establish the SPAs for both the 

lead item and all other items in the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34355 

product category, we are referring to this 

proposed policy as ‘‘lead item pricing’’ 

rather than ‘‘lead item bidding.’’ We are 

proposing to implement lead item 

pricing and change the methodology for 

establishing SPAs under the CBP for a 

number of reasons. 

We believe lead item pricing would 

greatly reduce the complexity of the 

bidding process and the burden on 

suppliers since they would no longer 

have to submit bids for numerous items 

in a product category. For some product 

categories, there are hundreds of items, 

and many suppliers submit bids for 

multiple product categories and in 

multiple CBAs. The more bids a 

supplier has to submit, the more time it 

takes to complete the bidding process 

and the greater the risk for keying errors, 

which have disqualified bidders in the 

past, reducing the level of competition 

and opportunity for savings under the 

program. Lead item pricing would also 

eliminate the need for item weights and 

calculation of composite bids based on 

item weights. This would greatly 

eliminate the burden for suppliers since 

they would no longer have to submit 

bids for each individual item in a 

product category. 

Several issues related to this lead item 

pricing proposal warrant discussion. 

First, lead item pricing would apply to 

all items in each product category, 

including all codes for base equipment 

(for example, power wheelchairs) and 

all codes for accessories for base 

equipment (for example, wheelchair 

batteries). Bids for the lead item (for 

example, one of the power wheelchair 

codes), would therefore be used to 

establish the SPA for the code for the 

lead item, other codes for power 

wheelchairs other than the lead item, 

and codes for accessories used with the 

base equipment (in this example, 

various types of power wheelchairs). 

Examples of how this pricing method 

would work are in section V.D.2 of this 

proposed rule. 

Second, it is likely that some of the 

larger, conglomerate product categories 

established to promote ‘‘one stop 

shopping’’ for beneficiaries and referral 

agents would need to be split into 

multiple product categories so that lead 

item pricing is not implemented for 

categories that include different types of 

base equipment. Such categories 

include general home equipment 

(hospital beds, support surfaces, 

commode chairs, patient lifts, and seat 

lifts), respiratory equipment (oxygen 

and oxygen equipment, continuous 

positive airway pressure devices, and 

respiratory assist devices), and standard 

mobility equipment (walkers, standard 

manual wheelchairs, standard power 

wheelchairs, and scooters). We believe 

that it would be overly complex and 

confusing to establish prices for one 

type of equipment (for example, power 

wheelchairs) based on bids submitted 

for another type of equipment (for 

example, walkers). We believe it would 

be more straightforward for suppliers to 

submit a lead item bid for one code for 

one type of base equipment (for 

example, group 2, captains chair power 

wheelchair, which is a lead item 

because it has the highest allowed 

charges) that would be used to establish 

payment amounts for all similar types of 

the base equipment that is, power 

wheelchairs (for example, groups 1 and 

2, captains chair and sling seat versions, 

and equipment accommodating various 

patient weight capacities) and 

accessories used with the various power 

wheelchairs (for example, batteries, arm 

pads, and tires). 

Third, as part of the proposal to move 

to lead item pricing, we are proposing 

to establish a new definition under 

§ 414.402 for ‘‘lead item,’’ and we are 

proposing to revise the current 

definitions for ‘‘bid’’ and ‘‘composite 

bid’’ under § 414.402. We propose to 

revise the definition of ‘‘bid’’ to include 

the words ‘‘or items’’ after the word 

‘‘item’’. The definition of ‘‘bid’’ would 

read as follows ‘‘Bid means an offer to 

furnish an item or items for a particular 

price and time period that includes, 

where appropriate, any services that are 

directly related to the furnishing of the 

item or items.’’ We are proposing this 

change because under lead item pricing, 

the bid for a lead item includes the 

supplier’s bid for furnishing all of the 

items in the product category and not 

just the lead item. 

We propose to revise the definition of 

‘‘composite bid’’. The definition would 

read as follows ‘‘Composite bid means 

the bid submitted by the supplier for the 

lead item in the product category.’’ 

Currently, the supplier’s bid amounts 

for multiple items in the product 

category are weighted and summed to 

generate the supplier’s composite bid 

for that product category. Under lead 

item pricing, the supplier’s bid amount 

for the lead item is the composite bid. 

In addition, the bids for the lead items 

would be used to determine the SPAs 

for the rest of the items in the product 

category. We would educate suppliers 

regarding how pricing for all of the 

items in the product category would be 

established based on the bids submitted 

for the lead item, and that they should 

consider their costs for furnishing the 

various items in the product category 

when submitting their bid for the lead 

item. 

As indicated in section V.A of this 

proposed rule, section 1847(a)(1)(G) of 

the Act and our regulations require that 

bidding suppliers obtain bid surety 

bonds when participating in future 

competitions under the CBP. If the 

supplier is offered a contract for any 

product category for a CBA, and its 

composite bid for such product category 

and area is at or below the median 

composite bid rate for all bidding 

suppliers included in the calculation of 

the SPAs for the product category/CBA 

combination, the supplier must accept 

the contract offered or the supplier’s bid 

surety bond for the applicable CBA will 

be forfeited. Because we are proposing 

a change to the definition of composite 

bid (the composite bid would be defined 

as the supplier’s bid for the lead item in 

the product category), we note that the 

supplier’s bid for the lead item would 

also be treated as the ‘‘composite bid’’ 

for the purpose of implementing the 

statutory and regulatory bid surety bond 

requirement. Under the lead item 

pricing method, suppliers would forfeit 

their bid surety bond for a product 

category in a CBA if their composite bid 

(their bid for the lead item) is at or 

below the median composite bid rate for 

all bidding suppliers included in the 

calculation of SPAs for the product 

category and CBA and they do not 

accept a contract offer for the product 

category and CBA. In other words, the 

median of the winning bids for the lead 

item in the product category would be 

calculated and used to implement the 

bid surety bond requirement at section 

1847(a)(1)(H)(i) of the Act and 

§ 414.412(h). 

We are proposing to add the 

definition for ‘‘lead item’’ under 

§ 414.402. The definition of ‘‘lead item’’ 

would read as follows ‘‘Lead item is the 

item in a product category with multiple 

items with the highest total nationwide 

Medicare allowed charges of any item in 

the product category prior to each 

competition. Total nationwide Medicare 

allowed charges means the total sum of 

charges allowed for an item furnished in 

all states, territories, and D.C. where 

Medicare beneficiaries reside and can 

receive covered DMEPOS items and 

services.’’ 

Currently under § 414.412(d)(2) the 

‘‘lead item’’ in the product category is 

described as ‘‘the code with the highest 

total nationwide allowed services for 

calendar year 2012,’’ and ‘‘total 

nationwide allowed services’’ is defined 

in § 414.402 as meaning the total 

number of services allowed for an item 

furnished in all states, territories, and 

DC where Medicare beneficiaries reside 

and can receive covered DMEPOS items 

and services. We are proposing to delete 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34356 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

the lead item bidding provision that 

currently appears in § 414.412(d)(2) and 

replace it with the proposed lead item 

pricing provision. We are proposing to 

change these descriptions and 

definitions as explained by replacing 

this language in § 414.412(d)(2) with a 

new definition of lead item in § 414.402. 

We believe that using allowed charges 

rather than allowed services is a better 

way to identify the lead item in a 

product category for the purpose of 

implementing lead item pricing because 

the item with the highest allowed 

charges is the item that generates the 

most revenue for the suppliers of the 

items in the product category. The item 

with the most allowed services is not 

always the item that generates the most 

revenue for the supplier. For example, 

there are far more allowed services for 

NPWT dressings than NPWT pump 

rentals, but the revenue generated by the 

pump rentals is more than double the 

revenue generated by the dressings. 

Therefore, the item with the most 

allowed charges in the product category 

(the NPWT pump rentals) generates 

more revenue for the suppliers than the 

item with the most allowed services in 

the product category (the NPWT 

dressings). We note that in most cases 

the item with the most allowed charges 

would also be the item with the most 

allowed services, but in cases where this 

is not true, we believe that the lead item 

should be the one that generates the 

most revenue for suppliers as opposed 

to the one that has the higher number 

of allowed services. 

Section 1847(b)(2)(A)(iii) of the Act 

prohibits the awarding of contracts 

under the CBP unless the total amounts 

to be paid to contract suppliers in a CBA 

are expected to be less than the total 

amounts that would otherwise be paid. 

In order to implement this requirement 

for assurance of savings under the CBP, 

we propose to revise § 414.412(b)(2) to 

require that the supplier’s bid for each 

lead item and product category in a CBA 

cannot exceed the fee schedule amount 

that would otherwise apply to the lead 

item without any adjustments based on 

information from the CBP. 

Finally, we propose to amend the 

conditions for awarding contracts under 

the CBP in § 414.414(e) related to 

evaluation of bids under the CBP. 

Currently, this section indicates that 

CMS evaluates bids submitted for items 

within a product category, and that 

expected beneficiary demand in a CBA 

is calculated for items in the product 

category. We are proposing to change 

this section to indicate that CMS 

evaluates composite bids submitted for 

the lead item within a product category, 

and that expected beneficiary demand 

in a CBA is calculated for the lead item 

in the product category. We are 

proposing that under the lead item 

pricing methodology, CMS would 

calculate expected beneficiary demand 

and total supplier capacity based on the 

lead item in the product category when 

evaluating bids. Currently, beneficiary 

demand for items in a product category 

and supplier capacity for furnishing 

items in the product category are 

calculated based on historic utilization 

of the items making up at least 80 

percent of the total expenditures for the 

product category as a whole. The 

demand for these items is trended 

forward to the contract period by the 

projected growth in beneficiary 

population in the CBA and utilization of 

the items in the product category. The 

pivotal bid is where total supplier 

capacity for furnishing the items within 

a product category meets projected 

beneficiary demand for the items. 

Projected demand for items within a 

product category and supplier capacity 

for meeting the projected demand for 

items within a product category are 

calculated by adding the projected 

demand and supplier capacity for those 

items in the product category that make 

up 80 percent of the total expenditures 

for the product category. It is assumed 

that the suppliers with the capacity to 

furnish the items making up 80 percent 

of the total expenditures for the product 

category would also have the capacity to 

furnish the remaining items in the 

product category as well. This has 

proven to be true. Under lead item 

pricing, we are proposing that projected 

demand and supplier capacity would 

only be calculated for the lead item for 

the purpose of determining or 

establishing the pivotal bid. In other 

words, the winning range of suppliers 

would be set based on where the 

cumulative capacity of suppliers for 

furnishing the lead item equals or 

exceeds the projected beneficiary 

demand for the lead item. It is assumed 

that the suppliers with the capacity to 

furnish the lead item in the product 

category would also have the capacity to 

furnish the remaining items in the 

product category as well. We believe 

this change would have a minimal 

impact on the number of contracts 

awarded under the program, with the 

exception of CPAP devices and 

accessories. For this category of items, 

the CPAP device would be the lead 

item, but there are also several codes for 

accessories (masks, tubing, etc.) where 

total allowed charges are close to the 

allowed charge total for the CPAP 

device itself. Establishing projected 

demand and supplier capacity based on 

the CPAP device alone could result in 

a drop in the number of winning 

suppliers; however, we believe that 

suppliers that have the capacity to meet 

projected beneficiary demand for rental 

of the CPAP device would also have the 

capacity to furnish the accessories used 

with the devices they are furnishing. In 

addition, the 20 percent cap on supplier 

capacity would still be in effect, which 

limits the capacity of suppliers, 

including large, national chain 

suppliers, to 20 percent of projected 

demand, even if these suppliers could 

meet far more than 20 percent of 

beneficiary demand for CPAP devices 

and accessories. 

In summary, we propose to amend 

§§ 414.402, 414.412, and § 414.414 to 

change the definitions, the methodology 

for the calculation of SPAs, and the 

evaluation of bids under the CBP to 

reflect and establish the lead item 

pricing methodology. 

2. Calculation of Single Payment 

Amounts (SPAs) Using Maximum 

Winning Bids for Lead Items 

We propose to revise § 414.416 to 

change the methodology for calculating 

SPAs under the CBP. The SPA for the 

lead item in each product category and 

CBA would be based on the maximum 

or highest amount bid for the item by 

suppliers in the winning range as 

illustrated in Table 23. The SPAs for all 

other items in the product category 

would be based on a percentage of the 

maximum winning bid for the lead item. 

Specifically, the SPA for a non-lead 

item in the product category would be 

equal to the SPA for the lead item 

multiplied by the ratio of the average of 

the 2015 fee schedule amounts for all 

areas (that is, all states, DC, Puerto Rico, 

and the U.S. Virgin Islands) for the item 

to the average of the 2015 fee schedule 

amounts for all areas for the lead item. 

Thus, the SPAs for a non-lead item 

would be based on the relative 

difference in the fee schedule amounts 

for the lead and non-lead item before 

the fee schedule amounts were adjusted 

based on information from the CBP. For 

example, if the average 2015 fee 

schedule amount for a non-lead item 

such as a wheelchair battery is $107.25, 

and the average 2015 fee schedule 

amount for the lead item (Group 2, 

captains chair power wheelchair) is 

$578.51, the ratio for these two items 

would be computed by dividing $107.25 

by $578.51 to get 0.18539. Multiplying 

$578.51 by 0.18539 then generates the 

amount of $107.25. Under the lead item 

pricing methodology, if the maximum 

winning bid for the lead item in this 

example (Group 2, captains chair power 

wheelchair) is used to compute an SPA 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34357 

of $433.88 for this lead item, then the 

SPA for the non-lead item in this 

example (wheelchair battery) would be 

computed by multiplying $433.88 by 

0.18539 to generate an SPA of $80.44 for 

the non-lead item (wheelchair battery). 

We believe that establishing the SPA 

for the lead item based on the maximum 

winning bid rather than the median of 

winning bids could also further simplify 

the bidding process and better ensure 

the long term sustainability of the CBP. 

The maximum winning bid is the bid 

for the lead item submitted by the 

supplier with the pivotal bid, defined in 

§ 414.402 as the lowest composite bid 

based on bids submitted by suppliers for 

a product category that includes a 

sufficient number of suppliers to meet 

beneficiary demand for the items in that 

product category. Under the proposed 

revised definition of composite bid, 

each supplier’s bid for the lead item 

would be their composite bid. In no case 

would a supplier in the winning range 

be paid an amount for the lead item in 

a product category that is less than its 

bid amount for the lead item, or its 

composite bid, for the product category 

as a whole. We believe that this is the 

best way to ensure that the supplier can 

furnish the quantity of items and 

services it indicates it can furnish with 

its bid. As an alternative to using 

median bids to establish SPAs, we are 

proposing to use the maximum winning 

bid for the lead item in a product 

category to establish the SPAs for the 

rest of the items in the product category 

in order to ensure long term 

sustainability of the DMEPOS CBP. We 

believe that lead item pricing based on 

the maximum winning bid for the lead 

item is the best way to ensure that the 

supplier can furnish the quantity of 

items and services it indicates it can 

furnish with its bid because all 

suppliers in the winning range would be 

paid at least what they bid for the lead 

item or more. Currently, suppliers are 

paid based on the median of the 

winning bids for each item, which 

results in many suppliers being paid 

less than the amount they bid for an 

item, which could potentially lead to 

beneficiary access problems for these 

items if the SPA based on the median 

of the winning bids is not sufficient to 

cover the supplier’s costs for furnishing 

the quantity of items they indicated that 

they could furnish with their bid. 

Currently under the CBP, certain 

suppliers can be offered contracts after 

the initial contract awards are made if 

necessary to ensure access to items and 

services. These suppliers are suppliers 

that had composite bids above the 

pivotal bid, so their bids are even 

further removed from the median bid 

levels than the suppliers initially 

awarded contracts. As median bid levels 

continue to decline over time, we 

believe that it is possible that many of 

the suppliers with bids above the 

median would not be willing or able to 

accept contracts for items and services 

with SPAs that were set using the 

median of winning bids. We believe this 

could potentially jeopardize the 

program. If there are not enough 

suppliers willing to accept contract 

offers and meet beneficiary demand, 

then this would result in no contracts or 

payments at SPA levels set too low to 

ensure access. We believe this possible 

scenario could be avoided by changing 

the way that the SPAs are calculated, 

and using the proposed maximum 

winning bid for the lead item in a 

product category to establish the SPAs 

for all items in the product category, 

rather than using the median of winning 

bids to establish the SPA for each item 

in a product category. Also, by applying 

lead item pricing to all items, it would 

eliminate price inversions associated 

with suppliers bidding high for low 

weight items, since items weights and 

bids for low weight items would no 

longer be used to establish SPAs for 

items under the CBP. 

Bids from small suppliers that are 

only awarded contracts in order to help 

meet the small supplier target would not 

be used to determine the maximum 

winning bid because these contracts are 

awarded after the SPAs are established. 

Under § 414.414(g)(1)(i), we established 

a 30 percent target for small supplier 

participation in the CBP; thereby 

ensuring efforts are made to award at 

least 30 percent of contracts to small 

suppliers. If less than 30 percent of the 

suppliers in the winning range 

(suppliers at or below the pivotal bid) 

are not small suppliers, additional 

contracts are offered to small suppliers 

who bid above the pivotal bid in order 

to attempt to meet this 30 percent small 

supplier target. However, the bids above 

the pivotal bid have not been used to 

calculate the SPA in past competitions, 

and will not be used to calculate the 

SPA going forward. If small suppliers 

who are offered contracts do not accept 

them, we may not meet the small 

supplier target, but this refusal of the 

contract offers would not result in an 

access problem. The small supplier 

target is just a target for enhancing 

participation of small suppliers in the 

CBP and is not a threshold that must be 

met in order to meet demand for items 

and services. Currently, small suppliers 

not in the winning range who are only 

offered contracts in an attempt to meet 

this target must accept payment at the 

median of the winning bids for each 

item, which in most cases are amounts 

that are below what they bid for the 

item. While SPAs based on the 

proposed maximum winning bids 

would still be below what these 

suppliers bid, they are generally going 

to be closer to the amounts they bid 

than the SPAs based on the median of 

the winning bids. 

Likewise, bids from other suppliers 

awarded contracts after the SPAs are 

established are not currently used to 

determine the SPAs and would not be 

used to determine the maximum 

winning bid. Currently, in very limited 

cases, suppliers are offered and awarded 

contracts after the SPAs are established 

and contract offers are made because of 

errors that were made in the bid 

evaluation process. Also, additional 

contracts can be offered at any point 

during the contract period if necessary 

to ensure beneficiary access to items 

and services. The SPAs are not 

recalculated in these situations because 

it would be very disruptive and 

logistically challenging to change the 

SPAs and repeat the contracting process 

each time an additional contract is 

offered and accepted. The process for 

completing all of the steps necessary for 

CMS to implement a competition under 

the CBP from the time the competition 

is announced and suppliers are 

registered to bid in DBids (the online 

bidding system) to the time the contract 

period begins already takes 

approximately 2 years. 

Under the current methodology for 

establishing SPAs, for individual items 

within each product category in each 

CBA, the median of the winning bids for 

each item is used to establish the SPA 

for that item in each CBA, as illustrated 

in Table 21. The proposed methodology 

of using the maximum winning bids to 

establish SPAs is illustrated in Table 23. 

TABLE 23—PROPOSED MAXIMUM

WINNING BIDS METHODOLOGY

Supplier bids 

Bid amounts 

for the lead 

item 

Supplier 1 bid ....................... $1.00 

Supplier 4 bid ....................... 2.00 

Supplier 6 bid ....................... 2.00 

Supplier 9 bid ....................... 2.00 

Supplier 5 bid ....................... 2.00 

Supplier 11 bid ..................... 3.00 

Supplier 7 bid (pivotal bid) ... 3.00 

Maximum bid/SPA ................ 3.00 

As shown in this Table 23, the 

maximum winning bid, the pivotal bid, 

and the SPA are all equal. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34358 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

We stated in the 2007 DMEPOS final 

rule that we believed that setting the 

SPA based on the maximum of the 

winning bids is not representative of all 

bids submitted. However, we now 

believe that using the maximum 

winning bid amount for the lead item to 

establish the SPAs and paying most 

contract suppliers more than they bid 

helps to ensure access and long term 

sustainability of the CBP. This 

methodology has the advantage of being 

easily understood by bidding suppliers. 

Using the maximum winning bid for the 

lead item to establish SPAs addresses 

criticism from stakeholders that the use 

of median bids to establish SPAs results 

in CMS paying approximately half of 

the winning suppliers below what they 

bid for the item. Using the maximum 

winning bid is also strongly supported 

by the supplier community, as 

expressed in comments described in the 

preamble to the 2007 DMEPOS final 

rule (72 FR 18046). Under the CBP, 

suppliers have consistently accepted 

contract offers 92 percent of the time, 

even though the median bid levels have 

trended lower with each successive 

round of competitions. However, if bid 

levels continue to trend downward, we 

believe this could ultimately result in 

many suppliers rejecting contract offers, 

to the point where there may not be 

enough suppliers accepting contracts to 

meet demand for items and services. 

Table 24 shows the average SPAs for 

seven high volume items that have been 

included in all rounds of bidding and 

how they have changed with each 

successive recompete of the contracts. 

TABLE 24—CHANGE IN AVERAGE SPAS OVER ROUNDS OF BIDDING

Round Year SPA Year SPA Change % 

E1390—Oxygen Concentrator/Oxygen and Oxygen Equipment 

1 ........................ 2011 $116.16 2014 $95.74 ¥18 

1 ........................ 2014 95.74 2017 77.97 ¥19 

2 ........................ 2013 93.07 2016 76.84 ¥17 

E0601—CPAP 

1 ........................ 2011 $582.31 2014 $518.58 ¥11 

1 ........................ 2014 518.58 2017 426.76 ¥18 

2 ........................ 2013 466.02 2016 397.60 ¥15 

K0823—Group 2 Standard Power Wheelchair 

1 ........................ 2011 $2,554.22 2014 $2,189.28 ¥14 

1 ........................ 2014 2,189.28 2017 1,770.17 ¥19 

2 ........................ 2013 1,889.48 2016 1,785.41 ¥6 

B4035—Daily Supplies for Enteral Nutrition by Pump 

1 ........................ 2011 $7.50 2014 $5.79 ¥23 

1 ........................ 2014 5.79 2017 5.22 ¥10 

2 ........................ 2013 5.98 2016 5.25 ¥12 

E0143—Folding Wheeled Walker 

1 ........................ 2011 $66.13 2014 $58.79 ¥11 

1 ........................ 2014 58.79 2017 47.89 ¥19 

2 ........................ 2013 53.22 2016 45.93 ¥14 

E0260—Semi-Electric Hospital Bed 

1 ........................ 2011 $803.45 2014 $738.59 ¥8 

1 ........................ 2014 738.59 2017 615.22 ¥17 

2 ........................ 2013 703.14 2016 591.30 ¥16 

E0277—Powered Mattress Support Surface 

1 ........................ 2011 $3,197.50 2014 $2,855.09 ¥11 

1 ........................ 2014 2,855.09 2017 2,257.05 ¥21 

2 ........................ 2013 2,351.77 2016 1,748.70 ¥26 

If the median bids continue on this 

downward trend, suppliers with bids 

above the median bid may not be able 

to continue to furnish items and 

services at the SPAs established based 

on the median of winning bids, and this 

could cause problems with securing 

enough contract suppliers to meet 

demand and could cause non-viable 

programs in certain areas for certain 

product categories. We believe 

establishing SPAs based on the 

maximum winning bid for the lead item 

would help prevent such a scenario 

from unfolding and would enhance the 

long term sustainability of the DMEPOS 

CBP. We believe current tools used to 

address potential access or demand 

issues in CBAs, such as awarding 

additional contracts, may become 

insufficient if suppliers in the upper 

half of the winning range (those that bid 

at or below the pivotal bid, but above 

the median) stop accepting contract 

offers because the SPAs over time have 

decreased to the point where they are 

unacceptable to these suppliers. 

We believe that the maximum 

winning bid methodology would enable 

long term sustainability of the CBP but 

has some risks. This methodology could 

skew the data set of bids if there is an 

outlier. For example, in Table 23, if one 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34359 

supplier bids $20 and the majority of 

suppliers bid between $1 and $3, this 

would cause the entire item price to be 

inaccurately skewed in one direction 

and would increase the cost of the item 

significantly. Although there are some 

hindrances in replacing the median bid 

amount methodology with the 

maximum winning bid methodology for 

determining the SPA, such as the risk of 

skewed bids and the risk of paying 

suppliers more than necessary to meet 

beneficiary demand, we believe that the 

pros of reducing burden and enhancing 

access to items and services and 

sustainability of the competitive bidding 

program outweigh these cons. We solicit 

comments on ways to minimize these 

risks. 

With regard to the fiscal impact of the 

proposal to use lead item pricing and 

maximum winning bids to establish 

SPAs, we believe that use of maximum 

winning bids to establish SPAs for lead 

items would increase payment amounts 

and expenditures for these lead items, 

but would also decrease payment 

amounts and expenditures for many of 

the non-lead items, which should offset 

the cost of the payments for the lead 

items. For example, the monthly rental 

SPA for the NPWT pump (E2402) for the 

Virginia Beach, Virginia CBA is $654.89 

(60 percent less than the fee schedule 

amount of $1,642.09) and the purchase 

SPA for the NPWT dressing (A6550) is 

$25.39 (only 3 percent less than the fee 

schedule amount of $26.25). In 2017, 

approximately $356,257 was spent on 

the pump in this CBA while 

approximately $154,752 was spent on 

the dressings. Under lead item pricing, 

code E2402 would be the lead item, and 

the maximum winning bid for this item 

under the Round 2 Recompete (2016) 

was $839.00 per month (49 percent less 

than the fee schedule amount of 

$1,642.09). Had this amount been paid 

in 2017 in the Virginia Beach CBA, it 

would have increased expenditures for 

NPWT pump (E2402) by approximately 

$100,159 from $356,257 to 

approximately $456,416. However, 

using lead item pricing, the price for the 

dressing would have decreased from 

$25.39 to $13.41 (49 percent less than 

the fee schedule amount of $26.25), 

which would have decreased 

expenditures for code A6550 by 

approximately $73,018 from $154,752 to 

approximately $81,734. The net increase 

in expenditures in this example would 

have been approximately $27,141 

($100,159¥$73,018). 

In summary, we propose to amend the 

SPA determination methodology in 

§ 414.416 to change the methodology 

from one that uses the median of 

winning bids for each item to establish 

the SPAs for each item to one that uses 

the maximum winning bid for the lead 

item to set the SPA for the lead item and 

the rest of the items within the product 

category (‘‘non-lead items’’). The SPAs 

for each non-lead item would be based 

on the relative difference in the fee 

schedule amounts for the non-lead item 

and the lead item in 2015, before the fee 

schedule amounts were adjusted based 

on information from the CBP. 

Finally, we are interested in obtaining 

feedback from the public on whether or 

not certain large CBAs should be split 

into smaller size CBAs to create more 

manageable service areas for suppliers, 

as has been done for the New York, Los 

Angeles, and Chicago CBAs. We are 

soliciting feedback that we can consider 

in potentially adjusting the size and 

boundaries of CBAs for future 

competitions. There are currently nine 

CBAs with more than 7,000 square 

miles, and three of these CBAs are areas 

with more than 9,000 square miles. The 

largest CBA is the Phoenix-MesaScottsdale, Arizona CBA with 

approximately 12,000 square miles. This 

CBA is comprised of the two counties, 

Maricopa (approximately 8,000 square 

miles) in the northwest and Pinal 

(approximately 4,000 square miles) in 

the southeast. One option for reducing 

the size of this CBA would be to split 

the CBA in two based on the county 

borders and then remove some of the 

large low population density zip code 

areas from the southwestern portion of 

the new Maricopa County CBA to 

reduce the size of this CBA. Interstate 

highway 10 runs west to east and then 

south through the northern part of the 

current CBA (primarily Maricopa 

County), while interstate highway 8 

runs west to east through the southern 

part of the current CBA (primarily Pinal 

County). 

The second largest CBA is the Boise 

City, Idaho CBA, comprised of five 

counties, approximately 11,800 square 

miles. Three zip code areas (83604, 

83624, and 83650) south of the Snake 

River and interstate highway 84 in 

Owyhee County make up almost 65 

percent of the area for the CBA 

(approximately 7,700 square miles), but 

only 2 percent of the population. 

Removing these three zip codes from the 

CBA would reduce the size of the CBA 

to a little over 4,000 square miles. The 

average size of the 130 CBAs is 

approximately 2,900 square miles. The 

third largest CBA is the Dallas-Fort 

Worth-Arlington, Texas CBA with 

approximately 9,100 square miles. The 

Dallas-Fort Worth-Arlington, Texas 

MSA and is made up of the two 

metropolitan divisions of Dallas-PlanoIrving (approximately 5,000 square 

miles over eight counties) and Fort 

Worth-Arlington (approximately 4,000 

square miles over seven counties). This 

CBA could potentially be divided into 

two new CBAs based on the 

metropolitan divisions. The other six 

CBAs with more than 7,000 square 

miles are Riverside-San BernardinoOntario, California (approximately 8,900 

square miles), Houston-The WoodlandsSugar Land, Texas (approximately 8,800 

square miles), Bakersfield, California 

(approximately 8,100 square miles), Salt 

Lake City, Utah (approximately 7,500 

square miles), San Antonio-New 

Braunfels, Texas (approximately 7,300 

square miles), and Atlanta-Sandy 

Springs-Roswell, Georgia 

(approximately 7,300 square miles). 

We are soliciting feedback on whether 

certain large CBAs should be 

subdivided to make the areas more 

manageable to serve. One result of 

subdividing the CBAs and creating more 

CBAs is that suppliers who wish to bid 

for furnishing items and services in all 

of the areas that formerly would have 

been one area would have to incur the 

cost and effort of obtaining multiple bid 

surety bonds for the new areas rather 

than one bid surety bond. 

VI. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information From the DMEPOS CBP 

A. Background 

Section 16008 of the 21st Century 

Cures Act (the Cures Act) (Pub. L. 114– 

255) was enacted on December 13, 2016, 

and amended section 1834(a)(1)(G) of 

the Act to require in the case of items 

and services furnished in non-CBAs on 

or after January 1, 2019, that in making 

any adjustments to the fee schedule 

amounts in accordance with sections 

1834(a)(1)(F)(ii) and (iii), 

1834(a)(1)(H)(ii), or 1842(s)(3)(B) of the 

Act, the Secretary shall: (1) Solicit and 

take into account stakeholder input; and 

(2) take into account the highest bid by 

a winning supplier in a CBA and a 

comparison of each of the following 

factors with respect to non-CBAs and 

CBAs: 

• The average travel distance and cost 

associated with furnishing items and 

services in the area. 

• The average volume of items and 

services furnished by suppliers in the 

area. 

• The number of suppliers in the 

area. 

1. Stakeholder Input Gathered in 

Accordance With Section 16008 of the 

Cures Act 

Section 16008 of the Cures Act 

mandates that we solicit and take into 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34360 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

account stakeholder input in making 

adjustments to fee schedule amounts for 

items furnished on or after January 1, 

2019, based on information from the 

CBP. In order to solicit stakeholder 

input, we announced that we would be 

hosting a Medicare Learning Network 

(MLN) ConnectsTM National Provider 

Call (MLN Connects Call), which are 

educational conference calls conducted 

for the Medicare provider and supplier 

community that educate and inform 

participants about new policies and/or 

changes to the Medicare program. We 

announced this call through multiple 

CMS listservs throughout March 2017, 

in order to get the word out as quickly 

and directly as possible to our 

stakeholders. On March 23, 2017, CMS 

hosted a national provider call to solicit 

stakeholder input regarding adjustments 

to fee schedule amounts using 

information from the DMEPOS CBP. 

The national provider call was 

announced on March 3, 2017, and we 

requested written comments by April 6, 

2017. 

We received 125 written comments 

from stakeholders. More than 330 

participants called into our national 

provider call, with 23 participants 

providing oral comments during the 

call. In general, the commenters were 

mostly suppliers, but also included 

manufacturers, trade organizations, and 

healthcare providers such as physical 

and occupational therapists. These 

stakeholders expressed concerns that 

the level of the adjusted payment 

amounts constrains suppliers from 

furnishing items and services to rural 

areas. Stakeholders requested an 

increase to the adjusted payment 

amounts for these areas. The written 

comments generally echoed the oral 

comments from the call held on March 

23, 2017, whereby stakeholders claimed 

that the adjusted fees are not sufficient 

to cover the costs of furnishing items 

and services in non-CBAs and that this 

is having an impact on access to items 

and services in these areas. 

The oral and written comments are 

organized into the following categories: 

Inadequacy of Adjusted Fee Schedule 

Amounts: Commenters claim the 

adjusted fee schedule amounts do not 

cover the cost of furnishing the items 

and are not sustainable. Many 

commenters opposed the current 

adjusted payment amounts as 

insufficient to sustain the current cost of 

doing business. Some commenters 

stated that current reimbursement levels 

are below the cost of doing business. 

Many commenters stated they were 

billing non-assigned for items, or were 

considering billing non-assigned in the 

future. 

Travel Distance: Commenters claim 

the average travel distance and cost for 

suppliers serving rural areas are greater 

than the average travel distance and cost 

for suppliers serving CBAs. Many 

commenters described farther travel 

distances in rural areas than in nonrural areas. (For the purpose of 

implementing the fee schedule 

adjustment methodologies at 

§ 414.210(g), the term ‘‘rural area’’ is 

defined at § 414.202 and essentially 

includes any areas outside an MSA or 

excluded from a CBA). 

Volume of Services: Many 

commenters asserted that the average 

volume of services furnished by 

suppliers, when serving non-CBAs, are 

lower than the average volume of 

services furnished by suppliers, when 

serving CBAs. Many commenters stated 

that they do not get the same increase 

in volume that suppliers who obtain 

competitive bidding contracts get, 

which does not allow them to have 

economies of scale and obtain products 

at lower costs. 

Beneficiary Access: Many commenters 

stated that the adjusted fees have 

reduced the number of suppliers in the 

area, and that this has caused or will 

cause beneficiary access issues. Some 

commenters claimed that they were the 

only supplier in the area. 

Adverse Beneficiary Health 

Outcomes: Commenters stated that 

beneficiaries are going without items 

and this is causing adverse health 

outcomes. Commenters stated that 

hospital readmissions and lengths of 

stay, falls, and fractures are increasing 

as a result of the fee schedule 

reductions. 

Delivery Expenses: A few commenters 

provided an estimate of how much their 

delivery expenses cost, their estimated 

service radius, and the average distance 

traveled. Several commenters stated that 

they have reduced the size of their 

service area due to the level of 

reimbursement that they are receiving. 

Costs in Rural Areas: Many 

commenters stated rural areas have 

unique costs, costs that are higher than 

non-rural areas. Similar to comments 

received on our CY 2015 ESRD PPS 

proposed rule (79 FR 40275 through 

40315) and discussed in the CY 2015 

ESRD PPS final rule (79 FR 66223 

through 66265), some commenters 

stated that a 10 percent payment 

increase in rural areas is not enough to 

cover costs in rural areas. One 

commenter stated that non-contiguous 

areas, such as Alaska and Hawaii, face 

unique and greater costs due to higher 

shipping costs, a smaller amount of 

suppliers, and more logistical 

challenges related to delivery. Some 

commenters stated specific costs, as 

well as data sources, that CMS should 

take into account when adjusting fees in 

non-CBAs. These included the 

following: Geographic wage index 

factors, gas, taxes, employee wages and 

benefits, wear and tear of vehicle, 

average per capita income, training, 

delivery, set up, historical Medicare 

home placement volume, proximity to 

nearby CBAs, employing a respiratory 

therapist, electricity charges, freight 

charges, 24/7 service, documentation 

requirements, average per patient cost, 

licensing accreditation, surety bonds, 

audits, population density, miles and 

time between points of service, 

regulatory costs, vehicle insurance, and 

liability insurance. 

Two commenters pointed to the 

Ambulance Fee Schedule and one 

commenter pointed to the Bureau of 

Labor Statistic Consumer Expenditure 

Survey as evidence that health care 

costs in rural areas are higher than in 

urban areas. Another commenter 

mentioned the Internal Revenue Service 

Mileage Rate, the minimum wage, AAA 

Gallon of Gasoline prices, and the price 

of a loaf of white bread, to highlight 

how the prices of such items have 

increased over the years, while 

reimbursement for DME has not. 

Using the Highest Winning Bids for 

the Adjusted Fee Schedule 

Methodology: Five commenters 

suggested that the adjusted fee schedule 

amounts be based on maximum winning 

bids in CBAs rather than the median of 

winning bids in CBAs. One commenter 

suggested that the maximum winning 

bids should be the starting point for the 

adjustments and that additional 

payment should be added on to these 

amounts to pay for the higher costs of 

furnishing items and services in nonCBAs. 

2. Highest Winning Bids in CBAs 

Analysis 

Section 16008 of the Cures Act 

mandates that we take into account the 

highest amount bid by a winning 

supplier in a CBA in making 

adjustments to fee schedule amounts for 

items furnished on or after January 1, 

2019, based on information from the 

CBP. We considered the highest 

amounts bid by a winning supplier for 

a specific item (maximum bid) in the 

various CBAs in Round 1 2017 and 

Round 2 Recompete to see if maximum 

bids varied in different types of areas 

(that is, low volume versus high volume 

areas, large versus small delivery service 

areas, areas with few suppliers versus 

many suppliers). We analyzed 

maximum bids for the lead items in 

each product category (those with the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34361 

highest allowed charges) and for other 

lower volume items. For lower volume 

items with low item weights, suppliers 

had less of an incentive to bid low on 

these items and therefore the maximum 

bids for many of these items are not 

significantly below the unadjusted fee 

schedule amounts. 

For the lead items, we focused 

primarily on items that clearly are 

delivered locally such as large bulky 

hospital beds and oxygen equipment 

(concentrators and tanks) since 

variations in maximum bid amounts 

from CBA to CBA due to differences in 

travel distances and costs would be 

most noticeable for these items. There 

are 130 CBAs in total in Round 1 2017 

and Round 2 Recompete varying greatly 

in size, volume, and number of 

suppliers. What we found is that there 

is no pattern indicating that maximum 

bids are higher for larger areas with 

lower volume than they are for smaller 

areas with higher volume. 

Table 25 lists the 130 maximum bids 

for code E0260 (semi-electric hospital 

bed). We ranked the CBAs/bids from the 

largest maximum bid for E0260 to the 

lowest maximum bid for E0260. The 

average volume per supplier for each 

item is also included and ranked from 

1 (lowest average volume per supplier) 

to 130 (highest average volume per 

supplier). We looked to see if lower 

average volumes (for example, rankings 

1, 2, 3, etc.) corresponded with higher 

maximum bid amounts. We also looked 

to see if larger areas (for example, 

rankings 1, 2, 3, etc.) corresponded with 

higher maximum bid amounts. 

TABLE 25—MAXIMUM BID AMOUNTS IN ROUND 1 2017 AND ROUND 2 RECOMPETE FOR CODE E0260 

[Semi-Electric Hospital Bed] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E0260 

Max E0260 

bid rank 

Average 

E0260 

services per 

supplier 1

Volume rank 

(low to high) 

E0260 

Salt Lake City UT ..................................... 7,473 7 $1,343.79 1 37 23 

Ocala FL .................................................. 1,585 88 1,325.00 2 33 17 

Albuquerque NM ...................................... 6,287 10 1,303.00 3 35 19 

Charlotte-Concord-Gastonia NC .............. 3,788 37 1,276.61 4 75 68 

Kansas City MO ....................................... 4,572 25 1,207.50 5 51 36 

Seattle-Tacoma-Bellevue WA .................. 5,872 14 1,199.00 6 34 18 

Wichita KS ............................................... 4,149 29 1,100.00 7 61 53 

Knoxville TN ............................................. 3,501 39 1,100.00 7 49 33 

Honolulu HI .............................................. 601 124 1,075.00 9 46 30 

Portland-Hillsboro-Beaverton OR ............ 4,399 26 1,000.00 10 61 52 

McAllen-Edinburg-Mission TX .................. 1,571 90 950.00 11 127 107 

Colorado Springs CO ............................... 2,684 52 941.00 12 22 3 

Nashville-Davidson-Murfreesboro-Franklin TN .................................................... 6,036 12 940.00 13 68 60 

Phoenix-Mesa-Scottsdale AZ .................. 12,036 1 924.82 14 79 73 

Riverside-San Bernardino-Ontario CA ..... 8,900 4 920.00 15 53 37 

Bridgeport-Stamford-Norwalk CT ............. 625 122 897.23 16 84 77 

Orlando-Kissimmee-Sanford FL .............. 3,478 40 873.47 17 67 57 

Tampa-St. Petersburg-Clearwater FL ...... 2,513 55 850.00 18 85 78 

Boise City ID ............................................ 11,766 2 850.00 18 31 14 

Hartford-West Hartford-East Hartford CT 1,515 94 843.92 20 138 110 

Los Angeles County CA .......................... 2,232 65 840.60 21 109 96 

New Haven-Milford CT ............................ 605 123 829.62 22 157 117 

Boston-Cambridge-Quincy MA ................ 2,424 59 828.19 23 166 119 

Kansas City-Overland Park-Ottawa KS ... 2,829 48 819.00 24 36 20 

Denver-Aurora-Lakewood CO ................. 3,906 34 818.11 25 24 6 

Chicago-Naperville-Arlington Heights IL .. 1,273 103 818.10 26 328 130 

Wilmington DE ......................................... 426 127 817.41 27 156 116 

Fresno CA ................................................ 5,958 13 816.78 28 30 12 

Worcester MA .......................................... 1,511 95 814.00 29 57 46 

Jeffersonville-New Albany IN ................... 1,709 82 811.56 30 95 87 

Scranton-Wilkes-Barre-Hazleton PA ........ 1,747 81 807.35 31 142 112 

Greensboro-High Point NC ...................... 1,994 73 805.31 32 73 65 

Indianapolis-Carmel-Anderson IN ............ 3,994 33 800.00 33 120 101 

Minneapolis-St. Paul-Bloomington MN .... 4,731 23 800.00 33 94 86 

El Paso TX ............................................... 1,013 112 800.00 33 74 66 

Austin-Round Rock TX ............................ 4,220 27 800.00 33 58 47 

Beaumont-Port Arthur TX ........................ 3,034 46 800.00 33 37 24 

Lakeland-Winter Haven FL ...................... 1,798 80 798.88 38 71 63 

Deltona-Daytona Beach-Ormond Beach 

FL ......................................................... 1,586 87 798.88 38 45 29 

Silver Spring-Rockville-Bethesda MD ...... 1,152 105 789.00 40 104 93 

Augusta-Richmond County GA ................ 1,909 76 787.00 41 101 90 

Atlanta-Sandy Springs-Roswell GA ......... 7,275 9 787.00 41 92 84 

Columbia SC ............................................ 3,250 43 787.00 41 74 67 

Greenville-Anderson-Mauldin SC ............ 2,711 51 787.00 41 69 61 

Memphis TN ............................................. 1,926 74 785.00 45 119 100 

Omaha NE ............................................... 2,265 63 780.65 46 28 8 

Council Bluffs IA ...................................... 2,085 70 780.65 46 14 1 

Chester Lancaster-York Counties SC ..... 1,810 79 780.00 48 30 10 

Oklahoma City OK ................................... 5,512 15 778.68 49 59 49 

Birmingham-Hoover AL ............................ 5,280 17 776.79 50 86 79 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34362 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 25—MAXIMUM BID AMOUNTS IN ROUND 1 2017 AND ROUND 2 RECOMPETE FOR CODE E0260—Continued 

[Semi-Electric Hospital Bed] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E0260 

Max E0260 

bid rank 

Average 

E0260 

services per 

supplier 1

Volume rank 

(low to high) 

E0260 

Chattanooga TN ....................................... 1,306 99 776.27 51 45 27 

Washington DC ........................................ 61 130 765.00 52 110 97 

Miami-Fort Lauderdale-West Palm Beach 

FL ......................................................... 5,077 20 760.20 53 159 118 

Jacksonville FL ........................................ 3,201 45 752.90 54 115 99 

Jackson MS ............................................. 4,649 24 752.90 55 82 74 

Baton Rouge LA ...................................... 4,027 32 752.90 55 61 51 

South Haven-Olive Branch MS ................ 2,448 57 752.90 55 55 40 

Cape Coral-Fort Myers FL ....................... 785 118 752.90 55 37 22 

East St. Louis IL ...................................... 3,845 36 750.00 59 59 48 

Catoosa Dade-Walker Counties GA ........ 783 119 750.00 59 24 5 

Pittsburgh PA ........................................... 5,282 16 749.00 61 121 103 

Raleigh NC ............................................... 2,118 68 748.00 62 70 62 

Charleston-North Charleston SC ............. 2,588 54 748.00 62 60 50 

Aiken-Edgefield Counties SC .................. 1,571 90 748.00 62 56 43 

Syracuse NY ............................................ 2,385 61 742.50 65 50 34 

St. Louis MO ............................................ 5,267 18 739.22 66 57 45 

Nassau Kings Queens-Richmond Counties NY .................................................. 522 126 739.09 67 253 126 

Palm Bay-Melbourne-Titusville FL ........... 1,016 111 739.09 67 67 56 

Rockingham-Strafford Counties NH ........ 1,064 107 738.98 67 53 38 

Milwaukee-Waukesha-West Allis WI ....... 1,455 96 733.74 70 84 76 

Las Vegas-Henderson-Paradise NV ........ 1,578 89 733.01 71 47 31 

Providence RI .......................................... 1,034 109 728.84 72 63 55 

Huntington WV ......................................... 1,570 92 728.75 73 54 39 

Dearborn Franklin Ohio-Union Counties 

IN .......................................................... 937 113 728.70 74 31 15 

Mercer County PA ................................... 673 120 725.00 75 33 16 

Aurora-Elgin-Joliet IL ............................... 2,727 50 720.00 76 120 102 

Gary IN ..................................................... 1,878 77 719.99 77 124 105 

Houston-The Woodlands-Sugar Land TX 8,827 5 714.06 78 129 108 

Tulsa OK .................................................. 6,269 11 710.00 79 76 70 

Visalia-Porterville CA ............................... 3,377 41 705.49 80 113 98 

San Francisco-Oakland-Hayward CA ...... 2,471 56 705.49 80 92 85 

San Jose-Sunnyvale-Santa Clara CA ..... 2,679 53 705.49 80 30 13 

San Diego-Carlsbad CA .......................... 4,207 28 705.49 80 30 11 

Cleveland-Elyria OH ................................ 1,997 72 705.00 84 180 122 

New Orleans-Metairie LA ......................... 2,422 60 705.00 84 126 106 

Pierce-St. Croix Counties WI ................... 1,296 101 703.14 86 19 2 

Louisville-Jefferson County KY ................ 2,440 58 700.00 87 139 111 

Dayton OH ............................................... 1,706 83 700.00 87 103 92 

Cincinnati OH ........................................... 2,216 66 700.00 87 101 89 

Albany-Schenectady-Troy NY .................. 2,812 49 700.00 87 95 88 

Columbus OH .......................................... 4,797 22 700.00 87 87 80 

Youngstown-Warren-Boardman OH ........ 1,030 110 700.00 87 63 54 

Dallas-Fort Worth-Arlington TX ................ 9,091 3 697.17 93 142 113 

Baltimore-Columbia-Towson MD ............. 2,948 47 695.52 94 190 123 

Asheville NC ............................................ 2,033 71 691.83 95 51 35 

Bakersfield CA ......................................... 8,132 6 690.00 96 24 7 

Calvert Charles-Prince Georges Counties 

MD ........................................................ 1,154 104 688.85 97 101 91 

Suffolk County NY ................................... 912 114 687.05 98 168 120 

Port Chester-White Plains-Yonkers NY ... 834 116 687.05 98 129 109 

Akron OH ................................................. 900 115 683.00 100 90 83 

Philadelphia PA ........................................ 2,156 67 682.71 101 308 129 

Buffalo-Cheektowaga-Niagara Falls NY .. 1,565 93 680.00 102 90 82 

Rochester NY ........................................... 3,266 42 680.00 102 77 72 

Jersey City-Newark NJ ............................ 1,926 74 675.00 104 258 128 

Elizabeth-Lakewood-New Brunswick NJ 2,239 64 675.00 104 258 127 

Detroit-Warren-Dearborn MI .................... 3,888 35 675.00 104 216 125 

Flint MI ..................................................... 637 121 675.00 104 83 75 

Grand Rapids-Wyoming MI ..................... 4,053 31 675.00 104 76 69 

Arlington-Alexandria-Reston VA .............. 3,226 44 675.00 104 72 64 

Richmond VA ........................................... 4,897 21 675.00 104 49 32 

Sacramento-Roseville-Arden-Arcade CA 5,094 19 674.00 111 151 115 

Orange County CA .................................. 791 117 674.00 111 68 59 

Oxnard-Thousand Oaks-Ventura CA ....... 1,290 102 674.00 111 56 44 

Stockton-Lodi CA ..................................... 1,391 98 674.00 111 37 21 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34363 

TABLE 25—MAXIMUM BID AMOUNTS IN ROUND 1 2017 AND ROUND 2 RECOMPETE FOR CODE E0260—Continued 

[Semi-Electric Hospital Bed] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E0260 

Max E0260 

bid rank 

Average 

E0260 

services per 

supplier 1

Volume rank 

(low to high) 

E0260 

San Antonio-New Braunfels TX ............... 7,313 8 671.50 115 29 9 

Camden NJ .............................................. 1,674 84 670.00 116 209 124 

Bronx-Manhattan NY ............................... 65 129 670.00 116 150 114 

Virginia Beach-Norfolk-Newport News VA 2,089 69 670.00 116 77 71 

North Port-Sarasota-Bradenton FL .......... 1,299 100 667.98 119 45 28 

Toledo OH ................................................ 1,618 85 664.58 120 55 41 

Covington-Florence-Newport KY ............. 1,400 97 658.46 121 55 42 

Lake-McHenry Counties IL ...................... 1,047 108 629.90 122 107 95 

Allentown-Bethlehem-Easton PA ............. 1,096 106 625.00 123 172 121 

Poughkeepsie-Newburgh-Middletown NY 1,607 86 625.00 123 67 58 

Kenosha County WI ................................. 272 128 618.78 125 23 4 

Bristol County MA .................................... 553 125 600.00 126 105 94 

Springfield MA .......................................... 1,844 78 574.29 127 121 104 

Little Rock-North Little Rock-Conway AR 4,085 30 574.29 127 90 81 

Tucson AZ ................................................ 3,675 38 574.29 127 42 26 

Vancouver WA ......................................... 2,285 62 574.29 127 40 25 

1 2016 allowed services. 

We found no correlation between the 

size of the areas and/or average volume 

per supplier and maximum bid amounts 

for code E0260. The lowest volume CBA 

(Council Bluffs, Iowa) had the 46th 

highest maximum bid for E0260 and the 

second lowest volume CBA (Pierce-St. 

Croix Counties Wisconsin) had the 86th 

highest maximum bid for E0260. The 

highest maximum bid for E0260 was 

from the 7,437 square mile area for Salt 

Lake City, Utah (the 7th largest area), 

but the second highest maximum bid for 

E0260 was from the 1,585 square mile 

area for Ocala, Florida (the 88th largest 

area). 

We also analyzed the maximum bids 

for E0260 for states with at least 7 CBAs 

to see if there was any correlation 

between maximum bid amounts and 

area size, average volume per supplier, 

or number of suppliers and did not see 

any correlation between the maximum 

bids and these factors. California has 12 

CBAs ranging in size from 791 to 8,900 

square miles. Bakersfield, one of the 

CBAs, has the second largest service 

area (8,132 square miles) and lowest 

average volume per supplier for E0260 

in 2016 (24) in California, but the 

maximum winning bid for E0260 for 

Bakersfield was lower than the 

maximum winning bids for seven of the 

eleven other CBAs, all having smaller 

service areas as well, with the exception 

of Riverside (8,900 square miles). See 

Table 26. 

TABLE 26—ROUND 1 2017 AND ROUND 2 RECOMPETE CALIFORNIA CBA COMPARISON AND MAXIMUM BIDS FOR E0260 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

Bakersfield ............................................... 8,132 839,631 462 19 24 $690.00 

Fresno ...................................................... 5,958 930,450 571 19 30 816.78 

San Diego ................................................ 4,207 3,095,313 1,360 46 30 705.49 

San Jose .................................................. 2,679 1,836,911 913 30 30 705.49 

Stockton-Lodi ........................................... 1,391 685,306 586 16 37 674.00 

Riverside .................................................. 8,900 4,224,851 2,838 54 53 920.00 

Oxnard ..................................................... 1,290 823,318 1,124 20 56 674.00 

Orange County ......................................... 791 3,010,232 2,596 38 68 674.00 

San Francisco .......................................... 2,471 4,335,391 5,729 62 92 705.49 

Los Angeles County ................................. 2,232 9,818,605 11,509 106 109 840.60 

Visalia-Porterville ..................................... 3,377 442,179 907 8 113 705.49 

Sacramento .............................................. 5,094 2,149,127 5,434 36 151 674.00 

Florida has 10 CBAs ranging in size 

from 785 to 5,077 square miles. Ocala, 

one of the CBAs, has the lowest volume 

per supplier and the highest maximum 

bid in Florida. However, North Point 

and Deltona have much lower 

maximum bids for E0260 but only 

slightly higher volume and number of 

suppliers and are the same size as the 

Ocala CBA. See Table 27. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34364 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 27—ROUND 1 2017 AND ROUND 2 RECOMPETE FLORIDA CBA COMPARISON AND MAXIMUM BIDS FOR E0260 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

Ocala ........................................................ 1,585 331,303 1,195 36 33 $1,325.00 

Cape Coral-Fort Myers ............................ 785 618,754 1,189 32 37 752.90 

North Port-Sarasota ................................. 1,299 702,281 2,177 48 45 667.98 

Deltona ..................................................... 1,586 590,289 2,223 49 45 798.88 

Orlando .................................................... 3,478 2,134,406 6,593 98 67 873.47 

Palm Bay-Melbourne ............................... 1,016 543,376 2,416 36 67 739.09 

Lakeland ................................................... 1,798 602,095 2,636 37 71 798.88 

Tampa-St. Petersburg .............................. 2,513 2,783,243 8,059 95 85 850.00 

Jacksonville .............................................. 3,201 1,345,596 5,163 45 115 752.90 

Miami ........................................................ 5,077 5,564,657 20,183 127 159 760.20 

New York has 9 CBAs ranging in size 

from 65 to 3,266 square miles. Syracuse, 

one of the CBAs, has the lowest volume 

and highest maximum bid in New York 

for E0260. By contrast, the Nassau CBA 

has a much higher volume for E0260 

and a smaller service area than the 

Syracuse CBA, but a maximum bid for 

E0260 that is very close to the maximum 

bid for E0260 for the Syracuse CBA. See 

Table 28. 

TABLE 28—ROUND 2 RECOMPETE NEW YORK CBA COMPARISON AND MAXIMUM BIDS FOR E0260 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

Syracuse .................................................. 2,385 662,577 1,599 32 50 $742.50 

Poughkeepsie .......................................... 1,607 670,301 2,291 34 67 625.00 

Rochester ................................................. 3,266 1,079,671 2,382 31 77 680.00 

Buffalo ...................................................... 1,565 1,135,509 1,983 22 90 680.00 

Albany ...................................................... 2,812 870,716 2,854 30 95 700.00 

Port Chester ............................................. 834 1,360,510 6,591 51 129 687.05 

Bronx-Manhattan ...................................... 65 2,970,981 9,884 66 150 670.00 

Suffolk County .......................................... 912 1,493,350 6,231 37 168 687.05 

Nassau Kings Queens ............................. 522 6,543,684 25,839 102 253 739.09 

Ohio has 7 CBAs ranging in size from 

900 to 4,797 square miles. Four of the 

CBAs have the same maximum bid for 

E0260 ($700), yet the areas are not 

similar in size, volume, or number of 

suppliers. See Table 29. 

TABLE 29—ROUND 1 2017 AND ROUND 2 RECOMPETE OHIO CBA COMPARISON AND MAXIMUM BIDS FOR E0260 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

Toledo ...................................................... 1,618 651,429 1,649 30 55 $664.58 

Youngstown ............................................. 1,030 449,130 1,199 19 63 700.00 

Columbus ................................................. 4,797 1,901,974 5,409 62 87 700.00 

Akron ........................................................ 900 703,200 2,350 26 90 683.00 

Cincinnati ................................................. 2,216 1,625,406 4,530 45 101 700.00 

Dayton ...................................................... 1,706 841,502 3,705 36 103 700.00 

Cleveland ................................................. 1,997 2,077,245 10,623 59 180 705.00 

Finally, Texas has 7 CBAs ranging in 

size from 1,013 to 9,091 square miles. 

The San Antonio CBA has the lowest 

volume for E0260 and is a large area, but 

has the lowest maximum bid amount for 

E0260 in Texas. The McAllen CBA has 

the highest maximum bid amount for 

E0260, but is much smaller and has a 

much higher average volume per 

supplier for E0260 than the San Antonio 

CBA. See Table 30. 

TABLE 30—ROUND 1 2017 AND ROUND 2 RECOMPETE TEXAS CBA COMPARISON AND MAXIMUM BIDS FOR E0260 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

San Antonio ............................................. 7,313 2,142,508 1,026 35 29 $671.50 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34365 

TABLE 30—ROUND 1 2017 AND ROUND 2 RECOMPETE TEXAS CBA COMPARISON AND MAXIMUM BIDS FOR E0260— 

Continued 

Area Service area 

(square miles) Population 

Allowed 

services 

in 2016 

(E0260) 

Number of 

suppliers 

in 2016 

(E0260) 

Average 

allowed 

services per 

supplier 

Maximum 

bid 

(E0260) 

Beaumont-Port Arthur .............................. 3,034 403,190 894 24 37 800.00 

Austin ....................................................... 4,220 1,716,289 2,599 45 58 800.00 

El Paso ..................................................... 1,013 800,647 1,110 15 74 800.00 

McAllen .................................................... 1,571 774,773 2,279 18 127 950.00 

Houston .................................................... 8,827 5,946,800 11,353 88 129 714.06 

Dallas ....................................................... 9,091 6,417,724 14,362 101 142 697.17 

We did not find any correlation 

between maximum winning bid 

amounts for code E0260 and the size of 

a service area or between maximum 

winning bid amounts for code E0260 

and the volume of items and services 

furnished by suppliers in various areas. 

Table 31 lists the 130 maximum bids 

in Round 1 2017 and Round 2 

Recompete for code E1390 (oxygen 

concentrators and portable oxygen 

contents or tanks). 

TABLE 31—MAXIMUM BID AMOUNTS FOR HCPCS CODE E1390 

[Oxygen concentrator and portable contents/tanks] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E1390 

Max E1390 

bid rank 

Average 

E1390 

services per 

supplier 1

Volume rank 

(low to high) 

E1390 

Cape Coral-Fort Myers, FL ...................... 785 118 $135.50 1 108 7 

Seattle-Tacoma-Bellevue, WA ................. 5,872 14 134.17 2 222 79 

Birmingham-Hoover, AL ........................... 5,280 17 132.52 3 174 49 

Hartford-West Hartford-East Hartford, CT 1,515 94 130.28 4 287 108 

Albuquerque, NM ..................................... 6,287 10 123.00 5 224 81 

Jeffersonville-New Albany, IN .................. 1,709 82 117.60 6 278 102 

Gary, IN .................................................... 1,878 77 117.60 6 279 103 

Indianapolis-Carmel-Anderson, IN ........... 3,994 33 115.00 8 357 122 

North Port-Sarasota-Bradenton, FL ......... 1,299 100 110.50 9 136 19 

Nashville-Davidson-Murfreesboro-Franklin, TN ................................................... 6,036 12 109.00 10 185 57 

Miami-Fort Lauderdale-West Palm 

Beach, FL ............................................. 5,077 20 109.00 10 199 65 

Salt Lake City, UT .................................... 7,473 7 106.00 12 375 126 

Ocala, FL ................................................. 1,585 88 106.00 12 108 7 

Charlotte-Concord-Gastonia, NC ............. 3,788 37 106.00 12 243 89 

Kansas City, MO ...................................... 4,572 25 106.00 12 315 115 

Wichita, KS .............................................. 4,149 29 106.00 12 412 130 

Knoxville, TN ............................................ 3,501 39 106.00 12 217 76 

Portland-Hillsboro-Beaverton, OR ........... 4,399 26 106.00 12 132 16 

McAllen-Edinburg-Mission, TX ................. 1,571 90 106.00 12 80 2 

Colorado Springs, CO .............................. 2,684 52 106.00 12 368 124 

Phoenix-Mesa-Scottsdale, AZ ................. 12,036 1 106.00 12 168 44 

Riverside-San Bernardino-Ontario, CA .... 8,900 4 106.00 12 188 61 

Bridgeport-Stamford-Norwalk, CT ............ 625 122 106.00 12 234 84 

Tampa-St. Petersburg-Clearwater, FL ..... 2,513 55 106.00 12 202 67 

Boise City, ID ........................................... 11,766 2 106.00 12 147 24 

Los Angeles County, CA ......................... 2,232 65 106.00 12 202 67 

New Haven-Milford, CT ........................... 605 123 106.00 12 237 87 

Boston-Cambridge-Quincy, MA ............... 2,424 59 106.00 12 349 121 

Kansas City-Overland Park-Ottawa, KS .. 2,829 48 106.00 12 275 100 

Denver-Aurora-Lakewood, CO ................ 3,906 34 106.00 12 365 123 

Chicago-Naperville-Arlington Heights, IL 1,273 103 106.00 12 377 127 

Fresno, CA ............................................... 5,958 13 106.00 12 280 105 

Worcester, MA ......................................... 1,511 95 106.00 12 226 82 

Minneapolis-St. Paul-Bloomington, MN ... 4,731 23 106.00 12 152 30 

El Paso, TX .............................................. 1,013 112 106.00 12 178 52 

Austin-Round Rock, TX ........................... 4,220 27 106.00 12 143 22 

Beaumont-Port Arthur, TX ....................... 3,034 46 106.00 12 171 47 

Lakeland-Winter Haven, FL ..................... 1,798 80 106.00 12 115 10 

Deltona-Daytona Beach-Ormond Beach, 

FL ......................................................... 1,586 87 106.00 12 123 13 

Silver Spring-Rockville-Bethesda, MD ..... 1,152 105 106.00 12 132 16 

Atlanta-Sandy Springs-Roswell, GA ........ 7,275 9 106.00 12 236 86 

Columbia, SC ........................................... 3,250 43 106.00 12 186 58 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34366 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 31—MAXIMUM BID AMOUNTS FOR HCPCS CODE E1390—Continued 

[Oxygen concentrator and portable contents/tanks] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E1390 

Max E1390 

bid rank 

Average 

E1390 

services per 

supplier 1

Volume rank 

(low to high) 

E1390 

Memphis, TN ............................................ 1,926 74 106.00 12 297 111 

Omaha, NE .............................................. 2,265 63 106.00 12 170 46 

Council Bluffs, IA ..................................... 2,085 70 106.00 12 148 26 

Oklahoma City, OK .................................. 5,512 15 106.00 12 286 106 

Chattanooga, TN ...................................... 1,306 99 106.00 12 176 51 

Washington, DC ....................................... 61 130 106.00 12 113 9 

Jacksonville, FL ....................................... 3,201 45 106.00 12 187 59 

Jackson, MS ............................................ 4,649 24 106.00 12 150 27 

Baton Rouge, LA ..................................... 4,027 32 106.00 12 166 39 

South Haven-Olive Branch, MS ............... 2,448 57 106.00 12 214 74 

East St. Louis, IL ..................................... 3,845 36 106.00 12 258 92 

Pittsburgh, PA .......................................... 5,282 16 106.00 12 327 120 

Charleston-North Charleston, SC ............ 2,588 54 106.00 12 153 31 

Aiken-Edgefield Counties, SC ................. 1,571 90 106.00 12 96 3 

St. Louis, MO ........................................... 5,267 18 106.00 12 315 115 

Nassau Kings Queens-Richmond Counties, NY ................................................. 522 126 106.00 12 216 75 

Palm Bay-Melbourne-Titusville, FL .......... 1,016 111 106.00 12 157 34 

Rockingham-Strafford Counties, NH ....... 1,064 107 106.00 12 197 64 

Milwaukee-Waukesha-West Allis, WI ...... 1,455 96 106.00 12 268 99 

Providence, RI ......................................... 1,034 109 106.00 12 221 77 

Huntington, WV ........................................ 1,570 92 106.00 12 223 80 

Dearborn Franklin Ohio-Union Counties, 

IN .......................................................... 937 113 106.00 12 106 5 

Aurora-Elgin-Joliet, IL .............................. 2,727 50 106.00 12 191 62 

Houston-The Woodlands-Sugar Land, TX 8,827 5 106.00 12 207 69 

Tulsa, OK ................................................. 6,269 11 106.00 12 226 82 

Visalia-Porterville, CA .............................. 3,377 41 106.00 12 398 128 

San Francisco-Oakland-Hayward, CA ..... 2,471 56 106.00 12 166 39 

San Jose-Sunnyvale-Santa Clara, CA .... 2,679 53 106.00 12 130 15 

San Diego-Carlsbad, CA ......................... 4,207 28 106.00 12 159 35 

Cleveland-Elyria, OH ............................... 1,997 72 106.00 12 407 129 

New Orleans-Metairie, LA ........................ 2,422 60 106.00 12 160 36 

Pierce-St. Croix Counties, WI .................. 1,296 101 106.00 12 72 1 

Dayton, OH .............................................. 1,706 83 106.00 12 235 85 

Cincinnati, OH .......................................... 2,216 66 106.00 12 311 112 

Albany-Schenectady-Troy, NY ................. 2,812 49 106.00 12 263 94 

Columbus, OH ......................................... 4,797 22 106.00 12 199 65 

Dallas-Fort Worth-Arlington, TX ............... 9,091 3 106.00 12 262 93 

Baltimore-Columbia-Towson, MD ............ 2,948 47 106.00 12 324 118 

Bakersfield, CA ........................................ 8,132 6 106.00 12 164 38 

Calvert-Charles-Prince Georges Counties, MD ................................................ 1,154 104 106.00 12 178 52 

Suffolk County, NY .................................. 912 114 106.00 12 208 70 

Port Chester-White Plains-Yonkers, NY .. 834 116 106.00 12 153 31 

Philadelphia, PA ....................................... 2,156 67 106.00 12 326 119 

Buffalo-Cheektowaga-Niagara Falls, NY 1,565 93 106.00 12 286 106 

Rochester, NY .......................................... 3,266 42 106.00 12 171 47 

Detroit-Warren-Dearborn, MI ................... 3,888 35 106.00 12 322 117 

Grand Rapids-Wyoming, MI .................... 4,053 31 106.00 12 183 54 

Arlington-Alexandria-Reston, VA ............. 3,226 44 106.00 12 166 39 

Richmond, VA .......................................... 4,897 21 106.00 12 275 100 

Sacramento-Roseville-Arden-Arcade, CA 5,094 19 106.00 12 210 72 

Orange County, CA ................................. 791 117 106.00 12 134 18 

Oxnard-Thousand Oaks-Ventura, CA ...... 1,290 102 106.00 12 140 20 

San Antonio-New Braunfels, TX .............. 7,313 8 106.00 12 210 72 

Bronx-Manhattan, NY .............................. 65 129 106.00 12 97 4 

Virginia Beach-Norfolk-Newport News, 

VA ......................................................... 2,089 69 106.00 12 253 91 

Covington-Florence-Newport, KY ............ 1,400 97 106.00 12 167 42 

Lake-McHenry Counties, IL ..................... 1,047 108 106.00 12 183 55 

Kenosha County, WI ................................ 272 128 106.00 12 161 37 

Bristol County, MA ................................... 553 125 106.00 12 264 97 

Springfield, MA ......................................... 1,844 78 106.00 12 252 90 

Tucson, AZ ............................................... 3,675 38 106.00 12 141 21 

Vancouver, WA ........................................ 2,285 62 106.00 12 121 11 

Raleigh, NC .............................................. 2,118 68 105.00 105 127 14 

Asheville, NC ........................................... 2,033 71 94.00 106 312 114 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34367 

TABLE 31—MAXIMUM BID AMOUNTS FOR HCPCS CODE E1390—Continued 

[Oxygen concentrator and portable contents/tanks] 

Area name Size in 

square miles Size rank 

Maximum 

winning bid 

E1390 

Max E1390 

bid rank 

Average 

E1390 

services per 

supplier 1

Volume rank 

(low to high) 

E1390 

Honolulu, HI ............................................. 601 124 92.66 107 107 6 

Las Vegas-Henderson-Paradise, NV ....... 1,578 89 92.27 108 191 62 

Orlando-Kissimmee-Sanford, FL ............. 3,478 40 92.00 109 175 50 

Greensboro-High Point, NC ..................... 1,994 73 86.84 110 169 45 

Poughkeepsie-Newburgh-Middletown, 

NY ......................................................... 1,607 86 85.35 111 147 24 

Augusta-Richmond County, GA ............... 1,909 76 85.00 112 155 33 

Allentown-Bethlehem-Easton, PA ............ 1,096 106 85.00 112 263 94 

Flint, MI .................................................... 637 121 84.29 114 150 27 

Greenville-Anderson-Mauldin, SC ........... 2,711 51 83.44 115 263 94 

Chester Lancaster-York Counties, SC .... 1,810 79 83.44 115 150 27 

Scranton-Wilkes-Barre-Hazleton, PA ....... 1,747 81 83.00 117 311 112 

Louisville-Jefferson County, KY ............... 2,440 58 83.00 117 373 125 

Little Rock-North Little Rock-Conway, AR 4,085 30 83.00 117 279 103 

Stockton-Lodi, CA .................................... 1,391 98 82.15 120 122 12 

Wilmington, DE ........................................ 426 127 82.00 121 209 71 

Mercer County, PA .................................. 673 120 82.00 121 143 22 

Jersey City-Newark, NJ ........................... 1,926 74 82.00 121 237 87 

Camden, NJ ............................................. 1,674 84 82.00 121 287 108 

Youngstown-Warren-Boardman, OH ....... 1,030 110 81.41 125 187 59 

Akron, OH ................................................ 900 115 81.41 125 167 42 

Syracuse, NY ........................................... 2,385 61 81.00 127 265 98 

Elizabeth-Lakewood-New Brunswick, NJ 2,239 64 81.00 127 296 110 

Catoosa Dade-Walker Counties, GA ....... 783 119 79.80 129 221 77 

Toledo, OH ............................................... 1,618 85 79.80 129 183 55 

1 2016 allowed services. 

Again, we found no correlation 

between area size and/or average 

volume for E1390 per supplier and 

maximum bid amounts. In addition, 

CBAs that had the highest maximum 

winning bids for code E0260 did not 

always have the highest maximum 

winning bids for code E1390. For 

example, the Cape Coral-Fort Myers, 

Florida CBA had the highest maximum 

winning bid for E1390, but was tied for 

the 55th highest maximum winning bid 

for E0260. In many cases, national chain 

suppliers for oxygen bid the same 

amount in every area. For oxygen and 

oxygen equipment (E1390), there were 

six national chain suppliers that 

submitted the same winning bid 

amounts in at least 33 different CBAs 

and four suppliers that submitted the 

same winning bid amounts in at least 67 

different CBAs. One of these suppliers 

submitted the maximum winning bid 

for E1390 of $106 in 93 different CBAs. 

Maximum bid amounts can be bid 

amounts from a single supplier (the 

supplier submitting the pivotal bid), 

which may or may not reflect the costs 

of other suppliers and don’t seem to 

show any pattern from area to area in 

terms of some areas always having the 

highest maximum bids for items and 

other areas always having the lowest 

maximum winning bids for items. The 

maximum winning bids for items show 

no correlation with area size, volume, or 

number of suppliers. In some cases, the 

maximum bid amount is the same in 

dozens of different CBAs across the 

country. The maximum bids for lower 

weight items are also impacted by 

unbalanced bidding, whereby the 

suppliers bid higher amounts for these 

items knowing that they will have little 

impact on their composite bid and 

chances for winning. 

3. Travel Distance Analysis 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the average travel 

distances associated with furnishing 

items and services in CBAs and nonCBAs in making adjustments to fee 

schedule amounts for items furnished 

on or after January 1, 2019, based on 

information from the CBP. We first 

examined the average travel distances in 

CBAs versus non-CBAs by analyzing 

differences in the geographic size in 

square miles of CBAs versus non-CBAs 

consisting of MSAs and micropolitan 

statistical areas (micro areas). The 

majority of items subject to the fee 

schedule adjustments are furnished in 

these non-CBAs. 

The U.S. Office of Management and 

Budget (OMB) delineates MSAs and 

micro areas, which are referred to 

collectively as ‘‘core based statistical 

areas’’ (CBSAs). OMB set the standards 

for delineating MSAs and micro areas in 

the notice published on June 28, 2010 

in the Federal Register, titled ‘‘2010 

Standards for Delineating Metropolitan 

and Micropolitan Statistical Areas’’ (75 

FR 37245). The general concept of the 

MSA and micro area is that of a core 

area containing a substantial population 

nucleus, together with adjacent 

communities having a higher degree of 

economic and social integration with 

that core. CBSAs consist of counties and 

equivalent entities throughout the U.S. 

and Puerto Rico (75 FR 37249). A CBSA 

is categorized based on the population 

of the largest urban area (urbanized area 

or urban cluster) within the CBSA (75 

FR 37250). Each CBSA must have a 

Census Bureau delineated urbanized 

area of at least 50,000 population or a 

Census Bureau delineated urban cluster 

of at least 10,000 population (75 FR 

37249). An urbanized area is a statistical 

geographic entity delineated by the U.S. 

Census Bureau, consisting of densely 

settled census tracts and blocks and 

adjacent densely settled territory that 

together contain at least 50,000 people 

(75 FR 37252). An urban cluster is a 

statistical geographic entity delineated 

by the U.S. Census Bureau, consisting of 

densely settled census tracts and blocks 

and adjacent densely settled territory 

that together contain at least 2,500 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34368 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

people (75 FR 37252). MSAs contain at 

least one urbanized area that has a 

population of at least 50,000; micro 

areas contain at least one urban cluster 

that has a population of at least 10,000 

and less than 50,000 (75 FR 37252). 

We compared the average size of the 

different areas nationally and by Bureau 

of Economic Analysis (BEA) region. We 

also computed the weighted average 

size of the different areas nationally and 

by region, weighted by total population. 

The CBAs have much larger service 

areas than the non-CBA MSA and micro 

areas. It is also worth noting that our 

current definition of rural area for the 

purposes of fee schedule adjustments in 

non-CBAs includes micro areas (in 

general, a rural area is currently defined 

at 42 CFR 414.202 as any zip code area 

where at least 50 percent of the area is 

outside a MSA or with a low population 

density that was excluded from a CBA). 

Under the CBP, a contract supplier is 

required to deliver items to any 

beneficiary in the CBA that requests 

service. The size of CBAs can be 

compared to the size of non-CBAs to 

indicate how far a supplier located in or 

near the areas may have to travel to 

serve beneficiaries located in the 

various areas. As shown in Table 32, the 

average size of CBAs in each of the eight 

BEA regions is larger than the average 

size of both non-rural areas and rural 

areas classified as micro areas by OMB, 

areas where competitive bidding, for the 

most part, not yet been implemented, 

and where the vast majority of items are 

furnished in the non-CBAs. 

TABLE 32—AVERAGE SIZE OF AREA

[Square miles] 

BEA region CBA MSA Micro 

New England ............................................................................................................................... 1,241 1,175 968 

Mideast ........................................................................................................................................ 1,659 833 859 

Great Lakes ................................................................................................................................. 2,061 942 638 

Plains ........................................................................................................................................... 3,700 1,880 1,029 

Southeast ..................................................................................................................................... 2,776 1,218 681 

Southwest .................................................................................................................................... 5,737 3,637 1,992 

Rocky Mountain ........................................................................................................................... 6,457 3,025 3,002 

Far West ...................................................................................................................................... 3,791 2,308 3,776 

Average ........................................................................................................................................ 3,428 1,877 1,618 

The average non-CBA MSA size is 55 

percent of the average CBA size and the 

average non-CBA micro area size is 47 

percent of the average CBA size. As 

shown in Table 33, when weighting the 

average size of the areas based on U.S. 

Census total resident 2010 population 

numbers, the differences in the average 

size of the areas is similar to the 

differences noted in Table 32. The 

weighted average non-CBA MSA size is 

57 percent of the weighted average CBA 

size and the weighted average non-CBA 

micro area size is 43 percent of the 

weighted average CBA size. 

TABLE 33—AVERAGE SIZE OF AREA (SQUARE MILES) WEIGHTED BY POPULATION

BEA region CBA MSA Micro 

BEA Region ................................................................................................................................. CBA MSA Micro 

New England ............................................................................................................................... 1,624 1,273 1,094 

Mideast ........................................................................................................................................ 1,718 937 1,016 

Great Lakes ................................................................................................................................. 2,707 1,875 711 

Plains ........................................................................................................................................... 4,371 3,169 1,157 

Southeast ..................................................................................................................................... 5,780 1,517 911 

Southwest .................................................................................................................................... 7,917 3,510 2,355 

Rocky Mountain ........................................................................................................................... 5,559 3,934 3,494 

Far West ...................................................................................................................................... 3,833 2,749 3,582 

Average ........................................................................................................................................ 4,189 2,371 1,790 

The size of the CBAs are much larger 

than the size of the non-CBA MSAs and 

micro areas where most of the items 

subject to the fee schedule adjustments 

are furnished. The contract suppliers 

must serve every part of these areas and 

have much larger travel distances on 

average than suppliers in both non-CBA 

urban areas (MSAs) and non-CBA rural 

areas (areas outside MSAs). 

The data in Table 34 shows what 

percentage of suppliers furnishing items 

and services subject to the fee schedule 

adjustments are located in the same 

areas where the items and services are 

furnished (that is, the percentage of 

suppliers located in the same area as the 

beneficiary). We separated the data by 

CBA, and then non-CBA MSA, micro 

area, or Outside Core Based Statistical 

Area (OCBSA), which are counties that 

do not qualify for inclusion in a CBSA. 

The data in Table 34 shows that the 

majority of suppliers furnishing items 

and services subject to the fee schedule 

adjustments are located in the same 

areas where these items and services are 

furnished. 

TABLE 34—PERCENTAGE OF ITEMS AND SERVICES IN 2016 FURNISHED BY SUPPLIERS

LOCATED IN THE SAME AREA AS THE BENEFICIARY

Beneficiary area Hospital beds 

(%) 

Oxygen 

(%) 

All items 

(%) 

CBAs ............................................................................................................................................ 68 77 64 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34369 

TABLE 34—PERCENTAGE OF ITEMS AND SERVICES IN 2016 FURNISHED BY SUPPLIERS—Continued 

LOCATED IN THE SAME AREA AS THE BENEFICIARY

Beneficiary area Hospital beds 

(%) 

Oxygen 

(%) 

All items 

(%) 

Non-CBA MSAs ........................................................................................................................... 68 63 65 

Non-CBA Micro Areas ................................................................................................................. 64 61 61 

Non-CBA OCBSAs ...................................................................................................................... 78 82 81 

We also compared the average travel 

distances for suppliers in the different 

areas using claims data for items and 

services subject to the fee schedule 

adjustments. For each allowed DME 

item and service, we used the shortest 

distance between the coordinates of the 

beneficiary’s residential ZIP code and 

those of the supplier’s ZIP code on the 

surface of a globe as a proxy of DME 

delivery distance. In addition, we 

prioritized 9-digit ZIP codes over 5-digit 

ZIP codes when determining the 

coordinates. The results in Table 35 are 

for hospital beds and oxygen and 

oxygen equipment, items that are most 

likely to be delivered locally by 

suppliers using company vehicles. 

TABLE 35—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY BASED ON CLAIMS FOR 2016 

Beneficiary area Hospital beds Oxygen 

CBAs ........................................................................................................................................................................ 62 79 

Non-CBA MSAs ....................................................................................................................................................... 35 54 

Non-CBA Micro Areas ............................................................................................................................................. 30 49 

Non-CBA OCBSAs .................................................................................................................................................. 34 57 

These results indicate that the average 

travel distances in CBAs are much 

greater than the average travel distances 

in all non-CBAs, but the data may be 

skewed by claims for suppliers that put 

a billing address on the claim that is not 

the address of the location that 

furnished the item (either a different 

location or a subcontractor). The data 

may also be skewed by claims where the 

beneficiary receives the item from a 

supplier in a different area because he 

or she is travelling (for example, 

‘‘snowbirds’’). To account for this, we 

excluded data for claims where the 

beneficiary address was more than two 

states away from the supplier location 

on the claim form, as these are likely 

claims where the item was delivered 

from a different location or by a subcontractor, or were claims for traveling 

beneficiaries (that is, snowbirds and 

other beneficiaries receiving items from 

suppliers in locations other than their 

permanent residence). We also excluded 

data for suppliers with multiple 

locations that always put the same 

address on all of their claims. When 

using data for this restricted population 

(beneficiaries receiving items from 

suppliers in same or adjoining states) 

and these restricted suppliers (all 

suppliers except those with multiple 

locations that always bill from the same 

location), the results on average 

distances are significant, as shown in 

Table 36 for hospital beds, oxygen and 

oxygen equipment, and all items subject 

to the fee schedule adjustments. 

TABLE 36—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY

BASED ON RESTRICTED CLAIMS FOR 2016 1

Beneficiary area Hospital beds Oxygen All items 

CBAs ............................................................................................................................................ 25 21 27 

Non-CBA MSAs ........................................................................................................................... 22 19 24 

Non-CBA Micro Areas ................................................................................................................. 23 21 27 

Non-CBA OCBSAs ...................................................................................................................... 27 30 36 

1 Claims where the supplier billing address is in the same or adjoining state as the beneficiary address, excluding claims from suppliers with 

multiple locations that always use the same billing address. 

Based on these results, the average 

distances from the supplier to the 

beneficiary in the CBAs are still greater 

than the average distances from the 

supplier to the beneficiary in the nonCBA MSAs and micro areas where most 

of the items subject to the fee schedule 

adjustments are furnished. However, the 

average distances for other rural areas 

(areas outside both MSAs and micro 

areas) are slightly greater than the 

average distances for the CBAs. 

It is not surprising that the average 

distances between supplier billing 

locations and beneficiary residences are 

greater in CBAs than in non-CBA MSAs 

and micro areas given the findings 

above that the CBAs are much larger 

areas and given that the majority of 

items furnished in the various areas are 

furnished by suppliers located in those 

areas. Regardless of the type of area, it 

makes sense that suppliers would locate 

their businesses in the places where 

most of the population resides (cities 

and towns). The means that the average 

distance travelled by the supplier will 

be weighted heavily in favor of the 

shorter trips made from the location to 

the beneficiaries living in the immediate 

area. The supplier will also make much 

longer trips, but these trips would not 

have as great an impact on the average 

travel distance as the trips made to the 

population nucleus immediately 

surrounding the supplier location. 

We also did this same analysis 

comparing average distances in CBAs 

versus non-CBAs broken out not based 

on whether the beneficiary resided in an 

MSA, micro area, or OCBSA, but broken 

out based on whether or not the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34370 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

18https://www.ers.usda.gov/data-products/ 

frontier-and-remote-area-codes/. 

beneficiary resided in a super rural (SR) 

area based on the definition of super 

rural area used in the ambulance fee 

schedule rules in § 414.610(c)(5)(ii). 

Specifically, we used the April 2018 

quarterly Zip Code to Carrier Locality 

File. When doing so, we found that out 

of all allowed services for DME items 

subject to the fee schedule adjustments, 

9 percent of allowed services were 

furnished in SR areas. From 2015 to 

2016, SR areas saw a 3 percent increase 

in allowed services. At the product 

category level, SR areas exhibit the same 

level of change in service volume as the 

rest of the nation. Without any data 

restrictions, CBAs tend to have greater 

average service distances than nonCBAs. For the restricted population, 

however, SR areas almost always show 

the greatest average distance. Lastly, we 

did not find any noticeable increase in 

service distance from 2015 to 2016 for 

any product category. 

Table 37 shows the data for claims 

from all suppliers and Table 38 shows 

the data for the same restricted claims. 

TABLE 37—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY BASED ON CLAIMS FOR 2016 

Beneficiary area Hospital beds Oxygen 

CBAs ........................................................................................................................................................................ 62 79 

Non-SR Areas .......................................................................................................................................................... 32 51 

SR Areas ................................................................................................................................................................. 48 64 

TABLE 38—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY BASED ON RESTRICTED CLAIMS FOR

2016 1

Beneficiary area Hospital beds Oxygen All items 

CBAs ............................................................................................................................................ 25 21 27 

Non-SR Areas .............................................................................................................................. 22 19 25 

SR Areas ..................................................................................................................................... 36 35 41 

1 Claims where the supplier billing address is in the same or adjoining state as the beneficiary address, excluding claims from suppliers with 

multiple locations that always use the same billing address. 

We also did this same analysis 

comparing average distances in CBAs 

versus non-CBAs broken out not based 

on whether the beneficiary resided in an 

MSA, micro area, or OCBSA, but broken 

out based on whether or not the 

beneficiary resided in a far and remote 

(FAR) area. We examined whether the 

beneficiary resided in a FAR area, as 

defined by the Office of Rural Health 

Policy in the Health Resources and 

Services Administration in a final notice 

published on May 5, 2014 in the 

Federal Register, titled ‘‘Methodology 

for Designation of Frontier and Remote 

Areas’’ (79 FR 25599). FAR is a 

statistical delineation that defines 

frontier and remote areas based on 

remoteness and population sparseness. 

FAR areas are defined in relation to the 

time it takes to travel by car to the edges 

of nearby Census defined Urban Areas. 

The Department of Agriculture 

maintains a list of ZIP codes that 

identify FAR areas in the U.S. 

Specifically, we used the 2010 Frontier 

and Remote Area Codes Data Files, last 

updated by the Department of 

Agriculture on April 15, 2015.18 There 

are four levels of FAR, as rural areas 

experience degrees of remoteness at 

higher or lower population levels that 

affect access to different types of goods 

and services. 

We looked at whether the beneficiary 

resided in a FAR level 1 (FAR1) area: 

An area with a population of less than 

50,000 people located 60 minutes or 

more from an area with a population of 

at least 50,000 people. Roughly 7 

percent of items and services subject to 

competitive bidding nationally are 

furnished in these FAR1 areas. 

We also compared average distances 

in CBAs versus non-CBAs broken out 

based on whether the beneficiary 

resided in a FAR level 3 (FAR3) area: 

An area with a population of less than 

10,000 people located 30 minutes or 

more from an urban area of 10,000 to 

24,999 people, 45 minutes or more from 

an urban area of 25,000 to 49,999 

people, and 60 minutes or more from an 

urban area of 50,000 or more. Roughly 

3 percent of items and services subject 

to competitive bidding nationally are 

furnished in these FAR3 areas. 

Table 39 shows the data for claims 

from all suppliers and Table 40 shows 

the data for the same restricted claims. 

TABLE 39—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY BASED ON CLAIMS FOR 2016 

Beneficiary area Hospital beds Oxygen 

CBAs ........................................................................................................................................................................ 62 79 

Non-FAR Areas ....................................................................................................................................................... 33 52 

FAR1 Areas ............................................................................................................................................................. 40 57 

FAR3 Areas ............................................................................................................................................................. 49 72 

TABLE 40—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY

BASED ON RESTRICTED CLAIMS FOR 2016 1

Beneficiary area Hospital beds Oxygen All items 

CBAs ............................................................................................................................................ 25 21 27 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34371 

19https://ia800903.us.archive.org/14/items/ 

durablemedicaleq00kowa/durablemedical

eq00kowa.pdf. 

TABLE 40—AVERAGE NUMBER OF MILES BETWEEN SUPPLIER AND BENEFICIARY—Continued 

BASED ON RESTRICTED CLAIMS FOR 2016 1

Beneficiary area Hospital beds Oxygen All items 

Non-FAR Areas ........................................................................................................................... 22 20 26 

FAR1 Areas ................................................................................................................................. 29 30 37 

FAR3 Areas ................................................................................................................................. 37 40 46 

1 Claims where the supplier billing address is in the same or adjoining state as the beneficiary address, excluding claims from suppliers with 

multiple locations that always use the same billing address. 

Average distances between suppliers 

and beneficiaries in areas falling under 

the current definition of rural areas at 

§ 414.202 are not greater than the 

average distances in CBAs. When the 

restricted data for rural areas for nonCBAs is broken out by micro area and 

OCBSA, the distances are only slightly 

greater for OCBSAs than CBAs. 

However, when the restricted data for 

non-CBAs in general is broken out based 

on whether the non-CBA is a FAR3, 

Super Rural, or OCBSA, the distances 

between suppliers and beneficiaries are 

much greater than for the CBAs. 

4. Cost Analysis 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the average costs 

associated with furnishing items and 

services in CBAs and non-CBAs in 

making adjustments to fee schedule 

amounts for items furnished on or after 

January 1, 2019, based on information 

from the CBP. In our CY 2015 ESRD PPS 

proposed rule published in the Federal 

Register, titled ‘‘Medicare Program; 

End-Stage Renal Disease Prospective 

Payment System, Quality Incentive 

Program, and Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies;’’ (79 FR 40279), we noted that 

Congress previously mandated that the 

costs of furnishing DME in different 

geographic regions of the country be 

studied. Section 135 of the Social 

Security Act Amendments of 1994 (Pub. 

L. 103–432), required an examination of 

the geographic variations in DME 

supplier costs in order to determine 

whether the fee schedules are 

reasonably adjusted to account for any 

geographic differences. Jing Xing Health 

and Safety Resources, Inc. provided 

assistance to the Health Care Financing 

Administration, now CMS, in 

conducting this study. The project, 

titled ‘‘Durable Medical Equipment 

Supplier Product and Service Cost 

Study’’, was completed under Contract 

Number Health Care Financing 

Administration (HCFA) 500–95–0044 

and submitted to the agency in June 

1996.19 As part of the study, a Federal 

Advisory Panel was convened, a formal 

meeting with representatives of the 

DME industry was held, and a literature 

review was conducted. The general 

consensus among industry 

representatives and government 

agencies that participated in the study 

was that there is no conclusive evidence 

that urban and rural costs differed 

significantly or that the costs of 

furnishing DME items and services were 

higher in urban areas versus rural areas 

or vice versa. 

Jing Xing Health and Safety 

Resources, Inc. summarized the findings 

from the study in a report titled ‘‘Final 

Report: Durable Medical Equipment 

Supplier Product and Service Cost 

Study’’, and stated that, ‘‘At one level, 

it is intuitively obvious that certain 

DME categories require a much larger 

service component than others. To 

illustrate, the service component in 

providing oxygen equipment is a larger 

proportion of costs than, for example, 

selling a walker or cane. The latter does 

not involve very much, if any, assembly, 

patient education, maintenance, etc.’’ 

Additionally, ‘‘There was a general 

consensus among study participants 

that excluding the impact of volume 

purchasing the costs of acquiring DME 

items (that is, wholesale costs) are 

generally the same around the country 

with the possible exceptions of Alaska 

and Hawaii where shipping costs are 

greater. There was also general 

agreement that service costs do vary 

with the largest geographic variation 

resulting from labor costs. Limited tests 

using Medicare data provide support for 

the theory that geographic variation in 

the costs of providing DME is primarily 

caused by service components.’’ 

In researching cost data for section 

16008 of the Cures Act, we sought data 

that was national in scope, robust, and 

would allow us to access differences in 

costs of furnishing items and services in 

CBAs versus non-CBAs throughout the 

country. We also primarily sought data 

that was available at the county level, as 

this allowed us to compare CBA 

counties to non-CBA counties. CBAs are 

currently comprised of whole counties, 

except when certain low population 

density areas are excluded from a 

county included in a CBA in accordance 

with section 1847(a)(3)(A) of the Act. 

We examined four sources of cost 

data: (1) The Practice Expense 

Geographic Practice Cost Index (PE 

GPCI), (2) delivery driver wages from 

the Bureau of Labor Statistics (BLS), (3) 

real estate taxes from the U.S. Census 

Bureau’s American Community Survey 

(ACS), and (4) gas and utility prices 

from the Consumer Price Index (CPI). 

Overall, we found that CBAs tended to 

have the highest costs out of the cost 

data that we examined, when compared 

to non-CBAs. We will now discuss the 

cost data sources we examined, and the 

methodology we used to analyze such 

cost data. 

a. Cost Data Methodology 

We first examined the PE GPCI. CMS 

first implemented the GPCIs as part of 

the Medicare Physician Fee Schedule 

(PFS) in 1992 (56 FR 59502). CMS must 

review and, if necessary, adjust the 

GPCIs at least every 3 years, as required 

by section 1848(e)(1)(C) of the Act. The 

most recent update occurred in 2017, in 

which a final rule was published on 

November 15, 2016 in the Federal 

Register, titled ‘‘Medicare Program; 

Revisions to Payment Policies Under the 

Physician Fee Schedule and Other 

Revisions to Part B for CY 2017; 

Medicare Advantage Bid Pricing Data 

Release; Medicare Advantage and Part D 

Medical Loss Ratio Data Release; 

Medicare Advantage Provider Network 

Requirements; Expansion of Medicare 

Diabetes Prevention Program Model; 

Medicare Shared Savings Program 

Requirements’’ (81 FR 80170). The PE 

GPCIs are comprised of four component 

indices (employee wages; purchased 

services; office rent; and medical 

equipment, supplies and other 

miscellaneous expenses), and are 

designed to measure the relative cost 

difference in the mix of goods and 

services comprising practice expenses 

(not including malpractice expenses) 

among the 89 PFS fee schedule areas 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34372 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

20Proposed Revisions to the Sixth Update of the 

Geographic Practice Cost Index. https:// 

www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/PhysicianFeeSched/Downloads/CMS_

1524_P_CY2012_PFS_NPRM_GPCI_Revisions.pdf. 

21https://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/PhysicianFeeSched/PFSFederal-Regulation-Notices-Items/CMS-1654- 

F.html. 

22https://www.whitehouse.gov/sites/ 

whitehouse.gov/files/omb/bulletins/2015/15-01.pdf. 

throughout the nation, as compared to 

the national average of these costs. The 

current 89 fee schedule areas are 

defined by state boundaries (for 

example, Wisconsin), metropolitan 

areas (for example, Metropolitan St. 

Louis, MO), portions of a metropolitan 

area (for example, Manhattan), or restof-state areas that exclude metropolitan 

areas (for example, Rest of Missouri). 

This configuration is used to calculate 

the GPCIs that are in turn used to 

calculate payments for physicians’ 

services under the PFS (81 FR 80263). 

The employee wage index measures 

several kinds of wages for clinical and 

administrative office staff. The current 

GPCI methodology relies on wage data 

from occupations representing 100 

percent of total non-physician wages in 

the ‘‘offices of physicians: industry’’ 

from the BLS Occupational Employment 

Statistics (OES). This includes wages for 

‘‘Medical secretaries,’’ ‘‘Receptionists 

and information clerks,’’ ‘‘Medical 

records and health information 

technicians,’’ and other additional 

occupations.20

The purchased services index 

includes BLS OES wages for 

occupations employed in industries 

from which physicians are likely to 

purchase services, which includes the 

cost of contracted services (for example, 

accounting, legal). This includes wages 

for ‘‘Commercial and industrial 

machinery and equipment repair and 

maintenance,’’ ‘‘Services to buildings 

and dwellings,’’ and other additional 

occupations.20

The office rent index measures 

regional variation in the price of office 

rents using residential rent data from 

the U.S. Census Bureau’s American 

Community Survey (ACS) on median 

gross rents for two-bedroom apartments. 

The ACS determines gross rent by 

adding up the following: Contract rent 

+ utilities (electricity, gas, and water 

and sewer) + fuel (oil, coal, kerosene, 

wood, etc.). As such, we are using the 

PE GPCI as a proxy for commercial rent 

and utilities. 

In a final rule published on November 

15, 2016 in the Federal Register, titled 

‘‘Medicare Program; Revisions to 

Payment Policies Under the Physician 

Fee Schedule and Other Revisions to 

Part B for CY 2017; Medicare Advantage 

Bid Pricing Data Release; Medicare 

Advantage and Part D Medical Loss 

Ratio Data Release; Medicare Advantage 

Provider Network Requirements; 

Expansion of Medicare Diabetes 

Prevention Program Model; Medicare 

Shared Savings Program Requirements’’ 

final rule (81 FR 80170), we stated 

because Medicare is a national program, 

and section 1848(e)(1)(A) of the Act 

requires CMS to establish GPCIs to 

measure relative cost differences among 

localities compared to the national 

average, we believe it is important to 

use the best data that is available on a 

nationwide basis, that is regularly 

updated, and retains consistency areato-area, year-to-year (81 FR 80263). CMS 

discussed how there is currently no 

national data source available for 

physician office or other comparable 

commercial rents, which is why CMS 

uses county-level residential rent data 

from ACS as a proxy for the relative cost 

differences in commercial office rents. 

The ACS is administered by the U.S. 

Census Bureau, which is a leading 

source of national, robust, quality, 

publicly available data. A commercial 

data source for office rent that provided 

for adequate representation of urban and 

rural areas nationally would be 

preferable to a residential rent proxy. 

The GPCIs are not an absolute measure 

of practice costs, rather they are a 

measure of the relative cost differences 

for each of the three GPCI components. 

The U.S. Census Bureau is a federal 

agency that specializes in data 

collection, accuracy, and reliability, and 

we believe that where such a publicly 

available resource exists that can 

provide useful data to assess geographic 

cost differences in office rent, even 

though it is a proxy for the exact data 

we seek, we should utilize that available 

resource. 

Therefore, given its national 

representation, reliability, high response 

rate and frequent updates, we believe 

the ACS residential rent data is the most 

appropriate data source available at this 

time for the purposes of analyzing rent 

and utilities. It is also worth noting that 

we examine utility prices from the CPI 

as another source of cost data, which is 

discussed further on in the preamble of 

this proposed rule. 

The medical equipment, supplies and 

other miscellaneous expense cost index 

component of the PE GPCI measures 

practice expenses associated with a 

wide range of costs that include 

chemicals and rubber, to telephone and 

postage. The medical equipment, 

supplies, and miscellaneous expenses 

index holds that there is a national 

market for the items it measures such 

that there is not significant geographic 

variation in costs. Therefore, this index 

is given a value of 1.000 for each PFS 

fee schedule area. We discussed our 

reasoning behind this in the final rule 

published on November 15, 2004 in the 

Federal Register, titled ‘‘Medicare 

Program; Revisions to Payment Policies 

Under the Physician Fee Schedule for 

Calendar Year 2005’’ (69 FR 66235), 

stating ‘‘We were again unable to find 

any data sources that demonstrated 

price differences by geographic areas. 

As mentioned in previous updates, 

some price differences may exist, but 

these differences are more likely to be 

based on volume discounts rather than 

on geographic areas.’’ Separately 

billable items such as DMEPOS are 

generally not included in this index, but 

this finding is consistent with the 

aforesaid findings from the Jing Xing 

Health and Safety Resources, Inc. study. 

The PE GPCIs are calculated at the fee 

schedule area level after aggregating the 

county-level component indexes. The 

PE GPCI county level data are for 

informational purposes only so that 

interested parties can have a better 

understanding of the data that underpin 

their fee schedule area GPCI values. In 

order to compare CBAs and non-CBAs, 

we used CY 2017 PE GPCI county data 

(CY 2017 PFS final rule (81 FR 80170)) 

found in the GPCI public use files.21

This allowed us to then map each 

county in this dataset to either a CBA, 

or non-CBA by MSA, micro area, or 

OCBSA county, and to then see its 

corresponding PE GPCI. The counties 

and county equivalent names listed in 

this file are from the 2010 U.S. Census. 

When mapping counties to CBAs, we 

selected all counties that were included 

in Round 2 Recompete or Round 1 2017. 

We then used OMB Bulletin No. 15–01 

as the source for mapping the remaining 

counties to either non-CBA by MSAs, 

micro areas, or OCBSAs.22 After doing 

this, we grouped all contiguous counties 

of the U.S. with the same delineation 

and BEA Region together. We grouped 

any non-contiguous counties of the U.S. 

with the same delineation together. We 

then calculated the weighted average of 

each delineation’s PE GPCI value using 

U.S. Census 2010 total resident 

population numbers for each county. 

For this PE GPCI analysis, we included 

all 50 states and the District of 

Columbia. 

Although counties in Puerto Rico and 

the Virgin Islands have a PE GPCI value, 

each is assigned the GPCI national 

average of 1.0. For the Virgin Islands, 

because county-level wage and rent data 

are not available, and insufficient 

malpractice premium data are available, 

CMS has set the PE GPCI values for the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34373 

23https://www.bls.gov/oes/tables.htm. 

24https://www.bls.gov/oes/current/msa_def.htm. 

25https://www.census.gov/geographies/referencefiles/time-series/demo/metro-micro/delineationfiles.html. 

26NACo Analysis of U.S. Census Bureau, NACo 

Research, 2013. 

27U.S. Census Bureau, 2012–2016 American 

Community Survey 5-Year Estimates. 

28https://www.bls.gov/cpi/cpi_dr.htm. 

Virgin Islands fee schedule area at the 

national average of 1.0 (81 FR 80269). In 

an effort to provide greater consistency 

in the calculation of GPCIs given the 

lack of comprehensive data regarding 

the validity of applying the proxy data 

used in the states in accurately 

accounting for variability of costs for 

these island territories, we discussed in 

a final rule published on November 15, 

2016 in the Federal Register, titled 

‘‘Medicare Program; Revisions to 

Payment Policies Under the Physician 

Fee Schedule and Other Revisions to 

Part B for CY 2017; Medicare Advantage 

Bid Pricing Data Release; Medicare 

Advantage and Part D Medical Loss 

Ratio Data Release; Medicare Advantage 

Provider Network Requirements; 

Expansion of Medicare Diabetes 

Prevention Program Model; Medicare 

Shared Savings Program Requirements’’ 

final rule (81 FR 80170) that we would 

treat the Caribbean Island territories (the 

Virgin Islands and Puerto Rico) in a 

consistent manner. We thus finalized a 

proposal to do so by assigning the 

national average of 1.0 to each GPCI 

index for both Puerto Rico and the 

Virgin Islands. Thus, in calculating 

weighted average PE GPCIs for noncontiguous areas, we only incorporated 

PE GPCIs from Hawaii and Alaska. 

Because stakeholders on the March 

23, 2017 stakeholder call indicated that 

deliveries make up a significant part of 

the costs when furnishing items and 

services, we examined delivery driver 

wages as the next source of cost data. 

The BLS OES provides delivery driver 

wage data in the ‘‘53–0000 

Transportation and Material Moving 

Occupations’’ occupation group. 

Specifically, we used the ‘‘53–3033 

Light Truck or Delivery Services 

Drivers’’ individual occupation wage 

index, which is underneath the ‘‘53– 

0000 Transportation and Material 

Moving Occupations’’ occupation 

group. 

We used the median hourly wage 

from the ‘‘53–3033 Light Truck or 

Delivery Services Drivers’’ individual 

occupation wage index as the source of 

this delivery driver wage data. We used 

median hourly wage values from the 

May 2016 Metropolitan and 

Nonmetropolitan Area Occupational 

Employment and Wage Estimates.23

For this analysis, we used a similar 

methodology that we used for the 

aforesaid PE GPCI analysis. We mapped 

each county to two areas: Its 

corresponding delineation (CBA, nonCBA MSA, non-CBA micro area, or nonCBA OCBSA), and its BEA Region. We 

then mapped counties to their 

corresponding median hourly wage by 

using the May 2016 Metropolitan and 

Nonmetropolitan Area Definitions 

provided by the BLS.24 In cases where 

BLS did not have a median hourly 

delivery driver wage for a particular 

county, we calculated and then assigned 

such counties the median hourly 

delivery driver wage for that county’s 

state (this was the case for the following 

counties: Bradley County, Tennessee 

(TN); Polk County, TN; Los Alamos 

County, New Mexico; Champaign 

County, Illinois (IL); Piatt County, IL; 

Ford County, IL; Kankakee County, IL). 

In order to come up with an hourly 

wage for each BEA Region and 

delineation, we calculated the weighted 

average of the median hourly wages for 

the counties within each area, basing 

the weighted average off of each 

county’s U.S. Census total resident 2010 

population numbers. 

For New England states, the BLS 

assigns wages to New England city and 

town areas (NECTAs) instead of 

metropolitan and non-metropolitan 

areas that adhere to county boundaries, 

which the BLS does for every other area 

outside of New England. An issue with 

assigning wages to NECTAs is that there 

is not a one-to-one mapping of NECTAs 

to counties, as the collection of 

townships in a NECTA may not 

completely cover a county. This results 

in counties being represented in 

multiple NECTAs. To address this issue, 

we mapped NECTAs to New England 

counties by using the U.S. Census 

Bureau’s ‘‘NECTAs, NECTA divisions, 

and combined NECTAs’’ file that is 

based on OMB Bulletin No. 15–01 

delineations.25 If a New England county 

had more than one NECTA, we 

calculated the weighted average of each 

of its NECTAs’ median hourly wages. 

We used total population estimates from 

the 2016 ACS for the population 

weighting (U.S. Census Bureau, 2012– 

2016 ACS 5-Year Estimates). 

OMB set the standards for NECTAs in 

the notice published on June 28, 2010 

in the Federal Register, titled ‘‘2010 

Standards for Delineating Metropolitan 

and Micropolitan Statistical Areas’’ (75 

FR 37245). Based upon these standards, 

10 counties in New England did not 

have any towns or cities that qualified 

as NECTAs (Aroostook County, Maine 

(ME); Caledonia County, Vermont (VT); 

Carroll County, New Hampshire; Essex 

County, VT; Franklin County, ME; Knox 

County, ME; Nantucket County, 

Massachusetts; Orleans County, VT; 

Washington County, ME; and Windham 

County, (VT). We assigned delivery 

driver wages to these 10 counties based 

upon which area each of these counties’ 

seat were located in the May 2016 

Metropolitan and Nonmetropolitan Area 

Definitions provided by BLS.26

We also used ACS data to examine 

real estate taxes. We analyzed 2016 data 

from the survey titled ‘‘Mortgage Status 

by Median Real Estate Taxes Paid 

(Dollars) Universe: Owner-occupied 

housing units’’.27 In this survey, ACS 

provides a median real estate tax for 

each U.S. county, thus allowing us to 

use a similar methodology that we used 

for the PE GCPIs and delivery driver 

wages. In order to come up with a real 

estate tax value for each BEA Region 

and delineation, we calculated the 

weighted average of the median real 

estate tax values for the counties within 

each area, basing the weighted average 

off of each county’s U.S. Census total 

resident 2010 population numbers. It is 

worth noting that the ACS measures real 

estate taxes paid on housing units, not 

business units. However, similar to our 

reasoning above for using residential 

rent data provided by the ACS as a 

proxy for commercial rent, we believe 

the ACS is a valuable tool in measuring 

geographic differences in cost, and are 

also using real estate taxes on housing 

units as a proxy to measure taxes paid 

on business units. 

In order to further examine costs, we 

also analyzed CPI data for gas and 

utility prices. For each month in 2016, 

BLS released a CPI detailed report with 

monthly prices for various data 

included in the CPI.28 In order to 

analyze gas prices, we compiled the CPI 

detailed report for every month in 2016, 

and calculated the annual average for 

the values in the ‘‘Gasoline All Types’’ 

index of ‘‘Table P3: Average prices for 

gasoline, U.S. city average and selected 

areas’’ of the CPI detailed report. In 

order to analyze utility prices, we 

compiled the CPI detailed report for 

every month in 2016, and calculated the 

annual average for the values in ‘‘Table 

P2: Average residential unit prices and 

consumption ranges for utility (piped) 

gas and electricity for U.S. city average 

and selected areas’’. Specifically, we 

looked at the ‘‘Average price per therm 

of utility (piped) gas’’ and the ‘‘Average 

price per KWH of electricity’’ index in 

the CPI report. As discussed earlier in 

the preamble of this proposed rule, the 

Office Rent Index of the PE GPCI 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34374 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

29https://www.bls.gov/opub/mlr/1996/12/ 

art2full.pdf. 

30BLS Handbook of Methods. Chapter 17. The 

Consumer Price Index. (Updated 06/2015). 

31https://www.bls.gov/opub/mlr/1996/12/ 

art2full.pdf. 

32https://www.census.gov/geo/reference/countychanges.html. 

already includes utilities in its 

calculation, based on ACS residential 

rent data. Nevertheless, we examined an 

additional source of utility prices, in 

order to further examine any potential 

price trends. 

BLS separates prices in these tables 

based upon the following size classes: 

A, B/C, and D. Size A represents 

metropolitan areas with a population of 

over 1,500,000, size B/C represents midsized and small metropolitan areas 

(population of 50,000 to 1,500,000), and 

size D represents nonmetropolitan 

urban areas.29

An issue with CPI size classes is that 

the CPI data cannot directly map to 

every county and BEA Region in the 

U.S., unlike the previously discussed 

cost data. This is because the CPI data 

is only available at the national level, 

for a select number of metropolitan 

areas, and for the four U.S. Census 

Bureau Regions. 

However, the CPI sampled a total of 

87 Primary Sampling Units (PSUs) for 

the 2016 CPI, which are the smallest 

geographic areas in which pricing is 

done for the CPI. Appendix 4 in Chapter 

17 of the BLS Handbook of Methods 

lists the 87 PSUs sampled in the 2016 

CPI.30 Appendix 4 also lists the counties 

in these PSUs that the CPI sampled, 

which totaled 425 counties and 

included counties in the contiguous and 

non-contiguous U.S. 

We found that CBA counties made up 

the majority of size class A and B/C, 

while non-CBA micro and OCBSA 

counties made up the majority of size 

class D. The exact number can be found 

in Table 41, and the exact percentages 

can be found in Table 42. In order to 

identify the delineation of these 

counties and to be consistent with our 

previous cost data analyses, we used the 

same reference materials that we used 

for our previous cost data analyses: 

county and county equivalent names 

from the 2010 U.S. Census, and county 

and county equivalent delineations from 

OMB Bulletin No. 15–01. 

It is worth noting that although the 

CPI data is from 2016, the 2016 CPI 

bases the counties and county 

equivalents and their size classes off of 

the 1990 decennial Census and its 

Metropolitan Areas off of OMB Bulletin 

No. 93–05.31 One implication of this is 

that counties and county equivalents 

sampled in the 2016 CPI may have 

changed size classes based upon their 

population numbers in the 2010 Census, 

and their Metropolitan Area status in 

OMB Bulletin No. 15–01. Further, 

CBSAs, micro areas, and OCBSAs were 

not a concept at the time in OMB 

Bulletin No. 93–05. Additionally, the 

counties and county equivalents that the 

CPI sampled were based off of the 1990 

U.S. Census, meaning that the CPI data 

would not reflect any substantial 

changes to counties and county 

equivalent entities after 1990, as 

indicated by the U.S. Census Bureau.32

However, most of the county and county 

equivalent names that the CPI sampled 

remained the same or were similar to 

those in the 2010 U.S. Census, allowing 

us to map the counties and county 

equivalents listed in Appendix 4 of 

Chapter 17 of the BLS Handbook of 

Methods to those in the 2010 U.S. 

Census. We also believe that this CPI 

data is a valuable tool in examining 

price trends for gas and utilities 

amongst differently sized areas with 

varying levels of urbanization. Further, 

because we are able to know which 

counties the CPI sampled, we are able 

to know which size classes have CBA 

and non-CBA counties, thus allowing us 

to compare costs between CBAs and 

non-CBAs, making it useful for our data 

purposes in fulfilling section 16008 of 

the Cures Act. 

TABLE 41—NUMBER OF COUNTIES SAMPLED IN 2016 CPI 

Delineation Size A Size B/C Size D Total number 

counties 

CBA .................................................................................................................. 235 86 1 322 

Non-CBA MSA ................................................................................................. 26 46 3 75 

Non-CBA Micro ................................................................................................ 5 8 8 21 

Non-CBA OCBSA ............................................................................................ 1 0 6 7 

Total number Counties ............................................................................. 267 140 18 425 

TABLE 42—COUNTY DELINEATION PERCENTAGES FOR 2016 CPI 

Delineation Size A 

% 

Size B/C 

% 

Size D 

% 

CBA .............................................................................................................................................. 88.01 61.43 5.56 

Non-CBA MSA ............................................................................................................................. 9.74 32.86 16.67 

Non-CBA Micro ............................................................................................................................ 1.87 5.71 44.44 

Non-CBA OCBSA ........................................................................................................................ 0.37 0.00 33.33 

Total ...................................................................................................................................... 100.00 100.00 100.00 

b. Cost Data Results 

We found that, on average, CBAs had 

higher costs than non-CBAs, for most of 

the cost data that we examined. For 

instance, CBAs had the highest average 

PE GPCI in every BEA Region, when 

compared to the non-CBAs in each BEA 

Region. CBAs had the highest average 

driver wage in all but one BEA Region 

(Rocky Mountain), when compared to 

the non-CBAs in each Region. CBAs also 

had the highest average real estate tax in 

every BEA Region, when compared to 

the non-CBAs in each BEA Region. 

Typically, the ranking from highest to 

lowest cost delineation in each BEA 

Region was the following: (1) CBA, (2) 

non-CBA MSA, (3) non-CBA micro, and 

(4) non-CBA OCBSA. Thus, the more 

urbanized areas tended to have higher 

costs than the less urbanized areas. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34375 

Additionally, we found that BEA 

Regions have different costs. We 

arranged the 8 BEA Regions into two 

cost tiers, for each of the cost data that 

we examined. The top tier included 

BEA Regions where costs were, on 

average, the highest. The bottom tier 

included BEA Regions where costs 

were, on average, the lowest. To be in 

the top tier, a BEA Region had to have 

a value that was in the top 50 percent 

of all 8 BEA Region values. To be in the 

bottom tier, a BEA Region had to have 

a value that was in the bottom 50 

percent of all 8 BEA Region values. 

Overall, the Far West, Mideast, and New 

England Regions tended to be in the top 

cost tier for most of the cost data sources 

that we examined. The Far West Region 

was in the top cost tier most often, 

indicating that its costs are amongst the 

highest out of the 8 BEA Regions. 

The Far West, New England, Mideast, 

and Rocky Mountain BEA Regions were 

in the top tier of average PE GPCI values 

in the 8 BEA Regions. For instance, 

when looking at the average PE GPCI 

value for each of the 8 BEA Regions, 

these 4 BEA Regions’ average PE GPCI 

values were in the top 50 percent for 

every delineation. The bottom tier 

included the Great Lakes, Southwest, 

Plains, and Southeast BEA Regions. 

They were all in the bottom 50 percent 

of average PE GPCI values, for every 

delineation. 

When looking at the average delivery 

driver wage for each of the 8 BEA 

Regions, the Plains and Far West 

Regions’ average driver wage were in 

the top 50 percent for every delineation. 

New England, Mideast, and Rocky 

Mountain were also a part of this top 

tier, yet alternated in and out of the top 

50 percent, depending on which 

delineation we examined. The bottom 

tier for delivery driver wages included 

the Great Lakes, Southwest, and 

Southeast BEA Regions. 

For real estate taxes, the New England 

and Mideast BEA Regions had 

significantly higher real estate taxes, on 

average, than every other BEA Region, 

for each delineation. The BEA Regions 

of New England, Mideast, Far West, and 

the Great Lakes were in the top 50 

percent of real estate taxes for every 

delineation. The BEA Regions of 

Southwest, Plains, Southeast, and Rocky 

Mountain were in the bottom 50 percent 

of real estate taxes for every delineation. 

It is worth noting that we did not 

include non-contiguous areas in the 

average values for the 8 BEA Regions, 

and instead counted non-contiguous 

areas as their own type of area. In doing 

so, we found that the average PE GPCI 

for non-contiguous delineations (in 

Alaska and Hawaii) were higher than 

every other delineation in the 8 BEA 

Regions. Additionally, the average 

driver wage for non-contiguous 

delineations (in Alaska and Hawaii), 

were higher than every other 

delineation in the 8 BEA Regions, 

except for non-contiguous micro areas, 

which were only lower than driver 

wages in the micro areas of the Rocky 

Mountain BEA Region. When we 

included driver wages from Puerto Rico 

in the non-contiguous average driver 

wage calculation (along with Alaska and 

Hawaii), the Puerto Rico driver wages 

lowered the average non-contiguous 

driver wages so that OCBSAs were then 

the only non-contiguous delineation 

with a higher value than delineations in 

the 8 BEA Regions. 

Lastly, there were certain non-CBA 

counties around the country that had 

relatively high driver wages—driver 

wages that were higher than that of CBA 

counties. These counties primarily were 

in the Plains, Rocky Mountain, and Far 

West BEA Regions. Many of these nonCBA counties with higher driver wages 

were either OCBSAs or micro areas. 

However, many other OCBSA or micro 

counties elsewhere in the country had 

relatively low driver wages. It is also 

worth noting that these very same 

counties that had higher driver wages 

had relatively low PE GPCI values and 

real estate taxes. 

Table 43 shows the summary of these 

cost data results. 

TABLE 43—AVERAGE COSTS BY BEA REGION

BEA region Delineation PE GPCI 

Average 

median 

driver wage 

per hour 

Annual 

residential 

real estate 

tax 

Far West .......................................................................................................... CBA 1.14 $15.79 $3,463.59 

Far West .......................................................................................................... MSA 1.03 15.11 2,413.43 

Far West .......................................................................................................... Micro 0.96 15.04 1,778.87 

Far West .......................................................................................................... OCBSA 0.96 15.06 1,663.85 

Great Lakes ..................................................................................................... CBA 0.97 14.77 3,338.46 

Great Lakes ..................................................................................................... MSA 0.92 14.08 2,322.51 

Great Lakes ..................................................................................................... Micro 0.87 13.19 1,629.62 

Great Lakes ..................................................................................................... OCBSA 0.86 12.85 1,491.14 

Mideast ............................................................................................................ CBA 1.11 15.92 5,245.05 

Mideast ............................................................................................................ MSA 0.96 13.92 3,132.32 

Mideast ............................................................................................................ Micro 0.89 12.97 2,102.79 

Mideast ............................................................................................................ OCBSA 0.89 13.46 2,208.62 

New England ................................................................................................... CBA 1.10 16.49 4,725.59 

New England ................................................................................................... MSA 1.02 14.88 3,739.11 

New England ................................................................................................... Micro 1.00 14.02 4,065.67 

New England ................................................................................................... OCBSA 0.93 13.17 2,317.18 

Plains ............................................................................................................... CBA 0.98 16.20 2,408.32 

Plains ............................................................................................................... MSA 0.90 14.45 2,049.21 

Plains ............................................................................................................... Micro 0.87 13.34 1,489.76 

Plains ............................................................................................................... OCBSA 0.84 13.52 1,160.55 

Rocky Mountain ............................................................................................... CBA 1.00 15.28 1,658.02 

Rocky Mountain ............................................................................................... MSA 0.93 14.60 1,506.69 

Rocky Mountain ............................................................................................... Micro 0.93 16.09 1,428.58 

Rocky Mountain ............................................................................................... OCBSA 0.88 15.64 1,047.09 

Southeast ......................................................................................................... CBA 0.97 14.47 1,821.26 

Southeast ......................................................................................................... MSA 0.90 13.19 1,094.17 

Southeast ......................................................................................................... Micro 0.84 12.38 787.18 

Southeast ......................................................................................................... OCBSA 0.83 12.12 624.88 

Southwest ........................................................................................................ CBA 0.97 14.38 2,643.70 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34376 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

33https://www.bls.gov/opub/mlr/1996/12/ 

art2full.pdf. 

TABLE 43—AVERAGE COSTS BY BEA REGION—Continued 

BEA region Delineation PE GPCI 

Average 

median 

driver wage 

per hour 

Annual 

residential 

real estate 

tax 

Southwest ........................................................................................................ MSA 0.91 13.42 1,698.48 

Southwest ........................................................................................................ Micro 0.87 12.96 1,054.82 

Southwest ........................................................................................................ OCBSA 0.85 12.66 915.76 

Tables 44 through 46 summarize the 

data at the national contiguous level and 

for non-contiguous areas. 

TABLE 44—AVERAGE COSTS FOR THE CONTIGUOUS U.S. 

Delineation PE GPCI 

Average 

median 

driver 

wage per 

hour 

Annual 

residential 

real estate 

tax 

CBA .............................................................................................................................................. 1.04 $15.24 $3,301.60 

MSA ............................................................................................................................................. 0.93 13.95 1,943.28 

Micro ............................................................................................................................................ 0.88 13.23 1,415.56 

OCBSA ........................................................................................................................................ 0.85 12.95 1,083.05 

TABLE 45—AVERAGE COSTS FOR THE NON-CONTIGUOUS U.S. (ALASKA, HAWAII) 

Delineation PE GPCI 

Average 

median 

driver 

wage per 

hour 

Annual 

residential 

real estate 

tax 

CBA (Honolulu, HI) ...................................................................................................................... 1.17 $15.35 $1,710.00 

MSA ............................................................................................................................................. 1.11 19.12 2,863.27 

Micro ............................................................................................................................................ 1.05 15.42 1,230.27 

OCBSA ........................................................................................................................................ 1.09 21.65 1,600.30 

TABLE 46—AVERAGE COSTS FOR THE NON-CONTIGUOUS U.S. (ALASKA, HAWAII, AND PUERTO RICO) 

Delineation PE GPCI 

Average 

median 

driver 

wage per 

hour 

Annual 

residential 

real estate 

tax 

CBA (Honolulu, HI) ...................................................................................................................... 1.17 $15.35 $1,710.00 

MSA ............................................................................................................................................. 1.02 10.39 846.20 

Micro ............................................................................................................................................ 1.04 13.33 958.94 

OCBSA ........................................................................................................................................ 1.08 19.98 1,429.99 

As discussed earlier, BLS separates 

certain CPI data based upon the 

following size classes: A, B/C, and D. 

Size A represents metropolitan areas 

with a population of over 1,500,000 

people, size B/C represents mid-sized 

and small metropolitan areas 

(population of 50,000 to 1,500,000), and 

size D represents nonmetropolitan 

urban areas.33 For the gas and utility CPI 

data in Tables 50, 51, and 52, the typical 

ranking was the following from highest 

to lowest price: (1) size class A, (2) size 

class B/C, and (3) size class D. This is 

thus similar to our other cost data 

summarized in Tables 43, 44, 45, and 

46, in that the more populated urban 

areas (size class A and B/C) tended to 

have higher average costs than the less 

populated urban areas (size class D). 

Additionally, CPI size classes with more 

CBA counties (size class A and B/C) 

tended to have higher average costs than 

size classes with more non-CBA 

counties (size class D). Thus, we 

conclude based off this CPI data in 

Tables 47, 48, and 49, that CBAs 

generally have higher gas prices and 

residential utility prices, on average, 

than non-CBAs. 

TABLE 47—AVERAGE PRICES FOR

GASOLINE, U.S. CITY AVERAGE AND

SELECTED AREAS

[Per Gallon] 

Gasoline all Types 

Urban area size class 

National 

average 

2016 

A ........................................... $2.296 

B/C ........................................ 2.102 

D ........................................... 2.128 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34377 

TABLE 48—AVERAGE RESIDENTIAL

UNIT PRICES AND CONSUMPTION

RANGES FOR UTILITY (PIPED) GAS

AND ELECTRICITY FOR U.S. CITY

AVERAGE AND SELECTED AREAS

Average Price per KWH of Electricity 

Urban area size class 

National 

average 

2016 

A ........................................... $0.150 

B/C ........................................ 0.125 

D ........................................... 0.117 

TABLE 49—AVERAGE RESIDENTIAL

UNIT PRICES AND CONSUMPTION

RANGES FOR UTILITY (PIPED) GAS

AND ELECTRICITY FOR U.S. CITY

AVERAGE AND SELECTED AREAS

Average Price per Therm of Utility (Piped) Gas 

Urban area size class 

National 

average 

2016 

A ........................................... $0.949 

B/C ........................................ 0.894 

D ........................................... 0.829 

5. The Average Volume of Items and 

Services Furnished by Suppliers in the 

Area Analysis 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the average volume of 

items and services furnished by 

suppliers in CBAs and non-CBAs in 

making adjustments to fee schedule 

amounts for items furnished on or after 

January 1, 2019, based on information 

from the CBP. We found that in virtually 

all cases, the average volume of items 

and services for suppliers when 

furnishing those items to the various 

areas is higher in CBAs than non-CBAs. 

As indicated in Table 50, the difference 

in volume is more pronounced as the 

size of the area in terms of population 

declines. 

TABLE 50—ALLOWED SERVICES PER SUPPLIER IN 2015 AND 2016 FOR ITEMS SUBJECT TO THE FEE SCHEDULE

ADJUSTMENTS

Areas 

Allowed 

services 

(2015) 

Suppliers 

serving area 

(2015) 

Allowed 

services per 

supplier 

(2015) 

Allowed 

services 

(2016) 

Suppliers 

serving area 

(2016) 

Allowed 

services per 

supplier 

(2016) 

CPAP & RADs 

CBAs ........................................................ 9,140,617 4,091 2,234 10,634,486 4,064 2,617 

Non-CBA MSAs ....................................... 4,780,160 4,977 960 5,474,533 4,918 1,113 

Non-CBA Rural ........................................ 4,318,843 5,519 783 4,928,348 5,372 917 

Oxygen 

CBAs ........................................................ 6,406,412 4,667 1,373 6,265,856 4,289 1,461 

Non-CBA MSAs ....................................... 3,766,780 4,883 771 3,662,808 4,548 805 

Non-CBA Rural ........................................ 4,521,374 5,325 849 4,420,783 5,036 878 

Nebulizers 

CBAs ........................................................ 2,088,109 7,643 273 1,769,830 6,392 277 

Non-CBA MSAs ....................................... 1,132,972 6,167 184 1,032,926 5,742 180 

Non-CBA Rural ........................................ 1,372,641 7,002 196 1,267,774 6,509 195 

Standard Wheelchairs 

CBAs ........................................................ 1,589,682 3,428 464 1,624,569 3,419 475 

Non-CBA MSAs ....................................... 652,588 4,687 139 658,504 4,451 148 

Non-CBA Rural ........................................ 600,098 5,441 110 609,432 5,190 117 

WC Accessories 

CBAs ........................................................ 1,339,631 2,903 461 1,388,992 2,909 477 

Non-CBA MSAs ....................................... 431,487 3,505 123 456,145 3,388 135 

Non-CBA Rural ........................................ 334,264 4,093 82 355,364 3,938 90 

Hospital Beds 

CBAs ........................................................ 791,371 2,814 281 781,486 2,707 289 

Non-CBA MSAs ....................................... 314,095 3,870 81 310,312 3,647 85 

Non-CBA Rural ........................................ 332,047 4,460 74 331,278 4,212 79 

Infusion Pumps 

CBAs ........................................................ 741,236 1,320 562 641,192 1,329 482 

Non-CBA MSAs ....................................... 305,067 1,415 216 258,168 1,388 186 

Non-CBA Rural ........................................ 268,204 1,589 169 224,845 1,498 150 

Walkers 

CBAs ........................................................ 466,112 3,558 131 465,134 3,722 125 

Non-CBA MSAs ....................................... 255,487 5,367 48 248,570 5,138 48 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34378 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

34Morrison Informatics, Inc., A Comprehensive 

Cost Analysis of Medicare Home Oxygen Therapy 

(Mechanicsburg, Pa.: June 27, 2006). 

TABLE 50—ALLOWED SERVICES PER SUPPLIER IN 2015 AND 2016 FOR ITEMS SUBJECT TO THE FEE SCHEDULE

ADJUSTMENTS—Continued 

Areas 

Allowed 

services 

(2015) 

Suppliers 

serving area 

(2015) 

Allowed 

services per 

supplier 

(2015) 

Allowed 

services 

(2016) 

Suppliers 

serving area 

(2016) 

Allowed 

services per 

supplier 

(2016) 

Non-CBA Rural ........................................ 230,651 6,488 36 227,668 6,094 37 

Commode Chairs 

CBAs ........................................................ 191,538 3,656 52 177,339 3,010 59 

Non-CBA MSAs ....................................... 69,232 3,193 22 67,323 2,838 24 

Non-CBA Rural ........................................ 63,932 3,845 17 61,175 3,483 18 

NPWT 

CBAs ........................................................ 182,939 1,413 129 182,375 1,380 132 

Non-CBA MSAs ....................................... 86,421 1,371 63 87,326 1,347 65 

Non-CBA Rural ........................................ 76,583 1,565 49 79,939 1,532 52 

Patient Lifts 

CBAs ........................................................ 161,975 2,450 66 156,168 2,223 70 

Non-CBA MSAs ....................................... 55,504 2,262 25 53,969 2,124 25 

Non-CBA Rural ........................................ 52,133 2,724 19 50,405 2,532 20 

Support Surfaces 

CBAs ........................................................ 131,756 1,859 71 128,033 1,725 74 

Non-CBA MSAs ....................................... 51,675 2,186 24 50,267 2,113 24 

Non-CBA Rural ........................................ 47,302 2,665 18 47,402 2,519 19 

TENS 

CBAs ........................................................ 119,135 1,164 102 53,695 1,031 52 

Non-CBA MSAs ....................................... 55,563 780 71 28,878 697 41 

Non-CBA Rural ........................................ 55,020 867 63 28,207 791 36 

Seat Lifts 

CBAs ........................................................ 5,925 1,057 6 3,026 715 4 

Non-CBA MSAs ....................................... 3,774 927 4 2,652 746 4 

Non-CBA Rural ........................................ 6,032 1,326 5 4,439 1,151 4 

Complex Wheelchairs 

CBAs ........................................................ 1,059 209 5 1,295 236 5 

Non-CBA MSAs ....................................... 581 176 3 618 199 3 

Non-CBA Rural ........................................ 420 140 3 544 171 3 

Notes: Complex wheelchairs include Group 2 complex rehabilitative power wheelchair bases. 

One factor to consider is that as a 

supplier’s volume increases, the overall 

costs of furnishing those items also 

increases due to the need to purchase 

more delivery vehicles, hire additional 

employees, expand warehouse and 

office space, purchase additional office 

equipment, additional use of gas and 

other utilities, etc. 

Past stakeholder input and studies 

suggest that delivery costs and wages 

affect a suppliers’ overall costs more 

than equipment acquisition costs and 

volume discounts. In 2006, Morrison 

Informatics, Inc. conducted a study for 

the American Association for Homecare 

titled ‘‘A Comprehensive Cost Analysis 

of Medicare Home Oxygen Therapy’’, 

which used a survey of 74 oxygen 

suppliers to determine which factors are 

more important in influencing oxygen 

suppliers’ cost of furnishing oxygen and 

oxygen equipment. The study 

concluded that equipment acquisition 

only accounted for 28 percent of the 

cost of providing medically necessary 

oxygen to Medicare beneficiaries. This 

study concluded that services such as 

preparing and delivering equipment, 

driving to the home to repair and 

maintain equipment, training and 

educating patients, obtaining required 

medical necessity documentation, 

customer service, and operating and 

overhead costs accounted for 72 percent 

of overall costs. Our data indicates that 

delivery, wages, gasoline, utilities, office 

rental, and other overhead costs are 

lower in non-CBAs than in CBAs, and 

the findings of the Morrison study 

indicate that these costs represent a 

majority of the supplier’s overall cost.34

Table 2 from the Morrison study 

provided a breakdown of an oxygen 

supplier’s monthly cost per patient of 

$201.20 into seven components: One for 

equipment cost; four for labor for 

various tasks; one for delivery; and one 

for overhead, including rent and other 

facility costs. Table 51 represents that 

table from the study. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34379 

TABLE 51—2006 OXYGEN SUPPLIER

COST SURVEY BY MORRISON

INFORMATICS, INC

Cost component 

Average 

cost perpatient 

per-month 

1. SYSTEM ACQUISITION 1 $55.81 

2. INTAKE AND CUSTOMER SERVICE2 .......... 12.66 

3. PREPARATION, RETURN, DISPOSABLES, 

AND SCHEDULED MAINTENANCE3 ....................... 25.24 

4. UNSCHEDULED REPAIRS AND MAINTENANCE4 ........................... 6.10 

5. PATIENT ASSESSMENT, 

TRAINING, EDUCATION 

AND MONITORING 5 ........ 17.54 

6. DELIVERY ASSOCIATED 

WITH PREPARATION, 

RETURN, DISPOSABLES, 

AND SCHEDULED MAINTENANCE6 ....................... 42.26 

TABLE 51—2006 OXYGEN SUPPLIER

COST SURVEY BY MORRISON

INFORMATICS, INC—Continued 

Cost component 

Average 

cost perpatient 

per-month 

7. OTHER MONTHLY OPERATING AND OVERHEAD 7 .............................. 41.59 

8. TOTAL DIRECT COST 

BEFORE TAXES .............. 201.20 

1The amount includes acquisition costs for 

stationary, portable and backup units, conserving devices, ancillary equipment and accessories, and oxygen system contents (liquid 

and gaseous oxygen). 2The amount includes labor associated with 

patient intake functions, ongoing customer 

service (patient inquiries, scheduling of deliveries/maintenance/clinical visits, accommodating patient travel plans), and initial and renewal prescription processing. 

3The amount includes labor associated with 

equipment preparation (testing, cleaning, and 

repair), equipment set-up and maintenance 

upon return, initial patient instruction, cost of 

disposable and maintenance supplies, and 

labor costs associated with scheduled preventive equipment maintenance. 4The amount includes labor and vehicle 

costs associated with unscheduled equipment 

repair and maintenance. 5The amount includes labor and travel costs 

associated with clinical visits by respiratory 

care practitioner, in-home patient assessments 

(including home environment safety assessment and oxygen therapy plan of care), training, education and compliance monitoring. 6The amount includes delivery costs associated with oxygen fills (liquid and gaseous oxygen), preparation, return, disposables and 

scheduled maintenance. 7The amount includes rent and other facility 

costs, administration, insurance, legal, regulatory compliance, MIS systems/controls, communications systems, employee training, accreditation, supplies, billing and compliance 

functions. 

Table 52 combines the monthly costs 

from Table 2 of the Morrison study into 

the major components of a DME 

supplier’s costs: Equipment cost; labor 

cost; delivery cost; and overhead. 

TABLE 52—DOLLAR COST BREAKOUT FOR DME SUPPLIER OF OXYGEN AND OXYGEN EQUIPMENT

Monthly average cost per beneficiary Component 

Percentage 

of total cost 

(percent) 

$55.81 ....................................................... Oxygen Equipment ....................................................................................................... 28 

61.54 ......................................................... Combined Labor Costs ................................................................................................ 30 

42.26 ......................................................... Delivery ........................................................................................................................ 21 

41.59 ......................................................... Overhead ...................................................................................................................... 21 

201.20 ....................................................... Total Cost Per Month ................................................................................................... 100 

The average volume of oxygen 

equipment furnished by suppliers in 

CBAs is greater than the average volume 

of oxygen equipment furnished by 

suppliers in non-CBAs, particularly 

rural areas, as shown previously in 

Table 50. But volume discounts 

associated with bulk purchasing of 

oxygen equipment, or the lack thereof, 

would only impact 28 percent of the 

suppliers’ total cost per month 

according to the Morrison study. The 

Morrison study concludes that labor, 

delivery, and overhead costs combined 

account for far more of the oxygen 

supplier’s overall cost (72 percent) than 

the cost of the oxygen equipment (28 

percent). Even if the supplier received a 

25 percent volume discount on the price 

of the equipment from the 

manufacturer, reducing its monthly cost 

for the equipment from $55.81 to 

$41.86, this savings would be more than 

cancelled out if the supplier’s labor, 

delivery, and overhead costs are just 10 

percent higher than the supplier in the 

area with lower costs and lower volume. 

Also, as a supplier increases their 

volume, the costs associated with labor, 

delivery, and overhead also increase 

proportionally. The conclusion drawn 

from the Morrison study is that although 

the average volume of oxygen and 

oxygen equipment furnished by 

suppliers in the CBAs may be higher 

than the average volume of oxygen and 

oxygen equipment furnished by 

suppliers in the non-CBA areas, this 

factor alone does not mean that the 

overall costs of furnishing oxygen and 

oxygen equipment in the CBAs is lower 

than the overall costs of furnishing 

oxygen and oxygen equipment in the 

non-CBAs. Our data indicates that the 

labor, delivery, and overhead costs of 

suppliers furnishing oxygen and oxygen 

equipment in CBAs are higher than the 

labor, delivery, and overhead costs of 

suppliers furnishing oxygen and oxygen 

equipment in non-CBAs, and the 

Morrison study concludes that these 

costs make up 72 percent of the oxygen 

supplier’s overall costs. 

6. Number of Suppliers Analysis 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the number of suppliers 

in CBAs and non-CBAs in making 

adjustments to fee schedule amounts for 

items furnished on or after January 1, 

2019, based on information from the 

CBP. We examined data regarding the 

number of suppliers serving the various 

CBAs and did not find any correlation 

between number of suppliers and SPA 

or maximum winning bid amount. We 

are not certain how much this factor 

might affect costs in terms of 

competition for business or serving 

areas with a limited number of 

suppliers, but it does not appear to have 

been a factor under the competitive 

bidding program in terms of bids 

submitted in the various CBAs. 

Data for number of suppliers per area 

and product category did not change 

significantly in 2016 from levels in 

2015. There was at least a double digit 

number of suppliers serving non-CBAs 

in almost every MSA, micro area or 

other rural counties for items subject to 

the fee schedule reductions. The 

number of suppliers in the non-CBAs 

decreased by a little over 6 percent in 

2016 overall, while volume per supplier 

increased, suggesting a consolidation in 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34380 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

the number of locations serving the nonCBAs. 

We believe that one of the most 

critical items subject to the fee schedule 

adjustments in terms of beneficiary 

access is oxygen and oxygen equipment. 

If access to oxygen and oxygen 

equipment is denied to a beneficiary 

who needs oxygen, this can have serious 

health implications. Oxygen and oxygen 

equipment is also an item that must be 

delivered to the beneficiary and set up 

and used properly in the home for safety 

reasons. Access to oxygen and oxygen 

equipment in remote areas is critical 

and this has been stressed by 

stakeholders. To determine if there were 

pockets of the country where access to 

oxygen and oxygen equipment was in 

jeopardy, we looked at data showing 

how many non-CBA counties are being 

served by only one oxygen supplier. 

This data shows that these instances are 

extremely rare (35 counties out of about 

2,700 counties in 2016 and 2017) and 

that the suppliers serving these counties 

are all accepting the fully adjusted fee 

schedule amounts as payment in full 

100 percent of the time. Of the 35 

counties, 28 have only one beneficiary 

using oxygen, so only one supplier 

could serve these counties at one time, 

meaning that there may be other 

suppliers able to serve these areas as 

well if there were more beneficiaries 

using oxygen in these areas. Also of 

note, 28 of these counties are from 

Puerto Rico (25), Alaska (2), or the 

Virgin Islands (1), and the suppliers for 

these non-contiguous areas are all 

accepting the fully adjusted fee 

schedule amounts as payment in full 

100 percent of the time and are 

continuing to serve these areas. 

7. Fee Schedule Adjustment Impact 

Monitoring Data 

Regarding adverse beneficiary health 

outcomes, we have been monitoring 

claims data from non-CBAs and it does 

not show any observable trends 

indicating an increase in adverse health 

outcomes such as mortality, hospital 

and nursing home admission rates, 

monthly hospital and nursing home 

days, physician visit rates, or emergency 

room visits in 2016, 2017, or 2018 

compared to 2015 in the non-CBAs, 

overall. In addition, we have been 

monitoring data on the rate of 

assignment in non-CBAs and it remains 

high (over 99 percent) in most areas, 

which reflects when suppliers are 

accepting Medicare payment as 

payment in full and not balance billing 

beneficiaries for the cost of the DME. 

We are, however, soliciting comments 

on ways to improve our fee schedule 

adjustment impact monitoring data. 

8. Summary of Our Findings 

A brief summary of our general 

findings gathered in accordance with 

section 16008 of the Cures Act are as 

follows: 

Highest Winning Bid 

Highest winning bids from Round 2 

Recompete varied widely across the 

CBAs and the variance does not appear 

to be based on any geographic factor 

(that is, there is no pattern of maximum 

bid amounts for items being higher in 

certain CBAs or regions of the country 

versus others). 

Stakeholder Input 

Stakeholders, most of which were 

suppliers, stated that the fully adjusted 

fee schedule amounts are not sufficient 

to cover supplier costs for furnishing 

items and services in non-CBAs. 

Stakeholders also stated that the number 

of suppliers furnishing items in these 

areas continues to decline, the average 

travel distance and cost for suppliers 

serving rural areas are greater than the 

average travel distance and cost for 

suppliers serving CBAs, and that the 

average volume of services furnished by 

suppliers when serving non-CBAs are 

lower than the average volume of 

services furnished by suppliers when 

serving CBAs. Many commenters also 

stated that the adjusted fee schedule 

amounts have caused or will cause 

beneficiary access issues, and that 

beneficiaries are going without items 

and that this is causing adverse health 

outcomes. Several commenters stated 

that they have reduced the size of their 

service area due to the level of 

reimbursement that they are receiving. 

Five commenters suggested that the 

adjusted fee schedule amounts be based 

on maximum winning bids in CBAs. 

Distance 

From our analysis presented in this 

rule, the average distance traveled in 

CBAs is generally greater than in most 

non-CBAs. However, when looking at 

certain non-CBA rural areas such as 

FAR, OCBSAs, and super rural areas, 

suppliers generally must travel farther 

distances to beneficiaries located in 

these areas than beneficiaries located in 

CBAs and other non-CBAs. 

Costs 

Costs, on average, are higher in CBAs 

than they are in the non-CBAs, for most 

of the cost data that we examined and 

presented in this proposed rule. 

Volume 

Overall, suppliers in CBAs have 

significantly more volume than 

suppliers in either non-CBA MSAs, 

micro areas, or OCBSAs, based on 

claims data we examined and the 

analysis presented in this proposed rule. 

Number of Suppliers 

The number of suppliers in the nonCBAs decreased by a little over 6 

percent in 2016 overall, while volume 

per supplier increased, suggesting a 

consolidation in the number of locations 

serving the non-CBAs. Instances of 

beneficiaries located in areas being 

served by one supplier were extremely 

rare, when looking at users of oxygen 

and oxygen equipment, and were mostly 

in non-contiguous areas of the country. 

The suppliers for these non-contiguous 

areas were all accepting the fully 

adjusted fee schedule amounts as 

payment in full 100 percent of the time 

in 2016 and 2017. We also did not find 

any correlation between number of 

suppliers and SPA or maximum 

winning bid amount. 

We are soliciting comments on these 

findings. 

B. Current Issues 

1. Proposed Fee Schedule Adjustments 

for Items and Services Furnished in 

Non-Competitive Bidding Areas During 

a Gap in the DMEPOS CBP 

As indicated in section V.D.2 of 

section V ‘‘Changes to the Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) 

Competitive Bidding Program (CBP)’’ of 

the proposed rule, we are proposing to 

make changes to the DMEPOS CBP 

effective January 1, 2019. The proposed 

changes to the CBP would be effective 

for competitions beginning on or after 

January 1, 2019. The Round 2 

Recompete, National Mail-Order 

Recompete, and Round 1 2017 contract 

periods of performance will end on 

December 31, 2018. Competitive 

bidding for items furnished on or after 

January 1, 2019 has not yet begun, and 

therefore, we do not expect that CBP 

contracts would be in place on January 

1, 2019. Thus we anticipate that there 

would be a gap in the CBP beginning 

January 1, 2019. During a gap in the CBP 

beginning January 1, 2019, there would 

be no contract suppliers and payment 

for all items and services previously 

included under the CBP would be based 

on the lower of the supplier’s charge for 

the item or fee schedule amounts 

adjusted in accordance with sections 

1834(a)(1)(F) and 1842(s)(3)(B) of the 

Act. We are proposing specific fee 

schedule adjustments as a way to 

temporarily pay for items and services 

in the event of a gap in the CBP due to 

CMS being unable to timely recompete 

CBP contracts before the current 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34381 

DMEPOS competitive bidding contract 

periods of performance end. 

We are proposing three different fee 

schedule adjustment methodologies 

depending on the area in which the 

items and services are furnished: (1) 

One fee schedule adjustment 

methodology for DME items and 

services furnished on or after January 1, 

2019, in areas that are currently CBAs 

in the event of a gap in the CBP; (2) 

another fee schedule adjustment 

methodology for items and services 

furnished from January 1, 2019, through 

December 31, 2020, in areas that are 

currently not CBAs, are not rural areas, 

and are located in the contiguous 

United States (U.S.); and (3) another fee 

schedule adjustment methodology for 

items and services furnished from 

January 1, 2019, through December 31, 

2020, in areas that are currently not 

CBAs and are either rural areas or noncontiguous areas. 

With regard to section 16008 of the 

Cures Act, we have taken the 

information mandated by section 16008 

of the Cures Act into account as part of 

developing the proposed fee schedule 

adjustments for items and services 

furnished on or after January 1, 2019 

through December 31, 2020, in areas 

that are currently non-CBAs. Section 

16008 of the Cures Act first mandates 

that we take stakeholder input into 

account in making fee schedule 

adjustments based on information from 

the DMEPOS CBP for items and services 

furnished beginning in 2019. The 

information we have collected includes 

input from many stakeholders 

indicating that the fully adjusted fee 

schedule amounts are too low and that 

this is having an adverse impact on 

beneficiary access to items and services 

furnished in rural and remote areas. 

Industry stakeholders have stated that 

the fully adjusted fee schedule amounts 

are not sufficient to cover the supplier’s 

costs, particularly for delivering items 

in rural, remote areas. We are 

monitoring outcomes, assignment rates, 

and other issues related to access of 

items and services such as changes in 

allowed services and number of 

suppliers. We believe it is important to 

continue monitoring these things before 

proposing a more long term fee schedule 

adjustment methodology using 

information from the CBP. If fee 

schedule amounts are too low, they 

could impact access and potentially 

damage the businesses that furnish 

DMEPOS items and services. If fee 

schedule amounts are too high, this 

increases Medicare program and 

beneficiary costs unnecessarily. For 

these reasons, we believe that we should 

proceed cautiously in developing fee 

schedule adjustment methodologies for 

the short term that can protect access to 

items, while we continue to monitor 

and gather data and information. We 

plan to address fee schedule 

adjustments for items furnished on or 

after January 1, 2021 in future 

rulemaking after we have continued to 

monitor health outcomes, assignment 

rates, and other information. 

Section 16008 of the Cures Act 

mandates that we take into the account 

the highest amount bid by a winning 

supplier in a CBA. However, as 

previously discussed in section VI.A.2 

of this proposed rule, the highest 

winning bids from Round 2 Recompete 

varied widely across the CBAs and the 

variance does not appear to be based on 

any geographic factor (that is, there is no 

pattern of maximum bid amounts for 

items being higher in certain CBAs or 

regions of the country versus others). 

Thus, we did not find any supporting 

evidence for the development of a 

payment methodology for the non-CBAs 

based on the highest winning bids in a 

CBA. 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the average travel 

distance and cost associated with 

furnishing items and services in the 

area. We found that the average travel 

distance and cost for suppliers in nonCBAs is generally lower than the 

average travel distance and cost for 

suppliers in CBAs. However, oftentimes 

costs in the non-contiguous areas of the 

U.S., particularly in Hawaii and Alaska, 

were higher than costs in the contiguous 

areas of the U.S., for most of the cost 

data that we examined and presented in 

this rule. As noted in section VI.A.1 of 

this proposed rule, this was confirmed 

by one commenter who stated that noncontiguous areas, such as Alaska and 

Hawaii, face unique and greater costs 

due to higher shipping costs, a smaller 

amount of suppliers, and more logistical 

challenges related to delivery. 

Additionally, from our analysis 

presented in this rule, the average 

distance traveled in CBAs is generally 

greater than in most non-CBAs. 

However, when looking at certain nonCBA rural areas such as FAR, OCBSAs, 

and super rural areas, suppliers, on 

average, must travel farther distances to 

beneficiaries located in these areas than 

beneficiaries located in CBAs and other 

non-CBAs. Thus, we believe this 

supports a payment methodology that 

factors in the increased costs in noncontiguous areas, and the increased 

travel distance suppliers face in 

reaching certain rural areas. 

Section 16008 of the Cures Act 

mandates that we take into account a 

comparison of the average volume of 

items and services furnished by 

suppliers in the area. We found that in 

virtually all cases, the average volume of 

items and services for suppliers when 

furnishing those items is higher in CBAs 

than non-CBAs. We believe this finding 

supports a payment methodology that 

factors in and ensures beneficiary access 

to items and services in non-CBAs with 

relatively low volume. 

Finally, section 16008 of the Cures 

Act mandates that we take into account 

a comparison of the number of suppliers 

in the area. According to Medicare 

claims data, the number of supplier 

locations furnishing DME items and 

services subject to the fee schedule 

adjustments decreased by 22 percent 

from 2013 to 2016. In 2016 alone there 

was a little over 6 percent decline from 

the previous year in the number of DME 

supplier locations furnishing items and 

services subject to the fee schedule 

adjustments. The magnitude of this 

decline in DME supplier locations, from 

13,535 (2015) to 12,617 (2016), indicates 

that the number of DME supplier 

locations serving these areas continues 

to decline. There has been a further 

reduction in supplier locations of 9 

percent in 2017. We can attribute a 

certain percentage of this decline in the 

number of suppliers to audit, 

investigation, and evaluations by CMS 

and its contractors to enhance fraud and 

abuse controls to monitor suppliers. 

Furthermore, we have noted in section 

VI.A.6 of this proposed rule that 

instances of beneficiaries located in 

areas being served by one supplier were 

extremely rare, when looking at users of 

oxygen and oxygen equipment, and 

were mostly in non-contiguous areas of 

the country. The suppliers for these 

non-contiguous areas were all accepting 

the fully adjusted fee schedule amounts 

as payment in full 100 percent of the 

time in 2016 and 2017. Additionally, 

while the number of suppliers in the 

non-CBAs decreased by a little over 6 

percent in 2016 overall, volume per 

supplier increased, suggesting a 

consolidation in the number of locations 

serving the non-CBAs. However, we are 

still concerned about the potential 

beneficiary access issues that might 

occur in more rural and remote areas 

based on this consistent decline in 

number of suppliers. As such, out of an 

abundance of caution, we believe that 

the consistent decline in number of 

suppliers supports adjusting the fee 

schedule amounts in a way that seeks to 

abate this declining trend and ensure 

access to items and services for 

beneficiaries living in rural areas and 

other remote areas such as Alaska, 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34382 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

Hawaii, Puerto Rico and other U.S. 

territories. 

Based on the stakeholder comments, 

the higher costs for non-contiguous 

areas, the increased average travel 

distance in certain rural areas, the 

significantly lower average volume per 

supplier in non-CBAs, especially in 

rural and non-contiguous areas, and the 

decrease in the number of non-CBA 

supplier locations, we believe the fee 

schedule amounts for items and services 

furnished from January 1, 2019 through 

December 31, 2020, in all areas that are 

currently rural or non-contiguous nonCBAs, should be based on a blend of 50 

percent of the adjusted fee schedule 

amounts and 50 percent of the 

unadjusted fee schedule amounts in 

accordance with the current 

methodologies under paragraphs (1) 

through (8) of § 414.210(g). We believe 

that since the information from the CBP 

comes from bidding in non-rural areas 

only and in all but one case in areas 

located in the contiguous U.S., that full 

adjustments based on this information 

should not be applied to fee schedule 

amounts for items and services 

furnished in rural and non-contiguous 

areas on or after January 1, 2019. We 

believe that blended rates can help 

ensure beneficiary access to needed 

DME items and services in rural, remote 

and non-contiguous areas and better 

account for the differences in costs for 

these areas versus more densely 

populated areas. We believe the fee 

schedule amounts for items and services 

furnished from January 1, 2019 through 

December 31, 2020, in all areas that are 

currently non-CBAs, but are not rural or 

non-contiguous areas, should be based 

on 100 percent of the adjusted fee 

schedule amounts in accordance with 

the current methodologies under 

paragraphs (1) through (8) of 

§ 414.210(g). Although the average 

volume of items and services furnished 

by suppliers in non-rural non-CBAs is 

lower than the average volume of items 

and services furnished by suppliers in 

CBAs, the travel distances and costs for 

these areas are lower than the travel 

distances and costs for CBAs. Because 

the travel distances and costs for these 

areas are lower than the travel distances 

and costs for CBAs, we believe the fully 

adjusted fee schedule amounts are 

sufficient. However, we request specific 

comments on the issue of whether the 

50/50 blended rates should apply to 

these areas as well. 

In the event that the proposal outlined 

in section V ‘‘Changes to the Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies (DMEPOS) 

Competitive Bidding Program (CBP)’’, to 

change the method for calculating SPAs 

under the CBP is finalized and SPAs 

under future competitions are 

calculated based on maximum winning 

bids rather than the median of winning 

bids, this change in payments under the 

CBP may warrant further changes to the 

fee schedule adjustment methodologies 

under § 414.210(g)(1) through (8). We 

would address further changes to the fee 

schedule adjustment methodologies in 

future rulemaking. 

In summary, based on stakeholder 

input, the higher costs for suppliers in 

non-contiguous areas, the longer average 

travel distance for suppliers furnishing 

items in certain rural areas, the 

significantly lower average volume that 

most non-CBA suppliers furnish, and 

the decrease in the number of non-CBA 

supplier locations, we are proposing to 

revise § 414.210(g)(9) and to adjust the 

fee schedule amounts for items and 

services furnished in rural and noncontiguous non-CBAs by extending 

through December 31, 2020, the current 

methodology which bases the fee 

schedule amounts on a blend of 50 

percent of the adjusted fee schedule 

amounts and 50 percent of the 

unadjusted fee schedule amount in 

accordance with the current 

methodologies under paragraphs (1) 

through (8) of § 414.210(g). We are 

proposing to adjust the fee schedule 

amounts for items and services 

furnished in non-rural and contiguous 

non-CBAs from January 1, 2019 through 

December 31, 2020, using the current 

methodologies under paragraphs (1) 

through (8) of § 414.210(g). We plan to 

continue monitoring health outcomes, 

assignment rates, and other information 

and would address fee schedule 

adjustments for all non-CBAs for items 

furnished on or after January 1, 2021, in 

future rulemaking. 

2. Proposed Fee Schedule Adjustments 

for Items and Services Furnished in 

Former Competitive Bidding Areas 

During a Gap in the DMEPOS CBP 

In the event of a future gap in the CBP 

due to CMS being unable to timely 

recompete contracts under the program 

before the DMEPOS competitive bidding 

contract periods of performance end, we 

are proposing a fee schedule adjustment 

methodology that would be used to 

adjust the fee schedules for items and 

services that are currently subject to and 

included in competitive bidding 

programs. We believe that a fee 

schedule adjustment methodology for 

items and services furnished during a 

gap in the CBP in areas that were 

included in the CBP should result in 

rates comparable to the rates that would 

otherwise be established under the CBP 

in order to maintain the level of savings 

that would otherwise be achieved if the 

CBP was in effect. We are proposing a 

specific fee schedule adjustment 

methodology for items and services 

furnished within former CBAs in 

accordance with sections 1834(a)(1)(F) 

and 1834(a)(1)(G) of the Act. 

Specifically, we propose to add a new 

paragraph (10) under § 414.210(g) that 

would establish a methodology for 

adjusting fee schedule amounts paid in 

areas that were formerly CBAs during 

periods when there is a temporary lapse 

in the CBP. We propose to adjust the fee 

schedule amounts for items and services 

furnished in former CBAs based on the 

SPAs in effect in the CBA on the last 

day before the CBP contract periods of 

performance ended, increased by the 

projected percentage change in the CPI 

for all Urban Consumers (CPI–U) for the 

12-month period on the date after the 

contract periods ended (for example, 

January 1, 2019). If the gap in the CBP 

lasts for more than 12 months, the fee 

schedule amounts are increased once 

every 12 months on the anniversary date 

of the first day after the contract period 

ended based on the projected percentage 

change in the CPI–U for the 12-month 

period ending on the anniversary date. 

We also propose to revise paragraph 

(4) under § 414.210(g), so that it does 

not conflict with the proposed new 

paragraph (10), by revising the first 

sentence in paragraph (4) to read: ‘‘In 

the case where adjustments to fee 

schedule amounts are made using any of 

the methodologies described, other than 

paragraph (g)(10) of this section, if the 

adjustments are based solely on single 

payment amounts from competitive 

bidding programs that are no longer in 

effect, the single payment amounts are 

updated before being used to adjust the 

fee schedule amounts.’’ 

With regard to payment for non-mail 

order diabetic testing supplies, section 

1834(a)(1)(H) of the Act mandates that 

payment for non-mail order diabetic 

testing supplies be equal to the SPAs 

established under the national mail 

order competition for diabetic testing 

supplies. We believe that as of January 

1, 2019, we must continue payment for 

non-mail order diabetic supplies at the 

current SPA rates. These SPA rates 

would not be updated by inflation 

adjustment factors and would remain in 

effect until new SPA rates are 

established under the national mail 

order program. We do not believe that 

this statutory provision would cease to 

apply in situations where there is a gap 

in the national mail order competitions 

for diabetic testing supplies; and 

therefore, we will continue to use the 

SPAs for mail order diabetic testing 

supplies as the payment amounts for 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34383 

non-mail order diabetic testing supplies 

in the event that there is a gap in the 

CBP. 

We seek comments on these 

proposals. 

C. Provisions of the Proposed Rule 

We are proposing to revise the fee 

schedule adjustment methodology at 

§ 414.210(g)(9) so that for items and 

services furnished in non-CBAs that are 

rural or non-contiguous areas with dates 

of service from January 1, 2019, through 

December 31, 2020, the fee schedule 

amount for the area is equal to 50 

percent of the adjusted payment amount 

established under this section and 50 

percent of the unadjusted fee schedule 

amount. We are proposing to revise the 

fee schedule adjustment methodology at 

§ 414.210(g)(9) so that for items and 

services furnished in non-CBAs that are 

not rural or non-contiguous areas with 

dates of service from January 1, 2019, 

through December 31, 2020, the fee 

schedule amount for the area is equal to 

100 percent of the adjusted payment 

amount established under this section. 

We also propose a methodology for 

adjusting the fee schedule amounts for 

items and services that are currently 

subject to competitive bidding furnished 

in former CBAs in the event of a lapse 

in the DMEPOS CBP. We propose to 

create a new paragraph (10) under 

§ 414.210(g) titled ‘‘Payment 

Adjustments for Items and Services 

Furnished in Former Competitive 

Bidding Areas During Temporary Gaps 

in the DMEPOS CBP’’ that has the 

following text underneath: ‘‘During a 

temporary gap in the entire DMEPOS 

CBP and/or National Mail Order CBP, 

the fee schedule amounts for items and 

services that were competitively bid and 

furnished in areas that were competitive 

bidding areas at the time the program(s) 

was in effect are adjusted based on the 

SPAs in effect in the competitive 

bidding areas on the last day before the 

CBP contract period of performance 

ended, increased by the projected 

percentage change in the Consumer 

Price Index for all Urban Consumers 

(CPI–U) for the 12-month period ending 

on the date after the contract periods 

ended. If the gap in the CBP lasts for 

more than 12 months, the fee schedule 

amounts are increased once every 12 

months on the anniversary date of the 

first day of the gap period based on the 

projected percentage change in the CPI– 

U for the 12-month period ending on the 

anniversary date.’’ 

Finally, with regard to payment for 

non-mail order diabetic testing supplies 

in the event of a gap in the CBP, 

payment would continue at the SPA 

rates for mail order diabetic testing 

supplies as mandated by section 

1834(a)(1)(H) of the Act. We would pay 

for non-mail order diabetic supplies at 

the current SPA rates until new rates are 

established under the national mail 

order program. 

VII. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes 

A. Background 

The Medicare payment rules for 

durable medical equipment are set forth 

in section 1834(a) of the Act and 42 CFR 

part 414, subpart D of our regulations. 

In general, Medicare payment for DME 

items and services paid on a fee 

schedule basis is equal to 80 percent of 

the lower of either the actual charge or 

the fee schedule amount for the item. 

The beneficiary coinsurance is equal to 

20 percent of the lower of either the 

actual charge or the fee schedule 

amount for the item. General payment 

rules for DME are set forth in section 

1834(a)(1) of the Act and § 414.210 of 

our regulations, and § 414.210 also 

contains paragraphs relating to 

maintenance and servicing of items and 

replacement of items. Specific payment 

rules for oxygen and oxygen equipment 

are set forth in section 1834(a)(5) of the 

Act and § 414.226 of our regulations. 

The average monthly payment to 

suppliers serving beneficiaries with a 

prescribed flow rate of greater than 4 

liters per minute in 2006 was 

approximately $299.76. Before the 

enactment of the Deficit Reduction Act 

of 2005 (DRA), these monthly payments 

continued for the duration of use of the 

equipment, provided that Medicare Part 

B coverage and eligibility criteria were 

met. Medicare covers three types of 

oxygen delivery systems: (1) Stationary 

or portable oxygen concentrators, which 

concentrate oxygen in room air; (2) 

stationary or portable liquid oxygen 

systems, which use oxygen stored as a 

very cold liquid in cylinders and tanks; 

and (3) stationary or portable gaseous 

oxygen systems, which administer 

compressed oxygen directly from 

cylinders. There is also transfilling 

equipment that takes oxygen from 

concentrators and fills up small portable 

gaseous tanks. Both liquid and gaseous 

oxygen systems require delivery of 

oxygen contents. Concentrators and 

transfilling systems do not require 

delivery of oxygen contents. Medicare 

payment for furnishing oxygen and 

oxygen equipment is made on a 

monthly basis and the fee schedule 

amounts vary by State. 

Effective January 1, 2006, section 

5101(b) of the DRA amended section 

1834(a)(5) of the Act, limiting the 

monthly payments for oxygen 

equipment to 36 months of continuous 

use. The limit of 36 months of payment 

also applies to cases where there is an 

oxygen flow rate of greater than 4 liters 

per minute. The DRA mandated that 

payment for the delivery of oxygen 

contents continue after the 36-month 

cap on payments for oxygen equipment. 

At this time, Medicare already had an 

established fee schedule amount or 

payment class for oxygen contents only 

for beneficiaries who owned the 

stationary and/or portable oxygen 

equipment. The monthly payment for 

oxygen contents for beneficiaries who 

purchased oxygen equipment prior to 

1989 included payment for delivery of 

both stationary and portable contents 

and was approximately $156 on average 

in 2006. CMS implemented section 

1834(a)(5) of the Act, as amended by 

section 5101 of the DRA, in the final 

rule published on November 9, 2006 in 

the Federal Register, titled ‘‘Home 

Health Prospective Payment System 

Rule Update for Calendar Year 207 and 

Deficit Reduction Act of 2005 Changes 

to Medicare Payment for Oxygen 

Equipment and Capped Rental Durable 

Medical Equipment’’, (71 FR 65884). As 

part of this rule, we amended § 414.226 

by adding a new paragraph (c) and 

separate payment classes for: Oxygen 

generating portable equipment (OGPE) 

consisting of portable oxygen 

concentrators and transfilling 

equipment that met the patient’s 

portable oxygen needs without relying 

on the delivery of oxygen contents; 

stationary oxygen contents after the 36- 

month rental period; and portable 

oxygen contents after the 36-month 

rental period. With the addition of the 

new class for OGPE, rather than 

receiving the standard monthly add-on 

payment of $31.79 for portable oxygen 

equipment, we established a higher 

amount of $51.63 per month for this 

new technology as opposed to 

furnishing portable gaseous or liquid 

oxygen equipment, which continued to 

be paid at the lower add-on payment 

rate of $31.79 per month. 

Section 1834(a)(9)(D) of the Act 

provides the authority to create separate 

classes of oxygen and oxygen 

equipment. Section 1834(a)(9)(D)(ii) of 

the Act mandates that new, separate 

classes of oxygen and oxygen equipment 

be budget neutral; the Secretary may 

establish new classes for oxygen and 

oxygen equipment only if the 

establishment of such classes does not 

result in expenditures for any year that 

are less or more than the expenditures 

which would have been made had the 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34384 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

classes not been established. It is 

important to stress that the budget 

neutrality requirement in section 

1834(a)(9)(D)(ii) of the Act applies 

regardless of whether fee schedule 

amounts are adjusted based on 

information from the DMEPOS CBP. As 

long as suppliers continue to get paid 

more for OGPE than they would 

otherwise be paid had the OGPE class 

not been established, a methodology 

must be employed to ensure that 

payments or expenditures overall are 

budget neutral. Since 2008, in 

accordance with our regulations at 

§ 414.226(c), CMS has ensured budget 

neutrality each year by determining how 

much expenditures increased as a result 

of the higher paying OGPE class and 

reducing the monthly payment amount 

for stationary oxygen equipment and 

oxygen contents by a certain percentage 

to offset the increase in payments 

attributed to the higher amount paid for 

OGPE. Stakeholders have argued that 

the budget neutrality requirement 

should no longer apply in situations 

where the fee schedule amounts for 

oxygen and oxygen equipment, 

including the fee schedule amounts for 

OGPE, are adjusted based on 

information from the DMEPOS CBP. 

However, as long as the add-on payment 

amounts for OGPE are higher than the 

add-on payment amounts that would 

otherwise have been made for portable 

oxygen equipment in general, a budget 

neutrality offset is needed to ensure the 

OGPE class does not result in total 

expenditures for any year which are 

more or less than the expenditures 

which would have been made if the 

payment class had not been established. 

As of January 1, 2018, the average 

adjusted fee schedule monthly add-on 

amount for OGPE was $40.08 and for 

portable gaseous and liquid oxygen 

equipment was $18.20. Either of these 

monthly add-on amounts is added to the 

average adjusted fee schedule monthly 

payment for stationary oxygen 

equipment and oxygen contents which 

was $72.95. We note that if the fee 

schedule amounts for oxygen and 

oxygen equipment are adjusted based on 

information from the DMEPOS CBP, and 

these adjustments result in the fees for 

OGPE being lower than the add-on 

payment amounts that would otherwise 

have been made for portable oxygen 

equipment in general, a positive rather 

than a negative budget neutrality offset 

would be needed to ensure that total 

expenditures for any year are not more 

or less than the expenditures which 

would have been made if the payment 

class had not been established. 

B. Provisions of the Proposed Rule 

1. Adding a Portable Liquid Oxygen 

Equipment Class 

The current payment classes for 

oxygen and oxygen equipment are 

included in § 414.226(c), and include: 

(i) Stationary oxygen equipment 

(including stationary concentrators) and 

oxygen contents (stationary and 

portable); (ii) Portable equipment only 

(gaseous or liquid tanks); (iii) OGPE 

only; (iv) Stationary oxygen contents 

only; and (v) Portable oxygen contents 

only. 

As explained earlier in the preamble, 

the add-on payment for OGPE is higher 

than the add-on payment for portable 

gaseous and liquid equipment. OGPE 

provides advantages for beneficiaries in 

that they do not need to rely on the 

delivery of oxygen contents, in contrast 

to beneficiaries using portable gaseous 

or liquid equipment. The OGPE systems 

are also more lightweight and therefore 

allow for greater ambulation for 

beneficiaries who cannot carry or push 

heavier equipment. Since adding the 

higher paying OGPE class, utilization of 

this equipment has doubled, use of 

portable gaseous equipment declined 

slightly, while use of portable liquid 

equipment dropped significantly and 

now accounts for only 2 percent of 

utilization of portable oxygen 

equipment. Although portable liquid 

oxygen equipment does not eliminate 

the need for delivery of oxygen 

contents, it is a more lightweight system 

like OGPE and promotes ambulation in 

beneficiaries. It is also more expensive 

than portable gaseous equipment to 

suppliers, beneficiaries, and the 

Medicare program. The higher payments 

and incentives for furnishing OGPE 

have in essence created a disincentive to 

furnish portable liquid equipment. 

This proposed rule would amend our 

regulations at § 414.226 by using the 

authority at section 1834(a)(9)(D) to add 

separate payment classes for portable 

gaseous oxygen equipment only and 

portable liquid oxygen equipment only. 

Instead of having one class for portable 

oxygen equipment only (gaseous and 

liquid tanks), we propose splitting this 

class into two classes and increasing the 

add-on amount for portable liquid 

oxygen equipment. We propose 

establishing the initial add-on amounts 

for portable liquid oxygen equipment so 

that they are equal to the add-on 

amounts for OGPE, thus reducing the 

incentive to furnish OGPE over portable 

liquid oxygen equipment. The add-on 

payment amounts would be adjusted in 

the future based on pricing information 

from the DMEPOS CBP. As explained 

above, section 1834(a)(9)(D)(ii) of the 

Act mandates that these new classes be 

annually budget neutral; however, we 

do not expect this change to result in a 

dramatic increase in the use of portable 

liquid oxygen equipment, and so we do 

not believe the budget neutrality offset 

would be significant. 

Suppliers furnishing oxygen and 

oxygen equipment in a CBA under the 

DMEPOS CBP must furnish portable 

liquid oxygen equipment in any case 

where a beneficiary starting a new 36- 

month period of continuous use for 

oxygen and oxygen equipment requests 

portable liquid oxygen equipment. This 

is because all of the HCPCS codes 

describing the different types of oxygen 

and oxygen equipment are items 

included in the respiratory equipment 

product category under the DMEPOS 

CBP and § 414.422(e)(1) requires that 

that a contract supplier agree to furnish 

items under its contract to any 

beneficiary who maintains a permanent 

residence in, or who visits, the CBA and 

who requests those items from that 

contract supplier. However, suppliers in 

non-CBAs are not required to furnish 

portable liquid oxygen equipment even 

if a beneficiary requests such equipment 

from a supplier, which is why we 

believe it is important to eliminate any 

disincentives for furnishing this 

modality that may result because of 

higher payments for OGPE. Thus, we 

believe that adding the portable liquid 

oxygen equipment class and adding a 

provision to the regulations that would 

ensure that the payment amount for 

portable liquid oxygen equipment is the 

same as OGPE would encourage 

suppliers to furnish this modality when 

it is requested by beneficiaries. 

2. Adding a Liquid High-Flow Oxygen 

Contents Class 

As explained above, the statute allows 

a 50 percent volume adjustment add-on 

payment to suppliers for furnishing 

oxygen and oxygen equipment to 

beneficiaries with a prescribed oxygen 

flow rate of more than 4 liters per 

minute. This provides additional 

payment for equipment and/or delivery 

of additional contents necessary to meet 

the needs of beneficiaries who are 

prescribed a large quantity of oxygen. 

However, this add-on payment is tied to 

the payment for stationary equipment, 

which is capped after 36 months of 

continuous use. Certain oxygen 

concentrators are capable of meeting the 

high flow needs of some beneficiaries 

and continue to be available after the 

36-month cap on payments for oxygen 

equipment. In addition, transfilling 

machines can be used to fill multiple 

lightweight portable canisters and 

continue to be available after the 36- 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34385 

month cap on payments for oxygen 

equipment. 

Section 1834(a)(5)(F)(ii)(II) of the Act 

requires that Medicare continue to make 

monthly payments for the delivery and 

refilling of oxygen contents for the 

period of medical need after 36 months 

of continuous use. Currently, there are 

two classes for oxygen contents (gaseous 

and liquid), one for stationary oxygen 

contents and the other for portable 

oxygen contents—see § 414.226(iv) and 

(v). In a limited number of cases where 

a patient is ambulatory and is 

prescribed a very high flow rate of 

oxygen (generally greater than 6 liters 

per minute), a portable liquid oxygen 

system is the only modality that would 

meet their high flow, portable oxygen 

needs. In order to better ensure that 

these beneficiaries have access to the 

portable liquid oxygen contents 

necessary to meet their high flow needs, 

we propose to add a new separate class 

for ‘‘portable liquid oxygen contents 

only for prescribed flow rates of more 

than 4 liters per minute.’’ 

We propose to establish the initial fee 

schedule amounts for portable liquid 

oxygen contents for prescribed flow 

rates of more than 4 liters per minute by 

multiplying the fee schedule amounts 

for portable oxygen contents by 1.5 to 

increase the payment amount by 50 

percent above the payment amount for 

portable oxygen contents. Like the other 

classes of oxygen and oxygen 

equipment, the fee schedule amounts 

for this class would be adjusted in the 

future based on pricing information 

from the DMEPOS CBP. As explained 

above, section 1834(a)(9)(D)(ii) of the 

Act mandates that this new class be 

annually budget neutral; however, we 

expect that this change will have a very 

minimal impact on expenditures due to 

the limited number of beneficiaries who 

require a high flow rate for oxygen and 

can still ambulate. Therefore, we do not 

believe the budget neutrality offset 

needed would be significant. 

Table 53 compares the current classes 

of oxygen and oxygen equipment and 

the proposed classes of oxygen and 

oxygen equipment. 

TABLE 53—CURRENT AND PROPOSED OXYGEN AND OXYGEN EQUIPMENT CLASSES

Current oxygen and oxygen equipment: 

5 classes described in 414.226 

Proposed oxygen and oxygen equipment: 

7 classes 

Stationary oxygen equipment (including stationary concentrators) and 

oxygen contents (stationary and portable).

Stationary oxygen equipment (including stationary concentrators) and 

oxygen contents (stationary and portable). 

Portable equipment only (gaseous or liquid tanks) .................................. Portable gaseous equipment only. 

Portable liquid equipment only. 

Oxygen generating portable equipment only. .......................................... Oxygen generating portable equipment only. 

Stationary oxygen contents only .............................................................. Stationary oxygen contents only. 

Portable oxygen contents only ................................................................. Portable gaseous and liquid oxygen contents only except for portable 

liquid oxygen contents for prescribed flow rates greater than four liters per minute. 

Portable liquid oxygen contents only for prescribed flow rates greater 

than four liters per minute. 

3. Applying Budget Neutrality Offset to 

All Oxygen and Oxygen Equipment 

Classes 

In accordance with section 

1834(a)(9)(D)(ii) of the Act, the fee 

schedule amounts for the oxygen and 

oxygen equipment classes are set in a 

budget neutral manner for each oxygen 

and oxygen equipment HCPCS code. 

The budget neutrality offset necessary to 

maintain the separate class for OGPE 

has been exclusively applied to the 

stationary oxygen equipment fee 

schedule amount as indicated in 

§ 414.226(c)(6). We propose to change 

§ 414.226(c)(6) and the methodology for 

applying the budget neutrality offset, in 

addition to adding the two new oxygen 

and oxygen equipment classes proposed 

above. Rather than applying the budget 

neutrality offset to the payment for 

stationary equipment and oxygen 

contents only, we propose to apply the 

budget neutrality offset to all oxygen 

and oxygen equipment classes and 

HCPCS codes beginning January 1, 

2019. To implement our proposal, a 

budget neutrality offset shall be applied 

to all HCPCS codes for oxygen 

equipment and oxygen contents, thereby 

lowering the amount of the offset 

applied specifically to payments for 

stationary oxygen. We consider 

applying the budget neutrality offset to 

all oxygen classes instead of just the 

stationary oxygen equipment class to be 

more equitable in that it would not just 

lower payments for suppliers of 

stationary oxygen equipment (some of 

which may never furnish OGPE), but 

would spread the budget neutrality 

offset more equitably across all classes 

and codes for oxygen and oxygen 

equipment. Table 54 is an example of 

the fee schedule amounts when the 

budget neutrality offset is applied only 

to the stationary oxygen equipment rate 

versus applying the budget neutrality 

offset to all oxygen classes. This 

particular example depicts fully 

adjusted fee schedule amounts, 

including budget neutrality 

adjustments, for oxygen and oxygen 

equipment furnished in non-rural areas 

in the Southeast U.S. 

TABLE 54—JANUARY 1, 2018 FEES FOR CURRENT AND PROPOSED BUDGET NEUTRALITY METHODS

Current method 2018 rate Proposed method 2018 rate 

Stationary oxygen equipment (including stationary 

concentrators) and oxygen contents (stationary and 

portable).

$70.23 Stationary oxygen equipment (including stationary 

concentrators) and oxygen contents (stationary and 

portable).

$72.59 

Portable equipment only (gaseous or liquid tanks) ..... 17.29 Portable gaseous equipment only ............................... 16.04

Portable liquid equipment only ..................................... 34.73 

Oxygen generating portable equipment only ............... 37.44 Oxygen generating portable equipment only ............... 34.73 

Stationary oxygen contents only .................................. 53.32 Stationary oxygen contents only .................................. 49.46 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34386 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 54—JANUARY 1, 2018 FEES FOR CURRENT AND PROPOSED BUDGET NEUTRALITY METHODS—Continued 

Current method 2018 rate Proposed method 2018 rate 

Portable oxygen contents only ..................................... 53.32 Portable gaseous and liquid oxygen contents only 

with the exception of portable liquid contents greater than four liters per minute.

49.46 

Portable liquid contents only greater than four liters 

per minute.

74.19 

We solicit comments on these 

provisions. 

VIII. Payment for Multi-Function 

Ventilators 

A. Background 

Section 1834(a) of the Act governs 

payment for DME covered under Part B 

and under Part A for a home health 

agency and provides for the 

implementation of a fee schedule 

payment methodology for DME 

furnished on or after January 1, 1989. 

Sections 1834(a)(2) through (a)(7) of the 

Act set forth separate payment 

categories of DME and describe how the 

fee schedule amounts for items under 

each of the categories are established. 

More importantly, the payment rules for 

these categories are different and in 

some cases mutually exclusive. Table 55 

provides a summary of the payment 

categories, corresponding payment 

methodology, and statutory and 

regulatory sections. The main payment 

categories are: Inexpensive or other 

routinely purchased items, items 

requiring frequent and substantial 

servicing, customized items, oxygen and 

oxygen equipment, and other items of 

DME (capped rental). Some differences 

in the payment rules for the payment 

categories arise, for example, where 

sections 1834(a)(2), (4), (6), and (7) of 

the Act allow for the lump sum 

purchase of certain items paid under 

these categories, while sections 

1834(a)(3) and (5) of the Act do not 

allow for lump sum purchase of items 

in those categories. Also, sections 

1834(a)(2), (5), and (7) of the Act cap or 

limit total rental payments for items 

paid under these categories, whereas 

section 1834(a)(3) does not. With regard 

to rented items, section 1834(a)(7) of the 

Act mandates beneficiary ownership of 

the item after 13 months of continuous 

rental, whereas sections 1834(a)(2), (3), 

and (5) do not require transfer of 

ownership to the beneficiary. Finally, 

section 1834(a)(3) of the Act mandates 

that payment for covered items such as 

ventilators and intermittent positive 

pressure breathing machines be made 

on a monthly basis for the rental of the 

item, whereas ventilators that are either 

continuous positive airway pressure 

devices or intermittent assist devices 

with continuous positive airway 

pressure devices are excluded from 

section 1834(a)(3) of the Act. 

Respiratory assist devices, suction 

pumps (aspirators), and nebulizers fall 

under section 1834(a)(7) of the Act. 

TABLE 55—SUMMARY OF DME EQUIPMENT PAYMENT CATEGORIES AND RULES

Payment category Payment rules 

Inexpensive or other routinely purchased items—section 1834(a)(2) 

of the Act 

Purchase price of $150 or less, OR were routinely purchased (75 percent of the time or more) under the 

rent/purchase program prior to 1989, OR are speech generating devices, OR are accessories used in 

conjunction with nebulizers, aspirators, continuous positive airway pressure devices, respiratory assist 

devices, or speech generating devices. If covered, these items can be purchased new or used and can 

be rented; however, total payments cannot exceed the purchase new fee for the item. See 42 CFR 

414.220. 

Items requiring frequent and substantial servicing—section 

1834(a)(3) of the Act 

Items, such as ventilators, requiring frequent and substantial servicing, in order to avoid risk to the patient’s health. If covered, these items can be rented as long as they are medically necessary with the 

supplier retaining ownership of the equipment. Payment is generally made on a monthly rental basis with 

no cap on the number of rental payments made as long as medically necessary. Excludes CPAP devices, respiratory assist devices, suction pumps/aspirators, and nebulizers. See 42 CFR 414.222. 

Customized items—section 

1834(a)(4) of the Act 

Payment amounts are not calculated for a customized DME item. Customized DME is defined at 42 CFR 

414.224, including customized wheelchairs. If covered, payment is made in a lump-sum amount for the 

purchase of the item based on the DME Medicare Administrative Contractor (MAC), Part A MAC, or Part 

B MAC’s individual determination. See 42 CFR 414.224. 

Oxygen and oxygen equipment— 

section 1834(a)(5) of the Act 

One bundled monthly rental payment amount is made, not to exceed a 36 month cap, for all covered stationary equipment, stationary and portable contents, and all accessories used in conjunction with the oxygen equipment. An add-on payment may also be made for portable oxygen. After 36 months, payment 

can continue to be made on a monthly basis for oxygen contents for liquid or gaseous oxygen equipment. Payment for in-home maintenance and servicing of supplier-owned oxygen concentrators and 

transfilling equipment may be made every 6 months, beginning 6 months after the 36 month rental cap, 

for any period of medical need for the remainder of the reasonable useful lifetime of the equipment (5 

years). See 42 CFR 414.226. 

Other Covered Items (Other than 

DME)—section 1834(a)(6) of the 

Act 

Payment under a lump sum purchase. 

Other items of DME (capped rental 

items)—section 1834(a)(7) of the 

Act 

Monthly rental payment amount is made not to exceed a 13 month cap at which point the beneficiary takes 

over ownership of the equipment. Complex rehabilitative power wheelchairs can be purchased in the first 

month of use. For capped rental items other than power wheelchairs, the payment amount is calculated 

based on 10 percent of the base year purchase price for months 1 through 3. Beginning with the fourth 

month, the payment amount is equal to 7.5 percent of the purchase price. For power wheelchairs, the 

rental payment amount is calculated based on 15 percent of the base year purchase price for months 1 

through 3. Beginning with the fourth month, the fee schedule amount is equal to 6 percent of the purchase price. See 42 CFR 414.229. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34387 

The Medicare allowed amount for 

DMEPOS items and services paid on a 

fee schedule basis is equal to the lower 

of the supplier’s actual charge or the fee 

schedule amount. The Medicare 

payment amount for a DME item is 

generally equal to 80 percent of the 

lesser of the actual charge or the fee 

schedule amount for the item, less any 

unmet Part B deductible. The 

beneficiary coinsurance for such items 

is generally equal to 20 percent of the 

lesser of the actual charge or the fee 

schedule amount for the item once the 

deductible is met. 

B. Current Issues 

Concerns have been raised by the 

manufacturer of a multi-function 

ventilator about how the separate 

payment categories set forth at sections 

1834(a)(2) through (a)(7) of the Act 

would apply to a new type of ventilator, 

which consists of a ventilator base item 

classified under section 1834(a)(3) of the 

Act, but can also perform the function 

of portable oxygen equipment classified 

under the payment categories in 

sections 1834(a)(5), and the functions of 

a nebulizer, a suction pump, and a 

cough stimulator classified under 

paragraph (7) of section 1834(a) of the 

Act. For example, a new product was 

recently cleared by the Food and Drug 

Administration (FDA) as a ventilator, 

but can also function as a portable 

oxygen concentrator, nebulizer, suction 

pump (aspirator), and cough stimulator. 

The multi-function ventilator assists 

with serving multiple, different medical 

needs of beneficiaries with diagnoses 

such as chronic lung disease, cystic 

fibrosis, ALS, and muscular dystrophy. 

As shown in Table 56, separate DME 

items perform each of these functions, 

and the DME items that perform these 

functions have already been assigned 

separate HCPCS codes and payment 

amounts under the DMEPOS fee 

schedule. Currently, HCPCS codes 

E0465 and E0466 are denoted for a 

home ventilator item, any type, used 

with either an invasive interface (for 

example, tracheostomy tube) or noninvasive interface (for example, mask, 

chest shell). Portable oxygen 

concentrators are identified using a 

combination of codes E1390 plus E1392. 

TABLE 56—FUNCTIONS, PAYMENT CATEGORY, AND HCPCS FOR FUNCTIONS OF A MULTI-FUNCTION VENTILATOR

HCPCS code Function Payment category 

E0465 or E0466 ................... Ventilator ......................................................................... Items requiring frequent and substantial servicing. 

E1390 and E1392 ................ Portable Oxygen Concentrator ....................................... Oxygen and oxygen equipment. 

E0570 ................................... Nebulizer ......................................................................... Capped rental items. 

E0600 ................................... Suction Pump .................................................................. Capped rental items. 

E0482 ................................... Cough Stimulator ............................................................ Capped rental items. 

We noted other concerns while 

considering how to categorize and pay 

for the multi-function ventilator. One 

concern is that a patient may not need 

all of the functions that the new multifunction ventilator performs, and there 

are different Medicare medical necessity 

coverage criteria for each of the five 

different functions typically performed 

by five different pieces of equipment. In 

addition, another concern we have is 

while section 1847(a)(2)(A) of the Act 

mandates the implementation of 

competitive bidding for covered items, 

the only items that comprise the multifunction ventilator that have been 

phased into the DMEPOS CBP at this 

time are portable oxygen concentrators 

and nebulizers. As a result, in CBAs, 

only contract suppliers can furnish 

portable oxygen concentrators or 

nebulizers to beneficiaries in these 

areas, whereas non-contract suppliers 

can furnish ventilators, suction pumps, 

and cough stimulators in these same 

areas. The current competitive bid 

product categories do not include a 

single item, furnished by one supplier, 

which performs the functions of five 

separate items, as the multi-function 

ventilator does. Upon determination 

that the multi-function ventilator is a 

covered item within the meaning of 

section 1834(a)(13) of the Act and its 

payment category, the multi-function 

ventilator item can be eligible for 

inclusion in a CBP along with other 

ventilator items. 

To address these concerns, we 

reviewed the payment rules for 

ventilators. Section 1834(a)(1)(C) of the 

Act indicates that subsection (a) of 

section 1834 is the exclusive payment 

rule for these items; however, this 

subsection does not specifically set forth 

a payment category for DME items that 

are capable of performing the functions 

of other items that can be classified 

under the multiple, different payment 

categories and accompanying rules 

under sections 1834(a)(2) through (7) of 

the Act. Similarly, the regulations at 42 

CFR 414.220 through 42 CFR 414.229 

and program instructions currently do 

not address payment for the multifunction ventilator’s additional 

functions. In addition, there is no 

guidance or criteria regarding how to 

determine which function of a new 

multi-function item should determine 

the payment category for the entire 

multi-function item. Furthermore, 

because the supplier is only furnishing 

one item and the patient may not need 

more than one of the functions/features 

for the duration of time the item is used 

by the patient, we do not believe 

payment should be established by 

summing the current separate payment 

amounts for each function (ventilators, 

oxygen concentrators, nebulizers, 

suction pumps, and cough stimulators) 

to determine the fee schedule amount 

for the integrated multi-function item. 

We believe we should classify multifunction ventilators in the frequent and 

substantial servicing payment category 

under section 1834(a)(3) of the Act and 

address payment for these ventilators 

that can perform multiple functions. 

The information we gathered during our 

review supports our proposal to classify 

these items under the frequent and 

substantial servicing payment category 

at section 1834(a)(3) of the Act. Multifunction ventilators are classified by the 

FDA as ventilators, instead of oxygen 

concentrators, nebulizers, suction 

pumps, or cough stimulators. We 

believe that section 1834(a)(1)(C) of the 

Act requires that DME be classified into 

one of the payment categories in section 

1834(a)(2) through (7) of the Act. We 

believe that by classifying these items 

under section 1834(a)(3) of the Act and 

not under sections 1834(a)(2), (4), (5), 

(6), or (7) of the Act, that only the rules 

under section 1834(a)(3) would apply to 

these items. We believe this is 

appropriate and propose to establish fee 

schedule amounts for multi-function 

ventilators based on the current 

Medicare fee schedule amounts for 

ventilators plus an additional amount 

for the average cost of the various 

additional functions or features the 

equipment offers (oxygen concentration, 

drug nebulization, respiratory airway 

suction, and cough stimulation). This is 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34388 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

similar to how fee schedule amounts 

have been established for other DME 

items in the past, such as using the 

average of allowed charges for underarm 

crutches with shock absorbers and 

allowed charges for underarm crutches 

without shock absorbers to establish the 

fee schedule amounts for underarm 

crutches with or without shock 

absorbers (HCPCS code E0116), or using 

the average of allowed charges for 

walkers with a fixed height and allowed 

charges for walkers with an adjustable 

height to establish the fee schedule 

amounts for walkers with or without 

adjustable heights (HCPCS codes E0130 

through E0143). 

C. Provisions of the Proposed Rule 

Based on our review, we are 

proposing to add a provision to the 

regulation at § 414.222(f) to establish a 

payment methodology for multifunction ventilators effective for dates of 

service on or after January 1, 2019. We 

believe that our proposal complies with 

the Medicare payment rules for DME in 

section 1834(a) of the Act, while 

recognizing and encouraging 

innovations in technology such as 

multi-function ventilators. These 

devices can enhance patient care and 

promote ambulation by eliminating the 

need for the patient to be tethered to 

several pieces of equipment. We 

propose that multi-function ventilators 

be classified under section 1834(a)(3) of 

the Act. Items classified under section 

1834(a)(3) of the Act are paid on a 

continuous monthly rental basis. We are 

interested in receiving comments on 

alternatives to the approach we are 

taking regarding the proposed 

classification and payment of multifunction ventilators. 

We propose to establish the monthly 

rental fee schedule amounts for a multifunction ventilator based on the existing 

monthly rental fee schedule amounts for 

ventilators plus payment for the average 

cost of the additional functions. Under 

this proposal, a single monthly rental 

fee schedule amount shall be paid to 

encompass the base ventilator item and 

its additional functional components as 

follows. 

• The monthly rental fee schedule 

amount for a multi-function ventilator is 

equal to the monthly rental fee schedule 

amount for a ventilator established in 

§ 414.222(c) and (d) plus the average of 

the lowest monthly cost for one 

additional function and the monthly 

cost of all additional functions, 

increased by the annual coverage item 

updates of section 1834(a)(14) of the 

Act. 

• The monthly cost for additional 

functions shall be determined as 

follows: 

Æ For functions performed by items 

classified under § 414.222 prior to 1994 

the monthly cost is equal to the monthly 

rental fee schedule amount established 

in paragraphs (c) and (d) of this section 

increased by the covered item update of 

section 1834(a)(14) of the Act. 

Æ For functions performed by items 

classified under § 414.220, the monthly 

cost is equal to the fee schedule amount 

for purchased equipment established in 

§ 414.220(c), (d), (e), and (f), adjusted in 

accordance with § 414.210(g), divided 

by 60 months or total number of months 

of the reasonable useful lifetime of the 

equipment. There are currently no 

multi-function ventilators on the market 

that perform the function for items 

classified under § 414.220. 

Æ For functions performed by items 

classified under § 414.226 for oxygen 

equipment, the monthly cost is equal to 

the monthly payment amount 

established in § 414.226(e), (f), and (g), 

adjusted in accordance with 

§ 414.210(g), multiplied by 36 and 

divided by 60 months or total number 

of months of the reasonable useful 

lifetime of the oxygen equipment. 

Æ For functions performed by items 

classified under § 414.229 for cough 

stimulator, the monthly cost is equal to 

the purchase price established in 

§ 414.229(c), adjusted in accordance 

with § 414.210(g), divided by 60 months 

or total number of months of the 

reasonable useful lifetime of the 

equipment. 

TABLE 57—PROPOSED PAYMENT METHOD FOR MULTI-FUNCTION VENTILATORS

[Example] 

Step Method HCPCS codes 

(1) ...................... Base amount = ventilator monthly rental fee schedule amount ................................................................... E0465 or E0466 

(2) ...................... Determine monthly rental fee schedule amount for each additional function: 

(a) ............... (Portable Oxygen Concentrator monthly fee schedule amount × 36 months)/60 months * ......................... E1392 + E1390 

(b) ............... CY 1993 Nebulizer monthly rental fee schedule amount × covered item update factor for DME to CY 

2019 **.

E0570 

(c) ............... CY 1993 Suction Pump monthly rental fee schedule amount × covered item update factor for DME to 

CY 2019 **.

E0600 

(d) ............... (Cough Stimulator newly purchased fee schedule amount)/60 months * ..................................................... E0482 

(3) ...................... Base amount from Step 1 + lowest cost function amount from Step 2.

(4) ...................... Base amount from Step 1 + all function amounts from Step 2.

(5) ...................... Determine Payment for Multi-function ventilator (average of step 3 and 4).

* 5 year (60 months) reasonable useful lifetime of the equipment. 

** The monthly rental amounts paid prior to 1994 included payment for the equipment and all related accessories. 

Medicare coverage and payment can 

be available for multi-function 

ventilators furnished to beneficiaries 

who are prescribed a multi-function 

ventilator and meet the Medicare 

medical necessity coverage criteria for a 

ventilator and at least one of the four 

additional functions of the device. The 

fee schedule amount for the multifunction ventilator would be 

determined in advance for each 

calendar year and would not vary 

regardless of how many additional 

functions the beneficiary needs in 

addition to the ventilator function. We 

are proposing that the payment amount 

would be established for CY 2019 and 

then updated each year after 2019 using 

the covered item update factors 

mandated by section 1834(a)(14) of the 

Act. In the event that a patient is 

furnished a multi-function ventilator 

and only meets the Medicare medical 

necessity coverage criteria for a 

ventilator, Medicare coverage and 

monthly rental payments would be for 

the ventilator only, and payment could 

not be made for the other functions of 

the device. 

We are proposing a payment method 

that we believe ensures an integration of 

the functions of the multi-function 

ventilator with a bundled corresponding 

payment amount that addresses 

additional functions of the items that 

are necessary for patient care. If a 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34389 

beneficiary is furnished a multi-function 

ventilator, payment would be denied for 

any separate claims for oxygen and 

oxygen equipment, nebulizers and 

related accessories, suction pumps and 

related accessories, and cough 

stimulators and any related accessories. 

Thus, our proposal prevents division of 

the multi-function item into separate 

parts with separate fee schedule 

amounts for each function of the item, 

some of which have conflicting payment 

rules. Also, this proposed payment 

method lessens confusion for the 

supplier which could occur if the 

supplier were to receive varying 

monthly rental amounts for a multifunction item and instead permits a 

supplier to receive predictable monthly 

payments over the 60 month reasonable 

useful lifetime of the multi-function 

ventilator. 

We are not proposing § 414.222(f) to 

apply to other DME items. Subsequent 

rulemaking would be necessary to 

address other multi-function items. 

We are soliciting comments on this 

proposal. 

IX. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs 

A. Background 

In our CY 2015 ESRD PPS final rule 

(79 FR 66223 through 66265), we said 

that while section 1847(a)(1)(A) of the 

Act provides that CBPs be established 

throughout the U.S., the definition of 

U.S. at section 210(i) of the Act does not 

include the Northern Mariana Islands. 

We therefore previously determined that 

the Northern Mariana Islands are not 

considered an area eligible for inclusion 

under a national mail order CBP. We 

finalized a proposal regarding fee 

schedule adjustments based on 

information from the national mail 

order program and the Northern 

Mariana Islands at § 414.210(g)(7) to 

provide that the fee schedule amounts 

for mail order items furnished in the 

Northern Mariana Islands are adjusted 

so that they are equal to 100 percent of 

the single payment amounts (SPAs) 

established under a national mail order 

program. We discussed how a few 

commenters recommended waiting for 

the second round of bidding for the 

national mail order CBP before adjusting 

the fee schedule amounts for mail order 

items furnished in the Northern Mariana 

Islands in order to allow more time to 

determine if the competitive bidding 

payment amounts allow for access to 

items and services and to acquire more 

pricing points over an extended period 

of time. The commenters further 

recommended increasing payment 

amounts for the national mail order SPA 

for the Northern Mariana Islands to 

limit any access or pricing 

complications. In response, we said we 

disagreed with these suggestions, and 

that the national mail order SPAs 

already applied to items shipped to 

various remote areas of the U.S. and 

have not resulted in any problems with 

access to mail order items in these areas. 

Therefore, we believed the SPAs could 

be used to adjust the mail order fee 

schedule amounts for the Northern 

Mariana Islands effective January 1, 

2016. 

B. Current Issues 

The national mail order program for 

diabetic testing supplies is currently in 

effect in all areas of the U.S., except for 

the Northern Mariana Islands. Thus, the 

Northern Mariana Islands are currently 

the only non-CBA for mail order 

diabetic testing supplies. However, even 

though the Northern Mariana Islands are 

currently not included in the national 

mail order program, per § 414.210(g)(7), 

CMS currently pays for mail order items 

furnished in the Northern Mariana 

Islands at 100 percent of the SPAs 

established under the national mail 

order CBP. After further examining this 

issue, it is now our view that the 

Northern Mariana Islands are an area 

eligible for inclusion under a national 

mail order CBP. A Joint Resolution 

addressing the Northern Mariana 

Islands titled ‘‘Covenant to Establish a 

Commonwealth of the Northern Mariana 

Islands in Political Union with the 

United States of America’’ was 

approved in 1976 (Pub. L. 94–241 

(HJRes 549), 90 Stat 263, March 24, 

1976). The Joint Resolution addresses 

the applicability of certain federal laws 

to the Northern Mariana Islands. Article 

V (‘‘Applicability of Laws’’), section 

502(a) specifies: 

‘‘The following laws of the United 

States in existence as of the effective 

date of this Section and subsequent 

amendments to such laws will apply to 

the Northern Mariana Islands, except as 

otherwise noted in this Covenant: (1) 

Those laws which provide federal 

services and financial assistance 

programs and the federal banking laws 

as they apply to Guam;’’ 

Thus, under the Joint Resolution, laws 

which provide federal services and 

financial assistance apply to the 

Northern Mariana Islands to the same 

extent as they do to Guam. CMS has 

recognized the Joint Resolution and 

taken the position that the Northern 

Mariana Islands fall within the 

definition of U.S. under Medicare in 42 

CFR 411.9(a). In a proposed rule 

published on April 25, 2006, in the 

Federal Register titled ‘‘Medicare 

Program; Proposed Changes to the 

Hospital Inpatient Prospective Payment 

Systems and Fiscal Year 2007 Rates’’, 

(71 FR 23996), we discussed the Joint 

Resolution and defined the U.S. to 

include the 50 States, the District of 

Columbia, Puerto Rico, the Virgin 

Islands, Guam, American Samoa, and 

the Northern Mariana Islands. The 

Northern Mariana Islands are also 

included in the definition of U.S. at 42 

CFR 400.200. Thus, even though the 

Northern Mariana Islands are not 

explicitly referenced in sections 1861(x) 

and 210(h) and (i) (which notably do 

reference Guam) of the Act, we believe 

that we can consider the Northern 

Mariana Islands to be part of the U.S. for 

the purposes of the national mail order 

program as well. 

As such, we propose to amend 

§ 414.210(g)(7) to say that beginning on 

or after the date that the Northern 

Mariana Islands are included under a 

national mail order CBP, the fee 

schedule adjustment methodology 

under this paragraph would no longer 

apply. Under this proposed rule, the 

Northern Mariana Islands would be 

included in the CBA for all 

competitions under the national mail 

order CBP beginning on or after January 

1, 2019. 

We are soliciting comments on this 

proposal. 

C. Provisions of the Proposed Rule 

We propose to amend § 414.210(g)(7) 

to indicate that beginning on or after the 

date that the Northern Mariana Islands 

are included under a national mail order 

competitive bidding program, the fee 

schedule adjustment methodology 

under this paragraph would no longer 

apply. 

We are soliciting comments on this 

proposal. 

X. Request for Information on the GapFilling Process for Establishing Fees for 

New DMEPOS Items 

In general, the statute mandates that 

fee schedule amounts established for 

DME, prosthetics and orthotics and 

other items be based on average 

payments made previously under the 

reasonable charge payment 

methodology. The criteria for 

determining reasonable charges are at 42 

CFR 405.502. For example, the 

exclusive payment rule at sections 

1834(a)(2), (3), (8), and (9) of the Act 

mandates that the fee schedule amounts 

for DME generally be based on average 

reasonable charges from 1986 and/or 

1987, increased by annual covered item 

update factors. Since section 

1834(a)(1)(C) of the Act mandates that 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34390 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

this be the exclusive payment rule for 

DME, as section 1834(h)(1)(D) of the Act 

does for prosthetic devices, prosthetics 

and orthotics, CMS is required to 

establish fee schedule amounts for these 

items based on the amounts and levels 

established under the reasonable charge 

payment periods set forth in the statute 

(that is, July 1, 1986 through June 30, 

1987, for prosthetic devices, prosthetics 

and orthotics, therapeutic shoes, and 

most DME items). 

Because there may be DMEPOS items 

that come on the market that were not 

paid for by Medicare during the 

reasonable charge payment periods that 

the statute mandates be used for 

establishing the fee schedule amounts 

for these items, we establish the fee 

schedule amounts for newly covered 

items using a ‘‘gap-filling’’ process. The 

gap-filling process allows Medicare to 

establish fee schedule amounts that 

align with the statutory basis for the 

DMEPOS fee schedule. We essentially 

fill the gap in the data due to the lack 

of historic reasonable charge payments 

from 1986 and 1987 by estimating what 

the historic reasonable charge payments 

would have been for the items. As 

described in section 60.3 of chapter 23 

of the Medicare Claims Processing 

Manual (Pub. L. 100–04), CMS gap-fills 

by using fees for comparable equipment 

or prices from supplier price lists, such 

as mail order catalogs. The gap-filling 

process only applies to items not 

assigned existing HCPCS codes that are 

also not items that previously were paid 

for under a HCPCS code that was either 

deleted or revised, in other words truly 

new items or technology as opposed to 

recoded/reclassified or technologically 

refined items or technology. This gapfilling process can result in fee schedule 

amounts that greatly exceed the cost to 

suppliers of the new technology items 

(such as when inflated prices from a 

manufacturer were used as a proxy for 

supplier price lists under past gapfilling exercises) or do not cover the 

costs of furnishing the technology if the 

comparable items used for gap-filling 

purposes are less expensive than the 

new item. 

We are considering if changes should 

be made to the gap-filling process for 

establishing fees for newly covered 

DMEPOS items paid on a fee schedule 

basis. We are soliciting comments for 

information on how the gap-filling 

process could be revised in terms of 

what data sources or methods could be 

used to estimate historic allowed 

charges for new technologies in a way 

that satisfies the exclusive payment 

rules for DMEPOS items and services, 

while preventing excessive 

overpayments or underpayments for 

new technology items and services. 

XI. DMEPOS CBP Technical 

Amendments 

A. Background 

Medicare pays for certain DMEPOS 

items and services furnished within 

competitive bidding areas based on the 

payment rules that are set forth in 

section 1847 of the Social Security Act 

(the Act) and 42 CFR part 414, subpart 

F. We propose to make two minor 

technical amendments to correct the 

existing DMEPOS CBP regulations in 42 

CFR 414.422 published in the Federal 

Register on November 6, 2014, titled 

‘‘Medicare Program; End-Stage Renal 

Disease Prospective Payment System, 

Quality Incentive Program, and Durable 

Medical Equipment, Prosthetics, 

Orthotics, and Supplies; Final Rule’’ (79 

FR 66120) and in § 414.423 in a final 

rule published in the Federal Register 

on November 29, 2010, titled ‘‘Medicare 

Program; Payment Policies Under the 

Physician Fee Schedule and Other 

Revisions to Part B for CY 2011; Final 

Rule’’ (75 FR 73169). 

B. Proposed Technical Amendments 

We are proposing to make minor 

technical amendments as follows: 

• In § 414.422, we propose to correct 

the numbering in section (d)(4), which 

contains subsections (i) through (vi), but 

omits (ii) in the numbering sequence. 

This error was made when the 

regulation was promulgated. The 

proposed new numbering in section 

(d)(4) contains subsections (i) through 

(v), including (ii). The content of (d)(4) 

would remain the same. 

• In § 414.423(i)(8), we propose 

removing the reference to ‘‘42 U.S.C.’’ 

before Title 18. This statutory citation 

was inadvertently included when the 

regulation was promulgated. 

We solicit public comments on these 

technical amendments and request that 

when commenting on this section, 

commenters reference ‘‘DMEPOS CBP 

Proposed Technical Amendments.’’ 

XII. Burden Reduction on 

Comorbidities 

A. Background 

In the CY 2011 ESRD PPS final rule 

(75 FR 49094), we finalized six 

comorbidity categories that are eligible 

for a comorbidity payment adjustment, 

each with associated International 

Classification of Diseases (ICD) Clinical 

Modification diagnosis codes (75 FR 

49100). Beginning January 1, 2011, these 

categories included three acute, shortterm diagnostic categories (pericarditis, 

bacterial pneumonia, and 

gastrointestinal tract bleeding with 

hemorrhage) and three chronic 

diagnostic categories (hereditary 

hemolytic anemia (including sickle cell 

anemia), myelodysplastic syndrome, 

and monoclonal gammopathy). 

We stated in the same rule (75 FR 

49099) that we would require ESRD 

facilities to have documentation in the 

patient’s medical/clinical record to 

support any diagnosis recognized for a 

payment adjustment, utilizing specific 

criteria that we issued in sub-regulatory 

guidance, specifically the Medicare 

Benefit Policy Manual, Pub. 100–02, 

Chapter 11, Section 60.A.5 (https:// 

www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ 

downloads/bp102c11.pdf). For example, 

to qualify for the pericarditis 

comorbidity adjustment, at least two of 

the four following criteria must be met: 

Atypical chest pain; pericardial friction 

rub; suggestive electrocardiogram 

changes (for example, widespread ST 

segment elevation with reciprocal ST 

segment depressions and PR 

depressions) not previously reported; 

and new or worsening pericardial 

effusion. In response to such 

requirements, stakeholders have 

suggested it would require additional 

testing or procedures to document a 

comorbidity, which was not our intent. 

Rather, our assumption was that the 

patient’s diagnosing physician would 

provide the documentation. In the CY 

2011 ESRD PPS final rule (75 FR 49104), 

we stated that ESRD facilities will 

obtain diagnostic information through 

increased communication with their 

patients, their patient’s nephrologists 

and their patient’s families. If there is no 

documentation in the medical record, 

the ESRD facility would be unable to 

claim a comorbidity payment 

adjustment for that patient, but could 

seek payment through the outlier 

mechanism. 

In the CY 2012 ESRD PPS final rule 

(76 FR 70252), we clarified that the 

ICD–9–CM codes eligible for the 

comorbidity payment adjustment are 

subject to the annual ICD–9–CM coding 

updates that occur in the hospital 

Inpatient Prospective Payment System 

final rule and are effective October 1st 

of each year. We explained that any 

updates to the ICD–9–CM codes that 

affect the categories of comorbidities 

and the diagnoses within the 

comorbidity categories that are eligible 

for a comorbidity payment adjustment 

would be communicated to ESRD 

facilities through sub-regulatory 

guidance. We update the list of eligible 

diagnosis codes on an annual basis and 

communicate these changes through the 

CMS.gov website. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34391 

35These statistics can be accessed at: https:// 

dashboard.healthit.gov/quickstats/pages/FIGHospital-EHR-Adoption.php. 

In the CY 2016 ESRD PPS final rule 

(80 FR 68989 through 68990), in 

consideration of stakeholder concerns 

about the burden associated with 

meeting the documentation 

requirements for bacterial pneumonia, 

we finalized the elimination of the casemix payment adjustment for the 

comorbidity categories of bacterial 

pneumonia and monoclonal 

gammopathy beginning in CY 2016. 

B. Proposed Documentation 

Requirements 

In the CY 2018 ESRD PPS proposed 

rule (82 FR 31224), we published a 

request for information (RFI) related to 

improvements to the health care 

delivery system that reduce unnecessary 

burdens for clinicians, other providers, 

and patients and their families and 

invited the public to submit their ideas 

for regulatory, sub-regulatory, policy, 

practice, and procedural changes to 

better accomplish these goals. The aim 

of the RFI was to request information 

that would lead to increased quality of 

care, lower costs, improved program 

integrity, and to make the health care 

system more effective, simple and 

accessible. 

After a review of the comments 

received in response to the RFI, we have 

determined that the documentation 

requirements associated with the 

conditions that are eligible for the 

comorbidity payment adjustment 

should be revisited. We have heard from 

stakeholders that they continue to face 

challenges in obtaining the required 

documentation in order to report 

specific diagnosis codes and obtain the 

comorbidity payment adjustments. 

Additionally, we have determined that 

the ESRD PPS documentation 

requirements are more rigorous than the 

documentation requirements under 

other CMS payment systems that 

generally rely on the ICD Official 

Guidelines. 

In order to reduce burden on ESRD 

facilities and provide consistent policy 

across Medicare payment systems, we 

are proposing to reduce the 

documentation requirements necessary 

for justification of the comorbidity 

payment adjustment. Specifically, we 

would no longer require that ESRD 

facilities obtain results from specific 

diagnostic tests in order to qualify for a 

comorbidity payment adjustment. 

Instead, we propose to rely on the 

guidelines established by the Official 

ICD Guidelines for Coding and 

Reporting. This proposal does not 

preclude the requirement for ESRD 

facilities to maintain clear 

documentation in the beneficiary’s 

medical record used to justify the 

reporting of diagnosis codes, which is 

also necessary for adherence to ICD 

Guidelines. Documentation required to 

meet ICD guidelines continues to be 

required for purposes of the adjustment. 

We are soliciting comment on this 

proposal. 

XIII. Requests for Information 

This section addresses two requests 

for information (RFIs). Upon reviewing 

the RFIs, respondents are encouraged to 

provide complete, but concise 

responses. These RFIs are issued solely 

for information and planning purposes; 

neither RFI constitutes a Request for 

Proposal (RFP), application, proposal 

abstract, or quotation. The RFIs do not 

commit the U.S. Government to contract 

for any supplies or services or make a 

grant award. Further, CMS is not 

seeking proposals through these RFIs 

and will not accept unsolicited 

proposals. Responders are advised that 

the U.S. Government will not pay for 

any information or administrative costs 

incurred in response to this RFI; all 

costs associated with responding to 

these RFIs will be solely at the 

interested party’s expense. Failing to 

respond to either RFI will not preclude 

participation in any future procurement, 

if conducted. Please note that CMS will 

not respond to questions about the 

policy issues raised in these RFIs. CMS 

may or may not choose to contact 

individual responders. Such 

communications would only serve to 

further clarify written responses. 

Contractor support personnel may be 

used to review RFI responses. 

Responses to these RFIs are not offers 

and cannot be accepted by the U.S. 

Government to form a binding contract 

or issue a grant. Information obtained as 

a result of this RFI may be used by the 

U.S. Government for program planning 

on a non-attribution basis. Respondents 

should not include any information that 

might be considered proprietary or 

confidential. All submissions become 

U.S. Government property and will not 

be returned. CMS may publically post 

the comments received, or a summary 

thereof. 

A. Request for Information on 

Promoting Interoperability and 

Electronic Healthcare Information 

Exchange Through Possible Revisions to 

the CMS Patient Health and Safety 

Requirements for Hospitals and Other 

Medicare- and Medicaid-Participating 

Providers and Suppliers 

Currently, Medicare- and Medicaidparticipating providers and suppliers 

are at varying stages of adoption of 

health information technology (health 

IT). Many hospitals have adopted 

electronic health records (EHRs), and 

CMS has provided incentive payments 

to eligible hospitals, critical access 

hospitals (CAHs), and eligible 

professionals who have demonstrated 

meaningful use of certified EHR 

technology (CEHRT) under the Medicare 

EHR Incentive Program. As of 2015, 96 

percent of Medicare- and Medicaidparticipating non-Federal acute care 

hospitals had adopted certified EHRs 

with the capability to electronically 

export a summary of clinical care.35

While both adoption of EHRs and 

electronic exchange of information have 

grown substantially among hospitals, 

significant obstacles to exchanging 

electronic health information across the 

continuum of care persist. Routine 

electronic transfer of information postdischarge has not been achieved by 

providers and suppliers in many 

localities and regions throughout the 

Nation. 

CMS is firmly committed to the use of 

certified health IT and interoperable 

EHR systems for electronic healthcare 

information exchange to effectively help 

hospitals and other Medicare- and 

Medicaid-participating providers and 

suppliers improve internal care delivery 

practices, support the exchange of 

important information across care team 

members during transitions of care, and 

enable reporting of electronically 

specified clinical quality measures 

(eCQMs). The Office of the National 

Coordinator for Health Information 

Technology (ONC) acts as the principal 

Federal entity charged with 

coordination of nationwide efforts to 

implement and use health information 

technology and the electronic exchange 

of health information on behalf of the 

Department of Health and Human 

Services. 

In 2015, ONC finalized the 2015 

Edition health IT certification criteria 

(2015 Edition), the most recent criteria 

for health IT to be certified to under the 

ONC Health IT Certification Program. 

The 2015 Edition facilitates greater 

interoperability for several clinical 

health information purposes and 

enables health information exchange 

through new and enhanced certification 

criteria, standards, and implementation 

specifications. CMS requires eligible 

hospitals and CAHs in the Medicare and 

Medicaid EHR Incentive Programs and 

eligible clinicians in the Quality 

Payment Program (QPP) to use EHR 

technology certified to the 2015 Edition 

beginning in CY 2019. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34392 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

36The draft version of the trusted Exchange 

Framework may be accessed at: https:// 

beta.healthit.gov/topic/interoperability/trustedexchange-framework-and-common-agreement. 

In addition, several important 

initiatives will be implemented over the 

next several years to provide hospitals 

and other participating providers and 

suppliers with access to robust 

infrastructure that will enable routine 

electronic exchange of health 

information. Section 4003 of the 21st 

Century Cures Act (Pub. L. 114–255), 

enacted in 2016, and amending section 

3000 of the Public Health Service Act 

(42 U.S.C. 300jj), requires HHS to take 

steps to advance the electronic exchange 

of health information and 

interoperability for participating 

providers and suppliers in various 

settings across the care continuum. 

Specifically, Congress directed that 

ONC ‘‘. . . for the purpose of ensuring 

full network-to-network exchange of 

health information, convene publicprivate and public-public partnerships 

to build consensus and develop or 

support a trusted exchange framework, 

including a common agreement among 

health information networks 

nationally.’’ In January 2018, ONC 

released a draft version of its proposal 

for the Trusted Exchange Framework 

and Common Agreement,36 which 

outlines principles and minimum terms 

and conditions for trusted exchange to 

enable interoperability across disparate 

health information networks (HINs). 

The Trusted Exchange Framework (TEF) 

is focused on achieving the following 

four important outcomes in the longterm: 

• Professional care providers, who 

deliver care across the continuum, can 

access health information about their 

patients, regardless of where the patient 

received care. 

• Patients can find all of their health 

information from across the care 

continuum, even if they do not 

remember the name of the professional 

care provider they saw. 

• Professional care providers and 

health systems, as well as public and 

private health care organizations and 

public and private payer organizations 

accountable for managing benefits and 

the health of populations, can receive 

necessary and appropriate information 

on groups of individuals without having 

to access one record at a time, allowing 

them to analyze population health 

trends, outcomes, and costs; identify atrisk populations; and track progress on 

quality improvement initiatives. 

• The health IT community has open 

and accessible application programming 

interfaces (APIs) to encourage 

entrepreneurial, user-focused 

innovation that will make health 

information more accessible and 

improve EHR usability. 

ONC will revise the draft TEF based 

on public comment and ultimately 

release a final version of the TEF that 

will subsequently be available for 

adoption by HINs and their participants 

seeking to participate in nationwide 

health information exchange. The goal 

for stakeholders that participate in, or 

serve as, a HIN is to ensure that 

participants will have the ability to 

seamlessly share and receive a core set 

of data from other network participants 

in accordance with a set of permitted 

purposes and applicable privacy and 

security requirements. Broad adoption 

of this framework and its associated 

exchange standards is intended to both 

achieve the outcomes described above 

while creating an environment more 

conducive to innovation. 

In light of the widespread adoption of 

EHRs along with the increasing 

availability of health information 

exchange infrastructure predominantly 

among hospitals, we are interested in 

hearing from stakeholders on how we 

could use the CMS health and safety 

standards that are required for providers 

and suppliers participating in the 

Medicare and Medicaid programs (that 

is, the Conditions of Participation 

(CoPs), Conditions for Coverage (CfCs), 

and Requirements for Participation 

(RfPs) for Long-Term Care (LTC) 

Facilities) to further advance electronic 

exchange of information that supports 

safe, effective transitions of care 

between hospitals and community 

providers. Specifically, CMS might 

consider revisions to the current CMS 

CoPs for hospitals, such as: Requiring 

that hospitals transferring medically 

necessary information to another facility 

upon a patient transfer or discharge do 

so electronically; requiring that 

hospitals electronically send required 

discharge information to a community 

provider via electronic means if possible 

and if a community provider can be 

identified; and requiring that hospitals 

make certain information available to 

patients or a specified third-party 

application (for example, required 

discharge instructions) via electronic 

means if requested. 

On November 3, 2015, we published 

a proposed rule (80 FR 68126) to 

implement the provisions of the 

Improving Medicare Post-Acute Care 

Transformation Act of 2014 (the 

IMPACT Act) (Pub. L. 113–185) and to 

revise the discharge planning CoP 

requirements that hospitals (including 

short-term acute care hospitals, longterm care hospitals (LTCHs), 

rehabilitation hospitals, psychiatric 

hospitals, children’s hospitals, and 

cancer hospitals), critical access 

hospitals (CAHs), and home health 

agencies (HHAs) would need to meet in 

order to participate in the Medicare and 

Medicaid programs. This proposed rule 

has not been finalized yet. However, 

several of the proposed requirements 

directly address the issue of 

communication between providers and 

between providers and patients, as well 

as the issue of interoperability: 

• Hospitals and CAHs would be 

required to transfer certain necessary 

medical information and a copy of the 

discharge instructions and discharge 

summary to the patient’s practitioner, if 

the practitioner is known and has been 

clearly identified; 

• Hospitals and CAHs would be 

required to send certain necessary 

medical information to the receiving 

facility/post-acute care providers, at the 

time of discharge; and 

• Hospitals, CAHs, and HHAs would 

need to comply with the IMPACT Act 

requirements that would require 

hospitals, CAHs, and certain post-acute 

care providers to use data on quality 

measures and data on resource use 

measures to assist patients during the 

discharge planning process, while 

taking into account the patient’s goals of 

care and treatment preferences. 

We published another proposed rule 

(81 FR 39448) on June 16, 2016, that 

updated a number of CoP requirements 

that hospitals and CAHs would need to 

meet in order to participate in the 

Medicare and Medicaid programs. This 

proposed rule has not been finalized 

yet. One of the proposed hospital CoP 

revisions in that rule directly addresses 

the issues of communication between 

providers and patients, patient access to 

their medical records, and 

interoperability. We proposed that 

patients have the right to access their 

medical records, upon an oral or written 

request, in the form and format 

requested by such patients, if it is 

readily producible in such form and 

format (including in an electronic form 

or format when such medical records 

are maintained electronically); or, if not, 

in a readable hard copy form or such 

other form and format as agreed to by 

the facility and the individual, 

including current medical records, 

within a reasonable timeframe. The 

hospital must not frustrate the 

legitimate efforts of individuals to gain 

access to their own medical records and 

must actively seek to meet these 

requests as quickly as its recordkeeping 

system permits. 

We also published a final rule (81 FR 

68688) on October 4, 2016, that revised 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34393 

the requirements that LTC facilities 

must meet to participate in the Medicare 

and Medicaid programs. In this rule, we 

made a number of revisions based on 

the importance of effective 

communication between providers 

during transitions of care, such as 

transfers and discharges of residents to 

other facilities or providers, or to home. 

Among these revisions was a 

requirement that the transferring LTC 

facility must provide all necessary 

information to the resident’s receiving 

provider, whether it is an acute care 

hospital, an LTCH, a psychiatric facility, 

another LTC facility, a hospice, a home 

health agency, or another communitybased provider or practitioner (42 CFR 

483.15(c)(2)(iii)). We specified that 

necessary information must include the 

following: 

• Contact information of the 

practitioner responsible for the care of 

the resident; 

• Resident representative information 

including contact information; 

• Advance directive information; 

• Special instructions or precautions 

for ongoing care; 

• The resident’s comprehensive care 

plan goals; and 

• All other necessary information, 

including a copy of the resident’s 

discharge or transfer summary and any 

other documentation to ensure a safe 

and effective transition of care. 

We note that the discharge summary 

mentioned above must include 

reconciliation of the resident’s 

medications, as well as a recapitulation 

of the resident’s stay, a final summary 

of the resident’s status, and the postdischarge plan of care. In addition, in 

the preamble to the rule, we encouraged 

LTC facilities to electronically exchange 

this information if possible and to 

identify opportunities to streamline the 

collection and exchange of resident 

information by using information that 

the facility is already capturing 

electronically. 

Additionally, we specifically invite 

stakeholder feedback on the following 

questions regarding possible new or 

revised CoPs/CfCs/RfPs for 

interoperability and electronic exchange 

of health information: 

• If CMS were to propose a new CoP/ 

CfC/RfP standard to require electronic 

exchange of medically necessary 

information, would this help to reduce 

information blocking as defined in 

section 4004 of the 21st Century Cures 

Act? 

• Should CMS propose new CoPs/ 

CfCs/RfPs for hospitals and other 

participating providers and suppliers to 

ensure a patient’s or resident’s (or his or 

her caregiver’s or representative’s) right 

and ability to electronically access his 

or her health information without 

undue burden? Would existing portals 

or other electronic means currently in 

use by many hospitals satisfy such a 

requirement regarding patient/resident 

access as well as interoperability? 

• Are new or revised CMS CoPs/CfCs/ 

RfPs for interoperability and electronic 

exchange of health information 

necessary to ensure patients/residents 

and their treating providers routinely 

receive relevant electronic health 

information from hospitals on a timely 

basis or will this be achieved in the next 

few years through existing Medicare and 

Medicaid policies, the implementing 

regulations related to the privacy and 

security standards of the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

(Pub. L. 104–91), and implementation of 

relevant policies in the 21st Century 

Cures Act? 

• What would be a reasonable 

implementation timeframe for 

compliance with new or revised CMS 

CoPs/CfCs/RfPs for interoperability and 

electronic exchange of health 

information if CMS were to propose and 

finalize such requirements? Should 

these requirements have delayed 

implementation dates for specific 

participating providers and suppliers, or 

types of participating providers and 

suppliers (for example, participating 

providers and suppliers that are not 

eligible for the Medicare and Medicaid 

EHR Incentive Programs)? 

• Do stakeholders believe that new or 

revised CMS CoPs/CfCs/RfPs for 

interoperability and electronic exchange 

of health information would help 

improve routine electronic transfer of 

health information as well as overall 

patient/resident care and safety? 

• Under new or revised CoPs/CfCs/ 

RfPs, should non-electronic forms of 

sharing medically necessary information 

(for example, printed copies of patient/ 

resident discharge/transfer summaries 

shared directly with the patient/resident 

or with the receiving provider or 

supplier, either directly transferred with 

the patient/resident or by mail or fax to 

the receiving provider or supplier) be 

permitted to continue if the receiving 

provider, supplier, or patient/resident 

cannot receive the information 

electronically? 

• Are there any other operational or 

legal considerations (for example, 

implementing regulations related to the 

HIPAA privacy and security standards), 

obstacles, or barriers that hospitals and 

other providers and suppliers would 

face in implementing changes to meet 

new or revised interoperability and 

health information exchange 

requirements under new or revised CMS 

CoPs/CfCs/RfPs if they are proposed and 

finalized in the future? 

• What types of exceptions, if any, to 

meeting new or revised interoperability 

and health information exchange 

requirements should be allowed under 

new or revised CMS CoPs/CfCs/RfPs if 

they are proposed and finalized in the 

future? Should exceptions under the 

QPP, including CEHRT hardship or 

small practices, be extended to new 

requirements? Would extending such 

exceptions impact the effectiveness of 

these requirements? 

We would also like to directly address 

the issue of communication between 

hospitals (as well as the other providers 

and suppliers across the continuum of 

patient care) and their patients and 

caregivers. MyHealthEData is a 

government-wide initiative aimed at 

breaking down barriers that contribute 

to preventing patients from being able to 

access and control their medical 

records. Privacy and security of patient 

data will be at the center of all CMS 

efforts in this area. CMS must protect 

the confidentiality of patient data, and 

CMS is completely aligned with the 

Department of Veterans Affairs (VA), the 

National Institutes of Health (NIH), 

ONC, and the rest of the Federal 

Government, on this objective. 

While some Medicare beneficiaries 

have had, for quite some time, the 

ability to download their Medicare 

claims information, in pdf or Excel 

formats, through the CMS Blue Button 

platform, the information was provided 

without any context or other 

information that would help 

beneficiaries understand what the data 

were really telling them. For 

beneficiaries, their claims information is 

useless if it is either too hard to obtain 

or, as was the case with the information 

provided through previous versions of 

Blue Button, hard to understand. In an 

effort to fully contribute to the Federal 

Government’s MyHealthEData initiative, 

CMS developed and launched the new 

Blue Button 2.0, which represents a 

major step toward giving patients 

meaningful control of their health 

information in an easy-to-access and 

understandable way. Blue Button 2.0 is 

a developer-friendly, standards-based 

application programming interface (API) 

that enables Medicare beneficiaries to 

connect their claims data to secure 

applications, services, and research 

programs they trust. The possibilities for 

better care through Blue Button 2.0 data 

are exciting, and might include enabling 

the creation of health dashboards for 

Medicare beneficiaries to view their 

health information in a single portal, or 

allowing beneficiaries to share complete 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34394 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

37See, for example, Medicare Provider Utilization 

and Payment Data, available at: https:// 

www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/MedicareProvider-Charge-Data/index.html. 

medication lists with their doctors to 

prevent dangerous drug interactions. 

To fully understand all of these health 

IT interoperability issues, initiatives, 

and innovations through the lens of its 

regulatory authority, CMS invites 

members of the public to submit their 

ideas on how best to accomplish the 

goal of fully interoperable health IT and 

EHR systems for Medicare- and 

Medicaid-participating providers and 

suppliers, as well as how best to further 

contribute to and advance the 

MyHealthEData initiative for patients. 

We are particularly interested in 

identifying fundamental barriers to 

interoperability and health information 

exchange, including those specific 

barriers that prevent patients from being 

able to access and control their medical 

records. We also welcome the public’s 

ideas and innovative thoughts on 

addressing these barriers and ultimately 

removing or reducing them in an 

effective way, specifically through 

revisions to the current CMS CoPs, CfCs, 

and RfPs for hospitals and other 

participating providers and suppliers. 

We have received stakeholder input 

through recent CMS Listening Sessions 

on the need to address health IT 

adoption and interoperability among 

providers that were not eligible for the 

Medicare and Medicaid EHR Incentives 

program, including long-term and postacute care providers, behavioral health 

providers, clinical laboratories and 

social service providers, and we would 

also welcome specific input on how to 

encourage adoption of certified health 

IT and interoperability among these 

types of providers and suppliers as well. 

B. Request for Information on Price 

Transparency: Improving Beneficiary 

Access to Provider and Supplier Charge 

Information 

In the FY 2019 IPPS/LTCH PPS 

proposed rule (83 FR 20548–49) and the 

FY 2015 IPPS/LTCH PPS proposed and 

final rules (79 FR 28169 and 79 FR 

50146, respectively), we stated that we 

intend to continue to review and post 

relevant charge data in a consumerfriendly way, as we previously have 

done by posting hospital and physician 

charge information on the CMS 

website.37 In the FY 2019 IPPS/LTCH 

PPS proposed rule, we also continued 

our discussion of the implementation of 

section 2718(e) of the Public Health 

Service Act, which aims to improve the 

transparency of hospital charges. This 

discussion in the FY 2019 IPPS/LTCH 

PPS proposed rule continued a 

discussion we began in the FY 2015 

IPPS/LTCH PPS proposed rule and final 

rule (79 FR 28169 and 79 FR 50146, 

respectively). In all of these rules, we 

noted that section 2718(e) of the Public 

Health Service Act requires that each 

hospital operating within the United 

States, for each year, establish (and 

update) and make public (in accordance 

with guidelines developed by the 

Secretary) a list of the hospital’s 

standard charges for items and services 

provided by the hospital, including for 

diagnosis-related groups (DRGs) 

established under section 1886(d)(4) of 

the Social Security Act. In the FY 2015 

IPPS/LTCH PPS proposed and final 

rules, we reminded hospitals of their 

obligation to comply with the 

provisions of section 2718(e) of the 

Public Health Service Act and provided 

guidelines for its implementation. We 

stated that hospitals are required to 

either make public a list of their 

standard charges (whether that be the 

chargemaster itself or in another form of 

their choice) or their policies for 

allowing the public to view a list of 

those charges in response to an inquiry. 

In the FY 2019 IPPS/LTCH PPS 

proposed rule, we took one step to 

further improve the public accessibility 

of charge information. Specifically, 

effective January 1, 2019, we are 

updating our guidelines to require 

hospitals to make available a list of their 

current standard charges via the Internet 

in a machine readable format and to 

update this information at least 

annually, or more often as appropriate. 

In general, we encourage all providers 

and suppliers of healthcare services to 

undertake efforts to engage in consumerfriendly communication of their charges 

to help patients understand what their 

potential financial liability might be for 

services they obtain, and to enable 

patients to compare charges for similar 

services. We encourage providers and 

suppliers to update this information at 

least annually, or more often as 

appropriate, to reflect current charges. 

We are concerned that challenges 

continue to exist for patients due to 

insufficient price transparency. Such 

challenges include patients being 

surprised by out-of-network bills for 

physicians, such as anesthesiologists 

and radiologists, who provide services 

at in-network hospitals and in other 

settings, and patients being surprised by 

facility fees, physician fees for 

emergency department visits, or by fees 

for provider and supplier services that 

the beneficiary considered to be part of 

an episode of care involving a hospital 

but were not services furnished by the 

hospital. We also are concerned that, for 

providers and suppliers that maintain a 

list of standard charges, the charge data 

may not be helpful to patients for 

determining what they are likely to pay 

for a particular service or facility 

encounter. In order to promote greater 

price transparency for patients, we are 

considering ways to improve the 

accessibility and usability of current 

charge information. 

We also are considering potential 

actions that would be appropriate to 

further our objective of having providers 

and suppliers undertake efforts to 

engage in consumer-friendly 

communication of their charges to help 

patients understand what their potential 

financial liability might be for services 

they obtain from the provider or 

supplier, and to enable patients to 

compare charges for similar services 

across providers and suppliers, 

including services that could be offered 

in more than one setting. Therefore, we 

are seeking public comment from all 

providers and suppliers, including 

ESRD facilities and DME suppliers, on 

the following: 

• How should we define ‘‘standard 

charges’’ in various provider and 

supplier settings? Is there one definition 

for those settings that maintain 

chargemasters, and potentially a 

different definition for those settings 

that do not maintain chargemasters? 

Should ‘‘standard charges’’ be defined 

to mean: Average or median rates for the 

items on a chargemaster or other price 

list or charge list; average or median 

rates for groups of items and/or services 

commonly billed together, as 

determined by the provider or supplier 

based on its billing patterns; or the 

average discount off the chargemaster, 

price list or charge list amount across all 

payers, either for each separately 

enumerated item or for groups of 

services commonly billed together? 

Should ‘‘standard charges’’ be defined 

and reported for both some measure of 

the average contracted rate and the 

chargemaster, price list or charge list? 

Or is the best measure of a provider’s or 

supplier’s standard charges its 

chargemaster, price list or charge list? 

• What types of information would be 

most beneficial to patients, how can 

health care providers and suppliers best 

enable patients to use charge and cost 

information in their decision-making, 

and how can CMS and providers and 

suppliers help third parties create 

patient-friendly interfaces with these 

data? 

• Should providers and suppliers be 

required to inform patients how much 

their out of pocket costs for a service 

will be before those patients are 

furnished that service? How can 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34395 

38https://www.bls.gov/oes/current/ 

oes292071.htm. 

39https://www.bls.gov/oes/current/ 

oes291141.htm. 

information on out-of-pocket costs be 

provided to better support patients’ 

choice and decision-making? What 

changes would be needed to support 

greater transparency around patient 

obligations for their out-of-pocket costs? 

How can CMS help beneficiaries to 

better understand how copayment and 

coinsurance are applied to each service 

covered by Medicare? What can be done 

to better inform patients of their 

financial obligations? Should providers 

and suppliers play any role in helping 

to inform patients of what their out-ofpocket obligations will be? 

• Can we require providers and 

suppliers to provide patients with 

information on what Medicare pays for 

a particular service performed by that 

provider or supplier? If so, what 

changes would need to be made by 

providers and suppliers? What burden 

would be added as a result of such a 

requirement? 

In addition, we are seeking public 

comment on improving a Medigap 

patient’s understanding of his or her 

out-of-pocket costs prior to receiving 

services, especially with respect to the 

following particular questions: 

• How does Medigap coverage affect 

patients’ understanding of their out of 

pocket costs before they receive care? 

What challenges do providers and 

suppliers face in providing information 

about out-of-pocket costs to patients 

with Medigap? What changes can 

Medicare make to support providers and 

suppliers that share out-of-pocket cost 

information with patients that reflects 

the patient’s Medigap coverage? Who is 

best situated to provide patients with 

clear Medigap coverage information on 

their out-of-pocket costs prior to receipt 

of care? What role can Medigap plans 

play in providing information to 

patients on their expected out-of-pocket 

costs for a service? What state-specific 

requirements or programs help educate 

Medigap patients about their out-ofpocket costs prior to receipt of care? 

XIV. Collection of Information 

Requirements 

A. Legislative Requirement for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

requirement should be approved by 

OMB, section 3506(c)(2)(A) of the 

Paperwork Reduction Act of 1995 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

B. Requirements in Regulation Text 

In section II.B.1 and II.B.2.b of this 

proposed rule, we are proposing 

changes to regulatory text for the ESRD 

PPS in CY 2019. However, the changes 

that are being proposed do not impose 

any new information collection 

requirements. 

C. Additional Information Collection 

Requirements 

This proposed rule does not impose 

any new information collection 

requirements in the regulation text, as 

specified above. However, there are 

changes in some currently approved 

information collections. The following 

is a discussion of these information 

collections. 

1. ESRD QIP—Wage Estimates 

To derive wage estimates, we used 

data from the U.S. Bureau of Labor 

Statistics’ May 2016 National 

Occupational Employment and Wage 

Estimates. In the CY 2016 ESRD PPS 

final rule (80 FR 69069), we stated that 

it was reasonable to assume that 

Medical Records and Health 

Information Technicians, who are 

responsible for organizing and managing 

health information data,38 are the 

individuals tasked with submitting 

measure data to CROWNWeb and 

NHSN, as well as compiling and 

submitting patient records for purposes 

of the data validation studies rather than 

a Registered Nurse, whose duties are 

centered on providing and coordinating 

care for patients.39 The mean hourly 

wage of a Medical Records and Health 

Information Technician is $20.59 per 

hour. Fringe benefit and overhead are 

calculated at 100 percent. Therefore, 

using these assumptions, we estimate an 

hourly labor cost of $41.18 as the basis 

of the wage estimates for all collection 

of information calculations in the ESRD 

QIP. We have adjusted these employee 

hourly wage estimates by a factor of 100 

percent to reflect current HHS 

department-wide guidance on 

estimating the cost of fringe benefits and 

overhead. These are necessarily rough 

adjustments, both because fringe 

benefits and overhead costs vary 

significantly from employer to employer 

and because methods of estimating 

these costs vary widely from study to 

study. Nonetheless, there is no practical 

alternative and we believe that these are 

reasonable estimation methods. 

We used these updated wage 

estimates along with updated facility 

counts and patient counts to re-estimate 

the total information collection burden 

under the ESRD QIP. We estimate the 

total information collection burden for 

the PY 2021 ESRD QIP to be $181 

million, and for PY 2022, to be $202 

million for a net incremental burden of 

$21 million. 

a. Estimated Time Required To Submit 

Data Based on Proposed Reporting 

Requirements 

In the CY 2016 ESRD PPS final rule 

(80 FR 69070), we estimated that the 

time required to submit measure data 

using CROWNWeb is 2.5 minutes per 

data element submitted, which takes 

into account the small percentage of 

data that is manually reported, as well 

as the human interventions required to 

modify batch submission files to ensure 

that they meet CROWNWeb’s internal 

data format requirements. 

b. Estimated Burden Associated With 

the Data Validation Requirements for PY 

2021 and PY 2022 

Section IV.B.6 of this proposed rule 

outlines our data validation proposals. 

Specifically, for the CROWNWeb 

validation, we are proposing to adopt 

the CROWNWeb data validation 

methodology that we previously 

adopted for the PY 2016 ESRD QIP as 

the methodology we would use to 

validate CROWNWeb data for all 

payment years, beginning with PY 2021. 

Under this methodology, 300 facilities 

would be selected each year to submit 

to CMS not more than 10 records, and 

we would reimburse these facilities for 

the costs associated with copying and 

mailing the requested records. The 

burden associated with these validation 

requirements is the time and effort 

necessary to submit the requested 

records to a CMS contractor. We 

estimate that it would take each facility 

approximately 2.5 hours to comply with 

this requirement. If 300 facilities are 

asked to submit records, we estimate 

that the total combined annual burden 

for these facilities would be 750 hours 

(300 facilities × 2.5 hours). Since we 

anticipate that Medical Records and 

Health Information Technicians or 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34396 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

similar administrative staff would 

submit these data, we estimate that the 

aggregate cost of the CROWNWeb data 

validation each year would be 

approximately $30,885 (750 hours × 

$41.18), or an annual total of 

approximately $103 ($30,885/300 

facilities) per facility in the sample. The 

burden associated with these 

requirements is captured in an 

information collection request (OMB 

control number 0938–1289). 

Under the proposed continued study 

for validating data reported to the NHSN 

Dialysis Event Module, we are 

proposing to modify the sampling 

methodology finalized in the CY 2018 

ESRD PPS final rule (82 FR 50766 

through 50767). Under the proposed 

modifications, we would select 150 

facilities for participation in the PY 

2021 validation study and 300 facilities 

for participation in the PY 2022 

validation study. A CMS contractor 

would send these facilities requests for 

20 patient records for each of 2 quarters 

of data reported in CY 2018 (for a total 

of 40 patient records per facility). The 

burden associated with these validation 

requirements is the time and effort 

necessary to submit the requested 

records to a CMS contractor. We 

estimate that it would take each facility 

approximately 10 hours to comply with 

this requirement. If 150 facilities are 

asked to submit records, as proposed for 

PY 2021, we estimate that the total 

combined annual burden for these 

facilities would be 1,500 hours (150 

facilities × 10 hours). Since we 

anticipate that Medical Records and 

Health Information Technicians or 

similar administrative staff would 

submit these data, we estimate that the 

aggregate cost of the NHSN data 

validation in PY 2021 would be $61,770 

(1,500 hours × $41.18), or a total of 

approximately $412 ($61,770/150 

facilities) per facility in the sample in 

PY 2021. If 300 facilities are asked to 

submit records, as proposed for PY 

2022, we estimate that the total 

combined annual burden for these 

facilities would be 3,000 hours (300 

facilities × 10 hours). Since we 

anticipate that Medical Records and 

Health Information Technicians or 

similar administrative staff would 

submit these data, we estimate that the 

aggregate cost of the NHSN data 

validation in PY 2022 would be 

$123,540 (3,000 hours × $41.18), or a 

total of approximately $412 ($123,540/ 

300 facilities) per facility in the sample 

for PY 2022. The information collection 

request (OMB control number 0938– 

1340) will be revised and sent to OMB 

for approval. 

2. Proposed New CROWNWeb 

Reporting Requirements for PY 2021, PY 

2022, and PY 2024 

To determine the burden associated 

with proposed new collection of 

information requirements, we look at 

the total number of patients nationally, 

the number of data elements per patientyear that the facility would be required 

to submit to CROWNWeb for each 

measure, the amount of time required 

for data entry, the estimated wage plus 

benefits applicable to the individuals 

within facilities who are most likely to 

be entering data into CROWNWeb, and 

the number of facilities submitting data 

to CROWNWeb. In section IV.B.1.c of 

this proposed rule, we are proposing to 

modify our data collection requirements 

for PY 2021 by removing four reporting 

measures from the ESRD QIP measure 

set. These changes would result in a 

burden collection savings of 

approximately $12 million for PY 2021 

(from an estimated $193 million in total 

ESRD QIP burden for PY 2021 to an 

estimated $181 million). Approximately 

$2 million of that reduction is 

attributable to the proposed removal of 

the Pain Assessment and Follow-Up 

reporting measure and the remaining 

$10 million of that reduction is 

attributable to the proposed removal of 

the Serum Phosphorus reporting 

measure. The total reduction in burden 

hours is approximately 300,000 hours 

(from an estimated 4.7 million burden 

hours for PY 2021 to an estimated 4.4 

million burden hours). Approximately 

40,000 hours of that reduction is 

attributable to the proposed removal of 

the Pain Assessment and Follow-Up 

reporting measure and the remaining 

260,000 hours of that reduction is 

attributable to the proposed removal of 

the Serum Phosphorus reporting 

measure. The proposed removal of the 

other two reporting measures 

(Healthcare Personnel Influenza 

Vaccination and Anemia Management) 

would not affect our burden 

calculations because data on those 

measures are not reported through 

CROWNWeb. 

In section IV.C.1 of this proposed 

rule, we are proposing to adopt two new 

measures beginning with PY 2022. We 

estimate that the burden associated with 

this new data collection requirement 

would be approximately $21 million, or 

an estimated 510,000 burden hours, and 

that this burden would be attributable 

entirely to the reporting of data on the 

proposed MedRec measure. Since 

facilities are not required to submit data 

to CROWNWeb for the PPPW measure, 

we estimate that there would be no 

additional burden on facilities if our 

proposal to adopt the PPPW measure is 

finalized. We estimate that the total 

burden increase associated with 

reporting data on the two new measures 

proposed for PY 2022 is $21 million. 

The information collection request 

under OMB control number 0938–1289 

will be revised and sent to OMB. 

In section IV.D.1 of this proposed 

rule, we are proposing to adopt one new 

measure beginning in PY 2024. We 

estimate that the burden associated with 

the proposed measure will be zero. 

Since facilities are not required to 

submit data to CROWNWeb for the SWR 

measure, there is no burden in 

connection with this measure in PY 

2024. 

3. DMEPOS Competitive Bidding 

Program 

a. Bidding Forms A and B 

Section V.D of this proposed rule 

outlines our proposed changes to the 

DMEPOS CBP. DMEPOS suppliers 

submit bids in order to compete to 

become a contract supplier to furnish 

competitively bid items to Medicare 

beneficiaries who live in a CBA. CMS 

publishes Request for Bids instructions 

to describe DMEPOS CBP requirements 

and to instruct bidders through the bid 

submission process. Bids are submitted 

electronically via the DMEPOS Bidding 

System (DBidS), which is the DMEPOS 

CBPs’ online bidding system. The bids 

submitted before the close of the bid 

window are evaluated to determine 

which bidders will be offered contracts. 

Form A collects key business 

information to identify a bidder, the 

areas and products where the bidder 

chooses to bid, and pertinent 

information to indicate whether the 

bidder meets all eligibility 

requirements. A thorough analysis is 

performed of all information submitted 

to determine that the bidder has met all 

requirements, including licensure, 

financial, and quality standards. Form B 

contains key bid information including 

the bid amount for each item, historical 

experience providing each item, and 

specific manufacturer and model 

information for each item. The 

manufacturer and model information is 

utilized to populate the Medicare 

Supplier Directory during the contract 

period for bidders that are awarded a 

contract. CMS utilizes the combined 

information from Forms A and B to 

select winning bidders and establish 

single payment amounts for 

competitively bid items and services. 

The previously approved information 

collection request is under OMB control 

number 0938–1016. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34397 

All bidders must submit their 

information and signature(s) 

electronically into Forms A and B using 

DBidS. This system allows bidders to 

efficiently and consistently provide the 

necessary information contained on 

Forms A and B for CMS to review. 

Bidders are allowed to make changes to 

their bids at any time prior to the close 

of the bid window, at which time 

bidders are required to complete, 

approve, and certify their bids. The 

Competitive Bidding Implementation 

Contractor (CBIC) will use the 

appropriate technology to safely obtain 

and secure the bidding information that 

is transmitted. Assistance and technical 

support is available to bidders 

throughout the competitive bidding 

process. Bidders will be required to 

submit supporting documentation such 

as required financial documents, proof 

of a bid surety bond(s), and any network 

agreement(s) to the CBIC. 

b. Burden Estimates (Hours and Wages) 

for Bidding Forms A and B 

Form A is used to identify the bidder. 

This form includes information for all 

locations that would be included with 

the bid(s). In preparation for the next 

round, CMS has incorporated an update 

to this form that would also provide 

new instructions in accordance with 

§ 414.412(h), allowing the bidder to 

attest that they have obtained a bid 

surety bond for each CBA for which 

they are submitting a bid. 

We have estimated the time to obtain 

a bid surety bond from a surety 

company (including contacting the 

company, filling out forms, submitting 

forms, filing paperwork, etc.) to be 11 

minutes. Additionally, we estimate that 

the time to assemble and complete the 

new bid surety bond section of Form A 

to be 5 minutes. The time to submit the 

bid surety bond documentation is 

estimated to take an additional 5 

minutes. Therefore, the total time to 

complete Form A has changed from 8 

hours to 8 hours and 21 minutes. Based 

on the number of bidders from prior 

rounds of competition, we have 

estimated the number of respondents 

(bidders) to be 1,500 for the next round. 

Each bidder would be required to 

complete one Form A for each round in 

which it bids. We anticipate that this 

form would be completed by the 

equivalent of an Administrative 

Services Manager with a mean hourly 

wage of $49.70, plus fringe benefits and 

overhead of $49.70, for a total of $99.40. 

This wage is based on the May 2017 

Occupational Employment Statistics 

from the Bureau of Labor Statistics, plus 

fringe benefits and overhead, https:// 

www.bls.gov/oes/current/ 

oes113011.htm. It is anticipated that an 

Administrative Services Manager would 

have the requisite knowledge, access to 

information, and decision making 

authority related to a bidder’s business 

operations necessary to formulate a bid. 

We are seeking comments on this 

assumption. We estimate, based on 

information from previous rounds of 

competition, the burden for each bidder 

to complete Form A is 8 hours and 21 

minutes, and $829.99. This estimate is 

based on the time it takes a bidder to 

develop their business strategy on 

which CBAs and product categories to 

bid; obtain their bid surety bond(s); 

gather the required documents; and 

enter and review their information. 

We do not know the exact number of 

bidders who would bid in the next 

round; however, for purposes of this 

estimate, we would assume that the 

number of bidders would be roughly the 

same as in previous rounds of 

competition. We estimate there would 

be approximately 1,500 bidders in the 

next round and each bidder would 

complete Form A once for a total of 

12,525 hours and a total cost of 

$1,244,985. 

Bidders will use Form B to submit 

bids for items included in the DMEPOS 

CBP. This form would be completed 

once for each CBA and product category 

combination with an estimated 

completion time of 3 hours. Total 

completion time assumes the time it 

takes a bidder to familiarize itself on 

how to complete Form B, develop its 

bid amount and enter the applicable 

information into Form B. For the next 

round, we do not know how many bids 

will be submitted; however, for 

purposes of this estimate, we would 

assume the average bidder would bid in 

5 CBAs in 7 product categories for an 

average total of 35 Form Bs. We expect 

the number of hours to complete Form 

B to decrease from previous rounds 

based on the removal of the expansion 

plan section, as well as the proposed 

change in bidding methodology to move 

to lead item pricing as described in this 

proposed rule. Specifically, the 

expansion plan section is being 

removed from Form B to reduce the 

burden for bidders as we have learned 

from past rounds that this information 

is no longer necessary. The proposed 

change in bidding methodology to move 

to lead item pricing would require 

bidders to only submit a single bid for 

an entire product category, instead of 

multiple bids (which can be over 100 for 

some product categories). We anticipate 

that this form would be completed by 

the equivalent of an Administrative 

Services Manager with a mean hourly 

wage of $49.70, plus fringe benefits and 

overhead of $49.70, for a total of $99.40. 

It is anticipated that an Administrative 

Services Manager would have the 

requisite knowledge, access to 

information, and decision making 

authority related to a bidder’s business 

operations necessary to formulate the 

bid. As a result, we estimate it would 

require the average bidder 105 hours to 

complete all 35 Form Bs with a cost of 

$10,437. Assuming 1,500 bidders 

participate in the next round of the 

DMEPOS CBP, and each bidder 

completes 35 Form Bs, there would be 

estimated 52,500 Form Bs submitted 

taking an estimated 157,500 hours for a 

total estimated cost of $15,655,500. 

The information collection request 

associated with the DMEPOS CBP will 

be revised and submitted to OMB under 

control number 0938–1016. These 

requirements are not effective until 

approved by OMB. 

XV. 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. 

XVI. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We have examined the impacts of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), 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), the Congressional 

Review Act (5 U.S.C. 804(2) and 

Executive Order 13771 on Reducing 

Regulation and Controlling Regulatory 

Costs (January 30, 2017). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Section 3(f) of Executive Order 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34398 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more in any 1 year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). 

We estimate that this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold, and 

hence also a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a RIA that to the best 

of our ability presents the costs and 

benefits of the rulemaking. 

We solicit comments on the 

regulatory impact analysis provided. 

2. Statement of Need 

a. ESRD PPS 

This rule proposes a number of 

routine updates and several policy 

changes to the ESRD PPS in CY 2019. 

The proposed routine updates include 

the CY 2019 wage index values, the 

wage index budget-neutrality 

adjustment factor, and outlier payment 

threshold amounts. Failure to publish 

this proposed rule would result in ESRD 

facilities not receiving appropriate 

payments in CY 2019 for renal dialysis 

services furnished to ESRD patients. 

b. AKI 

This rule also proposes routine 

updates to the payment for renal 

dialysis services furnished by ESRD 

facilities to individuals with AKI. 

Failure to publish this proposed rule 

would result in ESRD facilities not 

receiving appropriate payments in CY 

2019 for renal dialysis services 

furnished to patients with AKI in 

accordance with section 1834(r) of the 

Act. 

c. ESRD QIP 

This rule proposes to implement 

requirements for the ESRD QIP, 

including a proposal to adopt two new 

measures beginning with PY 2022 and 

a proposal to adopt a new measure 

beginning with PY 2024. Failure to 

propose requirements for the PY 2022 

ESRD QIP would prevent continuation 

of the ESRD QIP beyond PY 2021. In 

addition, proposing requirements for the 

PY 2022 ESRD QIP provides facilities 

with more time to review and fully 

understand new measures before their 

implementation in the ESRD QIP. 

d. DMEPOS 

i. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

The proposed revisions include 

implementation of lead item pricing and 

determination of SPAs based on 

maximum winning bids submitted for a 

lead item in each product category. This 

rule also proposes to revise the 

definitions of ‘‘bid’’ and ‘‘composite 

bid’’ and establish a new definition for 

‘‘lead item.’’ 

ii. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information From the DMEPOS CBP 

We are proposing to revise 

§ 414.210(g)(9) so that for items and 

services furnished in rural or noncontiguous areas with dates of service 

from January 1, 2019 through December 

31, 2020, under part 414, subpart D the 

fee schedule amount for the area is 

equal to 50 percent of the adjusted 

payment amount established under this 

section and 50 percent of the unadjusted 

fee schedule amount. We are proposing 

to revise § 414.210(g)(9) so that for items 

and services furnished in non-CBAs that 

are not rural or non-contiguous areas 

with dates of service from January 1, 

2019 through December 31, 2020, under 

part 414, subpart D the fee schedule 

amount for the area is equal to 100 

percent of the adjusted payment amount 

established under this section. 

We then propose to create a new 

paragraph (10) under § 414.210(g) titled, 

‘‘Payment Adjustments for Items and 

Services Furnished in Former 

Competitive Bidding Areas During 

Temporary Gaps in the DMEPOS 

Competitive Bidding Program’’ which 

has the following text underneath: 

‘‘During a temporary gap in the entire 

DMEPOS CBP and/or National Mail 

Order CBP, the fee schedule amounts for 

items and services that were 

competitively bid and furnished in areas 

that were competitive bidding areas at 

the time the program(s) was in effect are 

adjusted based on the SPAs in effect in 

the competitive bidding areas on the last 

day before the CBP contract period of 

performance ended, increased by the 

projected percentage change in the 

Consumer Price Index for all Urban 

Consumers (CPI–U) for the 12-month 

period ending on the date after the 

contract periods ended. If the gap in the 

CBP lasts for more than 12 months, the 

fee schedule amounts are increased 

once every 12 months on the 

anniversary date of the first day of the 

gap period based on the projected 

percentage change in the CPI–U for the 

12-month period ending on the 

anniversary date.’’ 

iii. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes 

This proposed rule would amend our 

regulations at § 414.226 by revising the 

payment rules for oxygen and oxygen 

equipment and adding a new paragraph 

after paragraph (c) that establishes some 

new oxygen and oxygen equipment 

payment classes effective January 1, 

2019. Instead of having one class for 

portable oxygen equipment only 

(gaseous and liquid tanks), we propose 

establishing two classes for portable 

oxygen equipment: (1) One class for 

portable oxygen equipment (gaseous 

tanks) and (2) another class for portable 

oxygen equipment (liquid tanks.) We are 

also proposing to add a class for liquid 

oxygen contents for prescribed flow 

rates greater than four liters per minute 

and used with portable equipment. We 

are also proposing a new budget 

neutrality offset to ensure the budget 

neutrality of all oxygen and oxygen 

equipment classes added after 2006. 

iv. Payment for Multi-Function 

Ventilators 

We are proposing to add a payment 

rule to § 414.222(f) for multi-function 

ventilators that would establish 

payment in accordance with section 

1834(a)(3) of the Act for ventilators that 

also perform the functions of other 

items of durable medical equipment 

subject to payment rules under 

paragraphs (2), (5), and (7) of section 

1834(a) of the Act. 

v. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs 

We propose to amend § 414.210(g)(7) 

to say that beginning on or after the date 

that the Northern Mariana Islands are 

included under a national mail order 

competitive bidding program, the fee 

schedule adjustment methodology 

under this paragraph would no longer 

apply. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34399 

3. Overall Impact 

a. ESRD PPS 

We estimate that the proposed 

revisions to the ESRD PPS would result 

in an increase of approximately $220 

million in payments to ESRD facilities 

in CY 2019, which includes the amount 

associated with updates to the outlier 

thresholds, and updates to the wage 

index. 

b. AKI 

We are estimating approximately 

$37.0 million that would now be paid 

to ESRD facilities for dialysis treatments 

provided to AKI beneficiaries. 

c. ESRD QIP 

For PY 2021, we have re-estimated the 

costs associated with information 

collection requirements under the 

Program with updated wage estimates, 

facility counts, and patient counts, as 

well as the proposed policy changes 

described earlier in the preamble of this 

proposed rule, including the proposed 

measure removals. We also re-estimated 

the payment reductions under the ESRD 

QIP in accordance with the proposed 

policy changes described earlier, 

including the proposed domain 

restructuring and reweighting. We 

estimate that these updates would result 

in an overall impact of $219 million 

associated with quality reporting burden 

and payment reductions, which 

includes a $12 million incremental 

reduction in burden in collection of 

information requirements and $38 

million in estimated payment 

reductions across all facilities. 

For PY 2022, we estimate that the 

proposed revisions to the ESRD QIP 

would result in an increase in overall 

impact to $240 million, which includes 

a $21 million incremental increase 

associated with the proposed collection 

of information requirements and $38 

million in estimated payment 

reductions across all facilities. 

d. DMEPOS 

i. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

This proposed rule with comment 

period, which proposes to base single 

payment amounts on the maximum 

winning bid and to implement lead item 

pricing in the Medicare DMEPOS CBP, 

(which we expect could potentially be 

delayed until January 1, 2021) has 

impacts estimated by rounding to the 

nearer 5 million dollars and is expected 

to cost $10 million in Medicare benefit 

payments and roughly $3 million in 

Medicare beneficiary cost sharing for 

the 5-year period beginning January 1, 

2019 and ending September 30, 2023. 

The Medicaid impacts for cost sharing 

for the dual eligibles for the federal and 

state portions are assumed to be $0 

million. 

ii. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information From the DMEPOS CBP 

This rule proposes transitional fee 

schedule adjustments for DMEPOS 

items and services furnished on or after 

January 1, 2019 in areas that are 

currently CBAs and in areas that are 

currently not CBAs. Altogether, this rule 

proposes three different fee schedule 

adjustment methodologies depending 

on the area in which the items and 

services are furnished: (1) One fee 

schedule adjustment methodology for 

DME items and services furnished on or 

after January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019, 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous United States (U.S.); and (3) 

another fee schedule adjustment 

methodology for items and services 

furnished from January 1, 2019, through 

December 31, 2020, in areas that are 

currently not CBAs and are either rural 

areas or non-contiguous areas. 

The estimated impacts for this part of 

the rule are calculated against a baseline 

that assumes payments for items 

furnished in CBAs and non-CBAs are 

done consistent with the rules in place 

as of January 1, 2018. 

The impacts are expected to cost 

$1,050 million in Medicare benefit 

payments and $260 million in Medicare 

beneficiary cost sharing for the 2-year 

period beginning January 1, 2019 and 

ending December 31, 2020. The 

Medicaid impacts for cost sharing for 

the dual eligibles for the federal and 

state portions are assumed to be $45 

million and $30 million, respectively. 

iii. New Payment Classes for Oxygen 

and Oxygen Equipment and 

Methodology for Ensuring Annual 

Budget Neutrality of the New Classes 

This proposed rule establishes new 

payment classes for oxygen and oxygen 

equipment and is estimated to be budget 

neutral to the Medicare program and its 

beneficiaries. 

iv. Payment for Multi-Function 

Ventilators 

This rule proposes to establish 

payment rules for multi-function 

ventilators. The impacts are estimated 

by rounding to the nearer 5 million 

dollars and are expected to cost $15 

million in Medicare benefit payments 

and $0 million in Medicare beneficiary 

cost sharing for the 5-year period 

beginning January 1, 2019 and ending 

September 30, 2023. The Medicaid 

impacts for cost sharing for the 

beneficiaries enrolled in the Medicare 

Part B and Medicaid programs for the 

federal and state portions are assumed 

to both be $0 million. 

v. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs 

This change would not have a fiscal 

impact. 

4. Regulatory Review Cost Estimation 

If regulations impose administrative 

costs on private entities, such as the 

time needed to read and interpret this 

proposed rule, we should estimate the 

cost associated with regulatory review. 

Due to the uncertainty involved with 

accurately quantifying the number of 

entities that will review the rule, we 

assume that the total number of unique 

commenters on last year’s proposed rule 

will be the number of reviewers of this 

proposed rule. We acknowledge that 

this assumption may understate or 

overstate the costs of reviewing this 

rule. It is possible that not all 

commenters reviewed last year’s rule in 

detail, and it is also possible that some 

reviewers chose not to comment on the 

proposed rule. For these reasons we 

thought that the number of past 

commenters would be a fair estimate of 

the number of reviewers of this rule. We 

welcome any comments on the 

approach in estimating the number of 

entities which will review this proposed 

rule. 

We also recognize that different types 

of entities are in many cases affected by 

mutually exclusive sections of this 

proposed rule, and therefore for the 

purposes of our estimate we assume that 

each reviewer reads approximately 50 

percent of the rule. We seek comments 

on this assumption. 

Using the wage information from the 

BLS (https://www.bls.gov/oes/2017/ 

may/naics4_621100.htm) for medical 

and health service managers (Code 11– 

9111), we estimate that the cost of 

reviewing this rule is $110.00 per hour, 

including overhead and fringe benefits. 

Assuming an average reading speed, we 

estimate that it would take 

approximately 6.25 hours for the staff to 

review half of this proposed rule. For 

each ESRD facility that reviews the rule, 

the estimated cost is $687.50 (6.25 hours 

× $110.00). Therefore, we estimate that 

the total cost of reviewing this 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34400 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

regulation rounds to $39,875. ($687.50 × 

58 reviewers). 

For DME suppliers, we calculate a 

different cost of reviewing this rule. 

Assuming an average reading speed, we 

estimate that it would take 

approximately 2 hours for the staff to 

review this proposed rule. For each 

entity that reviews this proposed rule, 

the estimated cost is $220.00 (2 hours × 

$110.00). Therefore, we estimate that 

the total cost of reviewing this proposed 

rule is $143,000 ($220.00 × 650 

reviewers). 

B. Detailed Economic Analysis 

1. CY 2019 End-Stage Renal Disease 

Prospective Payment System 

a. Effects on ESRD Facilities 

To understand the impact of the 

changes affecting payments to different 

categories of ESRD facilities, it is 

necessary to compare estimated 

payments in CY 2018 to estimated 

payments in CY 2019. To estimate the 

impact among various types of ESRD 

facilities, it is imperative that the 

estimates of payments in CY 2018 and 

CY 2019 contain similar inputs. 

Therefore, we simulated payments only 

for those ESRD facilities for which we 

are able to calculate both current 

payments and new payments. 

For this proposed rule, we used CY 

2017 data from the Part A and Part B 

Common Working Files, as of February 

16, 2018, as a basis for Medicare dialysis 

treatments and payments under the 

ESRD PPS. We updated the 2017 claims 

to 2018 and 2019 using various updates. 

The updates to the ESRD PPS base rate 

are described in section II.B.3.h of this 

proposed rule. Table 58 shows the 

impact of the estimated CY 2019 ESRD 

payments compared to estimated 

payments to ESRD facilities in CY 2018. 

TABLE 58—IMPACT OF PROPOSED CHANGES IN PAYMENT TO ESRD FACILITIES FOR CY 2019 1 PROPOSED RULE

Facility type Number of 

facilities 

Number of 

treatments 

(in millions) 

Effect of 2019 

changes in 

outlier policy 

(%) 

Effect of 2019 

changes in 

wage index, 

wage floor, 

and laborrelated share 

(%) 

Effect of 2019 

changes in 

payment rate 

update 

(%) 

Effect of total 

2019 proposed 

changes 

(outlier, wage 

index and 

floor, laborrelated share, 

routine 

updates to the 

payment rate) 

(%) 

A B C D E F 

All Facilities .............................................. 7,042 44.5 0.2 0.0 1.5 1.7 

Type: 

Freestanding ..................................... 6,626 42.4 0.2 0.0 1.5 1.7 

Hospital based .................................. 416 2.1 0.4 ¥0.1 1.5 1.8 

Ownership Type: 

Large dialysis organization ............... 5,355 34.4 0.2 0.0 1.5 1.7 

Regional chain .................................. 871 5.7 0.3 0.1 1.5 1.9 

Independent ...................................... 479 2.9 0.2 0.2 1.5 2.0 

Hospital based 1 ................................ 325 1.6 0.4 0.0 1.5 1.9 

Unknown ........................................... 12 0.0 0.1 0.3 1.5 1.9 

Geographic Location: 

Rural ................................................. 1,263 6.4 0.2 ¥0.3 1.5 1.4 

Urban ................................................ 5,779 38.1 0.2 0.0 1.5 1.8 

Census Region: 

East North Central ............................ 1,136 6.2 0.2 ¥0.4 1.5 1.4 

East South Central ........................... 569 3.3 0.2 ¥0.7 1.5 1.1 

Middle Atlantic .................................. 769 5.4 0.2 0.1 1.5 1.8 

Mountain ........................................... 398 2.3 0.2 ¥0.3 1.5 1.4 

New England .................................... 191 1.5 0.2 ¥0.3 1.5 1.4 

Pacific 2 ............................................. 837 6.4 0.2 1.1 1.5 2.8 

Puerto Rico and Virgin Islands ......... 51 0.3 0.1 4.5 1.5 6.2 

South Atlantic .................................... 1,612 10.4 0.3 ¥0.3 1.5 1.5 

West North Central ........................... 492 2.3 0.3 ¥0.3 1.5 1.5 

West South Central .......................... 987 6.5 0.2 ¥0.1 1.5 1.7 

Facility Size: 

Less than 4,000 treatments .............. 1,689 5.9 0.2 0.0 1.5 1.8 

4,000 to 9,999 treatments ................ 2,502 11.8 0.2 ¥0.2 1.5 1.6 

10,000 or more treatments ............... 2,776 26.7 0.2 0.1 1.5 1.8 

Unknown ........................................... 75 0.2 0.4 0.3 1.5 2.2 

Percentage of Pediatric Patients: 

Less than 2% .................................... 6,938 44.2 0.2 0.0 1.5 1.7 

Between 2% and 19% ...................... 41 0.3 0.3 0.0 1.5 1.8 

Between 20% and 49% .................... 12 0.0 0.1 ¥0.4 1.5 1.3 

More than 50% ................................. 51 0.0 0.1 0.2 1.5 1.8 

lSensipar and Parsabiv will be paid under the transitional drug add-on payment adjustment for CY 2019. In CY 2016 there was approximately 

$840 million in spending for Sensipar under Part D. 2 Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain ownership. 

3 Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34401 

Column A of the impact table 

indicates the number of ESRD facilities 

for each impact category and column B 

indicates the number of dialysis 

treatments (in millions). The overall 

effect of the proposed changes to the 

outlier payment policy described in 

section II.B.3.g of this proposed rule is 

shown in column C. For CY 2019, the 

impact on all ESRD facilities as a result 

of the changes to the outlier payment 

policy would be a 0.2 percent increase 

in estimated payments. Nearly all ESRD 

facilities are anticipated to experience a 

positive effect in their estimated CY 

2019 payments as a result of the 

proposed outlier policy changes. 

Column D shows the effect of the 

proposed CY 2019 wage indices and the 

wage index floor of 0.50. The categories 

of types of facilities in the impact table 

show changes in estimated payments 

ranging from a ¥0.7 percent to a 4.5 

percent increase due to these proposed 

updates in the wage indices. 

Column E shows the effect of the 

proposed CY 2019 ESRD PPS payment 

rate update. The proposed ESRD PPS 

payment rate update is 1.5 percent, 

which reflects the proposed ESRDB 

market basket percentage increase factor 

for CY 2019 of 2.2 percent and the 

proposed MFP adjustment of 0.7 

percent. 

Column F reflects the overall impact, 

that is, the effects of the proposed 

outlier policy changes, the proposed 

wage index floor, and payment rate 

update. We expect that overall ESRD 

facilities would experience a 1.7 percent 

increase in estimated payments in CY 

2019. The categories of types of facilities 

in the impact table show impacts 

ranging from an increase of 1.1 percent 

to 6.2 percent in their CY 2019 

estimated payments. 

b. Effects on Other Providers 

Under the ESRD PPS, Medicare pays 

ESRD facilities a single bundled 

payment for renal dialysis services, 

which may have been separately paid to 

other providers (for example, 

laboratories, durable medical equipment 

suppliers, and pharmacies) by Medicare 

prior to the implementation of the ESRD 

PPS. Therefore, in CY 2019, we estimate 

that the proposed ESRD PPS would 

have zero impact on these other 

providers. 

c. Effects on the Medicare Program 

We estimate that Medicare spending 

(total Medicare program payments) for 

ESRD facilities in CY 2019 would be 

approximately $10.6 billion. This 

estimate takes into account a projected 

increase in fee-for-service Medicare 

dialysis beneficiary enrollment of 1.2 

percent in CY 2019. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are 

responsible for paying 20 percent of the 

ESRD PPS payment amount. As a result 

of the projected 1.7 percent overall 

increase in the proposed CY 2019 ESRD 

PPS payment amounts, we estimate that 

there will be an increase in beneficiary 

co-insurance payments of 1.7 percent in 

CY 2019, which translates to 

approximately $60 million. 

e. Alternatives Considered 

In section II.B.3.b of this proposed 

rule, we proposed changes to the wage 

index floor. 

We considered maintaining the 

existing wage index floor of 0.4000 and 

also considered increasing the wage 

floor to 0.5500 and 0.5800. However, 

based on the analyses we have 

conducted, we no longer believe a wage 

index floor value of 0.4000 is 

appropriate and we are concerned about 

the impact a higher floor value would 

have on the base rate. 

2. Proposed Payment for Renal Dialysis 

Services Furnished to Individuals With 

AKI 

To understand the impact of the 

changes affecting payments to different 

categories of ESRD facilities for renal 

dialysis services furnished to 

individuals with AKI, it is necessary to 

compare estimated payments in CY 

2018 to estimated payments in CY 2019. 

To estimate the impact among various 

types of ESRD facilities for renal 

dialysis services furnished to 

individuals with AKI, it is imperative 

that the estimates of payments in CY 

2018 and CY 2019 contain similar 

inputs. Therefore, we simulated 

payments only for those ESRD facilities 

for which we are able to calculate both 

current payments and new payments. 

For this proposed rule, we used CY 

2017 data from the Part A and Part B 

Common Working Files, as of February 

16, 2018, as a basis for Medicare for 

renal dialysis services furnished to 

individuals with AKI. We updated the 

2017 claims to 2018 and 2019 using 

various updates. The updates to the AKI 

payment amount are described in 

section III.B of this proposed rule. Table 

59 shows the impact of the estimated 

CY 2019 payments for renal dialysis 

services furnished to individuals with 

AKI compared to estimated payments 

for renal dialysis services furnished to 

individuals with AKI in CY 2018. 

TABLE 59—IMPACT OF PROPOSED CHANGES IN PAYMENT FOR RENAL DIALYSIS SERVICES FURNISHED TO INDIVIDUALS

WITH AKI FOR CY 2019 PROPOSED RULE

Facility type Number of 

facilities 

Number of 

treatments 

(in thousands) 

Effect of 

2019 changes 

in wage 

index, wage 

floor, and 

labor-related 

share 

(%) 

Effect of 

2019 changes 

in payment 

rate update 

(%) 

Effect of 

total 2019 

proposed 

changes 

(%) 

(A) (B) (C) (D) (E) 

All Facilities .......................................................................... 3,861 156.9 0.0 1.5 1.5 

Type 

Freestanding ................................................................. 3,775 153.7 0.0 1.5 1.5 

Hospital based .............................................................. 86 3.2 ¥0.1 1.5 1.4 

Ownership Type 

Large dialysis organization ........................................... 3,269 134.8 0.0 1.5 1.5 

Regional chain .............................................................. 416 15.1 0.0 1.5 1.5 

Independent .................................................................. 119 4.5 0.1 1.5 1.6 

Hospital based 1 ............................................................ 55 2.5 0.0 1.5 1.5 

Unknown ....................................................................... 2 0.0 ¥0.3 1.5 1.2 

Geographic Location 

Rural ............................................................................. 691 25.7 ¥0.2 1.5 1.3 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34402 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 59—IMPACT OF PROPOSED CHANGES IN PAYMENT FOR RENAL DIALYSIS SERVICES FURNISHED TO INDIVIDUALS

WITH AKI FOR CY 2019 PROPOSED RULE—Continued 

Facility type Number of 

facilities 

Number of 

treatments 

(in thousands) 

Effect of 

2019 changes 

in wage 

index, wage 

floor, and 

labor-related 

share 

(%) 

Effect of 

2019 changes 

in payment 

rate update 

(%) 

Effect of 

total 2019 

proposed 

changes 

(%) 

(A) (B) (C) (D) (E) 

Urban ............................................................................ 3,170 131.2 0.1 1.5 1.6 

Census Region 

East North Central ........................................................ 706 29.9 ¥0.3 1.5 1.2 

East South Central ....................................................... 310 10.5 ¥0.6 1.5 0.9 

Middle Atlantic .............................................................. 401 16.5 0.0 1.5 1.5 

Mountain ....................................................................... 244 11.0 ¥0.2 1.5 1.3 

New England ................................................................ 123 4.7 ¥0.4 1.5 1.1 

Pacific 2 ......................................................................... 482 27.0 1.1 1.5 2.7 

Puerto Rico and Virgin Islands ..................................... 2 0.0 6.0 1.5 7.6 

South Atlantic ................................................................ 872 34.1 ¥0.3 1.5 1.2 

West North Central ....................................................... 251 7.7 ¥0.2 1.5 1.3 

West South Central ...................................................... 470 15.6 ¥0.2 1.5 1.3 

Facility Size 

Less than 4,000 treatments .......................................... 720 25.5 0.2 1.5 1.7 

4,000 to 9,999 treatments ............................................ 1,403 51.4 ¥0.2 1.5 1.3 

10,000 or more treatments ........................................... 1,716 79.1 0.1 1.5 1.6 

Unknown ....................................................................... 22 1.0 0.3 1.5 1.8 

Percentage of Pediatric Patients 

Less than 2% ................................................................ 3,860 156.7 0.0 1.5 1.5 

Between 2% and 19% .................................................. 1 0.2 0.6 1.5 2.1 

Between 20% and 49% ................................................ 0 0.0 0.0 0.0 0.0 

More than 50% ............................................................. 0 0.0 0.0 0.0 0.0 

Column A of the impact table 

indicates the number of ESRD facilities 

for each impact category and column B 

indicates the number of AKI dialysis 

treatments (in thousands). 

Column C shows the effect of the 

proposed CY 2019 wage indices and the 

wage index floor of 0.50. The categories 

of types of facilities in the impact table 

show changes in estimated payments of 

a 1.5 percent increase due to these 

proposed updates in the wage indices. 

Column D shows the effect of the 

proposed CY 2019 ESRD PPS payment 

rate update. The proposed ESRD PPS 

payment rate update is 1.5 percent, 

which reflects the proposed ESRDB 

market basket percentage increase factor 

for CY 2019 of 2.2 percent and the MFP 

adjustment of 0.7 percent. 

Column E reflects the overall impact, 

that is, the effects of the proposed wage 

index floor and payment rate update. 

We expect that overall ESRD facilities 

would experience a 1.5 percent increase 

in estimated payments in CY 2019. The 

categories of types of facilities in the 

impact table show impacts ranging from 

an increase of 0.0 percent to 7.6 percent 

in their CY 2019 estimated payments. 

b. Effects on Other Providers 

Under section 1834(r) of the Act, as 

added by section 808(b) of TPEA, we are 

proposing to update the payment rate 

for renal dialysis services furnished by 

ESRD facilities to beneficiaries with 

AKI. The only two Medicare providers 

authorized to provide these outpatient 

renal dialysis services are hospital 

outpatient departments and ESRD 

facilities. The decision about where the 

renal dialysis services are furnished is 

made by the patient and his or her 

physician. Therefore, this proposal will 

have zero impact on other Medicare 

providers. 

c. Effects on the Medicare Program 

We estimate approximately $30.0 

million would be paid to ESRD facilities 

in CY 2019 as a result of AKI patients 

receiving renal dialysis services in the 

ESRD facility at the lower ESRD PPS 

base rate versus receiving those services 

only in the hospital outpatient setting 

and paid under the outpatient 

prospective payment system, where 

services were required to be 

administered prior to the TPEA. 

d. Effects on Medicare Beneficiaries 

Currently, beneficiaries have a 20 

percent co-insurance obligation when 

they receive AKI dialysis in the hospital 

outpatient setting. When these services 

are furnished in an ESRD facility, the 

patients would continue to be 

responsible for a 20 percent coinsurance. Because the AKI dialysis 

payment rate paid to ESRD facilities is 

lower than the outpatient hospital PPS’s 

payment amount, we would expect 

beneficiaries to pay less co-insurance 

when AKI dialysis is furnished by ESRD 

facilities. 

e. Alternatives Considered 

As we discussed in the CY 2017 ESRD 

PPS proposed rule (81 FR 42870), we 

considered adjusting the AKI payment 

rate by including the ESRD PPS casemix adjustments, and other adjustments 

at section 1881(b)(14)(D) of the Act, as 

well as not paying separately for AKI 

specific drugs and laboratory tests. We 

ultimately determined that treatment for 

AKI is substantially different from 

treatment for ESRD and the case-mix 

adjustments applied to ESRD patients 

may not be applicable to AKI patients 

and as such, including those policies 

and adjustment would be inappropriate. 

We continue to monitor utilization and 

trends of items and services furnished to 

individuals with AKI for purposes of 

refining the payment rate in the future. 

This monitoring would assist us in 

developing knowledgeable, data-driven 

proposals. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34403 

3. ESRD QIP 

a. Effects of the PY 2022 ESRD QIP on 

ESRD Facilities 

The ESRD QIP provisions are 

intended to prevent possible reductions 

in the quality of ESRD dialysis facility 

services provided to beneficiaries. The 

methodology that we are proposing to 

use to determine a facility’s TPS for the 

PY 2022 ESRD QIP is described in 

section IV.C of this proposed rule. Any 

reductions in ESRD PPS payments as a 

result of a facility’s performance under 

the PY 2022 ESRD QIP would apply to 

ESRD PPS payments made to the facility 

for services furnished in CY 2022. 

For the PY 2022 ESRD QIP, we 

estimate that, of the 6,814 dialysis 

facilities (including those not receiving 

a TPS) enrolled in Medicare, 

approximately 44.31 percent or 2,896 of 

the facilities would receive a payment 

reduction for PY 2022. The total 

payment reduction for all of the 2,896 

facilities expected to receive a reduction 

is approximately $38,114,871.88. 

Facilities that do not receive a TPS do 

not receive a payment reduction. 

Table 60 shows the overall estimated 

distribution of payment reductions 

resulting from the PY 2022 ESRD QIP. 

TABLE 60—ESTIMATED DISTRIBUTION OF PY 2022 ESRD QIP PAYMENT REDUCTIONS

Payment reduction Number of 

facilities 

Percent of 

facilities 

0.0% ......................................................................................................................................................................... 3,639 55.68 

0.5% ......................................................................................................................................................................... 1,351 20.67 

1.0% ......................................................................................................................................................................... 923 14.12 

1.5% ......................................................................................................................................................................... 437 6.69 

2.0% ......................................................................................................................................................................... 185 2.83 

Note: This table excludes 279 facilities that we estimate will not receive a payment reduction because they will not report enough data to receive a TPS. 

To estimate whether a facility would 

receive a payment reduction in PY 2022, 

we scored each facility on achievement 

and improvement on several measures 

we have previously finalized and for 

which there were available data from 

CROWNWeb and Medicare claims. 

Measures used for the simulation are 

shown in Table 61. 

TABLE 61—DATA USED TO ESTIMATE PY 2022 ESRD QIP PAYMENT REDUCTIONS

Measure 

Period of time used to calculate achievement thresholds, 

performance standards, benchmarks, and improvement 

thresholds 

Performance period 

VAT: 

Standardized Fistula Rate ........................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

Long Term Catheter Rate ........................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

Kt/V Dialysis Adequacy Comprehensive ............................ Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

Hypercalcemia .................................................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

STrR ................................................................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

ICH CAHPS Survey ............................................................ Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

SRR .................................................................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

NHSN BSI ........................................................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

SHR .................................................................................... Jan 2015–Dec 2015 ........................................................... Jan 2016–Dec 2016. 

For all measures except STrR and 

SHR, clinical measure topic areas with 

less than 11 cases for a facility were not 

included in that facility’s TPS. For SHR 

and STrR, facilities were required to 

have at least 5 and 10 patient-years at 

risk, respectively, in order to be 

included in the facility’s TPS. Each 

facility’s TPS was compared to an 

estimated minimum TPS and an 

estimated payment reduction table that 

were consistent with the proposals 

outlined in section IV.B.3.b of this 

proposed rule. Facility reporting 

measure scores were estimated using 

available data from CY 2015 and 2016. 

Facilities were required to have a score 

on at least one clinical measure to 

receive a TPS. 

To estimate the total payment 

reductions in PY 2022 for each facility 

resulting from this proposed rule, we 

multiplied the total Medicare payments 

to the facility during the 1-year period 

between January 2016 and December 

2016 by the facility’s estimated payment 

reduction percentage expected under 

the ESRD QIP, yielding a total payment 

reduction amount for each facility: Total 

ESRD payment in January 2016 through 

December 2016 times the estimated 

payment reduction percentage. 

Table 62 shows the estimated impact 

of the finalized ESRD QIP payment 

reductions to all ESRD facilities for PY 

2022. The table details the distribution 

of ESRD facilities by facility size (both 

among facilities considered to be small 

entities and by number of treatments per 

facility), geography (both urban/rural 

and by region), and by facility type 

(hospital based/freestanding facilities). 

Given that the performance periods 

used for these calculations will differ 

from those we propose to use for the PY 

2022 ESRD QIP, the actual impact of the 

PY 2022 ESRD QIP may vary 

significantly from the values provided 

here. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34404 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 62—IMPACT OF PROPOSED QIP PAYMENT REDUCTIONS TO ESRD FACILITIES FOR PY 2022 

Number of 

facilities 

Number of 

treatments 

2016 

(in millions) 

Number of 

facilities 

with QIP 

score 

Number of 

facilities 

expected 

to receive a 

payment 

reduction 

Payment 

reduction 

(percent 

change 

in total ESRD 

payments) 

All Facilities ................................................................... 6,814 45.1 6,535 2,896 ¥0.40 

Facility Type: 

Freestanding ................................................................. 6,383 42.7 6,149 2,740 ¥0.40 

Hospital-based .............................................................. 431 2.4 386 156 ¥0.39 

Ownership Type: 

Large Dialysis ............................................................... 5,110 34.3 4,945 2,131 ¥0.37 

Regional Chain ............................................................. 871 5.8 841 341 ¥0.36 

Independent .................................................................. 487 3.1 448 291 ¥0.69 

Hospital-based (non-chain) ........................................... 341 1.8 301 133 ¥0.44 

Unknown ....................................................................... 5 0.0 0 0 ........................

Facility Size: 

Large Entities ................................................................ 5,981 40.1 5,786 2,472 ¥0.37 

Small Entities 1 .............................................................. 828 5.0 749 424 ¥0.59 

Unknown ....................................................................... 5 0.0 0 0 ........................

Rural Status: 

(1) Yes .......................................................................... 1,243 6.5 1,212 380 ¥0.25 

(2) No ............................................................................ 5,571 38.6 5,323 2,516 ¥0.43 

Census Region: 

Northeast ...................................................................... 933 7.0 894 462 ¥0.48 

Midwest ......................................................................... 1,593 8.6 1,504 538 ¥0.30 

South ............................................................................. 3,048 20.4 2,929 1,463 ¥0.45 

West .............................................................................. 1,183 8.6 1,151 389 ¥0.28 

U.S. Territories 2 ........................................................... 57 0.4 57 44 ¥0.99 

Census Division: 

Unknown ....................................................................... 7 0.1 7 4 ¥0.57 

East North Central ........................................................ 1,109 6.4 1,037 403 ¥0.34 

East South Central ....................................................... 551 3.4 534 244 ¥0.41 

Middle Atlantic .............................................................. 742 5.5 710 390 ¥0.52 

Mountain ....................................................................... 382 2.2 370 82 ¥0.17 

New England ................................................................ 191 1.5 184 72 ¥0.30 

Pacific ........................................................................... 801 6.3 781 307 ¥0.34 

South Atlantic ................................................................ 1,572 10.5 1,498 774 ¥0.47 

West North Central ....................................................... 484 2.3 467 135 ¥0.22 

West South Central ...................................................... 925 6.5 897 445 ¥0.45 

U.S. Territories 2 ........................................................... 50 0.4 50 40 ¥1.05 

Facility Size (number of total treatments): 

Less than 4,000 treatments .......................................... 1,127 2.0 900 301 ¥0.33 

4,000–9,999 treatments ................................................ 2,514 11.6 2,502 978 ¥0.35 

Over 10,000 treatments ................................................ 3,007 30.6 3,007 1,558 ¥0.45 

Unknown ....................................................................... 166 0.9 126 59 ¥0.50 

1Small Entities include hospital-based and satellite facilities, and non-chain facilities based on DFC self-reported status. 

2 Includes American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and Virgin Islands. 

b. Effects on Other Providers 

The ESRD QIP is applicable to 

dialysis facilities. We are aware that 

several of our measures impact other 

providers. For example, with the 

introduction of the SRR clinical 

measure in PY 2017 and the SHR 

clinical measure in PY 2020, we 

anticipate that hospitals may experience 

financial savings as dialysis facilities 

work to reduce the number of 

unplanned readmissions and 

hospitalizations. We are exploring 

various methods to assess the impact 

these measures have on hospitals and 

other outpatient facilities, such as 

through the impacts of the Hospital 

Readmissions Reduction Program and 

the Hospital-Acquired Conditions 

Reduction Program, and we intend to 

continue examining the interactions 

between our quality programs to the 

greatest extent feasible. 

c. Effects on the Medicare Program 

For PY 2022, we estimate that ESRD 

QIP would contribute approximately 

$38,114,872 in Medicare savings. For 

comparison, Table 63 shows the 

payment reductions that we estimate 

will be achieved by the ESRD QIP from 

PY 2017 through PY 2022. 

TABLE 63—ESTIMATED PAYMENT REDUCTIONS PAYMENT YEAR 2017 

THROUGH 2022 

Payment year Estimated payment reductions 

(citation) 

PY 2022 ......... $38,114,872. 

TABLE 63—ESTIMATED PAYMENT REDUCTIONS PAYMENT YEAR 2017 

THROUGH 2022—Continued 

Payment year Estimated payment reductions 

(citation) 

PY 2021 ......... $37,872,521. 

PY 2020 ......... $31,581,441 (81 FR 77960). 

PY 2019 ......... $15,470,309 (80 FR 69074). 

PY 2018 ......... $11,576,214 (79 FR 66257). 

PY 2017 ......... $11,954,631 (79 FR 66255). 

Additionally, we estimate that the 

proposed removal of four reporting 

measures beginning with PY 2021 

would reduce the information collection 

burden by $12 million. 

d. Effects on Medicare Beneficiaries 

The ESRD QIP is applicable to 

dialysis facilities. Since the Program’s 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34405 

inception, there is evidence of improved 

performance on ESRD QIP measures. As 

we stated in the CY 2018 ESRD PPS 

final rule, one objective measure we can 

examine to demonstrate the improved 

quality of care over time is the 

improvement of performance standards 

(82 FR 50795). As the ESRD QIP has 

refined its measure set and as facilities 

have gained experience with the 

measures included in the Program, 

performance standards have generally 

continued to rise. We view this as 

evidence that facility performance (and 

therefore the quality of care provided to 

Medicare beneficiaries) is objectively 

improving. To date we have been unable 

to examine the impact of the ESRD QIP 

on Medicare beneficiaries including the 

financial impact of the Program or the 

impact on the health outcomes of 

beneficiaries. However, in future years 

we are interested in examining these 

impacts through the addition of new 

measures to the Program and through 

the analysis of available data from our 

existing measures. 

Additionally, in this proposed rule, 

we are proposing changes to the ESRD 

QIP to reflect the Meaningful Measures 

Initiative’s priorities, including focusing 

our quality measure set on more 

outcome-oriented, less burdensome 

quality measures. We believe that the 

changes we are proposing, which 

include a reduced information 

collection burden of $12 million for PY 

2021, will help focus the Program’s 

measurements on the most clinically 

appropriate topics while ensuring that 

facilities are not unduly burdened by 

quality reporting requirements. 

e. Alternatives Considered 

As discussed in section IV.B.3.b of 

this proposed rule, we considered two 

alternatives for reassigning measure 

weights in situations where a facility 

does not receive a score on at least one 

measure but is still eligible to receive a 

TPS score: (1) Redistribute the weight of 

missing measures evenly across the 

remaining measures (that is, we would 

divide up the missing measure’s weight 

equally across the remaining measures), 

and (2) redistribute the weight of 

missing measures proportionately across 

the remaining measures, based on their 

weight as a percentage of TPS (that is, 

when dividing up a missing measure’s 

weight, we would shift a larger share of 

that weight to measures with a higher 

assigned weight; measures with a lower 

weight would gain a smaller portion of 

the missing measure’s weight). 

While the first policy alternative is 

administratively simpler to implement, 

we rejected this option because it would 

not maintain the Meaningful Measure 

Initiative priorities in the measure 

weights as effectively as the second 

policy alternative. In section IV.B.3 of 

this proposed rule, we propose an 

approach for reweighting the domains 

and measures in the ESRD QIP in PY 

2021 based on the priorities identified 

in the Meaningful Measures Initiative. 

For example, we propose to assign a 

higher weight to measures that focus on 

outcomes and a lower weight to 

measures that focus on clinical 

processes. If we adopted the first policy 

alternative, measures that we consider a 

lower priority would represent a much 

larger share of TPS relative to measures 

that we consider a higher priority, in 

situations where a facility is missing 

one or more measure scores. Under the 

second policy alternative, when a 

facility is not scored on a measure, the 

weight of lower priority measures 

relative to higher priority measures 

would be more consistent with the 

weights assigned to the complete 

measure set. For example, if a facility 

was ineligible to receive a score on all 

the measures in both the Clinical Care 

Measure Domain and the Safety 

Measure Domain in PY 2022, the weight 

of the Clinical Depression and FollowUp Measure—the lowest weight 

remaining in the measure set would 

increase from 2.5 percent of the TPS to 

13.5 percent of the TPS under the first 

policy alternative and would increase 

from 2.5 percent of the TPS to 5.6 

percent of the TPS under the second 

policy alternative. Under the same 

scenario, the weight of the ICH CAHPS 

measure—the highest weight remaining 

in the measure set would increase from 

15 percent to 26 percent under the first 

policy alternative and would increase 

from 15 percent to 33.33 percent under 

the second policy alternative. 

4. DMEPOS 

a. Changes to the Durable Medical 

Equipment, Prosthetics, Orthotics, and 

Supplies (DMEPOS) Competitive 

Bidding Program (CBP) 

i. Effects on Other Providers 

We believe that using the maximum 

winning bid amount and lead item 

pricing to establish the SPAs and paying 

most contract suppliers more than they 

bid helps to ensure beneficiary access to 

DMEPOS and long term sustainability of 

the CBP. This methodology has the 

advantage of being easily understood by 

bidding suppliers. Further, lead item 

pricing simplifies the supplier’s bidding 

process. We anticipate that more 

suppliers would compete given the 

simpler rules and the fact that all 

winning bidders would be paid at least 

as much as they bid. Therefore, we 

believe that this proposal would have a 

positive economic impact on bidding 

suppliers. 

ii. Effects on the Medicare Program 

This proposed rule, which proposes 

to base single payment amounts on the 

maximum winning bid and to 

implement lead item pricing in the 

Medicare DMEPOS CBP, is estimated by 

rounding to the nearer 5 million dollars 

and is expected to cost $10 million in 

Medicare benefit payments for the 5- 

year period beginning January 1, 2019 

and ending September 30, 2023. The 

estimate uses the current baseline which 

bases the SPAs on the median of 

winning bids. The cost of the proposal 

is the sum of yearly impacts. Each year’s 

impact is the product of the projected 

spending on items subject to 

competitive bidding furnished in former 

CBAs for that year multiplied by the 

percentage increase in aggregate 

spending due to the change in the 

payment rules, in this case 0.2 percent. 

In considering a future in which the 

current regulations remain in place (the 

regulatory baseline), we note that over 

the long run, a potential supplier would 

be motivated to continue bidding if its 

expenses are below its expectation for 

the median of the winning bids. As 

such, this long run—in which suppliers 

have learned the likely bidding 

outcomes—could result in no contracts 

or payments at SPA levels set too low 

to ensure access. In this scenario, 

bidders might have minimal incentive 

to change their bidding behavior based 

upon a policy switch from median to 

maximum winning bid to determine 

SPAs. After all, the baseline pricing 

method would award contracts to the 

suppliers with bids below the median at 

prices that at least cover their 

production costs. Additionally, it is 

possible that the behavioral response of 

bidders who, knowing that the SPA 

would be set based on the maximum 

winning bid, would respond by bidding 

more competitively in a CBP round 

where the payment is determined based 

on the maximum winning bid. The 

trade-off between setting the SPA using 

the maximum winning bid and the fact 

that bids are more competitive, hence 

lowering costs, tend to balance one 

another out so that the resulting SPAs 

would be expected to be similar to the 

SPAs set using median bid. This tradeoff is termed Revenue Equivalency with 

the expected result being that bidders 

would respond in a manner that would 

mitigate the SPA determination 

methodology change to maximum 

winning bid. In other words, a relatively 

low impact, such as that presented in 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34406 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

this section, could be reasonable 

considering Revenue Equivalency. 

As noted earlier in the preamble, 

median bid levels have trended lower 

with each successive round of 

competition. To the extent that factors 

impacting the competition are still 

developing, the impacts of this policy 

proposal may be underestimated. We 

request comment that would allow for 

refinement of the impact estimate for 

the final rule. We also seek comment 

and information on how much DMEPOS 

production costs change from year to 

year; whether the changes likely to be 

common across suppliers, or at least 

well known amongst them. We would 

also seek comment and information on 

the duration of time the bidding process 

requires to reach steady participation so 

that payment outcomes occur due to the 

implementation of new policies for the 

subsequent rounds of CBP (such as the 

surety bond policy that was part of the 

2016 ESRD PPS final rule). 

iii. Effects on Medicare Beneficiaries 

This proposed rule would base single 

payment amounts on the maximum 

winning bid and implement lead item 

pricing in the Medicare DMEPOS CBP. 

The effects are estimated by rounding to 

the nearer 5 million dollars and to cost 

roughly $3 million in Medicare 

beneficiary cost sharing for the 5-year 

period beginning January 1, 2019 and 

ending September 30, 2023. The 

Medicaid impacts for cost sharing for 

the dual eligibles for the federal and 

state portions are assumed to be $0 

million. Section 503 of the Consolidated 

Appropriations Act of 2016 and section 

5002 of the Cures Act, added section 

1903(i)(27) to the Act, which prohibits 

federal Medicaid reimbursement to 

states for certain DME expenditures that 

are, in the aggregate, in excess of what 

Medicare would have paid for such 

items. The requirement took effect 

January 1, 2018. Many states have 

started limiting payment for DME based 

on the Medicare rates, but the majority 

of the states do not currently have the 

ability to use rates that apply to only 

parts of the state, such as rates paid in 

CBAs or rural areas of the state. 

iv. Alternatives Considered 

One alternative we considered was to 

continue the Medicare DMEPOS CBP 

with no changes. This would have no 

economic impact on the Medicare 

program or its beneficiaries. 

Another alternative is to implement 

lead item pricing based on maximum 

winning bids as proposed, but offer 

contracts based on overall demand for 

items and services and unadjusted 

supplier capacity. We believe that 

currently more contracts are offered 

under the program than are needed to 

meet overall demand for items and 

services, so this is potentially an option 

we could consider. For example, we 

currently limit a supplier’s capacity to 

20 percent of projected demand. We 

could eliminate this limit which could 

result in less winning contracts being 

offered. However, the risk is that the 

number of contract suppliers could be 

reduced too much and could lead to 

access problems. 

b. Adjustments to DMEPOS Fee 

Schedule Amounts Based on 

Information From the DMEPOS CBP 

In the event of a gap in the CBP 

beginning January 1, 2019, any enrolled 

supplier can furnish the items currently 

subject to competitive bidding in former 

CBAs and non-CBAs. The suppliers 

furnishing items in former CBAs would 

be paid slightly more than the current 

SPAs based on the median of winning 

bids because the proposed fee schedule 

adjustment methodology for items and 

services furnished in former CBAs 

would adjust the fee schedule amounts 

for such items and services based on the 

current SPAs plus a CPI–U update. We 

understand this proposal to be 

consistent with the requirements of 

section 1834(a)(1)(F) of the Act. The 

suppliers furnishing items in non-CBAs 

would be paid based on current fee 

schedule amounts. 

i. Effects on the Medicare Program 

This rule proposes transitional fee 

schedule adjustments for DMEPOS 

items and services furnished on or after 

January 1, 2019 for areas that are 

currently CBAs and for areas that are 

currently not CBAs. Altogether, this rule 

proposes three different fee schedule 

adjustment methodologies depending 

on the area in which the items and 

services are furnished: (1) One fee 

schedule adjustment methodology for 

DME items and services furnished on or 

after January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous U.S.; and (3) another fee 

schedule adjustment methodology for 

items and services furnished from 

January 1, 2019 through December 31, 

2020, in areas that are currently not 

CBAs and are either rural areas or noncontiguous areas. The impacts for this 

part of the rule are calculated against a 

baseline that assumes payments for 

items furnished in CBAs and non-CBAs 

are done consistent with the rules in 

place as of January 1, 2018. The impacts 

are expected to cost $1,050 million 

dollars in Medicare benefit payments for 

the 2-year period beginning January 1, 

2019 and ending December 31, 2020. 

ii. Effects on Medicare Beneficiaries 

This rule proposes transitional fee 

schedule adjustments for DMEPOS 

items and services furnished on or after 

January 1, 2019 in areas that are 

currently CBAs and for areas that are 

currently not CBAs. Altogether, this rule 

proposes three different fee schedule 

adjustment methodologies depending 

on the area in which the items and 

services are furnished: (1) One fee 

schedule adjustment methodology for 

DME items and services furnished on or 

after January 1, 2019, in areas that are 

currently CBAs, in the event of a gap in 

the CBP; (2) another fee schedule 

adjustment methodology for items and 

services furnished from January 1, 2019, 

through December 31, 2020, in areas 

that are currently not CBAs, are not 

rural areas, and are located in the 

contiguous U.S.; and (3) another fee 

schedule adjustment methodology for 

items and services furnished from 

January 1, 2019 through December 31, 

2020, in areas that are currently not 

CBAs and are either rural areas or noncontiguous areas. 

The estimated impacts for this part of 

the rule are calculated against a baseline 

that assumes payments for items 

furnished in CBAs and non-CBAs are 

done consistent with the rules in place 

as of January 1, 2018. The impacts are 

expected to cost $265 million in 

Medicare beneficiary cost sharing 

beginning January 1, 2019. The 

Medicaid impacts for cost sharing for 

the beneficiaries enrolled in the 

Medicare Part B and Medicaid programs 

for the federal and state portions are 

assumed to be $45 million and $30 

million, respectively. 

iii. Alternatives Considered 

One alternative we considered but did 

not propose was to establish a fee 

schedule adjustment methodology that 

uses the blended (75 unadjusted/25 

adjusted) rates in all super rural and 

non-contiguous areas, and the blended 

(25 unadjusted/75 adjusted) rates in all 

other non-CBAs. In this alternative, the 

fee schedule amount for items furnished 

in current CBAs would be based on the 

current SPAs updated by the projected 

change in the CPI–U. This alternative is 

estimated by rounding to the nearer 5 

million dollars and is expected to cost 

$30 million in Medicare benefit 

payments and $5 million in Medicare 

beneficiary cost sharing beginning 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34407 

January 1, 2019. The Medicaid impacts 

for cost sharing for the dual eligibles for 

the federal and state portions are 

assumed to be $0 million and $0 

million, respectively. 

Another alternative we considered but 

did not propose was to maintain the 

current SPA determination 

methodology, which bases the SPA on 

the median of winning bids, for the 

CBAs and maintain the current fee 

schedule adjustment methodologies for 

the non-CBAs. This alternative is 

estimated by rounding to the nearer 5 

million dollars and to save $1,140 

million in Medicare benefit payments 

and $280 million in Medicare 

beneficiary cost sharing beginning 

January 1, 2019. The Medicaid impacts 

for cost sharing for the dual eligibles for 

the federal and state portions are 

assumed to be $50 million and $40 

million, respectively. 

We request public comments on these 

alternatives. 

c. New Payment Classes for Oxygen and 

Oxygen Equipment and Methodology 

for Ensuring Annual Budget Neutrality 

of the New Classes 

i. Effects on Other Providers 

Suppliers of high-flow oxygen 

equipment and oxygen contents would 

get paid more when furnishing oxygen 

to the high-risk beneficiaries who have 

been prescribed high-flow oxygen. The 

budget neutrality offset applied to all 

oxygen classes would lessen the offset 

applied to the stationary oxygen 

equipment fee schedule amount, which 

would be to the advantage of suppliers 

that furnish only stationary oxygen 

equipment. 

ii. Effects on the Medicare Program 

No fiscal impact due to the annual 

budget neutrality calculation. 

iii. Effects on Medicare Beneficiaries 

No fiscal impact due to the annual 

budget neutrality calculation. 

iv. Alternatives Considered 

One alternative we considered but did 

not propose was to apply the budget 

neutrality offset to all DME, not just to 

the oxygen classes as proposed. This 

would have no fiscal impact because it 

would be budget neutral. 

Another alternative we considered but 

did not propose was to eliminate OGPE 

classes added in 2006 and resort back to 

modality neutral payments for both 

stationary and portable equipment. This 

alternative would have no fiscal impact, 

either. 

d. New Payment Classes for Oxygen and 

Oxygen Equipment and Methodology 

for Ensuring Annual Budget Neutrality 

of the New Classes 

i. Effects on Other Providers 

Suppliers of high-flow oxygen 

equipment and oxygen contents would 

get paid more when furnishing oxygen 

to the high-risk beneficiaries who have 

been prescribed high-flow oxygen. The 

budget neutrality offset applied to all 

oxygen classes would lessen the offset 

applied to the stationary oxygen 

equipment fee schedule amount, which 

would be to the advantage of suppliers 

that furnish only stationary oxygen 

equipment. 

ii. Effects on the Medicare Program 

No fiscal impact due to the annual 

budget neutrality calculation. 

iii. Effects on Medicare Beneficiaries 

No fiscal impact due to the annual 

budget neutrality calculation. 

iv. Alternatives Considered 

One alternative we considered but did 

not propose was to apply the budget 

neutrality offset to all DME, not just to 

the oxygen classes as proposed. This 

would have no fiscal impact because it 

would be budget neutral. 

Another alternative we considered but 

did not propose was to eliminate OGPE 

classes added in 2006 and resort back to 

modality neutral payments for both 

stationary and portable equipment. This 

alternative would have no fiscal impact, 

either. 

e. Payment for Multi-Function 

Ventilators 

i. Effects on Other Providers 

We expect that the impact of our 

proposal to classify the multi-function 

ventilator item in the frequent and 

substantial servicing payment category 

and our proposed payment rule for 

determining the monthly rental fee 

schedule amount would overall result in 

a slight increase in payments to 

suppliers since the suppliers would 

continue to receive the monthly rental 

amount for the base ventilator item plus 

an additional average amount for the 

integrated functions. In addition, the 

supplier would retain ownership of the 

multi-function ventilator that is used 

and can furnish the equipment for 

additional separate rental periods to 

other beneficiaries. 

ii. Effects on the Medicare Program 

We expect our proposed payment rule 

for multi-function ventilators to be a 5- 

year cost of $15 million to the Medicare 

program as the proposed payment 

method would result in suppliers 

continuing to receive the monthly rental 

amount for the base ventilator item plus 

an additional average amount for the 

integrated functions. 

iii. Effects on Medicare Beneficiaries 

We expect the proposal would have a 

negligible effect on Medicare 

beneficiaries’ copayments. 

iv. Alternatives Considered 

We considered two alternatives for 

our proposed payment rule for multifunction ventilators. One alternative 

payment approach is to pay a ventilator 

base item monthly rental amount and 

also pay separate, add-on monthly 

rental payments for each of the four 

additional functions of the item. This 

alternative is expected to have no cost 

to the beneficiaries or the Medicare 

program. Another alternative payment 

approach is to establish a monthly 

rental payment amount for a ventilator 

plus the monthly cost of all four 

additional functions. However, this 

payment alternative would only be 

allowed if the patient requires all five 

functions of the multi-function 

ventilator. This alternative is expected 

to have no cost to the beneficiaries or 

the Medicare program. Each of these 

alternatives did not approach the new 

multi-function ventilator as an 

integrated item that encompasses 

efficiencies for the suppliers, 

beneficiaries and the program. Also, 

neither of these two alternatives would 

address payment for multi-function 

ventilators in a different manner than 

paying for five separate items that 

perform the same functions. Thus, we 

did not elect to pursue these 

alternatives. 

f. Including the Northern Mariana 

Islands in Future National Mail Order 

CBPs 

Because this proposal would not have 

a fiscal impact, no detailed economic 

analysis is necessary. 

C. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/circulars_

a004_a-4), in Table 64, we have 

prepared an accounting statement 

showing the classification of the 

transfers and costs associated with the 

various provisions of this proposed rule. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34408 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

TABLE 64—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED TRANSFERS AND COSTS/SAVINGS

ESRD PPS and AKI 

Category Transfers 

Annualized Monetized Transfers .............................................................. $190 million. 

From Whom to Whom .............................................................................. Federal government to ESRD providers. 

Category Transfers 

Increased Beneficiary Co-insurance Payments ....................................... $30 million. 

From Whom to Whom .............................................................................. Beneficiaries to ESRD providers.

ESRD QIP for PY 2021 

Category Transfers 

Annualized Monetized Transfers .............................................................. ¥$38 million. 

From Whom to Whom .............................................................................. Federal government to ESRD providers. 

Category Costs 

Annualized Monetized ESRD Provider Costs .......................................... $181 million. 

The PY 2021 policy changes would result in an estimated $12 million 

in savings. 

ESRD QIP for PY 2022 

Category Transfers 

Annualized Monetized Transfers .............................................................. ¥$38 million. 

From Whom to Whom .............................................................................. Federal government to ESRD providers. 

Category Costs 

Annualized Monetized ESRD Provider Costs .......................................... $202 million. 

The PY 2022 policy changes would result in an estimated $21 million 

increase. 

DME Provisions: Competitive Bidding Reforms Annualization Period 2019 to 2023 

Category 

Transfers 

Estimates Year dollar Discount rate 

Annualized Monetized Transfer on Beneficiary Cost Sharing (in $Millions) ......................... $2 

$2 

2019 

2019 

7% 

3% 

From Whom to Whom ........................................................................................................... Beneficiaries to Medicare providers 

Transfers 

Estimates Year dollar Discount rate 

Annualized Monetized Transfer Payments (in $Millions) ...................................................... $0.6 

$0.6 

2019 

2019 

7% 

3% 

From Whom to Whom ........................................................................................................... Federal government to Medicare providers. 

DME Provisions: Transitional Fee Adjustments Annualization Period 2019 to 2020 

Category Transfers 

Estimates Year dollar Discount rate 

Annualized Monetized Transfer on Beneficiary Cost Sharing (in $Millions) ......................... $506 

$516 

2019 

2019 

7% 

3% 

From Whom to Whom ........................................................................................................... Beneficiaries to Medicare providers. 

Transfers 

Estimates Year dollar Discount rate 

Annualized Monetized Transfer Payments (in $Millions) ...................................................... $128 

$130 

2019 

2019 

7% 

3% 

From Whom to Whom ........................................................................................................... Federal government to Medicare providers. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34409 

In accordance with the provisions of 

Executive Order 12866, this proposed 

rule was reviewed by the Office of 

Management and Budget. 

XVII. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96–354) 

(RFA) requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. 

Approximately 11 percent of ESRD 

dialysis facilities are considered small 

entities according to the Small Business 

Administration’s (SBA) size standards, 

which classifies small businesses as 

those dialysis facilities having total 

revenues of less than $38.5 million in 

any 1 year. Individuals and states are 

not included in the definitions of a 

small entity. For more information on 

SBA’s size standards, see the Small 

Business Administration’s Web site at 

http://www.sba.gov/content/smallbusiness-size-standards (Kidney 

Dialysis Centers are listed as 621492 

with a size standard of $38.5 million). 

We do not believe ESRD facilities are 

operated by small government entities 

such as counties or towns with 

populations of 50,000 or less, and 

therefore, they are not enumerated or 

included in this estimated RFA analysis. 

Individuals and States are not included 

in the definition of a small entity. 

For purposes of the RFA, we estimate 

that approximately 11 percent of ESRD 

facilities are small entities as that term 

is used in the RFA (which includes 

small businesses, nonprofit 

organizations, and small governmental 

jurisdictions). This amount is based on 

the number of ESRD facilities shown in 

the ownership category in Table 58. 

Using the definitions in this ownership 

category, we consider 479 facilities that 

are independent and 325 facilities that 

are shown as hospital-based to be small 

entities. The ESRD facilities that are 

owned and operated by Large Dialysis 

Organizations (LDOs) and regional 

chains would have total revenues of 

more than $38.5 million in any year 

when the total revenues for all locations 

are combined for each business 

(individual LDO or regional chain), and 

are not, therefore, included as small 

entities. 

For the ESRD PPS updates proposed 

in this rule, a hospital-based ESRD 

facility (as defined by type of 

ownership, not by type of dialysis 

facility) is estimated to receive a 1.9 

percent increase in payments for CY 

2019. An independent facility (as 

defined by ownership type) is also 

estimated to receive a 2.0 percent 

increase in payments for CY 2019. 

For AKI dialysis, we are unable to 

estimate whether patients would go to 

ESRD facilities, however, we have 

estimated there is a potential for $37.5 

million in payment for AKI dialysis 

treatments that could potentially be 

furnished in ESRD facilities. 

For ESRD QIP, we estimate that of the 

2,896 ESRD facilities expected to 

receive a payment reduction in the PY 

2022 ESRD QIP, 424 are ESRD small 

entity facilities. We present these 

findings in Table 60 (‘‘Estimated 

Distribution of PY 2022 ESRD QIP 

Payment Reductions’’) and Table 61 

(‘‘Impact of Proposed QIP Payment 

Reductions to ESRD Facilities for PY 

2022’’). We estimate that the payment 

reductions would average 

approximately $13,161 per facility 

across the 2,896 facilities receiving a 

payment reduction, and $14,665 for 

each small entity facility. We also 

estimate that there are 828 small entity 

facilities in total, and that the aggregate 

ESRD PPS payments to these facilities 

would decrease 0.59 percent in PY 

2022. 

For DMEPOS, small entities include 

small businesses, nonprofit 

organizations, and small governmental 

jurisdictions. Approximately 85 percent 

of the DME industry are considered 

small businesses according to the Small 

Business Administration’s size 

standards with total revenues of $6.5 

million or less in any 1 year and a small 

percentage are nonprofit organizations. 

Individuals and states are not included 

in the definition of a small entity. As 

discussed in section VI of this proposed 

rule, this rule would provide additional 

revenue to a substantial number of small 

rural entities, especially for certain 

items furnished outside of the former 

competitively bid areas. Therefore, the 

Secretary has determined that these 

proposed rules would have a significant 

economic impact on a substantial 

number of small entities. 

Therefore, the Secretary has 

determined that these proposed rules 

would have a significant economic 

impact on a substantial number of small 

entities. The economic impact 

assessment is based on estimated 

Medicare payments (revenues) and 

HHS’s practice in interpreting the RFA 

is to consider effects economically 

‘‘significant’’ only if greater than 5 

percent of providers reach a threshold of 

3 to 5 percent or more of total revenue 

or total costs. We solicit comment on 

the RFA analysis provided. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. Any such regulatory impact 

analysis must conform to the provisions 

of section 603 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a metropolitan 

statistical area and has fewer than 100 

beds. We do not believe this proposed 

rule would have a significant impact on 

operations of a substantial number of 

small rural hospitals because most 

dialysis facilities are freestanding. 

While there are 132 rural hospital-based 

dialysis facilities, we do not know how 

many of them are based at hospitals 

with fewer than 100 beds. However, 

overall, the 132 rural hospital-based 

dialysis facilities will experience an 

estimated 1.6 percent increase in 

payments. As concerns the DME parts of 

the rule, our data indicates that only 

around 6.9 percent of small rural 

hospitals are organizationally linked to 

a DME supplier with paid claims in 

2017. Thus, we do not believe the DME 

parts of the rule will have a significant 

impact on operations of a substantial 

number of small rural hospitals. As a 

result, the entire proposed rule is not 

estimated to have a significant impact 

on small rural hospitals. 

Therefore, the Secretary has 

determined that these proposed rules 

would not have a significant impact on 

the operations of a substantial number 

of small rural hospitals. 

XVIII. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

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 2018, that 

threshold is approximately $150 

million. These proposed rules do not 

include any mandates that would 

impose spending costs on state, local, or 

Tribal governments in the aggregate, or 

by the private sector, of $150 million. 

Moreover, HHS interprets UMRA as 

applying only to unfunded mandates. 

We do not interpret Medicare payment 

rules as being unfunded mandates, but 

simply as conditions for the receipt of 

payments from the Federal government 

for providing services that meet Federal 

standards. This interpretation applies 

whether the facilities or providers are 

private, state, local, or tribal. 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34410 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

XIX. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a proposed rule 

(and subsequent final rule) that imposes 

substantial direct requirement costs on 

state and local governments, preempts 

state law, or otherwise has Federalism 

implications. We have reviewed these 

proposed rules under the threshold 

criteria of Executive Order 13132, 

Federalism, and have determined that it 

would have substantial direct effects on 

the rights, roles, and responsibilities of 

states, local or Tribal governments. It is 

estimated that these proposals 

contained in section VI of this proposed 

rule would add $30 million dollars of 

additional expense to state governments 

because of the added cost sharing 

expense for Medicare and Medicaid 

dual eligible beneficiaries. 

XX. Reducing Regulation and 

Controlling Regulatory Costs 

Executive Order 13771, entitled 

Reducing Regulation and Controlling 

Regulatory Costs (82 FR 9339), was 

issued on January 30, 2017. This 

proposed rule is expected to be an 

Executive Order 13771 regulatory action 

due to the estimated $9 million 

incremental costs (see Table 64). 

XXI. Congressional Review Act 

These proposed rules are subject to 

the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and has been 

transmitted to the Congress and the 

Comptroller General for review. 

XXII. Files Available to the Public via 

the Internet 

The Addenda for the annual ESRD 

PPS proposed and final rulemakings 

will no longer appear in the Federal 

Register. Instead, the Addenda will be 

available only through the Internet and 

is posted on the CMS website at http:// 

www.cms.gov/ESRDPayment/PAY/ 

list.asp. In addition to the Addenda, 

limited data set (LDS) files are available 

for purchase at http://www.cms.gov/ 

Research-Statistics-Data-and-Systems/ 

Files-for-Order/LimitedDataSets/ 

EndStageRenalDiseaseSystemFile.html. 

Readers who experience any problems 

accessing the Addenda or LDS files, 

should contact ESRDPayment@

cms.hhs.gov. 

List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 414 

Administrative practice and 

procedure, Health facilities, Health 

professions, Kidney diseases, Medicare, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR 

SKILLED NURSING FACILITIES; 

PAYMENT FOR ACUTE KIDNEY 

INJURY DIALYSIS 

■ 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), 

1395g, 1395l(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Public Law 106–113, 113 Stat. 

1501A–332; sec. 3201 of Public Law 112–96, 

126 Stat. 156; sec. 632 of Public Law 112– 

240, 126 Stat. 2354; sec. 217 of Public Law 

113–93, 129 Stat. 1040; and sec. 204 of Public 

Law 113–295, 128 Stat. 4010; and sec. 808 of 

Public Law 114–27, 129 Stat. 362. 

■ 2. Section 413.177(a) is revised to read 

as follows: 

§ 413.177 Quality incentive program 

payment. 

(a) With respect to renal dialysis 

services as defined under § 413.171, in 

the case of an ESRD facility that does 

not earn enough points under the 

program described at § 413.178 to meet 

or exceed the minimum total 

performance score (as defined at 

§ 413.178(a)(8)) established by CMS for 

a payment year (as defined at 

§ 413.178(a)(10)), payments otherwise 

made to the facility under § 413.230 for 

renal dialysis services during the 

payment year will be reduced by up to 

2 percent as follows: 

(1) For every 10 points that the total 

performance score (as defined at 

§ 413.178(a)(14)) earned by the ESRD 

facility falls below the minimum total 

performance score, the payments 

otherwise made will be reduced by 0.5 

percent. 

(2) [Reserved] 

* * * * * 

■ 3. Section 413.178 is added to read as 

follows: 

§ 413.178 ESRD quality incentive program. 

(a) Definitions. As used in this 

section: 

(1) Achievement threshold means the 

15th percentile of national ESRD facility 

performance on a clinical measure 

during the baseline period for a 

payment year. 

(2) Baseline period means, with 

respect to a payment year, the time 

period used to calculate the 

performance standards, benchmark, 

improvement threshold and 

achievement threshold that apply to 

each clinical measure for that payment 

year. 

(3) Benchmark means, with respect to 

a payment year, the 90th percentile of 

national ESRD facility performance on a 

clinical measure during the baseline 

period that applies to the measure for 

that payment year. 

(4) Clinical measure means a measure 

that is scored for a payment year using 

the methodology described in 

paragraphs (d)(1)(i) through (iii) of this 

section. 

(5) End-Stage Renal Disease (ESRD) 

Quality Incentive Program (QIP) means 

the program authorized under section 

1881(h) of the Social Security Act. 

(6) ESRD facility means an ESRD 

facility as defined in § 413.171. 

(7) Improvement threshold means an 

ESRD facility’s performance on a 

clinical measure during the baseline 

period that applies to the measure for a 

payment year. 

(8) Minimum total performance score 

(mTPS) means, with respect to a 

payment year, the total performance 

score that an ESRD facility would 

receive if, during the baseline period, it 

performed at the 50th percentile of 

national ESRD facility performance on 

all clinical measures and the median of 

national ESRD facility performance on 

all reporting measures. 

(9) Payment reduction means the 

reduction, as specified by CMS, to each 

payment that would otherwise be made 

to an ESRD facility under § 413.230 for 

a calendar year based on the TPS earned 

by the ESRD facility for the 

corresponding payment year that is 

lower than the mTPS score established 

for that payment year. 

(10) Payment year means the calendar 

year for which a payment reduction, if 

applicable, is applied to the payments 

otherwise made to an ESRD facility 

under § 413.230. 

(11) Performance period means the 

time period during which data are 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34411 

collected for the purpose of calculating 

an ESRD facility’s performance on 

measures with respect to a payment 

year. 

(12) Performance standards are, for a 

clinical measure, the performance levels 

used to award points to an ESRD facility 

based on its performance on the 

measure, and are, for a reporting 

measure, the levels of data submission 

and completion of other actions 

specified by CMS that are used to award 

points to an ESRD facility on the 

measure. 

(13) Reporting measure means a 

measure that is scored for a payment 

year using the methodology described in 

paragraph (d)(1)(iv) of this section. 

(14) Total performance score (TPS) 

means the numeric score ranging from 

0 to 100 awarded to each ESRD facility 

based on its performance under the 

ESRD QIP with respect to a payment 

year. 

(b) Applicability of the ESRD QIP. The 

ESRD QIP applies to ESRD facilities as 

defined at § 413.171 beginning the first 

day of the month that is 4 months after 

the facility CMS Certification Number 

(CCN) effective date. 

(c) ESRD QIP measure selection. CMS 

specifies measures for the ESRD QIP for 

a payment year and groups the measures 

into domains. The measures for a 

payment year include, but are not 

limited to: 

(1) Measures on anemia management 

that reflect the labeling approved by the 

Food and Drug Administration for such 

management. 

(2) Measures on dialysis adequacy. 

(3) To the extent feasible, measures on 

iron management, bone mineral 

metabolism, and vascular access 

(including for maximizing the 

placement of arterial venous fistula). 

(4) Beginning with the 2016 payment 

year, measures specific to the conditions 

treated with oral-only drugs and that 

are, to the extent feasible, outcomesbased. 

(d) Performance scoring under the 

ESRD QIP. (1) CMS will award points to 

an ESRD facility based on its 

performance on each clinical measure 

for which the ESRD facility reports the 

applicable minimum number of cases 

during the performance period for a 

payment year, and based on the degree 

to which the ESRD facility submits data 

and completes other actions specified 

by CMS for a reporting measure during 

the performance period for a payment 

year. 

(i) CMS will award from 1 to 9 points 

for achievement on a clinical measure to 

each ESRD facility whose performance 

on that measure during the applicable 

performance period meets or exceeds 

the achievement threshold but is less 

than the benchmark specified for that 

measure. 

(ii) CMS will award from 0 to 9 points 

for improvement on a clinical measure 

to each ESRD facility whose 

performance on that measure during the 

applicable performance period meets or 

exceeds the improvement threshold but 

is less than the benchmark specified for 

that measure. 

(iii) CMS will award 10 points to each 

ESRD facility whose performance on a 

clinical measure during the applicable 

performance period meets or exceeds 

the benchmark specified for that 

measure. 

(iv) CMS will award from 0 to 10 

points to each ESRD facility on a 

reporting measure based on the degree 

to which, during the applicable 

performance period, the ESRD facility 

reports data and completes other actions 

specified by CMS with respect to that 

measure. 

(2) CMS calculates the TPS for an 

ESRD facility for a payment year as 

follows: 

(i) CMS calculates a domain score for 

each domain based on the total number 

of points the ESRD facility has earned 

under paragraph (d)(1) of this section for 

each measure in the domain and the 

weight that CMS has assigned to each 

measure. 

(ii) CMS weights each domain score 

in accordance with the domain weight 

that CMS has established for the 

payment year. 

(iii) The sum of the weighted domain 

scores is the ESRD facility’s TPS for the 

payment year. 

(e) Public availability of ESRD QIP 

performance information. (1) CMS will 

make information available to the public 

regarding the performance of each ESRD 

facility under the ESRD QIP on the 

Dialysis Facility Compare website, 

including the facility’s TPS and scores 

on individual measures. 

(2) Prior to making the information 

described in paragraph (e)(1) of this 

section available to the public, CMS will 

provide ESRD facilities with an 

opportunity to review that information, 

technical assistance to help them 

understand how their performance 

under the ESRD QIP was scored, and an 

opportunity to request and receive 

responses to questions that they have 

about the ESRD QIP. 

(3) CMS will provide each ESRD 

facility with a performance score 

certificate on an annual basis that 

describes the TPS achieved by the 

facility with respect to a payment year. 

The performance score certificate must 

be posted by the ESRD facility within 15 

business days of the date that CMS 

issues the certificate to the ESRD 

facility, with the content unaltered, in 

an area of the facility accessible to 

patients. 

(f) Limitation on review. There is no 

administrative or judicial review of the 

following: 

(1) The determination of the amount 

of the payment reduction under section 

1881(h)(1) of the Act. 

(2) The specification of measures 

under section 1881(h)(2) of the Act. 

(3) The methodology developed under 

section 1881(h)(3) of the Act that is used 

to calculate TPSs and performance 

scores for individual measures. 

(4) The establishment of the 

performance standards and the 

performance period under section 

1881(h)(4) of the Act. 

■ 4. Section 413.232 is amended by— 

■ a. Revising paragraphs (b) 

introductory text and (b)(2); 

■ b. Revising paragraph (c)(2); 

■ c. Revising paragraph (e); 

■ d. Revising paragraph (g)(2); and 

■ e. Adding paragraph (g)(3). 

The revisions and addition read as 

follows: 

§ 413.232 Low-volume adjustment. 

* * * * * 

(b) Definition of low-volume facility. 

A low-volume facility is an ESRD 

facility that, as determined based on the 

documentation submitted pursuant to 

paragraph (g) of this section: 

* * * * * 

(2) Has not opened, closed, or 

received a new provider number due to 

a change in ownership (except where 

the change in ownership results in a 

change in facility type) in the 3 cost 

reporting years (based on as-filed or 

final settled 12-consecutive month cost 

reports, whichever is most recent) 

preceding the payment year. 

(c) * * * 

(2) Five (5) road miles or less from the 

ESRD facility in question. 

* * * * * 

(e) Except as provided in paragraph (f) 

of this section and unless extraordinary 

circumstances justify an exception, to 

receive the low-volume adjustment an 

ESRD facility must provide an 

attestation statement, by November 1st 

of each year preceding the payment 

year, to its Medicare Administrative 

Contractor that the facility meets all the 

criteria established in this section, 

except that, for calendar year 2012, the 

attestation must be provided by January 

3, 2012, for calendar year 2015, the 

attestation must be provided by 

December 31, 2014, and for calendar 

year 2016, the attestation must be 

provided by December 31, 2015. 

* * * * * 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34412 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

(g) * * * 

(2) In the case of an ESRD facility that 

has undergone a change of ownership 

wherein the ESRD facility’s Medicare 

billing number does not change or 

changes due to a reclassification of 

facility type, the MAC relies upon the 

attestation and if the change results in 

two non-standard cost reporting periods 

(less than or greater than 12 consecutive 

months) does one of the following for 

the 3 cost reporting years preceding the 

payment year to verify the number of 

treatments: 

(i) Combines the two non-standard 

cost reporting periods of less than 12 

months to equal a full 12-consecutive 

month period; and/or 

(ii) Combines the two non-standard 

cost reporting periods that in 

combination may exceed 12-consecutive 

months and prorates the data to equal a 

full 12-consecutive month period. 

(3) In the case of an ESRD facility that 

has changed their cost reporting period, 

the MAC relies on the attestation and 

does one or both of the following for the 

3 cost reporting years preceding the 

payment year to verify the number of 

treatments: 

(i) Combines the two non-standard 

cost reporting periods of less than 12 

months to equal a full 12-consecutive 

month period; and/or 

(ii) Combines the two non-standard 

cost reporting periods that in 

combination may exceed 12-consecutive 

months and prorates the data to equal a 

full 12-consecutive month period. 

■ 5. Section 413.234 is amended— 

■ a. In paragraph (a) by removing the 

definition of ‘‘New injectable or 

intravenous product’’ and adding the 

definition of ‘‘New renal dialysis drug 

or biological’’ in alphabetical order; and 

■ b. By revising paragraphs (b) and (c). 

The revisions read as follows: 

§ 413.234 Drug designation process. 

(a) * * * 

New renal dialysis drug or biological. 

An injectable, intravenous, oral or other 

form or route of administration drug or 

biological that is used to treat or manage 

a condition(s) associated with ESRD. It 

must be approved by the Food and Drug 

Administration (FDA) on or after 

January 1, 2019 under section 505 of the 

Federal Food, Drug, and Cosmetic Act 

or section 351 of the Public Health 

Service Act, commercially available, 

have an HCPCS application submitted 

in accordance with the official HCPCS 

Level II coding procedures, and 

designated by CMS as a renal dialysis 

service under § 413.171. Oral-only drugs 

or biologicals are excluded until January 

1, 2025. 

* * * * * 

(b) Drug designation process. New 

renal dialysis drugs or biologicals are 

included in the ESRD PPS bundled 

payment using the following drug 

designation process: 

(1) If the new renal dialysis drug or 

biological is used to treat or manage a 

condition for which there is an ESRD 

PPS functional category, the new renal 

dialysis drug or biological is considered 

included in the ESRD PPS bundled 

payment and the following steps occur: 

(i) The new renal dialysis drug or 

biological is added to an existing ESRD 

PPS functional category. 

(ii) The new renal dialysis drug or 

biological is paid for using the 

transitional drug add-on payment 

adjustment described in paragraph (c)(1) 

of this section. 

(2) If the new renal dialysis drug or 

biological is used to treat or manage a 

condition for which there is not an 

ESRD PPS functional category, the new 

renal dialysis drug or biological is not 

considered included in the ESRD PPS 

bundled payment and the following 

steps occur: 

(i) An existing ESRD PPS functional 

category is revised or a new ESRD PPS 

functional category is added for the 

condition that the new renal dialysis 

drug or biological is used to treat or 

manage; 

(ii) The new renal dialysis drug or 

biological is paid for using the 

transitional drug add-on payment 

adjustment described in paragraph (c)(2) 

of this section; and 

(iii) The new renal dialysis drug or 

biological is added to the ESRD PPS 

bundled payment following payment of 

the transitional drug add-on payment 

adjustment. 

(c) Transitional drug add-on payment 

adjustment. A new renal dialysis drug 

or biological is paid for using a 

transitional drug add-on payment 

adjustment, which is based on 100 

percent of Average Sales Price (ASP). If 

ASP is not available then the 

transitional drug add-on payment 

adjustment is based on 100 percent of 

Wholesale Acquisition Cost (WAC) and, 

when WAC is not available, the 

payment would be based on the drug 

manufacturer’s invoice. 

(1) A new renal dialysis drug or 

biological that is considered included in 

the ESRD PPS base rate is paid the 

transitional drug add-on payment 

adjustment is paid for 2 years. 

(i) Following payment of the 

transitional drug add-on payment 

adjustment the ESRD PPS base rate will 

not be modified. 

(ii) [Reserved] 

(2) A new renal dialysis drug or 

biological that is not considered 

included in the ESRD PPS base rate is 

paid the transitional drug add-on 

payment adjustment until sufficient 

claims data for rate setting analysis for 

the new renal dialysis drug or biological 

is available, but not for less than 2 years. 

(i) Following payment of the 

transitional drug add-on payment 

adjustment the ESRD PPS base rate will 

be modified, if appropriate, to account 

for the new renal dialysis drug or 

biological in the ESRD PPS bundled 

payment. 

(ii) [Reserved] 

* * * * * 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 6. The authority citation for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(l) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(l)). 

■ 7. Section 414.210 is amended by— 

■ a. Revising paragraphs (g)(4), (7) and 

(9); and 

■ b. Adding paragraph (g)(10). 

The revisions and addition read as 

follows: 

§ 414.210 General payment rules. 

* * * * * 

(g) * * * 

(4) Payment adjustments using data 

on items and services included in 

competitive bidding programs no longer 

in effect. In the case where adjustments 

to fee schedule amounts are made using 

any of the methodologies described, 

other than paragraph (g)(10) of this 

section, if the adjustments are based 

solely on single payment amounts from 

competitive bidding programs that are 

no longer in effect, the single payment 

amounts are updated before being used 

to adjust the fee schedule amounts. The 

single payment amounts are updated 

based on the percentage change in the 

Consumer Price Index for all Urban 

Consumers (CPI–U) from the mid-point 

of the last year the single payment 

amounts were in effect to the month 

ending 6 months prior to the date the 

initial fee schedule reductions go into 

effect. Following the initial adjustments 

to the fee schedule amounts, if the 

adjustments continue to be based solely 

on single payment amounts from 

competitive bidding programs that are 

no longer in effect, the single payment 

amounts used to reduce the fee schedule 

amounts are updated every 12 months 

using the percentage change in the 

CPI–U for the 12-month period ending 

6 months prior to the date the updated 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34413 

payment adjustments would go into 

effect. 

* * * * * 

(7) Payment adjustments for mail 

order items furnished in the Northern 

Mariana Islands. The fee schedule 

amounts for mail order items furnished 

to beneficiaries in the Northern Mariana 

Islands are adjusted so that they are 

equal to 100 percent of the single 

payment amounts established under a 

national mail order competitive bidding 

program. Beginning on or after the date 

that the Northern Mariana Islands are 

included under a national mail order 

competitive bidding program, the fee 

schedule adjustment methodology 

under this paragraph would no longer 

apply. 

* * * * * 

(9) Transition rules. The payment 

adjustments described above are phased 

in as follows: 

(i) For applicable items and services 

furnished with dates of service from 

January 1, 2016 through December 31, 

2016, based on the fee schedule amount 

for the area is equal to 50 percent of the 

adjusted payment amount established 

under this section and 50 percent of the 

unadjusted fee schedule amount. 

(ii) For items and services furnished 

with dates of service from January 1, 

2017, through May 31, 2018, the fee 

schedule amount for the area is equal to 

100 percent of the adjusted payment 

amount established under this section. 

(iii) For items and services furnished 

in rural areas and non-contiguous areas 

(Alaska, Hawaii, and U.S. territories) 

with dates of service from June 1, 2018 

through December 31, 2020, based on 

the fee schedule amount for the area is 

equal to 50 percent of the adjusted 

payment amount established under this 

section and 50 percent of the unadjusted 

fee schedule amount. 

(iv) For items and services furnished 

in areas other than rural or 

noncontiguous areas with dates of 

service from June 1, 2018 through 

December 31, 2020, based on the fee 

schedule amount for the area is equal to 

100 percent of the adjusted payment 

amount established under this section. 

(10) Payment adjustments for items 

and services furnished in former 

competitive bidding areas during 

temporary gaps in the DMEPOS CBP. 

During a temporary gap in the entire 

DMEPOS CBP and/or National Mail 

Order CBP, the fee schedule amounts for 

items and services that were 

competitively bid and furnished in areas 

that were competitive bidding areas at 

the time the program(s) was in effect are 

adjusted based on the SPAs in effect in 

the competitive bidding areas on the last 

day before the CBP contract period of 

performance ended, increased by the 

projected percentage change in the 

Consumer Price Index for all Urban 

Consumers (CPI–U) for the 12-month 

period ending on the date after the 

contract periods ended. If the gap in the 

CBP lasts for more than 12 months, the 

fee schedule amounts are increased 

once every 12 months on the 

anniversary date of the first day of the 

gap period based on the projected 

percentage change in the CPI–U for the 

12-month period ending on the 

anniversary date. 

■ 8. Section 414.222 is amended by 

adding paragraph (f) to read as follows: 

§ 414.222 Items requiring frequent and 

substantial servicing. 

* * * * * 

(f) Multi-function ventilators—(1) 

Definition. For the purpose of this 

paragraph, a multi-function ventilator is 

a ventilator as defined in paragraph 

(a)(1) of this section that also performs 

medically necessary functions for the 

patient at the same time that would 

otherwise be performed by one or more 

different items classified under 

§ 414.220, § 414.226, or § 414.229. 

(2) Payment rule. Effective for dates of 

service on or after January 1, 2019, the 

monthly rental fee schedule amount for 

a multi-function ventilator described in 

paragraph (f)(1) of this section is equal 

to the monthly rental fee schedule 

amount for the ventilator established in 

paragraph (c) and paragraph (d) of this 

section plus the average of the lowest 

monthly cost for one additional function 

determined under paragraph (f)(3) of 

this section and the monthly cost of all 

additional functions determined under 

paragraph (f)(3), increased by the annual 

covered item updates of section 

1834(a)(14) of the Act. 

(3) Monthly cost for additional 

functions. (i) For functions performed 

by items classified under this section 

prior to 1994, the monthly cost is equal 

to the monthly rental fee schedule 

amount established in paragraphs (c) 

and (d) of this section increased by the 

covered item update of section 

1834(a)(14) of the Act. 

(ii) For functions performed by items 

classified under § 414.220, the monthly 

cost is equal to the fee schedule amount 

for purchased equipment established in 

§ 414.220(c), (d), (e), and (f), adjusted in 

accordance with § 414.210(g), divided 

by 60 months or total number of months 

of the reasonable useful lifetime of the 

equipment. 

(iii) For functions performed by items 

classified under § 414.226, the monthly 

cost is equal to the monthly payment 

amount established in § 414.226(e), (f), 

and (g) of, adjusted in accordance with 

§ 414.210(g), multiplied by 36 and 

divided by 60 months or total number 

of months of the reasonable useful 

lifetime of the oxygen equipment. 

(iv) For functions performed by items 

classified under § 414.229, the monthly 

cost is equal to the purchase price 

established in § 414.229 (c) of, adjusted 

in accordance with § 414.210(g), divided 

by 60 months or total number of months 

of the reasonable useful lifetime of the 

equipment. 

■ 9. Section 414.226 is amended— 

■ a. By revising the heading of 

paragraph (c); 

■ b. By revising paragraph (c)(6); 

■ c. By revising the heading of 

paragraph (d); 

■ d. In paragraph (d)(2) by removing the 

reference ‘‘paragraph (e)(2)’’ and adding 

in its place the reference ‘‘paragraph 

(g)(2)’’; 

■ e. By redesignating paragraphs (e), (f) 

and (g) as paragraphs (g), (h), and (i); 

and 

■ f. By adding new paragraphs (e) and 

(f). 

The revisions and additions read as 

follows: 

§ 414.226 Oxygen and oxygen equipment. 

* * * * * 

(c) Monthly fee schedule amount for 

items furnished from 2007 through 

2018. * * * 

* * * * * 

(6) For 2008 through 2018, CMS 

makes an annual adjustment to the 

national limited monthly payment rate 

for items described in paragraph (c)(1)(i) 

of this section to ensure that such 

payment rates do not result in 

expenditures for any year that are more 

or less than the expenditures that would 

have been made if such classes had not 

been established. 

(d) Application of monthly fee 

schedule amounts for items furnished 

from 2007 through 2018. * * * 

* * * * * 

(e) Monthly fee schedule amount for 

items furnished for years after 2018. (1) 

For 2019, national limited monthly 

payment rates are calculated and paid as 

the monthly fee schedule amounts for 

the following classes of items: 

(i) Stationary oxygen equipment 

(including stationary concentrators) and 

oxygen contents (stationary and 

portable). 

(ii) Portable gaseous equipment only. 

(iii) Portable liquid equipment only. 

(iv) Oxygen generating portable 

equipment only. 

(v) Stationary oxygen contents only. 

(vi) Portable oxygen contents only, 

except for portable liquid oxygen 


sradovich on DSK3GMQ082PROD with PROPOSALS2
34414 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 

contents for prescribed flow rates 

greater than four liters per minute. 

(vii) Portable liquid oxygen contents 

only for prescribed flow rates of more 

than 4 liters per minute. 

(2) The monthly payment rate for 

items described in paragraphs (e)(1)(i), 

(ii), (iv), (v), and (vi) of this section are 

determined using the applicable 

methodologies contained in 

§ 414.210(g). 

(3) The monthly payment rate for 

items described in paragraph (e)(1)(iii) 

of this section is determined initially 

based on the monthly payment rate for 

items described in paragraph (e)(1)(iv) 

of this section and is subsequently 

adjusted using the applicable 

methodologies contained in 

§ 414.210(g). 

(4) The monthly payment rate for 

items described in paragraph (e)(1)(vii) 

of this section is determined initially 

based on 150 percent of the monthly 

payment rate for items described in 

paragraph (e)(1)(vi) of this section and is 

subsequently adjusted using the 

applicable methodologies contained in 

§ 414.210(g). 

(5) Beginning in 2019, CMS makes an 

annual adjustment to the monthly 

payment rate for items described in 

paragraphs (e)(1)(i) through (e)(1)(vii) of 

this section to ensure that such payment 

rates do not result in expenditures for 

any year that are more or less than the 

expenditures that would have been 

made if such classes had not been 

established. 

(f) Application of monthly fee 

schedule amounts for items furnished 

for years after 2018. (1) The fee schedule 

amount for items described in paragraph 

(e)(1)(i) of this section is paid when the 

beneficiary rents stationary oxygen 

equipment. 

(2) Subject to the limitation set forth 

in paragraph (g)(2) of this section, the 

fee schedule amount for items described 

in paragraphs (e)(1)(ii), (iii), and (iv) of 

this section is paid when the beneficiary 

rents portable oxygen equipment. 

(3) The fee schedule amount for items 

described in paragraph (e)(1)(v) of this 

section is paid when the beneficiary— 

(i) Owns stationary oxygen equipment 

that requires delivery of gaseous or 

liquid oxygen contents; or 

(ii) Rents stationary oxygen 

equipment that requires delivery of 

gaseous or liquid oxygen contents after 

the period of continuous use of 36 

months described in paragraph (a)(1) of 

this section. 

(4) The fee schedule amount for items 

described in paragraph (e)(1)(vi) of this 

section is paid when the beneficiary— 

(i) Owns portable oxygen equipment 

described in paragraphs (e)(1)(ii) or 

(e)(1)(iii) of this section; or 

(ii) Rents portable oxygen equipment 

described in paragraphs (e)(1)(ii) or 

(e)(1)(iii) of this section during the 

period of continuous use of 36 months 

described in paragraph (a)(1) of this 

section and does not rent stationary 

oxygen equipment; or 

(iii) Rents portable oxygen equipment 

described in paragraphs (e)(1)(ii) or 

(e)(1)(iii) of this section after the period 

of continuous use of 36 months 

described in paragraph (a)(1) of this 

section. 

(5) The fee schedule amount for items 

described in paragraph (e)(1)(vii) of this 

section is paid when the beneficiary has 

a prescribed flow rate of more than 4 

liters per minute and— 

(i) Owns portable liquid oxygen 

equipment described in paragraph 

(e)(1)(iii) of this section; or 

(ii) Rents portable liquid oxygen 

equipment described in paragraph 

(e)(1)(iii) of this section during the 

period of continuous use of 36 months 

described in paragraph (a)(1) of this 

section and does not rent stationary 

oxygen equipment; or 

(iii) Rents portable liquid oxygen 

equipment described in paragraph 

(e)(1)(iii) of this section after the period 

of continuous use of 36 months 

described in paragraph (a)(1) of this 

section. 

§ 414.230 [Amended] 

■ 10. Section 414.230 is amended in 

paragraph (h) by removing the reference 

‘‘§ 414.226(f)’’ and adding in its place 

the reference ‘‘§ 414.226(h)’’. 

■ 11. Section 414.402 is amended by 

revising the definitions of ‘‘Bid’’ and 

‘‘Composite bid’’, and adding the 

definition of ‘‘Lead item’’ in 

alphabetical order to read as follows: 

§ 414.402 Definitions. 

* * * * * 

Bid means an offer to furnish an item 

or items for a particular price and time 

period that includes, where appropriate, 

any services that are directly related to 

the furnishing of the item or items. 

* * * * * 

Composite bid means the bid 

submitted by the supplier for the lead 

item in the product category. 

* * * * * 

Lead item is the item in a product 

category with multiple items with the 

highest total nationwide Medicare 

allowed charges of any item in the 

product category prior to each 

competition. 

* * * * * 

■ 12. Section 414.412 is amended by— 

■ a. Revising paragraphs (b)(1) and (2); 

■ b. Revising paragraph (c); 

■ c. Revising the heading of paragraph 

(e); and 

■ d. Revising the heading of paragraph 

(h). 

The revisions read as follows: 

§ 414.412 Submission of bids under a 

competitive bidding program. 

* * * * * 

(b) * * * 

(1) Composite bids, as defined in 

§ 414.402, are submitted for lead items, 

as defined in § 414.402. 

(2) The bid submitted for each lead 

item and product category cannot 

exceed the payment amount that would 

otherwise apply to the lead item under 

subpart C of this part, without the 

application of § 414.210(g), or subpart D 

of this part, without the application of 

§ 414.105. 

* * * * * 

(c) Furnishing of items. A bid must 

include all costs related to furnishing all 

items in the product category, including 

all services directly related to the 

furnishing of the items. 

(e) Commonly-owned or controlled 

suppliers. * * * 

* * * * * 

(h) Requiring bid surety bonds for 

bidding entities. * * * 

* * * * * 

■ 13. Section 414.414 is amended by 

revising paragraph (e) to read as follows: 

§ 414.414 Conditions for awarding 

contracts. 

* * * * * 

(e) Evaluation of bids. CMS evaluates 

composite bids submitted for a lead 

item within a product category by— 

(1) Calculating the expected 

beneficiary demand in the CBA for the 

lead item in the product category; 

(2) Calculating the total supplier 

capacity that would be sufficient to 

meet the expected beneficiary demand 

in the CBA for the lead item in the 

product category; 

(3) Arraying the composite bids from 

the lowest composite bid price to the 

highest composite bid price; 

(4) Calculating the pivotal bid for the 

product category; and 

(5) Selecting all suppliers and 

networks whose composite bids are less 

than or equal to the pivotal bid for that 

product category, and that meet the 

requirements in paragraphs (b) through 

(d) of this section. 

* * * * * 

■ 14. Section 414.416 is amended by 

revising paragraph (b) to read as follows: 


sradovich on DSK3GMQ082PROD with PROPOSALS2
Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Proposed Rules 34415 

§ 414.416 Determination of competitive 

bidding payment amounts. 

* * * * * 

(b) Methodology for setting payment 

amount. (1) The single payment amount 

for a lead item furnished under a 

competitive bidding program is equal to 

the maximum or highest bid submitted 

for that item by suppliers whose 

composite bids for the product category 

that includes the item are equal to or 

below the pivotal bid for that product 

category. 

(2) The single payment amount for a 

lead item must be less than or equal to 

the amount that would otherwise be 

paid for the same item under subpart C 

or subpart D of this part. 

(3) The single payment amount for an 

item in a product category furnished 

under a competitive bidding program 

that is not a lead item for that product 

category is equal to the single payment 

amount for the lead item in the same 

product category multiplied by the ratio 

of the average of the 2015 fee schedule 

amounts for all areas (that is, all states, 

the District of Columbia, Puerto Rico, 

and the United States Virgin Islands) for 

the item to the average of the 2015 fee 

schedule amounts for all areas for the 

lead item. 

§ 414.422 [Amended] 

■ 15. Section 414.422 is amended by 

redesignating paragraphs (d)(4)(iii) 

through (d)(4)(vi) as paragraphs (d)(4)(ii) 

through (d)(4)(v). 

■ 16. Section 414.423 is amended by 

revising paragraph (i)(8) to read as 

follows: 

§ 414.423 Appeals process for breach of a 

DMEPOS competitive bidding program 

contract actions. 

* * * * * 

(i) * * * 

(8) Comply with all applicable 

provisions of Title 18 and related 

provisions of the Act, the applicable 

regulations issued by the Secretary, and 

manual instructions issued by CMS. 

* * * * * 

Dated: June 26, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 28, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–14986 Filed 7–11–18; 4:15 pm] 

BILLING CODE P 


sradovich on DSK3GMQ082PROD with PROPOSALS2