DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 405, 411, 413 and 414 

[CMS-1614-P] 

RIN 0938-AS13 

Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality 

Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

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

ACTION: Proposed rule. 

SUMMARY: This rule proposes to update and make revisions to the End-Stage Renal Disease 

(ESRD) prospective payment system (PPS) for calendar year (CY) 2015. This rule also proposes 

to set forth requirements for the ESRD quality incentive program (QIP), including payment years 

(PYs) 2017 and 2018. This rule also proposes to make a technical correction to remove outdated 

terms and definitions. In addition, this rule proposes to set forth the methodology for adjusting 

Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule 

payment amounts using information from the Medicare DMEPOS Competitive Bidding Program 

(CBP); make alternative payment rules for DME and enteral nutrition under the Medicare 

DMEPOS CBP; clarify the statutory Medicare hearing aid coverage exclusion and specify 

devices not subject to the hearing aid exclusion; update the definition of minimal self-adjustment 

regarding what specialized training is needed by suppliers to provide custom fitting services if 

they are not certified orthotists; clarify the Change of Ownership (CHOW) and provides for an 

exception to the current requirements; revise the appeal provisions for termination of a contract 

and notification to beneficiaries under the Medicare DMEPOS CBP, and add a technical change 
CMS-1614-P 2 

 

related to submitting bids for infusion drugs under the Medicare DMEPOS CBP. 

DATES: To be assured consideration, comments must be received at one of the addresses 

provided below, no later than 5 p.m. E.S.T. on [INSERT DATE 60 DAYS AFTER DISPLAY 

DATE.]

ADDRESSES: In commenting, please refer to file code CMS-1614-P. Because of staff and 

resource limitations, we cannot accept comments by facsimile (FAX) transmission. 

 You may submit comments in one of four ways (please choose only one of the ways 

listed): 

1. Electronically. You may submit electronic comments on this regulation to 

http://www.regulations.gov. Follow the "Submit a comment" instructions. 

 2. By regular mail. You may mail written comments to the following address ONLY: 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Attention: CMS-1614-P, 

P.O. Box 8010, 

Baltimore, MD 21244-8010. 

Please allow sufficient time for mailed comments to be received before the close of the 

comment period. 

3. By express or overnight mail. You may send written comments to the following 

address ONLY: 

 Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

 Attention: CMS-1614-P, 
CMS-1614-P 3 

 

 Mail Stop C4-26-05, 

 7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

4. By hand or courier. Alternatively, you may deliver (by hand or courier) your 

written comments ONLY to the following addresses prior to the close of the comment period: 

a. For delivery in Washington, DC-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

Room 445-G, Hubert H. Humphrey Building, 

 200 Independence Avenue, SW., 

 Washington, DC 20201 

(Because access to the interior of the Hubert H. Humphrey Building is not readily 

available to persons without Federal government identification, commenters are encouraged to 

leave their comments in the CMS drop slots located in the main lobby of the building. A stampin clock is available for persons wishing to retain a proof of filing by stamping in and retaining 

an extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD-- 

 Centers for Medicare & Medicaid Services, 

Department of Health and Human Services, 

7500 Security Boulevard, 

Baltimore, MD 21244-1850. 

If you intend to deliver your comments to the Baltimore address, call telephone number 

(410) 786-9994 in advance to schedule your arrival with one of our staff members. 
CMS-1614-P 4 

 

 Comments erroneously mailed to the addresses indicated as appropriate for hand or 

courier delivery may be delayed and received after the comment period. 

For information on viewing public comments, see the beginning of the 

"SUPPLEMENTARY INFORMATION" section. 

FOR FURTHER INFORMATION CONTACT: 

Stephanie Frilling, (410) 786-4507, for issues related to the ESRD PPS, the ESRD PPS CY 2015 

Base Rate and Payment for Frequent Hemodialysis. 

Michelle Cruse, (410) 786-7540, for issues related to the ESRD PPS and the Low Volume 

Payment Adjustment. 

Karen Reinhardt, (410) 786-0189, for issues related to the ESRD PPS and the Outlier Payment 

Policy. 

Wendy Tucker, (410) 786- 3004, for issues related to the ESRD PPS and Wage Index. 

Heidi Oumarou, (410) 786-7342, for issues related to the ESRD PPS Market Basket Update. 

Anita Segar, (410) 786-4614, for issues related to the ESRD QIP. 

Christopher Molling (410) 786-6399 and Hafsa Vahora (410) 786-7899 for issues related to the 

methodology for making national price adjustments based upon information gathered from the 

DMEPOS CBP. 

Sandhya Gilkerson, (410) 786-4085, for issues related to the alternative payment methodologies 

under the CBP. 

Sandhya Gilkerson, (410) 786-4085 and Michelle Peterman, 410-786-2581 for issues related to 

the clarification of the statutory Medicare hearing aid coverage exclusion. 

Michelle Peterman, (410) 786-2591 for issues related to the definition of minimal selfadjustment at 414.402. 
CMS-1614-P 5 

 

Janae James (410) 786-0801 for issues related to CHOW and breach of contract appeals. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All comments received before the close of the comment period 

are available for viewing by the public, including any personally identifiable or confidential 

business information that is included in a comment. We post all comments received before the 

close of the comment period on the following Web site as soon as possible after they have been 

received: http://www.regulations.gov. Follow the search instructions on that Web site to view 

public comments. 

 Comments received timely will also be available for public inspection as they are 

received, generally beginning approximately 3 weeks after publication of a document, at the 

headquarters of the Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 a.m. to 4 p.m. To 

schedule an appointment to view public comments, phone 1-800-743-3951. 

Electronic Access 

 This Federal Register document is also available from the Federal Register online 

database through Federal Digital System (FDsys), a service of the U.S. Government Printing 

Office. This database can be accessed via the internet at http://www.gpo.gov/fdsys/. 

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

 In the past, a majority of the Addenda referred to throughout the preamble of our 

proposed and final rules were available in the Federal Register. However, the Addenda of the 

annual proposed and final rules will no longer be available in the Federal Register. Instead, 

these Addenda to the annual proposed and final rules will be available only through the Internet 

on the CMS Web site. The Addenda to the End-Stage Renal Disease (ESRD) Prospective 
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Payment System (PPS) rules are available at: http://www.cms.gov/ESRDPayment/PAY/list.asp. 

Readers who experience any problems accessing any of the Addenda to the proposed and final 

rules of the ESRD PPS that are posted on the CMS Web site identified above should contact 

Stephanie Frilling at 410-786-4507. 

Table of Contents 

 To assist readers in referencing sections contained in this preamble, we are providing a 

Table of Contents. Some of the issues discussed in this preamble affect the payment policies, but 

do not require changes to the regulations in the Code of Federal Regulations (CFR). 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) 

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

3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

B. Summary of the Major Provisions 

1. ESRD PPS 

2. ESRD QIP 

3. DMEPOS 

C. Summary of Costs and Benefits 

1. Impacts of the Proposed ESRD PPS 

2. Impacts for ESRD QIP 

3. Impacts for DMEPOS 

II. Calendar Year (CY) 2015 End-Stage Renal Disease (ESRD) Prospective Payment System 

(PPS) 

A. Background on the End-Stage Renal Disease (ESRD) Prospective Payment System (PPS)
CMS-1614-P 7 

 

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

1. ESRD PPS Base Rate 

a. Changes to the Drug Utilization Adjustment 

i. The Drug Utilization Adjustment Finalized in CY 2014 ESRD PPS Final Rule 

ii. PAMA Changes to the Drug Utilization Adjustment 

b. Payment Rate Update for CY 2015 

c. CY 2015 ESRD PPS Wage Index Budget Neutrality Adjustment 

d. Labor-Related Share 

2. ESRD Bundled Market Basket and Labor-Related Share 

a. Background 

b. Rebasing and Revision the ESRD Bundled Market Basket 

i. Cost Category Weights 

ii. Proposed Price Proxies for the CY 2012 ESRDB Market Basket 

iii. Proposed Market Basket Estimate for the CY 2015 ESRDB PPS Update 

c. Proposed Productivity Adjustment 

d. Calculation of the Proposed ESRDB Market Basket Update, Adjusted for Multifactor 

Productivity for CY 2015 

e. Labor-Related Share 

3. The Proposed CY 2015 ESRD PPS Wage Indices 

a. Background 

b. Proposed Implementation of New Labor Market Delineations 

c. Transition Period 

4. Proposed Revisions to the Outlier Policy 
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a. Proposed Changes to the Outlier Services MAP Amounts and Fixed Dollar Loss Amounts 

b. Outlier Policy Percentage 

C. Restatement of Policy Regarding Reporting and Payment for More than Three Dialysis 

Treatments per Week – 

1. Reporting More than Three Dialysis Treatments per Week on Claims 

2. Medical Necessity for More Than Three Treatments per Week 

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

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

F. Low-Volume Payment Adjustment (LVPA) 

1 . Background 

2. The United States Government Accountability Office Study on the LVPA 

a. The GAO’s Main Findings 

b. The GAO’s Recommendations 

3. Clarification of the LVPA Policy 

a. Hospital-Based ESRD Facilities 

b. Cost Reporting Periods Used for Eligibility 

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

the Comorbidity Payment Adjustment 

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

A. Background 

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

C. Websites for Measure Specifications 

D. Updating the NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical Measure for 
CMS-1614-P 9 

 

the PY 2016 ESRD QIP and Future Payment Years 

E. Oral-Only Drugs Measures in the ESRD QIP 

F. Proposed Requirements for the PY 2017 ESRD QIP 

1. Proposed Revision to the Expanded ICH CAHPS Reporting Measure 

2. Proposed Measures for the PY 2017 ESRD QIP 

a. PY 2016 Measures Continuing in PY 2017 and Future Payment Years 

b. Proposal to Determine when a Measure is “Topped-Out” in the ESRD QIP, and Proposal to 

Remove a Topped-Out Measure from the ESRD QIP, Beginning with PY 2017 

c. New Measures Proposed for PY 2017 and Future Payment Years 

i. Proposed Standardized Readmission Ratio (SRR) Clinical Measure 

3. Proposed Performance Period for the PY 2017 ESRD QIP 

4. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the PY 2017 

ESRD QIP 

a. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures in the PY 2017 ESRD QIP 

b. Estimated Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures Proposed for the PY 2017 ESRD QIP 

c. Proposed Performance Standards for the PY 2017 Reporting Measures 

5. Proposal for Scoring the PY 2017 ESRD QIP Measures 

a. Scoring Facility Performance on Clinical Measures Based on Achievement 

b. Scoring Facility Performance on Clinical Measures Based on Improvement 

6. Weighting the Total Performance Score 

7. Proposed Minimum Data for Scoring Measures for the PY 2017 ESRD QIP and Proposal for 
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Changing Attestation Process for Patient Minimums 

8. Proposed Payment Reductions for the PY 2017 ESRD QIP 

9. Proposal for Data Validation 

10. Proposal to Monitor Access to Dialysis Facilities 

11. Proposed Extraordinary Circumstances Exception 

G. Proposed Requirements for the PY 2018 ESRD QIP Beginning in PY 2018 

1. Proposal to Modify the Mineral Metabolism Reporting Measure 

2. Proposed New Measures for the PY 2018 ESRD QIP and Future Payment Years 

a. Proposed Standardized Transfusion Ratio (STrR) Clinical Measure 

b. Proposal to Adopt the Pediatric Peritoneal Dialysis Adequacy Clinical Measure and Add the 

Proposed Measure to the Dialysis Adequacy Measure Topic 

c. Proposed ICH CAHPS Clinical Measure 

d. Proposed Screening for Clinical Depression and Follow-Up Reporting Measure 

e. Proposed Pain Assessment and Follow-Up Reporting Measure 

f. Proposed NHSN Healthcare Personnel Influenza Vaccination Reporting Measure 

2. Proposed Performance Period for the PY 2018 ESRD QIP 

3. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the PY 2018 

ESRD QIP 

a. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures in the PY 2018 ESRD QIP 

b. Estimated Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures Proposed for the PY 2018 ESRD QIP 

c. Proposed Performance Standards for the PY 2018 Reporting Measures 
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4. Proposal for Scoring the PY 2018 ESRD QIP Measures 

a. Scoring Facility Performance on Clinical Measures Based on Achievement 

b. Scoring Facility Performance on Clinical Measures Based on Improvement 

c. Proposal for Scoring the ICH CAHPS Clinical Measure 

d. Proposals for Calculating Facility Performance on Reporting Measures 

5. Proposed Minimum Data for Scoring Measures for the PY 2018 ESRD QIP 

6. Proposal for Calculating the Clinical Measure Domain Score 

7. Proposal for Calculating the Reporting Measure Domain Score, the Reporting Measure 

Adjuster, and the TPS for the PY 2018 ESRD QIP 

8. Example of the Proposed PY 2018 ESRD QIP Scoring Methodology 

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

IV. Technical Corrections for 42 Part 405 

V. Methodology for Adjusting DMEPOS Payment Amounts using Information from 

Competitive Bidding Programs 

A. Background 

1. Payment Basis for Certain DMEPOS 

2. Fee Schedule Payment Methodologies 

3. Regional Fee Schedule Payment Methodology for P&O 

4. DMEPOS Competitive Bidding Programs Payment Rules 

5. Adjusting Payment Amounts using Information from the DMEPOS Competitive Bidding 

Program 

6. Diversity of Costs 

7. Advanced Notice of Proposed Rulemaking 
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B. Proposed Provisions 

1. Proposed Regional Adjustments Limited by National Parameters 

a. Regional Payment Adjustments 

1. P&O Regional Fee Weights – CMS Region 1 (Boston) (Weighted by Total Paid Claims for 

Dates of Service from July 1, 1991, thru June 30, 1992) 

b. National Parameters 

c. Rural and Frontier State Adjustments 

d. Areas Outside the Contiguous United States 

2. Methodology for Items and Services Included in Limited Number of Competitive Bidding 

Programs 

3. Adjusted Payment Amounts for Accessories used with Different Types of Base Equipment 

4. Adjustments to Single Payment Amounts that Result from Unbalanced Bidding 

5. National Mail Order Program - Northern Mariana Islands 

6. Updating Adjusted Payment Amounts 

7. Summary of Proposed Methodologies 

VI. Proposed Payment Methodologies and Payment Rules for Durable Medical 

Equipment and Enteral Nutrition Furnished under the Competitive Bidding Program 

A. Background 

B. Proposed Provisions 

1. Payment on a continuous rental basis for select items 

a. Enteral nutrition 

b. Oxygen and oxygen equipment 

c. Standard manual wheelchairs 
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d. Standard power wheelchairs 

e. CPAP and respiratory assist devices 

f. Hospital beds 

g. Transition rules 

h. Beneficiary-owned equipment 

2. Responsibility for repair of beneficiary-owned power wheelchairs furnished under CBPs 

3. Phasing in the proposed payment rules in CBAs 

4. Submitting bids for items paid on a continuous rental basis 

VII. Scope of Hearing Aid Coverage Exclusion

A. Background 

B. Current Issues 

C. Proposed Provisions 

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

A. Background 

B. Current Issues 

C. Proposed Provisions 

IX. Revision to Change of Ownership Rules to Allow Contract Suppliers to Sell Specific 

Lines of Business 

 

A. Background 

B. Proposed Provisions 

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

XI. Technical Change Related to Submitting Bids for Infusion Drugs under the DMEPOS 

Competitive Bidding Program 

XII. Accelerating Health Information Exchange 
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XIII. Collection of Information Requirements 

XIV. Response to Comments 

XV. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

2. Statement of Need 

3. Overall Impact 

B. Detailed Economic Analysis 

1. CY 2015 End-Stage Renal Disease Prospective Payment System 

a. Effects on ESRD Facilities 

b. Effects on Other Providers 

c. Effects on the Medicare Program 

d. Effects on Medicare Beneficiaries 

e. Alternatives Considered 

2. End-Stage Renal Disease Quality Incentive Program 

3. DMEPOS Provisions 

C. Accounting Statement 

XVI. Regulatory Flexibility Act Analysis

XVII. Unfunded Mandates Reform Act Analysis 

XVIII. Federalism Analysis 

XIX. Congressional Review Act 

XX. Files Available to the Public via the Internet 

Regulations Text 

Acronyms 
CMS-1614-P 15 

 

Because of the many terms to which we refer by acronym in this final rule, we are listing 

the acronyms used and their corresponding meanings in alphabetical order below: 

AHRQ Agency for Healthcare Research and Quality 

ANOVA Analysis of Variance 

ANPRM Advanced Notice of Proposed Rulemaking 

ARM Adjusted Ranking Metric 

ASP Average Sales Price 

ATRA The American Taxpayer Relief Act of 2012 

BEA Bureau of Economic Analysis 

BLS Bureau of Labor Statistics 

BMI Body Mass Index 

CBA Competitive Bidding Area 

CBP Competitive Bidding Program 

CBSA Core based statistical area 

CCN CMS Certification Number 

CDC Centers for Disease Control and Prevention 

CfC Conditions for Coverage 

CHOW Change of Ownership 

CKD Chronic Kidney Disease 

CPAP Continuous positive airway pressure 

CY Calendar Year 

DFC Dialysis Facility Compare 

DME Durable Medical Equipment 
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DMEPOS Durable Medical Equipment, Prosthetics, Orthotics, and Supplies 

ESA Erythropoiesis stimulating agent 

ESRD End-Stage Renal Disease 

ESRDB End-Stage Renal Disease bundled 

ESRD PPS End-Stage Renal Disease Prospective Payment System 

FDA Food and Drug Administration 

GEM General Equivalence Mappings 

HCP Healthcare Personnel 

HD Hemodialysis 

HAIs Healthcare-Acquired Infections 

HCPCS Healthcare Common Procedure Coding System 

HCFA Health Care Financing Administration 

HLM Hierarchical Logistic Modeling 

HHS Department of Health and Human Services 

ICD International Classification of Diseases 

ICD-9-CM International Classification of Disease, 9th Revision, Clinical Modification 

ICD-10-CM International Classification of Disease, 10th Revision, Clinical 

 Modification 

ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare Providers 

 and Systems 

IGI IHS Global Insight 

IIC Inflation-indexed charge 

IOLs Intraocular Lenses 
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IPPS Inpatient Prospective Payment System 

ICH CAHPS In-Center Hemodialysis Consumer Assessment of Healthcare Providers and 

 Services 

IUR Inter-unit reliability 

MAC Medicare Administrative Contractor 

MAP Medicare Allowable Payment 

MFP Multifactor Productivity 

MIPPA Medicare Improvements for Patients and Providers Act of 2008 

MLR Minimum Lifetime Requirement 

MSA Metropolitan statistical areas 

NAMES National Association of Medical Equipment Suppliers 

NHSN National Health Safety Network 

NQF National Quality Forum 

NQS National Quality Strategy 

OBRA Omnibus Budget Reconciliation Act 

OMB Office of Management and Budget 

P&O Prosthetics and orthotics 

PAMA Protecting Access to Medicare Act of 2014 

PC Product category 

PD Peritoneal Dialysis 

PEN Parenteral and enteral nutrition 

PFS Physician Fee Schedule 

QIP Quality Incentive Program 
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RMA Reporting Measure Adjuster 

RSPA Regional single payment amounts 

RUL Reasonable useful lifetime 

SAF Standard Analysis File 

SHR Standardized Hospitalization Ratio Admissions 

SMR Standardized Mortality Ratio 

SPA Single payment amount 

STrR Standardized Transfusion Ratio 

TENS Transcutaneous electrical nerve stimulation 

TEP Technical Expert Panel 

TPS Total Performance Score 

VBP Value Based Purchasing 

I. Executive Summary 

A. Purpose 

1. End-Stage Renal Disease (ESRD) Prospective Payment System (PPS) 

On January 1, 2011, we implemented the ESRD PPS, a case-mix adjusted bundled 

prospective payment system for renal dialysis services furnished by ESRD facilities. This rule 

proposes to update and make revisions to the End-Stage Renal Disease (ESRD) prospective 

payment system (PPS) for calendar year (CY) 2015. Section 1881(b)(14) of the Social Security 

Act (the Act), as added by section 153(b) of the Medicare Improvements for Patients and 

Providers Act of 2008 (MIPPA) (Public Law 110-275), and section 1881(b)(14)(F) of the Act, as 

added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care Act 

Public Law 111-148), established that beginning CY 2012, and each subsequent year, the 
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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 No. 112-240) 

included several provisions that apply to the ESRD PPS. Section 632(a) of ATRA added section 

1881(b)(14)(I) to the Act, which required the Secretary, by comparing per patient utilization data 

from 2007 with such data from 2011, to reduce the single payment amount to reflect the 

Secretary’s utilization of ESRD-related drugs and biologicals. We finalized the amount of the 

drug utilization adjustment pursuant to this section in the CY 2014 ESRD PPS final rule with a 

3- to 4-year transition (78 FR 72161 through 72170). Section 632(b) of ATRA prohibited the 

Secretary from paying for oral-only ESRD-related drugs and biologicals under the ESRD PPS 

before January 1, 2016. And finally, section 632(c) of ATRA requires the Secretary, by no later 

than January 1, 2016, to analyze the case mix payment adjustments under section 

1881(b)(14)(D)(i) of the Act and make appropriate revisions to those adjustments. 

 On April 1, 2014, the Congress enacted the Protecting Access to Medicare Act of 2014 

(PAMA) (Pub. L. No. 113-93). PAMA section 217 includes several provisions that apply to the 

ESRD PPS. Specifically, sections 217(b)(1) and (2) of PAMA amend sections 1881(b)(14)(F) 

and (I) of the Act. We interpret the amendments to sections 1881(b)(14)(F) and (I) as replacing 

the drug utilization adjustment that was finalized in the CY 2014 ESRD PPS final rule with 

specific provisions that dictate what the market basket update will be for CY 2015 (0.0 percent) 

and how it will be reduced in CYs 2016 through 2018. Section 217(a)(1) of PAMA amends 

section 632(b)(1) of ATRA, which now provides that the Secretary may not pay for oral-only 

drugs and biologicals used for the treatment of ESRD under the ESRD PPS prior to January 1, 

2024. Section 217(a)(2) further amends section 632(b)(1) of ATRA by adding a sentence that 
CMS-1614-P 20 

 

provides: “Notwithstanding section 1881(b)(14)(A)(ii) of the Social Security Act (42 U.S.C. 

1395rr(b)(14)(A)(ii)), implementation of the policy described in the previous sentence shall be 

based on data from the most recent year available.” Finally, PAMA section 217(c) provides that, 

as part of the CY 2016 ESRD PPS rulemaking, the Sectary shall establish a process for (1) 

determining when a product is no longer an oral-only drug; and (2) including new injectable and 

intravenous products into the ESRD PPS bundled payment. 

 As discussed further below, section 212 of PAMA provides that the Secretary may not 

adopt ICD-10 prior to October 1, 2015. HHS has announced that it intends to issue an interim 

final rule that will require use of ICD-10 beginning October 1, 2015 and will require the 

continued use of ICD-9-CM through September 30, 2015. Therefore, the ESRD PPS will 

continue to use ICD-9 through September 30, 2015 and will require use of ICD-10 beginning 

October 1, 2015 for purposes of the comorbidity payment adjustment. 

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

This rule also proposes to set forth requirements for the ESRD Quality Incentive 

Program (QIP), including for payment years (PYs) 2017 and 2018. The program is 

authorized under section 1881(h) of the Social Security Act (the Act). The ESRD QIP is 

the most recent step in fostering improved patient outcomes by establishing incentives 

for dialysis facilities to meet or exceed performance standards established by CMS. 

3. Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS)

 This proposed rule proposes a methodology for making national price adjustments to 

payments for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) paid 

under fee schedules based upon information gathered from the DMEPOS competitive bidding 

programs (CBPs) and proposes to phase in special payment rules in a limited number of 
CMS-1614-P 21 

 

competitive bidding areas (CBAs) under the CBP for certain, specified DME and enteral 

nutrition. This rule proposes to clarify the statutory Medicare hearing aid coverage exclusion 

under section 1862(a)(7) of the Act and the regulation at 42 CFR §411.15(d) to further specify 

the scope of this exclusion and to note certain devices excepted from the hearing aid exclusion. 

In addition, this rule proposes to update the definition of minimal self-adjustment at §414.402 to 

note the specialized training that is needed by suppliers to provide custom fitting services if they 

are not certified orthotists. Finally, this rule proposes a revision to the Change of Ownership 

(CHOW) policy in the current regulations to allow a product category to be severed from a 

competitive bidding contract and transferred to a new contract when a contract supplier sells a 

distinct line of business to a qualified successor entity. 

B. Summary of the Major Provisions 

1. ESRD PPS 

• Update to the ESRD PPS base rate for CY 2015: For CY 2015, we are proposing 

an ESRD PPS base rate of $239.33. This amount reflects a 0.0 percent update to the 

payment rate as required by section 1881(b)(14)(F)(i) of the Act, as amended by section 

217(b)(2) of PAMA, and the application of the proposed wage index budget-neutrality 

adjustment factor of 1.001306 to the CY 2014 ESRD PPS base rate of $239.02. 

• Rebasing and revision of the ESRD bundled (ESRDB) market basket: For CY 

2015, we are proposing to rebase and revise the ESRDB market basket so the cost weights 

and price proxies would reflect the mix of goods and services that underlie ESRD bundled 

operating and capital costs for CY 2012. We note that if PAMA had not been enacted the 

proposed 2012-based ESRDB market basket update less productivity for CY 2015 would 

have been 1.6 percent, or (2.0 percent less 0.4 percentage point). 
CMS-1614-P 22 

 

• Update to the labor-related share: Because the cost distributions would change 

significantly as a result of the proposed ESRDB market basket revision, the proposed laborrelated share would be 50.673 percent compared to the current labor-related share of 41.737 

percent. The change to the labor-related share would have a significant impact on payments 

for certain ESRD facilities, specifically those ESRD facilities that have low wage index 

values. Therefore, for CY 2015 we are proposing a 2-year transition, in which the CY 2015 

payment would be based on a 50/50 blended labor-related share that would apply to all 

ESRD facilities. ESRD facilities would receive 50 percent of their current labor-related 

share and 50 percent of their revised labor-related share. Specifically, we would apply a 

labor-related share of 46.205 ((41.737+50.673)/2 = 46.205). For CY 2016, the labor-related 

share would be based on 100 percent of the revised labor-related share. 

• Update to the wage index and wage index floor: We adjust wage indices on an annual 

basis using the most current hospital wage data to account for differing wage levels in areas in 

which ESRD facilities are located. In CY 2015, we are not proposing any changes to the 

application of the wage index budget-neutrality adjustment factor and will continue to apply the 

budget-neutrality adjustment to the base rate for the ESRD PPS. We will continue our policy for 

the gradual phase-out of the wage index floor and reduce the wage index floor values to 0.40, as 

finalized in the CY 2014 ESRD PPS final rule (78 FR 72173-72174). 

• Update to the Core-Based Statistical Areas (CBSA): For CY 2015, we are proposing to 

implement the new CBSA delineations as described in the February 28, 2013 OMB Bulletin No. 

13-01, beginning with the CY 2015 ESRD PPS wage index. In addition, we are proposing to 

implement a 2-year transition, under which a 50/50 blended wage index would apply to all 

ESRD facilities for CY 2015. Specifically, facilities would receive 50 percent of their CY 2015 
CMS-1614-P 23 

 

wage index based on the CBSA delineations for CY 2014 and 50 percent of their CY 2015 wage 

index based on the proposed new CBSA delineations. In CY 2016, facilities’ wage index values 

would be based 100 percent on the new CBSA delineations. 

• Update to the outlier policy: We are updating the outlier services fixed dollar loss 

amounts for adult and pediatric patients and Medicare Allowable Payments (MAPs) for adult 

patients for CY 2015 using 2013 claims data. Based on the use of more current data, the fixeddollar loss amount for pediatric beneficiaries would increase from $54.01 to $56.30 and the MAP 

amount would increase from $37.29 to $40.05, as compared to CY 2014 values. For adult 

beneficiaries, the fixed-dollar loss amount would decrease from $98.67 to $85.24 and the MAP 

amount would increase from $51.97 to $52.61. The 1 percent target for outlier payments was not 

achieved in CY 2013. We believe using CY 2013 claims data to update the outlier MAP and 

fixed dollar loss amounts for CY 2015 will increase payments for ESRD beneficiaries requiring 

higher resource utilization in accordance with a 1 percent outlier percentage. 

• Clarification for the low-volume payment adjustment (LVPA): We are clarifying two 

policies regarding MAC verification and proposing conforming changes to the LVPA regulation. 

The first clarification explains that MACs can consider supporting data from hospital-based 

ESRD facilities to verify the facility’s total treatment count. The second clarification explains 

that MACs can add or prorate treatment counts from non-standard cost reporting periods (those 

that are not 12-month periods) where there is a change in ownership that does not result in a new 

Provider Transaction Access Number. 

• Continued use of ICD-9-CM codes and corrections to the ICD-10-CM codes 

eligible for the comorbidity payment adjustment: Section 212 of PAMA provides that the 

Secretary may not adopt ICD-10 prior to October 1, 2015. HHS has announced that it 
CMS-1614-P 24 

 

intends to issue an interim final rule that will require use of ICD-10 beginning October 1, 

2015 and will require the continued use of ICD-9-CM through September 30, 2015. 

Therefore, the ESRD PPS will continue to use ICD-9 through September 30, 2015 and will 

require use of ICD-10 beginning October 1, 2015 for purposes of the comorbidity payment 

adjustment. For CY 2015, we are correcting several typographical errors and omissions in 

the Tables that appeared in the CY 2014 ESRD PPS final rule. 

2. ESRD QIP 

 This rule proposes to implement requirements for the ESRD QIP, including measure sets 

for PYs 2017 and 2018. 

• PY 2017 Measure Set: For PY 2017, we are proposing to remove one measure from the 

ESRD QIP, the Hemoglobin Greater than 12 g/dL clinical measure, on the grounds that it is 

“topped out”. We are also proposing to adopt the Standardized Readmission Ratio (SRR) 

clinical measure, which evaluates care coordination. 

• PY 2018 Measure Set: For PY 2018, we are proposing to adopt two new clinical 

measures—the Standardized Transfusion Ratio (STrR) and Pediatric Peritoneal Dialysis 

Adequacy—and three new reporting measures: (1) Pain Assessment and Follow-Up; (2) Clinical 

Depression Screening and Follow-Up; and (3) National Healthcare Safety Network (NHSN) 

Healthcare Personnel Influenza Vaccination. We are also proposing to transition the In-Center 

Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) survey 

reporting measure to a clinical measure. 

• Revision to the ICH CAHPS Reporting Measure: Beginning with the PY 2017 program 

year, we are proposing to revise the ICH CAHPS reporting measure to determine facility 

eligibility for the measure based on the number of survey-eligible patients treated during 
CMS-1614-P 25 

 

the “eligibility period”, which we propose to define as the Calendar Year (CY) that 

immediately precedes the performance period. Survey-eligible patients are defined in the 

ICH CAHPS measure specifications available at http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html

and https://ichcahps.org. 

• Revision to the NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical 

Measure: Beginning with the PY 2016 program year, we are proposing to revise the NHSN 

Bloodstream Infection in Hemodialysis Outpatients clinical measure to calculate facility 

performance using the Adjusted Ranking Metric (ARM). 

• Revision to the Mineral Metabolism Reporting Measure: Beginning with the PY 2018 

program year, we are proposing to revise the Mineral Metabolism reporting measure to allow 

facilities to submit both serum phosphorus and plasma phosphorus measurements. 

• Extraordinary Circumstances Exemption: Beginning with the PY 2017 ESRD QIP, we 

are proposing to exempt dialysis facilities from all requirements of the ESRD QIP clinical and 

reporting measures during the months in which they are forced to close due to a natural disaster 

or other extraordinary circumstances. 

• New Scoring Methodology for PY 2018: For PY 2018, we are proposing to use a new 

scoring methodology for the ESRD QIP. This proposed scoring methodology would assign 

facility Total Performance Scores (TPS) on the basis of two domains, the Clinical Measure 

Domain and the Reporting Measure Domain. Facility scores on clinical measures in the Clinical 

Measure Domain would be divided into subdomains that align with National Quality Strategy 

(NQS) domains and weighted according to the number of measures in a subdomain, facility 

experience with the measure, and the measure’s alignment with CMS priorities for quality 
CMS-1614-P 26 

 

improvement. These weighted scores would be summed to produce a facility’s Clinical Measure 

Domain score. Facility scores on reporting measures in the Reporting Measure Domain would 

be summed and calculated to produce a facility’s Reporting Measure Adjuster, which would be 

subtracted from the facility’s Clinical Measure Domain score to produce a facility’s TPS. 

3. DMEPOS 

• The methodology for making national price adjustments based upon information gathered 

from the DMEPOS CBPs: As required by the MIPPA, this rule proposes methodologies 

for using information from the DMEPOS CBP to adjust the fee schedule amounts for 

DME in areas where CBPs are not implemented. The rule proposes to use the same 

methodologies to adjust the fee schedule amounts for enteral nutrition and off-the shelf 

(OTS) orthotics in areas where CBPs are not implemented. 

• Phase in of special payment rules in a limited number of CBAs under the CBP for certain, 

specified DME and enteral nutrition. This rule proposes to phase-in special payment 

rules for certain DME and enteral nutrition under the DMEPOS CBP in a limited number 

of CBAs. 

• Medicare hearing aid coverage exclusion under section 1862(a)(7) of the Act: This rule 

proposes to modify the regulation at § 411.15 to address the scope of the statutory hearing 

aid exclusion and note the types of devices that are not subject to the hearing aid 

exclusion. 

• Definition of minimal self-adjustment at §414.402: This rule proposes to update the 

regulation to indicate what specialized training is needed to provide custom fitting 

services if suppliers are not certified orthotists. 
CMS-1614-P 27 

 

• Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of 

Business: This proposed rule proposes to establish an exception under the CHOW rules 

to allow CMS to sever a product category from a contract, incorporate the product 

category into a new contract, and transfer the new contract to a qualified new owner 

under certain specific circumstances. 

• Termination of a Competitive Bidding Contract: This rule proposes to clarify the 

effective date for terminations of competitive bidding contracts, which impacts the 

deadline for which contract suppliers must notify its beneficiaries of the termination. 

C. Summary of Costs and Benefits 

 In section XII.B of this proposed rule, we set forth a detailed analysis of the impacts 

that the proposed changes would have on affected entities and beneficiaries. The impacts 

include the following: 

1. Impacts of the Proposed ESRD PPS 

The impact chart in section XII.B.1.a of this proposed rule displays the estimated change 

in payments to ESRD facilities in CY 2015 compared to estimated payments in CY 2014. The 

overall impact of the CY 2015 changes is projected to be a 0.3 percent increase in payments. 

Hospital-based ESRD facilities have an estimated 0.5 percent increase in payments compared 

with freestanding facilities with an estimated 0.3 percent increase. 

We estimate that the aggregate ESRD PPS expenditures would increase by approximately 

$30 million from CY 2014 to CY 2015. This reflects a $0 million change from the payment rate 

update and a $30 million increase due to the updates to the outlier threshold amounts. As a result 

of the projected 0.3 percent overall payment increase, we estimate that there will be an increase 

in beneficiary co-insurance payments of 0.3 percent in CY 2015, which translates to 
CMS-1614-P 28 

 

approximately $10 million. 

2. Impacts for ESRD QIP 

 The overall economic impact of the ESRD QIP is an estimated $11.9 million in PY 

2017 and $7.2 million in PY 2018. In PY 2017, we expect the total payment reductions to be 

approximately $11.9 million, and the costs associated with the collection of information 

requirements for the validation of NHSN data feasibility study to be approximately $27 

thousand for all ESRD facilities. In PY 2018, we expect the total payment reductions to be 

approximately $7 million, and the costs associated with the collection of information 

requirements for the NHSN Healthcare Personnel Influenza Vaccination reporting measure to 

be approximately $248 thousand for all ESRD facilities. 

 The ESRD QIP will continue to incentivize facilities to provide high-quality care to 

beneficiaries. 

3. Impacts for DMEPOS 

a. Proposed methodology for making national price adjustments to DMEPOS fee schedule 

amounts based upon information gathered from the DMEPOS competitive bidding programs 

The proposed regulation proposes to adjust Medicare fee schedule amounts for items 

subject to DMEPOS CBPs beginning January 1, 2016, using information from the DMEPOS 

CBPs to be applied to items in non-competitive bidding areas. It is estimated that these 

adjustments would save over $7 billion for the 5-year period beginning January 1, 2016, and 

ending December 30, 2020. The estimated savings are primarily derived from price 

reductions for items. It is expected that most of the economic impact would result from 

reduced payment amounts. The ability of suppliers to furnish items is not expected to be 

impacted. 
CMS-1614-P 29 

 

b. Proposed phase in of special payment rules under the competitive bidding program for 

certain DME and enteral nutrition 

We believe that the proposed special payment rules for certain DME and enteral nutrition 

under the DMEPOS CBPs would not have a significant impact on beneficiaries and suppliers. 

Contract suppliers are responsible for furnishing items and services needed by the beneficiary, 

and the cost to suppliers for furnishing these items and services does not change based on 

whether or not the equipment and related items and services are paid for separately under a 

capped rental payment method. Because the supplier’s bids would reflect the cost of furnishing 

items in accordance with the new payment rules, we expect the overall savings to generally be 

the same as they are under the current payment rules. 

Furthermore, the proposed special payment rules would be phased under a limited 

number of areas first to evaluate their impact on the program, beneficiaries, and suppliers, 

including costs, quality, and access. Expanded use of the special payment rules in other areas or 

for other items would be addressed in future rulemaking. 

c. Proposed clarification of the statutory Medicare hearing aid coverage exclusion stipulated at 

section 1862(a)(7) of the Act 

This proposed rule proposes to clarify the scope of the Medicare coverage exclusion for 

hearing aids and withdraw coverage of bone anchored hearing aids. This proposal would not 

have a significant fiscal impact on the Medicare program, because the Medicare program 

expenditures for bone anchored hearing aids during the period CY2005 through CY 2013 are less 

than $9,000,000. This proposed rule, if finalized, would provide further guidance about 

coverage of DME with regard to the statutory hearing aid exclusion. The proposed rule, if 

finalized, would leave unchanged coverage of cochlear implants and brain stem implants, which 
CMS-1614-P 30 

 

are not considered hearing aids. 

d. Proposed update of the definition of minimal self-adjustment at 42 CFR §414.402 

The proposed rule proposes to update the definition of minimal self-adjustment to make 

clear that minimal self-adjustment means an adjustment that the beneficiary, caretaker for the 

beneficiary, or supplier of the device can perform and does not require the services of a certified 

orthotist (that is, an individual certified by either the American Board for Certification in 

Orthotics and Prosthetics, Inc., or the Board for Orthotist/Prosthetist Certification) or a physician 

as defined in section 1861(r) of the Act, a treating practitioner means a physician assistant, nurse 

practitioner, or clinical nurse specialist as defined in section 1861(aa)(5) of the Act, an 

occupational therapist as defined in 42 CFR §484.4, or physical therapist as defined in 42 CFR 

§484.4 in compliance with all applicable Federal and State licensure and regulatory 

requirements. If finalized, this revised definition would impact suppliers furnishing custom 

fitted orthotics that do not have this expertise. These suppliers would be required to hire an 

individual with expertise. For example, according to the Bureau of Labor Statistics Occupational 

Employment Statistics May 2013 the median pay for a certified orthotist is $30.27 an hour. The 

impact will vary according to the caseload of custom fitted orthotics provided by an individual 

supplier. 

e. Change of Ownership Rules to Allow Contract Suppliers to Sell Specific Lines of Business 

 This rule proposes to clarify the CHOW rules in order to limit disruption to the normal 

course of business for DME suppliers. This rule proposes to establish an exception under the 

current CHOW rules to allow CMS to sever a product category from a contract, incorporate the 

product category into a new contract, and transfer the new contract to a qualified new owner 

under certain specific circumstances. This proposed clarification would impact businesses in a 
CMS-1614-P 31 

 

positive way by allowing them to conduct everyday transactions with less disruption from our 

rules and regulations. 

II. Calendar Year (CY) 2015 End-Stage Renal Disease (ESRD) Prospective Payment 

System (PPS) 

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

On August 12, 2010, we published in the Federal Register a final rule (75 FR 49030 

through 49214) in which we implemented a case-mix adjusted bundled PPS for Medicare 

outpatient ESRD dialysis services beginning January 1, 2011, in accordance with section 

1881(b)(14) of the Act, as added by section 153(b) of MIPPA. On November 10, 2011, we 

published in the Federal Register a final rule (76 FR 70228 through 70316) in which we made a 

number of routine updates for CY 2012, implemented the second year of the transition to the 

ESRD PPS, made several policy changes and clarifications, and made technical changes. On 

November 9, 2012, we published in the Federal Register a final rule (77 FR 67450 through 

67531) in which we made a number of routine updates for CY 2013, implemented the third year 

of the transition to the ESRD PPS, and made several policy changes and reiterations. 

 On December 2, 2013, we published in the Federal Register a final rule (78 FR 72156 

through 72253) titled, Medicare Program; End-Stage Renal Disease Prospective Payment 

System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and 

Supplies” (hereinafter referred to as the CY 2014 ESRD PPS final rule). In that final rule, for the 

ESRD PPS, we made a number of routine updates for CY 2014, implemented the fourth and final 

year of the transition, implemented sections 632(a) and (b)(1) of ATRA, and made policy 

changes and clarifications. Specifically, in that rule, we finalized the following: 

• Update to the ESRD PPS base rate for CY 2015. An ESRD PPS base rate of $239.02 per 
CMS-1614-P 32 

 

treatment for renal dialysis services. This amount reflected the CY 2014 ESRD bundled 

(ESRDB) market basket update of 3.2 percent minus a multifactor productivity 

adjustment of 0.4 percent, that is, a 2.8 percent increase. This amount also reflected the 

application of the wage index budget-neutrality adjustment of 1.000454, the home 

dialysis training add-on budget neutrality adjustment factor of 0.999912, and the portion 

of the drug utilization adjustment that was transitioned for CY 2014, or $8.16. 

• Update to the wage index floor. A 0.05 reduction to the CY 2014 and CY 2015 wage 

index floor values, which resulted in a wage index floor value of 0.45 for CY 2014 and a 

wage index floor value of 0.40 for CY 2015 under the ESRD PPS. 

• Update to the outlier policy. Using CY 2012 claims data to update the outlier Medicare 

Allowable Payments (MAPs) and fixed dollar loss amounts for CY 2014, which resulted 

in updated fixed dollar loss amounts for adult and pediatric patients and MAPs for adult 

patients. Specifically, for pediatric beneficiaries, we finalized a fixed-dollar loss amount 

of $54.01 and a MAP amount of $40.49. For adult beneficiaries, we finalized a fixeddollar loss amount of $98.67 and a MAP amount of $50.25. 

• The application of ICD-10-CM diagnosis codes to the comorbidity payment adjustment. 

We discussed and provided a crosswalk from ICD-9-CM to ICD-10-CM for codes that 

are subject to the comorbidity payment adjustment. We finalized a policy under which 

all ICD-10-CM codes to which ICD-9-CM codes that are eligible for the comorbidity 

payment adjustment crosswalk are eligible for the comorbidity payment adjustment 

beginning on October 1, 2014 with two exceptions. As discussed further below, however, 

section 212 of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. No. 113-

93) provides that the Secretary may not adopt ICD-10 prior to October 1, 2015. HHS has 
CMS-1614-P 33 

 

announced that it intends to issue an interim final rule that will require use of ICD-10 

beginning October 1, 2015 and will continue to require use of ICD-9-CM through 

September 30, 2015. Accordingly, we plan to continue to require facilities to utilize 

ICD-9-CM codes to identify comorbidities eligible for the comorbidity payment 

adjustment through September 30, 2015, and then to use ICD-10-CM codes beginning 

October 1, 2015. 

• The self-dialysis and home dialysis training add-on adjustment. An increase to the selfdialysis and home dialysis training add-on adjustment from $33.44 to $50.16. 

• The delay in payment for oral-only ESRD-related drugs and biologicals until January 1, 

2016. We also delayed payment for oral-only ESRD-related drugs under the ESRD PPS 

until January 1, 2016. As discussed further below, section 217(a)(1) of PAMA amended 

section 632(b)(1) of ATRA to provide that the Secretary may not include oral-only 

ESRD-related drugs for payment under the ESRD PPS prior to January 1, 2024. 

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

1. ESRD PPS Base Rate 

In the CY 2011 ESRD PPS final rule (75 FR 49071 through 49083), we discussed the 

development of the ESRD PPS per treatment base rate that is codified in the Medicare 

regulations at §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 
CMS-1614-P 34 

 

Act), updated to CY 2011, and represented the average per treatment Medicare Allowable 

Payment (MAP) for composite rate and separately billable services. In accordance with section 

1881(b)(14)(D) of the Act and regulations at §413.230, the ESRD PPS base rate is adjusted for 

the patient-specific case-mix adjustments, applicable facility adjustments, geographic differences 

in area wage levels using an area wage index, as well as applicable outlier payments or training 

payments. 

a. Changes to the Drug Utilization Adjustment 

i. The Drug Utilization Adjustment Finalized in the CY 2014 ESRD PPS Final Rule 

 Section 1881(b)(14)(I) of the Act, as added by section 632(a) of the American Taxpayer 

Relief Act of 2012 (ATRA), required that, for services furnished on or after January 1, 2014, the 

Secretary shall make reductions to the single payment for renal dialysis services to reflect the 

Secretary’s estimate of the change in the utilization of ESRD-related drugs and biologicals 

(excluding oral-only ESRD-related drugs) by comparing per patient utilization data from 2007 

with such data from 2012. Section 1881(b)(14)(I) further required that in making the reductions, 

the Secretary take into account the most recently available data on Average Sales Prices (ASP) 

and changes in prices for drugs and biologicals reflected in the ESRD market basket percentage 

increase factor under section 1881(b)(14)(F). Consistent with these requirements, in CY 2014, 

we finalized a payment adjustment to the CY 2014 ESRD PPS base rate that reflected the change 

in utilization of ESRD-related drugs and biologicals from CY 2007 to CY 2012. 

 Specifically, we finalized the drug utilization adjustment amount of $29.93 per treatment, 

and finalized a policy to implement this amount over a 3- to 4-year transition period. For CYs 

2014 and 2015, we stated that we would implement the transition by offsetting the payment 

update by a portion of the reduction amount necessary to create an overall impact of a zero 
CMS-1614-P 35 

 

percent for facilities from the previous year’s payments. For example, in CY 2014 we finalized a 

per treatment drug utilization adjustment amount for the first transition year of $8.16 or 3.3 

percent, which represented the CY 2014 ESRDB market basket update minus productivity and 

other impacts to create an overall impact of zero percent. For a complete discussion of the 

methodology for computing the drug adjustment please see the CY 2014 ESRD PPS final rule 

(78 FR 72161 through 72170). 

ii. PAMA Changes to the Drug Utilization Adjustment 

 On April 1, 2014, Congress enacted PAMA. Section 217(b), titled Mitigation of the 

Application of Adjustment to ESRD Bundled Payment Rate to Account for Changes in the 

Utilization of Certain Drugs and Biologicals, amends section 1881(b)(14)(I) of the Act by 

inserting “and before January 1, 2015” after January 1, 2014. This amendment effectively 

eliminates the remaining years of the drug utilization adjustment transition. In its place, the 

PAMA amendments to section 1881(b)(14)(F)(i) dictate what the market basket increase factor 

will be for 2015 and how it will be reduced in 2016 through 2018. In particular, PAMA section 

217(b)(2)(C) amended section 1881(b)(14)(F)(i) by adding subclause (III), which provides that 

“[n]otwithstanding subclauses (I) and (II), in order to accomplish the purposes of subparagraph 

(I) with respect to 2015, the increase factor described in subclause (I) for 2015 shall be 0.0 

percent.” We interpret subclause (III) to mean that the market basket increase factor less the 

productivity adjustment for 2015 is 0.0 percent. The PAMA amendments also provide for a 

payment reduction in lieu of the drug utilization adjustment in 2016 through 2018. In particular, 

PAMA section 217(b)(2)(ii) further amends section 1881(b)(14)(i)(I) by adding at the end the 

following new sentence, “ In order to accomplish the purpose of subparagraph (I) with respect to 

2016, 2017, and 2018, after determining the increase factor described in the preceding sentence 
CMS-1614-P 36 

 

for each of 2016, 2017, and 2018, the Secretary shall reduce such increase factor by 1.25 

percentage points for each of 2016 and 2017 and by 1 percentage point for 2018.” We interpret 

this provision as requiring us to reduce the market basket increase factor for 2016 through 2018 

by the percentages prescribed in the statute. 

b. Payment Rate Update for CY 2015 

 As discussed in section II.B.2 of this proposed rule, section 1881(b)(14)(F)(i) of the Act, 

as added by section 153(b) of MIPPA and amended by section 3401(h) of the Affordable Care 

Act, provides that, beginning in 2012, the ESRD PPS payment amounts are required to be 

annually increased by the rate of increase in the ESRD market basket, reduced by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. If PAMA had not 

stipulated a 0.0 percent payment update for CY 2015, we would have proposed a payment update 

of 1.6 percent, (a 2.0 percent ESRDB market basket update less a 0.4 percent productivity 

adjustment). In accordance with section 1881(b)(14)(F)(i)(III) of the Act, as added by PAMA 

section 217(b)(2)(C), however, we propose a 0.0 percent update to the CY 2014 ESRD PPS base 

rate of $239.02 for CY 2015. 

c. CY 2015 ESRD PPS Wage Index Budget Neutrality Adjustment 

 For CY 2015 we propose to apply the wage index budget-neutrality adjustment factor of 

1.001306 to the unadjusted CY 2014 and CY 2015 ESRD PPS base rate (that is, $239.02), 

yielding a proposed CY 2015 ESRD PPS wage-index budget-neutrality adjusted base rate of 

$239.33 ($239.02 X 1.001306 = $239.33). 

d. Labor-Related Share 

As discussed in section II.2.e, as part of the proposed ESRDB market basket rebasing and 

revision, we are proposing to update the labor-related share value from 41.737 percent to 50.673 
CMS-1614-P 37 

 

percent. We note that some ESRD facilities are adversely affected by this proposal. For 

example, rural facilities and facilities located in CBSA areas with wage indexes below 1 will 

experience reduced payments due to an increase in the labor-related share, while other facilities 

located in CBSA area where wage indices are above 1 will experience increased payments. 

While we are proposing the new labor-related share under the ESRD PPS payment system 

computed at 50.673 percent, we propose to implement this value using a 2-year 50/50 blend 

transition. Therefore, for CY 2015 we propose to apply 50 percent of the value of the current 

labor-related share under the ESRD PPS (41.737) and 50 percent of the value of the new laborrelated share, (50.673), add the values together and divide by two, for a CY 2015 labor-related 

value of 46.205 ((41.737 + 50.673)/2 = 46.205). Beginning in CY 2016 we propose to apply 

100 percent of the proposed labor-related share value of 50.673 percent. We propose to continue 

to apply a labor-related share value of 50.673 percent until such time in the future the ESRDB 

market basket is again rebased in computing a wage index-adjusted base rate for ESRD facilities. 

We believe that this approach is similar to the 50/50 blend transition proposed for the CY 2015 

wage indexes and discussed in section II.3.c of this rule and that a 2- year transition is necessary 

to allow ESRD facilities time to adjust to the new labor related-share value. 

We note that we considered implementing the computed labor related share value of 

50.673 for CY 2015, but that would have increased the CY 2015 proposed wage index budget 

neutrality factor to 1.002081. This increase would have resulted in a decrease in CY 2015 

Medicare payments to rural facilities of 1.3 percent, and an increase to urban facilities 0.5 

percent. When we apply the transition labor-related share value of 46.205, the disparity in 

impacts for rural and urban facilities is reduced to less than 1.0 percent. Specifically, rural 

facilities would experience a decrease in payments of 0.5 percent and urban facilities would 
CMS-1614-P 38 

 

experience an increase in payments of 0.4 percent. . (For more information of the CY 2015 

Impact of Proposed Changes in Payments to ESRD Facilities for CY 2015 ESRD proposed rule, 

see section XV of this rule). Therefore, we believe a 2-year transition strikes an appropriate 

balance between ensuring that ESRD PPS payments are as accurate and stable as possible while 

giving facilities time to adjust to the new labor-related share factor. 

In summary, we propose a CY 2015 ESRD PPS base rate update of $239.33. This 

reflects a 0.0 percent payment update consistent with section 1881(b)(14)(F)(i)(III), as added by 

section 217(b)(2) of PAMA. This base rate reflects the CY 2015 proposed wage index budget 

neutrality factor of 1.001306, and a labor-related share value of 46.205. 

2. ESRD Bundled Market Basket and Labor-Related Share

a. Background 

In accordance with section 1881(b)(14)(F)(i) of the Act, beginning in 2012, the ESRD 

payment amounts are required to be annually increased by an ESRD market basket increase 

factor that is reduced by the productivity adjustment in section 1886(b)(3)(B)(xi)(II) of the Act. 

The application of the productivity adjustment may result in the increase factor being less than 

0.0 for a year and may result in payment rates for a year being less than the payment rates for the 

preceding year. The statute also provides that the market basket increase factor should reflect the 

changes over time in the prices of an appropriate mix of goods and services used to furnish renal 

dialysis services. 

In the CY 2011 ESRD PPS final rule (75 FR 49151 through 49162), we established an 

ESRD Bundled market basket using CY 2008 as the base year. This market basket was used to 

annually update the ESRD base rate payments for CY 2012, CY 2013, and CY 2014. In this CY 

2015 ESRD PPS proposed rule, we are proposing to revise and rebase the ESRDB market basket 
CMS-1614-P 39 

 

to a base year of CY 2012. We note that PAMA dictates a market basket update for CY 2015 of 

0.0 percent and a reduction to the market basket updates in CYs 2016 through 2018 (by 1.25 

percentage points for each of 2016 and 2017 and by 1 percentage point for 2018). 

The term “market basket” refers to the mix of goods and services needed to produce 

ESRD care, and is also commonly used to denote the input price index that includes both weights 

(mix of goods and services) and price factors. The term “ESRDB market basket” as used in this 

proposed rule refers to the ESRDB input price index. 

The proposed CY 2012-based ESRDB market basket represents the costs of operating 

and capital-related costs. The percentage change in the ESRDB market basket reflects the 

average change in the price of a fixed set of goods (both operating and capital) and services 

purchased by ESRD facilities in providing renal dialysis services. For further background 

information, see the CY 2011 final rule with comment period (75 FR 49151 through 49162). 

For purposes of the ESRDB PPS, the ESRDB market basket is a fixed-weight 

(Laspeyres-type) price index. A Laspeyres-type index compares the cost of purchasing a 

specified mix of goods and services in a selected base period to the cost of purchasing that same 

group of goods and services at current prices. The effects on total expenditures resulting from 

changes in the quantity or mix of goods and services purchased subsequent or prior to the base 

period are, by design, not considered. 

We construct the market basket in three steps. The first step is to select a base period and 

estimate total base period expenditure shares for mutually exclusive and exhaustive spending 

categories. We use total costs for operating and capital expenses. These shares are called “cost” 

or “expenditure” weights. The second step is to match each expenditure category to a price/wage 

variable, called a price proxy. We draw these price proxy variables from publicly available 
CMS-1614-P 40 

 

statistical series published on a consistent schedule, preferably at least quarterly. The final step 

involves multiplying the price series for each spending category by the cost weight for that 

category. The sum of these products (that is, weights multiplied by proxy index levels) for all 

cost categories yields the composite index level of the market basket for a given quarter or year. 

Repeating the third step for other quarters and years produces a time series of market basket 

index levels, from which we can calculate rates of growth. 

The market basket represents a fixed-weight index because it answers the question of 

how much more or less it would cost, at a later time, to purchase the same mix of goods and 

services that was purchased in the base period. 

We are proposing to use CY 2012 as the base year for the proposed rebased and revised 

ESRDB market basket cost weights. The cost weights for this proposed ESRDB market basket 

are based on the cost report data for independent ESRD facilities. We refer to the market basket 

as a CY market basket because the base period for all price proxies and weights are set to CY 

2012 = 100. Source data included CY 2012 Medicare cost reports (Form CMS-265-11), 

supplemented with 2012 data from the U.S. Census Bureau’s Services Annual Survey (SAS). 

Medicare cost reports from hospital-based ESRD providers were not used to construct the 

proposed ESRDB market basket because data from independent ESRD facilities tend to better 

reflect the actual cost structure faced by the ESRD facility itself, and are not influenced by the 

allocation of overhead over the entire institution, as can be the case with hospital-based 

providers. This approach is consistent with our standard methodology used in the development 

of other market baskets. 

Consistent with our discussion in the CY 2011 final rule with comment period (75 FR 

49153), and as further discussed below, to implement section 1881(b)(14)(F)(i) of the Act we 
CMS-1614-P 41 

 

propose to revise and rebase the market basket so the cost weights and price proxies reflect the 

mix of goods and services that underlie ESRD bundled operating and capital costs for CY 2012. 

b. Rebasing and Revision of the ESRD Bundled Market Basket 

The terms "rebasing" and "revising", while often used interchangeably, actually denote 

different activities. Rebasing means shifting the base year for the structure of costs of the input 

price index (for example, for this proposed rule, we propose to shift the base year cost structure 

from CY 2008 to CY 2012). Revising means changing data sources, cost categories, price 

proxies, and/or methodology used in developing the input price index. We are proposing both to 

rebase and revise the ESRDB market basket to reflect CY 2012 total cost data. 

We selected CY 2012 as the new base year because 2012 is the most recent year for 

which relatively complete Medicare cost report (MCR) data are available. In developing the 

proposed market basket, we reviewed ESRD expenditure data from ESRD MCRs (CMS Form 

265-11) for CY 2012 for each freestanding ESRD facility that reported expenses and payments. 

The CY 2012 cost reports are those with cost reporting periods beginning on or after January 1, 

2012 and before December 31, 2012. We propose to maintain our policy of using data from 

freestanding ESRD facilities because freestanding ESRD data reflect the actual cost structure 

faced by the ESRD facility itself. In contrast, expense data for a hospital-based ESRD reflect the 

allocation of overhead over the entire institution. Due to this method of allocation, the expenses 

of each hospital-based component may be skewed. 

We developed cost category weights for the proposed CY 2012-based ESRDB market 

basket in two stages. First, we derived base weights for nine major categories (Wages and 

Salaries, Employee Benefits, Medical Supplies, Lab Services, Housekeeping & Operations, 

Pharmaceuticals, Administrative and General, Capital-Related Building & Fixed Equipment, and 
CMS-1614-P 42 

 

Capital-Related Machinery) from the ESRD MCRs. Second, we are proposing to divide the 

Administrative & General cost category into further detail using 2012 U.S. Census Bureau 

Services Annual Survey (SAS) Data for the industry Kidney Dialysis Centers (NAICS 621492). 

We apply the 2012 distributions from the SAS data to the 2012 “Administrative & General” cost 

weight to yield the more detailed 2012 cost weights. This is similar to the methodology we used 

to break the 2008-based Administrative & General Costs into more detail for the ESRDB market 

basket as detailed in the CY 2011 ESRD final rule (75 FR 49154 through 49159). The main 

difference is that in the 2008-based market basket we relied on data from the U.S. Census Bureau 

Business Expenses Survey (BES). The BES data was the predecessor to the SAS. The Census 

Bureau SAS data are published annually, with the most recent data available being 2012. For 

more information on the SAS data, see 

http://www.census.gov/services/sas/about_the_surveys.html. 

We are proposing to include a total of 20 detailed cost categories for the proposed CY 

2012-based ESRDB market basket, which is four more cost categories than the CY 2008-based 

ESRDB market basket. In addition, we are proposing to further decompose both the Wages and 

Salaries and Employee Benefits cost categories into four more detailed cost categories reflecting 

the occupational mix of full time equivalents (FTEs) at ESRD facilities. The four detailed 

occupational categories that will underlie both Wages and Salaries and Employee Benefits are: 

(1) Health-related workers; (2) Management workers; (3) Administrative workers; and (4) 

Service workers. Having more detailed cost categories for these compensation costs enables 

them to be proxied more precisely. We are also proposing to collapse the Professional Fees and 

All Other Services cost categories into single categories rather than splitting those categories into 

Labor-Related and Non-Labor-Related Services. We will continue to assume that 87 percent of 
CMS-1614-P 43 

 

Professional Fees are labor-related costs and will be included in the proposed labor-related share. 

In addition, we are proposing to revise our labels for All Other Materials to Medical Materials 

and Supplies, Laboratories to Lab Services, and All Other Labor-Related / Non Labor-Related to 

All Other Goods and Services. A more thorough discussion of our proposals is provided below. 

i. Cost Category Weights 

Using Worksheets A and B from the CY 2012 Medicare cost reports, we first computed 

cost shares for nine major expenditure categories: Wages and Salaries, Employee Benefits, 

Pharmaceuticals, Supplies, Lab Services, Administrative and General (A&G), Housekeeping and 

Operations, Capital-Related Building & Equipment, and Capital-Related Machinery. Edits were 

applied to include only cost reports that had total costs greater than zero. In order to reduce 

potential distortions from outliers in the calculation of the cost weights for the major expenditure 

categories, cost values for each category less than the 5th percentile or greater than the 95th 

percentile were excluded from the computations. The resulting data set included information 

from approximately 4,700 independent ESRD facilities’ cost reports from an available pool of 

5,333 cost reports. Expenditures for the nine cost categories as a proportion of total expenditures 

are shown in Table 1. 

Table 1 presents the proposed CY 2012-based ESRDB and CY 2008-based ESRDB 

market basket major cost weights as derived directly from the MCR data. Following the table, 

we describe the sources of the major category weights and their subcategories in the proposed 

 
CMS-1614-P 44 

 

CY 2012-based ESRDB market basket. 

TABLE 1: PROPOSED CY 2012-BASED ESRDB MARKET BASKET MAJOR COST 

WEIGHTS 

Cost Category 

Proposed CY 2012-

based ESRDB Market 

Basket 

CY 2008-based ESRDB 

Market Basket 

Wages and Salaries 31.839% 26.338% 

Employee Benefits 6.570% 5.163% 

Pharmaceuticals 16.510% 26.358% 

Supplies 10.097% 9.726% 

Lab Services 1.532% 0.356% 

Housekeeping & Operations 3.785% 3.604% 

Administrative & General 

(residual) 

17.419% 17.594% 

Capital-related Building & Fixed 

Equipment 

8.378% 7.910% 

Capital-related Machinery 3.870% 2.951% 

Note: Totals may not sum to 100.000% due to rounding 

Some costs are reported on the Medicare cost report but are not included in the ESRD 

bundled payment. For example, we removed the expenses related to vaccine costs from total 

expenditures since these are excluded from the ESRD bundled payment, but reported on the 

Medicare cost report. 

We are proposing to expand the expenditure categories developed from the Medicare cost 

reports to allow for more detailed expenditure decomposition. To expand these cost categories, 

SAS data were used because the Medicare cost reports do not collect detailed information on the 

items of interest. Those categories include: benefits for all employees, professional fees, 

telephone, utilities, and all other goods and services. We chose to separately break out these 

categories to more accurately reflect ESRD facility costs. We describe below how the initially 
CMS-1614-P 45 

 

computed categories and weights from the cost reports were modified to yield the final 2012 

ESRDB market basket expenditure categories and weights presented in this proposed rule.

Wages and Salaries 

The weight for wages and salaries for direct patient care for 2012 was initially derived 

from Worksheet B of the Medicare cost report. However, because the cost center for direct 

patient care salaries does not include all other wage and salary costs for non-health workers and 

physicians, it was necessary to derive a methodology to include all salaries, not just direct patient 

care salaries, in order to calculate the appropriate market basket cost weight. This was 

accomplished in the following steps. 

1) From the trial balance of the cost report (Worksheet A), we computed the ratio of salaries 

to total costs in each of the following cost centers: housekeeping and operations, 

employee benefits for direct patient care, Administrative & General, Supplies, 

Laboratories, and Pharmaceuticals. 

2) We then multiplied the ratios computed in step 1 by the total costs for each corresponding 

cost center from Worksheet B. This provided us with an estimate of salaries other than 

direct-patient care for each cost center. 

3) The estimated salaries for each of the cost centers on Worksheet B estimated in step 2 

were subsequently summed and added to the direct patient care salary figure (resulting in 

a new total salaries figure). 

4) The estimated non-direct patient care salaries (see step 2) were then subtracted from their 

respective cost categories to avoid double-counting their values in the total costs. 

As a result of this process, we moved from an estimated Wages and Salaries cost weight 

of 23.242 percent (as estimated using only direct patient care salaries as a percent of total costs) 
CMS-1614-P 46 

 

to a weight of 31.839 percent (capturing both direct patient care salaries and all other salary costs 

and, again, dividing that by total costs found on the Medicare cost report), as seen in Table 2. 

The final adjustment made to this category is to include contract labor costs. These costs 

appear on the Medicare cost report; however, they are embedded in the Administrative and 

General category and cannot be disentangled using the Medicare cost reports alone. To move the 

appropriate expenses from the A&G category to Wages and Salaries, we used data from the 2012 

SAS, which reported 2.3 of total expenses were spent on contract labor costs. We allocated 80 

percent of that figure to Wages and Salaries. At the same time, we subtracted that same amount 

from A&G, where the contract labor expenses would be reported on the cost report. The 80 

percent figure that was used was determined by taking salaries as a percentage of total 

compensation (excluding contract labor) from the 2012 MCR data. The resulting cost weight for 

Wages and Salaries increases to 33.650 percent. 

TABLE 2: ESRD WAGES & SALARIES SHARE DETERMINATION 

Components 

Cost 

Share 

08 MCR Salaries Direct Patient Care (DPC) 22.297% 

08 MCR Additional Salaries Weight (other than DPC) 4.041% 

08 Wage & Salary Weight normalized after adding separately billable services into 

the bundle -1.373% 

08 Contract Labor (wages) (80% of BES CL share) 1.790% 

08 Final Wage & Salary Weight 26.755% 

12 MCR Salaries Direct Patient Care (DPC) 23.242% 

12 MCR Additional Salaries Weight (other than DPC) 8.597% 

12 Contract Labor (80% of SAS CL share) 1.811% 

12 Final Wage & Salary Weight 33.650% 

Benefits 

The Benefits weight was derived from the MCR data for employee benefits for direct 

patient care and supplemented with data from the 2012 SAS to account for non-direct patient 
CMS-1614-P 47 

 

care benefits. The cost report only reflects health-related benefit costs associated with direct 

patient care; that is, it does not reflect retirement benefits. In order to include the benefits related 

to non-direct patient care, we estimated this marginal increase from the SAS Benefits weight. 

Unlike the MCR, data the SAS benefits share includes expenses related to the retirement and 

pension benefits. In order to be consistent with the cost report definitions we do not want to 

include the costs associated with retirement and pension benefits in the cost share weights. 

These costs are relatively small compared to the costs for the health related benefits, accounting 

for only 2.7 percent of the total benefits costs as reported on the SAS. Our method produced a 

Benefits (both direct patient care and non-direct patient care) weight that was 1.824 percentage 

points larger (8.394 vs. 6.570) than the Benefits weight for direct patient care calculated directly 

from the cost reports. To avoid double-counting and to ensure all of the market basket weights 

still totaled 100 percent, we removed this additional 1.824 percentage point for Benefits from the 

residual category. 

The final adjustment made to this category is to include contract labor costs. Once again, 

these costs appear on the Medicare cost report; however, they are embedded in the 

Administrative and General category and cannot be disentangled using the Medicare cost report 

alone. We applied 20 percent of total contract labor costs, as estimated using the SAS, to the 

Benefits cost weight calculated from the cost reports. The resulting cost weight for Benefits 

increases to 8.847 percent. 

The Table 3 compares the 2008-based Benefits cost share derivation as detailed in the CY 

2011 ESRD final rule (75 FR 49155-49156) to the proposed 2012-based Benefits cost share 

derivation as explained above. 
CMS-1614-P 48 

 

TABLE 3: ESRD BENEFIT SHARE DETERMINATION 

Components Cost Share 

08 MCR Benefits 5.163% 

08 BES Additional Benefits Weight (Health only) 1.143% 

08 Contract Labor (20% of BES benefits share) 0.448% 

08 Final Benefit Weight 6.754% 

12 MCR Benefits 6.570% 

12 SAS Additional Benefits Weight (Health only) 1.824% 

12 Contract Labor (20% of SAS benefits share) 0.453% 

12 Final Benefit Weight 8.847% 

Utilities 

We developed a weight for Utility expenses using the 2012 SAS data, as utilities are not 

separately identified on the Medicare cost report. The SAS data reports the percentage of 

expenses for ‘purchased fuels (except motor fuels)’, ‘purchased electricity’, and ‘water, sewer, 

refuse, and other utilities.’ We applied these ratios to the administrative and general cost share 

(net of contract labor and additional benefits). The resulting Electricity, Fuel (Natural Gas), and 

Water and Sewerage weights in the proposed 2012 ESRDB market basket are 0.973, 0.101, and 

0.765 percent, respectively; together these categories yield a combined Utilities cost weight of 

1.838 percent. 

Pharmaceuticals 

The proposed ESRDB market basket includes expenditures for all drugs, including 

formerly separately billable drugs and ESRD-related drugs that were covered under Medicare 

Part D before the ESRD PPS was implemented. We were able to calculate an expenditure 

weight for pharmaceuticals directly from the following cost centers on Worksheet B: columns 11 

‘Drugs Included in Composite Rate’; 12 ‘ESAs’; 13 ‘ESRD-Related Drugs; and drug expenses 

reported on line 5 column 10, ‘Non-ESRD related drugs.’ The Non-ESRD related drugs would 
CMS-1614-P 49 

 

include drugs and biologicals, administered during dialysis for non-ESRD related conditions as 

well as oral-only drugs. Since these are costs to the facility for providing ESRD treatment to the 

patient we propose to include them in the drug cost share weight. Vaccine expenditures, which 

are mandated as separately reimbursable, were excluded when calculating this cost weight. 

Section 1842(o)(1)(A)(iv) of the Act requires that influenza, pneumococcal, and hepatitis B 

vaccines described in subparagraph (A) or (B) of section 1861(s)(10) of the Act be paid based on 

95 percent of average wholesale price (AWP) of the drug. Since these drugs are excluded from 

other prospective payment systems, we exclude them from the proposed ESRDB market basket, 

as well. 

Finally, to avoid double-counting, the weight for the Pharmaceuticals category was 

reduced to exclude the estimated share of non-direct patient care salaries and benefits associated 

with the applicable drug cost centers referenced above. This resulted in a proposed ESRDB 

market basket weight for Pharmaceuticals of 16.510 percent. ESA expenditures accounted for 

12.383 percentage points of the Pharmaceuticals weight, and all other drugs accounted for the 

remaining 4.127 percentage points (.438 percent for Drugs Included in Composite Rate, 3.534 

percent for ESRD-Related Drugs, and 0.155 percent for Non-ESRD related drugs). 

The 9-percentage point decrease in the pharmaceutical share between 2008 and 2012 

(25.052 percent to 16.510 percent) is due largely to the drop in drug utilization. The drug 

percentage of the base rate used in 2011 was about 31 percent; however, the analysis conducted 

for the drug utilization adjustment showed that the drug portion of the base rate in 2014 would 

have fallen to only be 22 percent of the base rate had it been fully implemented. The cost report 

data corroborate the drop in drug costs for facilities over the same time frame. 

Supplies 
CMS-1614-P 50 

 

We calculated the weight for Supplies included in the bundled rate using the costs 

reported in the Supplies cost center (column 7 on Worksheet B) of the Medicare cost report. 

This total was divided by total expenses to derive a weight for the Supplies component in the 

ESRDB market basket. Finally, to avoid double-counting, the weight for the Supplies category 

was reduced to exclude the estimated share of non-direct patient care salaries and benefits 

associated with this cost center. The resulting proposed 2012-based ESRDB market basket 

weight for Supplies is 10.097 percent. 

Lab Services 

We calculated the weight for Lab Services included in the bundled rate using the costs 

reported in the Laboratory cost center (column 8 on Worksheet B) of the Medicare cost report. 

This total was divided by total expenses to derive a weight for the Lab component in the ESRDB 

market basket. Finally, to avoid double-counting, the weight for the Lab services category was 

reduced to exclude the estimated share of non-direct patient care salaries and benefits associated 

with this cost center. The resulting proposed 2012-based ESRDB market basket weight for Lab 

Services is 1.532 percent. 

The cost weight for lab services is substantially lower than the 2008 ESRDB market 

basket lab weight of 5.497 percent. This is due to the change in the method used to determine 

lab costs. In 2008, we relied on MCR data for the cost share weight; however, the majority of 

lab services were performed by labs outside of the dialysis facility and those costs were not 

reported on the MCR. Therefore, in the 2008 ESRDB market basket we inflated the expenses 

reported for labs in ESRD facilities to reflect the use from other provider types. This adjustment 

factor was estimated based on the lab payment to dialysis facilities relative to the lab fee 

payment to other providers. For the rebased ESRDB market basket, the 2012 cost report data 
CMS-1614-P 51 

 

represents the expenses under the bundled payment system, and all of the expenses related to lab 

fees (whether in house or contracted through an outside lab) are reported in the MCR data. 

Housekeeping & Operations 

We calculated the weight for Housekeeping and Operations included in the bundled rate 

using the costs reported on worksheet A, column 8, lines 3 & 4 of the Medicare Cost Report. 

This total was divided by total expenses to derive a weight for the Housekeeping and Operations 

component in the ESRDB market basket. Finally, to avoid double-counting, the weight for the 

Housekeeping & Operations category was reduced to exclude the estimated share of non-direct 

patient care salaries and benefits associated with this cost center. The resulting proposed 2012-

based ESRDB market basket weight for Housekeeping and Operations is 3.785 percent.

Administrative and General (A&G) 

We computed the proportion of total A&G expenditures using the A&G cost center data 

from Worksheet B (column 9) of the Medicare cost reports. As described above, we exclude 

contract labor from this cost category and apportion these costs to the salary and benefits cost 

weights. Similar to other expenditure category adjustments, we then reduced the computed 

weight to exclude salaries and benefits associated with the A&G cost center and the additional 

benefits for non-direct patient care. The resulting A&G cost weight is 13.331 percent. This 

A&G cost weight is then fully apportioned to derive detailed cost weights for Utilities, 

Telephone, Professional Fees, and All Other Goods and Services. 

Professional Fees 

A separate weight for Professional Fees was developed using the 2012 SAS data. 

Professional fees include fees associated with the following: purchased professional & technical 

services (such as accounting, bookkeeping, legal, management, consulting, and other 
CMS-1614-P 52 

 

professional services fees) and purchased advertising & promotional services. To estimate 

professional fees, we first calculated the ratio of SAS professional fees to SAS expenses that 

match the A&G expenses from the cost reports. We then applied this ratio to the A&G total cost 

weight to estimate the proportion of ESRD facility professional fees. The resulting weight for 

the proposed 2012-based ESRDB market basket is 0.617 percent. An estimated 87 percent of the 

expenses are considered labor-related and subsequently included in the proposed labor-related 

share, which is described in more detail below. 

Telephone 

Because telephone service expenses are not separately identified on the Medicare cost 

report, we developed a Telephone Services weight using the 2012 SAS expenses. We estimated 

a ratio of telephone services expenses to total administrative and general expenses from SAS. 

We applied this ratio to the total A&G cost weight from the cost reports to estimate the 

proportion of ESRD facility telephone expenses. The resulting proposed 2012-based ESRDB 

market basket cost weight for Telephone Services is 0.468 percent. 

All Other Goods and Services 

A separate weight for All Other Goods and Services was developed using the 2012 SAS 

data. All other Goods and Services include expenses for purchased software, professional 

liability insurance, data processing and other purchased computer services, and all other 

operating expenses not otherwise captured. We estimated a ratio of All Other Goods and 

Services expenses to Total Administrative and General expenses from SAS. We then applied 

this ratio to the total A&G cost weight from the cost reports to estimate the cost weight for 

ESRD facility All Other Goods and Services. The resulting proposed 2012-based ESRDB 

market basket cost weight for All Other Goods and Services is 10.407 percent. 
CMS-1614-P 53 

 

Capital 

We developed a market basket weight for the Capital category using data from 

Worksheet B of the Medicare cost reports. Capital-related costs include depreciation and lease 

expense for buildings, fixtures, movable equipment, property taxes, insurance, the costs of 

capital improvements, and maintenance expense for buildings, fixtures, and machinery. Because 

housekeeping as well as operation & maintenance costs are included in the Worksheet B cost 

center for Capital-Related costs (Worksheet B, column 2), we excluded the costs for these two 

categories and developed a separate expenditure category for housekeeping & operations, as 

detailed above. Similar to the methodology used for other market basket cost categories with a 

salaries component, we computed a share for non-direct patient care salaries and benefits 

associated with the Capital-related Machinery cost center. We used Worksheet B to develop two 

capital-related cost categories, one for Buildings and Equipment (based on worksheet B column 

2 less housekeeping & operations), and one for Machinery (based on worksheet B column 4). 

We reasoned this delineation was particularly important given the critical role played by dialysis 

machines. Likewise, because price changes associated with Buildings and Equipment could 

move differently than those associated with Machinery, we felt that separate price proxies would 

be more appropriate. The resulting proposed 2012-based ESRDB market basket weights for 

Capital-related Buildings and Equipment and Capital-related Machinery are 8.378 and 3.870 

percent, respectively. 

Table 4 lists all of the cost categories and cost weights in the proposed CY 2012 ESRDB 

market basket compared to the cost categories and cost weights in the CY 2008 ESRDB market 

basket. 
CMS-1614-P 54 

 

TABLE 4: COMPARISON OF THE PROPOSED CY 2012-BASED ESRDB MARKET 

BASKET COST CATEGORIES & WEIGHTS AND THE CY 2008-BASED ESRDB 

MARKET BASKET COST CATAGORIES & WEIGHTS. 

2008 Cost Category 2008 Cost 

Weight 

Proposed 

2012 Cost 

Weight 

Proposed 2012 Cost 

Category 

Total 100.000% 100.000% Total 

 Compensation 33.509% 42.497% Compensation 

 Wages and Salaries 26.755% 33.650% Wages and Salaries 

 Employee Benefits 6.754% 8.847% Employee Benefits 

 Utilities 1.264% 1.839% Utilities 

 Electricity 0.621% 0.973% Electricity 

 Natural Gas 0.127% 0.101% Natural Gas 

 Water and Sewerage 0.516% 0.765% Water and Sewerage 

 All Other Materials 39.765% 28.139% 

 Medical Materials and 

Supplies 

 Pharmaceuticals 25.052% 16.510% Pharmaceuticals 

 Supplies 9.216% 10.097% Supplies 

 Lab Services 5.497% 1.532% Lab Services 

 All Other Services 15.929% 15.277% 

 All Other Goods and 

Services 

 Telephone 0.597% 0.468% Telephone Service 

 Housekeeping and 

Operations 2.029% 3.785% 

 Housekeeping and 

Operations 

 Labor-Related Services 2.768% 

 Prof. Fees: Labor-related 1.549% 0.617% 

 Professional Fees (Laborrelated and NonLabor-related 

services) 

 All Other Labor-related 1.219% 

 NonLabor-Related Services 10.535% 10.407% All Other Goods and Services 

 Prof. Fees: Nonlaborrelated 0.224% 

 All Other Nonlaborrelated 10.311% 

 Capital Costs 9.533% 12.248% Capital Costs 

 Capital Related-Building 

and Equipment 7.459% 8.378% 

 Capital Related-Building and 

Equipment 

 Capital Related-Machinery 2.074% 3.870% Capital Related-Machinery 

Note: Totals may not sum to 100.000 percent due to rounding 
CMS-1614-P 55 

 

ii. Proposed Price Proxies for the CY 2012 ESRDB Market Basket 

 After developing the cost weights for the proposed CY 2012-based ESRDB market 

basket, we selected the most appropriate wage and price proxies currently available to represent 

the rate of price change for each expenditure category. We base the price proxies on Bureau of 

Labor Statistics (BLS) data and group them into one of the following BLS categories: 

• Employment Cost Indexes. Employment Cost Indexes (ECIs) measure the rate of 

change in employment wage rates and employer costs for employee benefits per hour worked. 

These indexes are fixed-weight indexes and strictly measure the change in wage rates and 

employee benefits per hour. ECIs are superior to Average Hourly Earnings (AHE) as price 

proxies for input price indexes because they are not affected by shifts in occupation or industry 

mix, and because they measure pure price change and are available by both occupational group 

and by industry. The industry ECIs are based on the North American Classification System 

(NAICS) and the occupational ECIs are based on the Standard Occupational Classification 

System (SOC). 

• Producer Price Indexes. Producer Price Indexes (PPIs) measure price changes for 

goods sold in other than retail markets. PPIs are used when the purchases of goods or services 

are made at the wholesale level. 

• Consumer Price Indexes. Consumer Price Indexes (CPIs) measure change in the 

prices of final goods and services bought by consumers. CPIs are only used when the purchases 

are similar to those of retail consumers rather than purchases at the wholesale level, or if no 

appropriate PPIs were available. 

We evaluated the price proxies using the criteria of reliability, timeliness, availability, 

and relevance: 
CMS-1614-P 56 

 

• Reliability. Reliability indicates that the index is based on valid statistical methods and has 

low sampling variability. Widely accepted statistical methods ensure that the data were 

collected and aggregated in a way that can be replicated. Low sampling variability is 

desirable because it indicates that the sample reflects the typical members of the population. 

(Sampling variability is variation that occurs by chance because only a sample was surveyed 

rather than the entire population.) 

• Timeliness. Timeliness implies that the proxy is published regularly, preferably at least once 

a quarter. The market baskets are updated quarterly, and therefore, it is important for the 

underlying price proxies to be up-to-date, reflecting the most recent data available. We 

believe that using proxies that are published regularly (at least quarterly, whenever possible) 

helps to ensure that we are using the most recent data available to update the market basket. 

We strive to use publications that are disseminated frequently, because we believe that this is 

an optimal way to stay abreast of the most current data available. 

• Availability. Availability means that the proxy is publicly available. We prefer that our 

proxies are publicly available because this will help ensure that our market basket updates are 

as transparent to the public as possible. In addition, this enables the public to be able to 

obtain the price proxy data on a regular basis. 

• Relevance. Relevance means that the proxy is applicable and representative of the cost 

category weight to which it is applied. The CPIs, PPIs, and ECIs that we have selected to 

propose in this regulation meet these criteria. Therefore, we believe that they continue to be 

the best measure of price changes for the cost categories to which they would be applied. 

Table 7 lists all price proxies for the proposed revised and rebased ESRDB market 

basket. Below is a detailed explanation of the price proxies used for each cost category weight.
CMS-1614-P 57 

 

Wages and Salaries 

We will continue using an ECI blend for wages and salaries in the proposed 2012-based 

ESRDB market basket. However, we are proposing to expand the number of occupation 

categories and associated ECIs from two to four based on FTE data from ESRD Medicare Cost 

Reports and the availability of ECIs from BLS. We calculated weights for the Wages and 

Salaries sub-categories using 2012 FTE data and associated 2012 Average Mean Wage data from 

the Bureau of Labor Statistics’ Occupational Employment Statistics. 

Wages and Salaries—Health Related 

We are proposing to continue using the ECI for Wages & Salaries for Hospitals (All 

Civilian) (BLS series code #CIU1026220000000I). Of the two health-related ECIs that we 

considered (“Hospitals” and “Health Care and Social Assistance”), the wage distribution within 

the Hospital NAICS sector (622) is more closely related to the wage distribution of ESRD 

facilities than it is to the wage distribution of the Health Care and Social Assistance NAICS 

sector (62). 

The Wages and Salaries—Health Related subcategory weight within the Wages and 

Salaries cost category is 80percent. The ESRD Medicare Cost Report FTE categories used to 

define the Wages and Salaries—Health Related subcategory include “Physicians,” “Registered 

Nurses,” “Licensed Practical Nurses,” “Nurses’ Aides,” “Technicians,” and “Dieticians.” 

The current 2008-based ESRD Market Basket uses the ECI for Wages & Salaries for 

Hospitals (All Civilian) for 50 percent of Wages and Salaries. 

Wages and Salaries—Management 

We propose using the ECI for Wages & Salaries for Management, Business, and 

Financial (Private Industry) (BLS series code #CIU2020000110000I). We feel this ECI is the 
CMS-1614-P 58 

 

most appropriate price proxy to measure the price growth of management functions at ESRD 

facilities. Furthermore, we regularly use this ECI-wages for management, business, and financial 

in our other market baskets, such as the MEI. 

The Wages and Salaries—Management subcategory weight within the Wages and 

Salaries cost category is 8 percent. The ESRD Medicare Cost Report FTE category used to 

define the Wages and Salaries—Management subcategory is “Management.” 

Wages and Salaries—Administrative 

We propose using the ECI for Wages & Salaries for Office and Administrative Support 

(Private Industry) (BLS series code #CIU2020000220000I). We feel this ECI is the most 

appropriate price proxy to measure the price growth of administrative support at ESRD facilities. 

Furthermore, we regularly use this ECI for administrative wages in our other market baskets, 

such as the MEI. 

The Wages and Salaries—Administrative subcategory weight within the Wages and 

Salaries cost category is 7 percent. The ESRD Medicare Cost Report FTE category used to 

define the Wages and Salaries—Administrative subcategory is “Administrative.” 

Wages and Salaries—Services 

We propose using the ECI for Wages & Salaries for Service Occupations (Private 

Industry) (BLS series code #CIU2020000300000I). We feel this ECI is the most appropriate 

price proxy to measure the price growth of all other non-health related, non-management, and 

non-administrative service support at ESRD facilities. Furthermore, we regularly use this ECI for 

all other service wages in our other market baskets, such as the MEI. 
CMS-1614-P 59 

 

The Wages and Salaries—Services subcategory weight within the Wages and Salaries 

cost category is 6 percent. The ESRD Medicare Cost Report FTE categories used to define the 

Wages and Salaries—Services subcategory are “Social Workers” and “Other.” 

Table 5 lists the four ECI series and the corresponding weights used to construct the 

proposed ECI blend for wages and salaries. We feel this new ECI blend is the most appropriate 

price proxy to measure the growth of wages and salaries faced by ESRD facilities. 

TABLE 5: ECI BLEND FOR WAGES AND SALARIES IN THE PROPOSED 2012 

BASED ESRDB MARKET BASKET 

Cost Category ECI Series Weight 

(%) 

Wages and Salaries—

Health Related 

ECI—Wages & Salaries—Hospital (All 

Civilian) 

80% 

Wages and Salaries—

Management 

ECI—Wages & Salaries—Management, 

Business, and Financial (Private Industry) 

7% 

Wages and Salaries—

Administrative 

ECI—Wages & Salaries—Office and 

Administrative Support (Private Industry) 

7% 

Wages and Salaries—

Services 

ECI—Wages & Salaries—Service 

Occupations (Private Industry) 

6% 

The current 2008-based ESRDB market basket uses a 50 percent / 50 percent blend of the 

“ECI—Wages & Salaries—Hospital (All Civilian)” and the “ECI—Wages and Salaries—

Healthcare and Social Assistance” for the wages and salaries ECI blend. 

Benefits

We will continue using an ECI blend for Benefits in the proposed 2012-based ESRDB 

market basket; however, we are proposing to expand the number of occupation categories and 

associated ECIs from two to four based on the components of the proposed Wage and Salaries 

ECI blend. 

Benefits—Health Related 
CMS-1614-P 60 

 

We are proposing to continue using the ECI for Benefits for Hospitals (All Civilian) to 

measure price growth of this subcategory. The ECI for Benefits for Hospitals is calculated using 

the ECI for Total Compensation for Hospitals (BLS series code # CIU1016220000000I) and the 

relative importance of wages and salaries within total compensation. We believe this constructed 

ECI series is technically appropriate for the reason stated above in the wages and salaries price 

proxy section. 

Benefits—Management 

We propose using the ECI for Benefits for Management, Business, and Financial (Private 

Industry) to measure price growth of this subcategory. The ECI for Benefits for Management, 

Business, and Financial is calculated using the ECI for Total Compensation for Management, 

Business, and Financial (BLS series code # CIU2010000110000I) and the relative importance of 

wages and salaries within total compensation. We believe this constructed ECI series is 

technically appropriate for the reason stated above in the wages and salaries price proxy section. 

Benefits—Administrative 

We propose using the ECI for Benefits for Office and Administrative Support (Private 

Industry) to measure price growth of this subcategory. The ECI for Benefits for Office and 

Administrative Support is calculated using the ECI for Total Compensation for Office and 

Administrative Support (BLS series code # CIU2010000220000I) and the relative importance of 

wages and salaries within total compensation. We believe this constructed ECI series is 

technically appropriate for the reason stated above in the wages and salaries price proxy section. 

Benefits—Services 

We propose using the ECI for Benefits for Service Occupations (Private Industry) to 

measure price growth of this subcategory. The ECI for Benefits for Service Occupations is 
CMS-1614-P 61 

 

calculated using the ECI for Total Compensation for Service Occupations (BLS series code # 

CIU2030000300000I) and the relative importance of wages and salaries within total 

compensation. We believe this constructed ECI series is technically appropriate for the reason 

stated above in the wages and salaries price proxy section. 

We feel the new benefits ECI blend is the most appropriate price proxy to measure the 

growth of prices faced by ESRD facilities. Table 6 lists the four ECI series and the 

corresponding weights used to construct the proposed benefits ECI blend. 

TABLE 6: BENEFITS ECI BLEND IN THE PROPOSED 2012-BASED ESRDB 

MARKET BASKET 

Cost Category ECI Series Weight 

(%) 

Benefits—Health Related ECI—Benefits—Hospital (All Civilian) 80% 

Benefits—Management ECI—Benefits—Management, Business, 

and Financial (Private Industry) 

7% 

Benefits—Administrative ECI—Benefits—Office and 

Administrative Support (Private Industry) 

7% 

Benefits—Services ECI—Benefits—Service Occupations 

(Private Industry) 

6% 

The current 2008-based ESRDB market basket uses a 50 percent / 50 percent blend of the 

“ECI—Benefits—Hospital (All Civilian)” and the “ECI—Benefits—Healthcare and Social 

Assistance” for the benefits ECI blend. 

Electricity 

We propose to continue using the PPI for Commercial Electric Power (BLS series code 

#WPU0542) to measure the price growth of this cost category. This is the same proxy used in the 

current 2008-based ESRDB market basket. 

Natural Gas 
CMS-1614-P 62 

 

We propose to continue using the PPI for Commercial Natural Gas (BLS series code 

#WPU0552) to measure the price growth of this cost category. This is the same proxy used in 

the current 2008-based ESRDB market basket.

Water and Sewerage 

We propose to continue using the CPI for Water and Sewerage Maintenance (BLS series 

code #CUUR0000SEHG01) to measure the price growth of this cost category. This is the same 

proxy used in the current 2008-based ESRDB market basket.

Pharmaceuticals 

We propose to change the price proxy used for the pharmaceuticals cost category. A 

recent Health and Human Services Office of the Inspector General (OIG) report titled “Update: 

Medicare Payment for End Stage Renal Disease Drugs” recommended that CMS consider 

updating the ESRD payment bundle using a factor that takes into account drug acquisition costs. 

CMS had responded to this recommendation by stating that we would consider these findings in 

the continual evaluation of the ESRD market basket, particularly during the next rebasing and 

revising of the market basket index.1 

Drug acquisition cost data is neither publicly available nor the methods used to determine 

it transparent, and, therefore, wouldn’t meet our price proxy criteria of relevance, reliability, 

transparency, and public availability. However, after considering several viable options that do 

meet the criteria we are proposing to use the PPI: Vitamin, Nutrient, and Hematinic Preparations 

(BLS series code #WPU063807). This index includes drugs that are most similar to ESAs and 

other drugs used in the ESRD setting, such as iron supplements. The definition of a hematinic is 

 

1 http://oig.hhs.gov/oei/reports/oei-03-12-00550.asp 
CMS-1614-P 63 

 

a medicine that increases the hemoglobin content of the blood, and these types of drugs are used 

to treat iron-deficiency anemia essential for normal erythropoiesis. 

We believe the PPI: Vitamin, Nutrient, and Hematinic Preparations to be the most 

technically appropriate index available to measure the price growth of the pharmaceuticals cost 

category in the proposed 2012-based ESRDB market basket. The current 2008-based ESRDB 

market basket uses the PPI: Pharmaceuticals for Human Use.

Supplies 

We propose using the PPI for Surgical and Medical Instruments (BLS series code 

#WPU1562) since it excludes orthopedic, prosthetic, ophthalmic, and dental type medical 

equipment and devices, which are not likely to be used extensively in the ESRD setting. The 

types of equipment under Surgical and Medical Instruments, particularly blood transfusion and 

IV equipment, seem most similar to the medical equipment and supplies that would be used in 

the ESRD setting. The current 2008-based ESRDB market basket uses the PPI for Medical, 

Surgical, and Personal Aid Devices. 

Lab Services 

We propose to continue using the PPI for Medical Laboratories (BLS series code 

#PCU621511621511) to measure the price growth of this cost category. This is the same proxy 

used in the current 2008-based ESRDB market basket.

Telephone Service 

We propose to continue using the CPI for Telephone Services (BLS series code 

#CUUR0000SEED) to measure the price growth of this cost category. This is the same proxy 

used in the current 2008-based ESRDB market basket. 

Housekeeping and Operations 
CMS-1614-P 64 

 

We propose to continue using the PPI for Cleaning and Building Maintenance Services 

(BLS series code #WPU49) to measure the price growth of this cost category. This is the same 

proxy used in the current 2008-based ESRDB market basket.

Professional Fees 

We propose to continue using the ECI (Compensation) for Professional and Related 

Occupations (Private Industry) (BLS series code # CIU2010000120000I) to measure the price 

growth of this cost category. This is the same proxy used in the current 2008-based ESRDB 

market basket. 

All Other Goods and Services 

We propose using the PPI for Finished Goods less Foods and Energy (BLS series code 

#WPUFD4131) as the price proxy for the All Other Goods and Services cost category. This PPI 

series is used in most of CMS’ other market baskets to measure the expenses for the residual 

category of all other goods and services. It is more consistent with the purchase of items at a 

wholesale rather than a consumer level. The current 2008-based ESRDB market basket 

(specifically, the “All Other Non Labor-Related Services” cost category) uses the CPI-U, All 

Items less Foods and Energy. 

Capital-Related Building and Equipment 

We propose using the PPI for Lessors of Nonresidential Buildings (BLS series code 

#PCU531120531120) as it represents the types of fixed capital expenses most likely faced by 

ESRD facilities. We also use this proxy in the MEI as the fixed capital proxy for physicians. 

We believe the PPI for Lessors of Nonresidential Buildings is more appropriate as fixed capital 

expenses in both the ESRD and physician office setting should be more congruent with trends in 
CMS-1614-P 65 

 

business office space costs rather than residential costs. The current 2008-based ESRDB market 

basket uses the CPI for Owners’ Equivalent Rent of Residences. 

Capital Related Machinery 

We propose to continue using the PPI for Electrical Machinery and Equipment (BLS 

series code #WPU117) to measure the price growth of this cost category. This is the same proxy 

used in the current 2008-based ESRDB market basket. 

Table 7 shows all the proposed price proxies for the proposed CY 2012-based ESRDB Market 

Basket. 

TABLE 7: PROPORSED PRICE PROXIES for the CY 2012-BASED ESRDB MARKET 

BASKET 

Cost Category Price Proxy Cost 

Weight 

 Compensation 42.497% 

 Wages and Salaries 33.650% 

 Health-related Wages ECI—Wages & Salaries—Hospital 

(Civilian) 26.920% 

 Management Wages ECI—Wages & Salaries—Management, 

Business, and Financial (Private) 2.356% 

 Administrative Wages ECI—Wages & Salaries—Office and 

Administrative Support (Private) 2.356% 

 Service Wages ECI—Wages & Salaries—Service 

Occupations (Private) 2.019% 

 Employee Benefits 8.847% 

 Health-related Benefits ECI—Benefits—Hospital (Civilian) 7.078% 

 Management Benefits ECI—Benefits—Management, 

Business, and Financial (Private) 0.619% 

 Administrative Benefits ECI—Benefits—Office and 

Administrative Support (Private) 0.619% 

 Service Benefits ECI—Benefits—Service Occupations 

(Private) 0.531% 

 Utilities 1.839% 

 Electricity PPI—Commercial Electric Power 0.973% 

 Natural Gas PPI—Commercial Natural Gas 0.101% 

 Water and Sewerage CPI—Water and Sewerage Maintenance 0.765% 

 Medical Materials and Supplies 28.139% 
CMS-1614-P 66 

 

Cost Category Price Proxy Cost 

Weight 

 Pharmaceuticals PPI—Vitamin, Nutrient, and Hematinic 

Preparations 16.510% 

 Supplies PPI—Surgical and Medical Instruments 10.097% 

 Lab Services PPI—Medical Laboratories 1.532% 

 All Other Goods and Services 15.277% 

 Telephone Service CPI—Telephone Services 0.468% 

 Housekeeping and 

Operations 

PPI— Cleaning and Building 

Maintenance Services 3.785% 

 Professional Fees ECI— Compensation—Professional and 

Related Occupations (Private) 0.617% 

 All Other Goods and 

Services 

PPI—Finished Goods less Foods and 

Energy 10.407% 

 Capital Costs 12.248% 

Capital Related Building and 

Equipment 

PPI—Lessors of Nonresidential 

Buildings 8.378% 

Capital Related Machinery 

PPI—Electrical Machinery and 

Equipment 3.870% 

Total 100.000% 

Note: Totals may not sum to 100.000% due to rounding 

iii. Proposed Market Basket Estimate for the CY 2015 ESRDB PPS Update 

As discussed previously in this proposed rule, beginning with the CY 2015 ESRD PPS 

update, we are proposing to adopt the CY 2012-based ESRDB market basket as the appropriate 

market basket of goods and services for the ESRD PPS. 

Based on the IHS Global Insight, Inc. (IGI) first quarter 2014 forecast with history 

through the fourth quarter of 2013, the most recent estimate of the proposed CY 2012-based 

ESRDB market basket for CY 2015 is 2.0 percent. IGI is a nationally recognized economic and 

financial forecasting firm that contracts with CMS to forecast the components of the CMS 

market baskets. Based on IGI’s first quarter 2014 forecast with history through the fourth 

quarter of 2013, the estimate of the current CY 2008-based ESRDB market basket for CY 2015 

is 2.7 percent. 
CMS-1614-P 67 

 

Table 8 compares the proposed CY 2012-based ESRDB market basket and the CY 2008-

based ESRDB market basket percent changes. For the historical period between CY 2011 and 

CY 2013, the average difference between the two market baskets is -1.8 percentage points. This 

is primarily the result of the lower pharmaceutical cost share combined with the proposed revised 

price proxy for the pharmaceutical cost category. For the CY 2014 and CY 2015 forecasts, the 

difference in the market basket forecasts are mainly driven by the same factors as in the 

historical period; however, it is important to note that the differences between the two market 

baskets are projected to be smaller as the growth in the price proxy for the pharmaceutical 

category are projected to grow at more similar growth rates in the projected period than the 

growth rates in the recent historical period. 

TABLE 8: PROPOSED CY 2012-BASED ESRDB MARKET BASKET and CY 2008 

BASED ESRDB MARKET BASKET, PERCENT CHANGES: 2011-2015 

Calendar Year (CY) 

Proposed Rebased CY 

2012-based ESRDB Market 

Basket 

CY 2008-based ESRDB 

Market Basket 

Historical data: 

CY 2011 1.2 2.8 

CY 2012 1.4 3.4 

CY 2013 1.1 3.0 

Average CY 2011-2013 1.3 3.1 

Forecast: 

CY 2014 1.8 2.3 

CY 2015 2.0 2.7 

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

c. Proposed Productivity Adjustment 

Under section 1881(b)(14)(F)(i) of the Act, as amended by section 3401(h) of the 

Affordable Care Act, for CY 2012 and each subsequent year, the ESRD market basket 

percentage increase factor shall be reduced by the productivity adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. The statute defines the productivity adjustment as equal to the 
CMS-1614-P 68 

 

10-year moving average of changes in annual economy-wide private nonfarm business 

multifactor productivity (MFP) (as projected by the Secretary for the 10- year period ending with 

the applicable fiscal year, year, cost reporting period, or other annual period) (the ‘‘MFP 

adjustment’’). The Bureau of Labor Statistics (BLS) is the agency that publishes the official 

measure of private nonfarm business MFP. Please see http://www.bls.gov/mfp to obtain the BLS 

historical published MFP data. We note that the proposed and final methodology for calculating 

and applying the MFP adjustment to the ESRD payment update is similar to the methodology 

used in other payment systems, as required by section 3401 of the Affordable Care Act. 

The projection of MFP is currently produced by IGI. The details regarding the 

methodology for forecasting MFP and how it is applied to the market basket were finalized in the 

CY 2012 ESRD PPS final rule (76 FR 70232 through 70234). Using this method and the IGI 

forecast for the first quarter of 2014 of the 10-year moving average of MFP, the CY 2015 MFP 

factor we would have proposed is 0.4 percent. As discussed further below, however, section 

1881(b)(F)(i)(III) of the Act, as added by section 217(b)(2) of PAMA, requires the Secretary to 

implement a 0.0 percent payment update in CY 2015. 

d. Calculation of the Proposed ESRDB Market Basket Update, Adjusted for Multifactor 

Productivity for CY 2015 

Under section 1881(b)(14)(F) of the Act, beginning in CY 2012, ESRD PPS payment 

amounts shall be annually increased by an ESRD market basket percentage increase factor 

reduced by the productivity adjustment. For CY 2015, section 1881(b)(14)(F)(i)(III) of the Act, 

as added by section 217(b)(2) of PAMA, requires the Secretary to implement a 0.0 percent 

ESRDB market basket increase to the ESRD PPS base rate. In addition, we interpret the 

reference to “[n]otwithstanding subclause (III)” that was added to amended section 
CMS-1614-P 69 

 

1881(b)(14)(F)(i)(III) as precluding the application of the multi-factor productivity (MFP) 

adjustment in 2015. As a result of these provisions, the proposed CY 2015 ESRD market basket 

increase is 0.0 percent. We note that if PAMA had not been enacted the proposed 2012-based 

ESRDB market basket update less productivity for CY 2015 would have been 1.6 percent, or 2.0 

percent less 0.4 percentage point. 

e. Labor-Related Share 

We define the labor-related share (LRS) as those expenses that are labor-intensive and 

vary with, or are influenced by, the local labor market. The labor-related share of a market 

basket is determined by identifying the national average proportion of operating costs that are 

related to, influenced by, or vary with the local labor market. The labor-related share is typically 

the sum of Wages and Salaries, Benefits, Professional Fees, Labor-related Services, and a 

portion of the Capital share from a given market basket. 

We propose to use the proposed 2012-based ESRDB market basket costs to determine the 

proposed labor-related share for ESRD facilities of 50.673 percent, as shown in Table 9 below. 

These figures represent the sum of Wages and Salaries, Benefits, Housekeeping and Operations, 

87 percent of the weight for Professional Fees (details discussed below), and 46 percent of the 

weight for Capital-related Building and Equipment expenses (details discussed below). We note 

that this is a similar methodology used to compute the labor-related share used from CY 2011 

through CY 2014. 

 
CMS-1614-P 70 

 

TABLE 9: PROPOSED CY 2015 LABOR-RELATED SHARE and CY 2014 ESRDB 

LABOR-RELATED SHARE

Cost Category 

Proposed CY 2015 ESRDB 

Labor-Related Share 

(Percent) 

CY 2014 ESRDB LaborRelated Share (Percent) 

Wages 33.650 26.755 

Benefits 8.847 6.754 

Housekeeping and operations 3.785 2.029 

Professional fees (labor-related) 0.537 2.768 

Capital labor-related 3.854 3.431 

Total 50.673 41.737 

The labor-related share for Professional Fees (87 percent) reflects the proportion of 

ESRD facilities’ professional fees expenses that we believe vary with local labor market. We 

conducted a survey of ESRD facilities in 2008 to better understand the proportion of contracted 

professional services that ESRD facilities typically purchase outside of their local labor market. 

These purchased professional services include functions such as accounting and auditing, 

management consulting, engineering, and legal services. Based on the survey results, we 

determined that, on average, 87 percent of professional services are purchased from local firms 

and 13 percent are purchased from businesses located outside of the ESRD facility’s local labor 

market. Thus, we are proposing to include 87 percent of the cost weight for Professional Fees in 

the labor-related share, the same percentage as used in prior years. 

The labor-related share for capital-related expenses (46 percent of ESRD facilities’ 

adjusted Capital-related Building and Equipment expenses) reflects the proportion of ESRD 

facilities’ capital-related expenses that we believe varies with local labor market wages. 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 
CMS-1614-P 71 

 

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, longterm care facilities, and skilled nursing facilities (66 FR 39585). 

3. The Proposed CY 2015 ESRD PPS Wage Indices 

a. Background 

Section 1881(b)(14)(D)(iv)(II) of the Act provides that the ESRD PPS may include a 

geographic wage index payment adjustment, such as the index referred to in section 

1881(b)(12)(D) of the Act. In the CY 2011 ESRD PPS final rule (75 FR 49117), we 

finalized for the ESRD PPS the use of the Office of Management and Budget’s (OMB) CoreBased Statistical Areas (CBSAs)-based geographic area designations described in OMB bulletin 

03-04, issued June 6, 2003 as the basis for revising the urban and rural areas and their 

corresponding wage index values. This bulletin, as well as subsequent bulletins, is available 

online at http://www.whitehouse.gov/omb/bulletins_index2003-2005.

 We also finalized that we would use the urban and rural definitions used for the Medicare 

IPPS but without regard to geographic reclassification authorized under section 1886(d)(8) and 

(d)(10) of the Act. In the CY 2012 ESRD PPS final rule (76 FR 70239), we finalized that, under 

the ESRD PPS, we will continue to utilize the ESRD PPS wage index methodology, first 

established under the basic case-mix adjusted composite rate payment system, for updating the 

wage index values using the OMB’s CBSA-based geographic area designations to define urban 

and rural areas. 

b. Proposed Implementation of New Labor Market Delineations 
CMS-1614-P 72 

 

OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers 

and titles. In accordance with our established methodology, we have historically adopted via 

rulemaking CBSA changes that are published in the latest OMB bulletin. On February 28, 2013, 

OMB issued OMB Bulletin No. 13-01, which established revised delineations for Metropolitan 

Statistical Areas, Micropolitan Statistical Areas, and Combined Statistical Areas, and provided 

guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be 

obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. 

According to OMB, “[t]his bulletin provides the delineations of all Metropolitan Statistical 

Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and 

New England City and Town Areas in the United States and Puerto Rico based on the standards 

published on June 28, 2010, in the Federal Register (75 FR 37246-37252) and Census Bureau 

data.” In this CY 2015 ESRD PPS proposed rule, when referencing the new OMB geographic 

boundaries of statistical areas, we are using the term “delineations” rather than the term 

“definitions” that we have used in the past, consistent with OMB’s use of the terms (75 FR 

37249). Because the bulletin was not issued until February 28, 2013, with supporting data not 

available until later, and because the changes made by the bulletin and their ramifications needed 

to be extensively reviewed and verified, we were unable to undertake such a lengthy process 

before publication of the FY 2014 IPPS/LTCH PPS proposed rule and, thus, did not implement 

changes to the hospital wage index for FY 2014 based on these new CBSA delineations. 

 Likewise, for the same reasons, the CY 2014 ESRD PPS wage index (based upon the prefloor, pre-reclassified hospital wage data, which is unadjusted for occupational mix) also did not 

reflect the new CBSA delineations. In the FY 2015 IPPS/LTCH PPS proposed rule, we 

proposed to implement the new CBSA delineations as described in the February 28, 2013 OMB 
CMS-1614-P 73 

 

Bulletin No. 13-01, beginning with the FY 2015 IPPS wage index (79 FR 28054 through 28055). 

 Similarly, in this CY 2015 ESRD PPS proposed rule, we are proposing to implement the 

new CBSA delineations as described in the February 28, 2013 OMB Bulletin No. 13-01, 

beginning with the CY 2015 ESRD PPS wage index. We believe that the most current CBSA 

delineations accurately reflect the local economies and wage levels of the areas where facilities 

are located, and we believe that it is important for the ESRD PPS to use the latest CBSA 

delineations available in order to maintain an up-to-date payment system that accurately reflects 

the reality of populations shifts and labor market conditions. We have reviewed our findings and 

impacts relating to the new CBSA delineations using the most recent data available at the time of 

this proposed rule, and have concluded that there is no compelling reason to further delay the 

implementation of the CBSA delineations as set forth in OMB Bulletin 13-01. 

In order to implement these changes for the ESRD PPS, it is necessary to identify the 

new labor market area delineation for each county and facility in the country. For example, if we 

adopt the new CBSA delineations, there would be new CBSAs, urban counties that would 

become rural, rural counties that would become urban, and existing CBSAs that would be split 

apart. Because the wage index of urban areas is typically higher than that of rural areas, ESRD 

facilities currently located in rural counties that would become urban if we adopt the new CBSA 

delineations would generally experience an increase in their wage index values. We have 

identified 105 counties and 113 facilities that would move from rural to urban status if we adopt 

the new CBSA delineations beginning in CY 2015. Table 10: (CY 2015 Proposed Rural to 

Urban CBSA Crosswalk) shows the CBSA delineations for CY 2014 and the rural wage index 

values proposed for CY 2015 based on those delineations, compared to the proposed CBSA 

delineations for CY 2015 and the proposed urban wage index values for CY 2015 based on the 
CMS-1614-P 74 

 

new delineations, and the percentage change in these values for those counties that would change 

from rural to urban if we adopt the new CBSA delineations. If we adopt the new OMB 

delineations illustrated in Table 10 below, approximately 100 facilities would experience an 

increase in their wage index values. 

TABLE 10: CY 2015 PROPOSED RURAL to URBAN CBSA CROSSWALK

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 

2015 CBSA Delineations 

 County Name State CBSA 

Urban 

/ Rural 

Wage 

Index 

Value CBSA 

Urban 

/ Rural 

Wage 

Index 

Value 

Change 

In 

Value 

BALDWIN AL 01 RURAL 0.6981 19300 URBAN 0.7279 4.27%

PICKENS AL 01 RURAL 0.6981 46220 URBAN 0.8288 18.72%

COCHISE AZ 03 RURAL 0.9159 43420 URBAN 0.8970 -2.06%

LITTLE RIVER AR 04 RURAL 0.7265 45500 URBAN 0.7390 1.72%

WINDHAM CT 07 RURAL 1.1292 49340 URBAN 1.1536 2.16%

SUSSEX DE 08 RURAL 1.0248 41540 URBAN 0.9296 -9.29%

CITRUS FL 10 RURAL 0.8010 26140 URBAN 0.7653 -4.46%

GULF FL 10 RURAL 0.8010 37460 URBAN 0.7861 -1.86%

HIGHLANDS FL 10 RURAL 0.8010 42700 URBAN 0.8011 0.01%

SUMTER FL 10 RURAL 0.8010 45540 URBAN 0.8125 1.44%

WALTON FL 10 RURAL 0.8010 18880 URBAN 0.8260 3.12%

LINCOLN GA 11 RURAL 0.7425 12260 URBAN 0.9213 24.08%

MORGAN GA 11 RURAL 0.7425 12060 URBAN 0.9358 26.03%

PEACH GA 11 RURAL 0.7425 47580 URBAN 0.7570 1.95%

PULASKI GA 11 RURAL 0.7425 47580 URBAN 0.7570 1.95%

KALAWAO HI 12 RURAL 0.9953 27980 URBAN 0.9510 -4.45%

MAUI HI 12 RURAL 0.9953 27980 URBAN 0.9510 -4.45%

BUTTE ID 13 RURAL 0.7425 26820 URBAN 0.8966 20.75%

DE WITT IL 14 RURAL 0.8363 14010 URBAN 0.8935 6.84%

JACKSON IL 14 RURAL 0.8363 16060 URBAN 0.8354 -0.11%

WILLIAMSON IL 14 RURAL 0.8363 16060 URBAN 0.8354 -0.11%

SCOTT IN 15 RURAL 0.8454 31140 URBAN 0.8319 -1.60%

UNION IN 15 RURAL 0.8454 17140 URBAN 0.8942 5.77%

PLYMOUTH IA 16 RURAL 0.8483 43580 URBAN 0.8948 5.48%

KINGMAN KS 17 RURAL 0.7838 48620 URBAN 0.8503 8.48%
CMS-1614-P 75 

 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 

2015 CBSA Delineations 

 County Name State CBSA 

Urban 

/ Rural 

Wage 

Index 

Value CBSA 

Urban 

/ Rural 

Wage 

Index 

Value 

Change 

In 

Value 

ALLEN KY 18 RURAL 0.7770 14540 URBAN 0.8403 8.15%

BUTLER KY 18 RURAL 0.7770 14540 URBAN 0.8403 8.15%

ACADIA LA 19 RURAL 0.7608 29180 URBAN 0.7896 3.79%

IBERIA LA 19 RURAL 0.7608 29180 URBAN 0.7896 3.79%

ST. JAMES LA 19 RURAL 0.7608 35380 URBAN 0.8778 15.38%

TANGIPAHOA LA 19 RURAL 0.7608 25220 URBAN 0.9487 24.70%

VERMILION LA 19 RURAL 0.7608 29180 URBAN 0.7896 3.79%

WEBSTER LA 19 RURAL 0.7608 43340 URBAN 0.8347 9.71%

ST. MARYS MD 21 RURAL 0.8586 15680 URBAN 0.8625 0.45%

WORCESTER MD 21 RURAL 0.8586 41540 URBAN 0.9296 8.27%

MIDLAND MI 23 RURAL 0.8232 33220 URBAN 0.7964 -3.26%

MONTCALM MI 23 RURAL 0.8232 24340 URBAN 0.8832 7.29%

FILLMORE MN 24 RURAL 0.9057 40340 URBAN 1.1384 25.69%

LE SUEUR MN 24 RURAL 0.9057 33460 URBAN 1.1162 23.24%

MILLE LACS MN 24 RURAL 0.9057 33460 URBAN 1.1162 23.24%

SIBLEY MN 24 RURAL 0.9057 33460 URBAN 1.1162 23.24%

BENTON MS 25 RURAL 0.7603 32820 URBAN 0.9069 19.28%

YAZOO MS 25 RURAL 0.7603 27140 URBAN 0.7932 4.33%

GOLDEN VALLEY MT 27 RURAL 0.9055 13740 URBAN 0.8718 -3.72%

HALL NE 28 RURAL 0.8957 24260 URBAN 0.9253 3.30%

HAMILTON NE 28 RURAL 0.8957 24260 URBAN 0.9253 3.30%

HOWARD NE 28 RURAL 0.8957 24260 URBAN 0.9253 3.30%

MERRICK NE 28 RURAL 0.8957 24260 URBAN 0.9253 3.30%

JEFFERSON NY 33 RURAL 0.8226 48060 URBAN 0.8417 2.32%

YATES NY 33 RURAL 0.8226 40380 URBAN 0.8783 6.77%

CRAVEN NC 34 RURAL 0.7963 35100 URBAN 0.8547 7.33%

DAVIDSON NC 34 RURAL 0.7963 49180 URBAN 0.8660 8.75%

GATES NC 34 RURAL 0.7963 47260 URBAN 0.9156 14.98%

IREDELL NC 34 RURAL 0.7963 16740 URBAN 0.9123 14.57%

JONES NC 34 RURAL 0.7963 35100 URBAN 0.8547 7.33%

LINCOLN NC 34 RURAL 0.7963 16740 URBAN 0.9123 14.57%

PAMLICO NC 34 RURAL 0.7963 35100 URBAN 0.8547 7.33%

ROWAN NC 34 RURAL 0.7963 16740 URBAN 0.9123 14.57%

OLIVER ND 35 RURAL 0.7125 13900 URBAN 0.7251 1.77%
CMS-1614-P 76 

 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 

2015 CBSA Delineations 

 County Name State CBSA 

Urban 

/ Rural 

Wage 

Index 

Value CBSA 

Urban 

/ Rural 

Wage 

Index 

Value 

Change 

In 

Value 

SIOUX ND 35 RURAL 0.7125 13900 URBAN 0.7251 1.77%

HOCKING OH 36 RURAL 0.8315 18140 URBAN 0.9499 14.24%

PERRY OH 36 RURAL 0.8315 18140 URBAN 0.9499 14.24%

COTTON OK 37 RURAL 0.7824 30020 URBAN 0.7948 1.58%

JOSEPHINE OR 38 RURAL 1.0120 24420 URBAN 1.0123 0.03%

LINN OR 38 RURAL 1.0120 10540 URBAN 1.0919 7.90%

ADAMS PA 39 RURAL 0.8730 23900 URBAN 1.0142 16.17%

COLUMBIA PA 39 RURAL 0.8730 14100 URBAN 0.9382 7.47%

FRANKLIN PA 39 RURAL 0.8730 16540 URBAN 1.0997 25.97%

MONROE PA 39 RURAL 0.8730 20700 URBAN 0.9406 7.74%

MONTOUR PA 39 RURAL 0.8730 14100 URBAN 0.9382 7.47%

UTUADO PR 40 RURAL 0.4000 10380 URBAN 0.4000 0.00%

BEAUFORT SC 42 RURAL 0.8381 25940 URBAN 0.8807 5.08%

CHESTER SC 42 RURAL 0.8381 16740 URBAN 0.9123 8.85%

JASPER SC 42 RURAL 0.8381 25940 URBAN 0.8807 5.08%

LANCASTER SC 42 RURAL 0.8381 16740 URBAN 0.9123 8.85%

UNION SC 42 RURAL 0.8381 43900 URBAN 0.8275 -1.26%

CUSTER SD 43 RURAL 0.8343 39660 URBAN 0.9075 8.77%

CAMPBELL TN 44 RURAL 0.7387 28940 URBAN 0.7039 -4.71%

CROCKETT TN 44 RURAL 0.7387 27180 URBAN 0.7775 5.25%

MAURY TN 44 RURAL 0.7387 34980 URBAN 0.9053 22.55%

MORGAN TN 44 RURAL 0.7387 28940 URBAN 0.7039 -4.71%

ROANE TN 44 RURAL 0.7387 28940 URBAN 0.7039 -4.71%

FALLS TX 45 RURAL 0.7917 47380 URBAN 0.8202 3.60%

HOOD TX 45 RURAL 0.7917 23104 URBAN 0.9412 18.88%

HUDSPETH TX 45 RURAL 0.7917 21340 URBAN 0.8356 5.55%

LYNN TX 45 RURAL 0.7917 31180 URBAN 0.8870 12.04%

MARTIN TX 45 RURAL 0.7917 33260 URBAN 0.8973 13.34%

NEWTON TX 45 RURAL 0.7917 13140 URBAN 0.8541 7.88%

OLDHAM TX 45 RURAL 0.7917 11100 URBAN 0.8308 4.94%

SOMERVELL TX 45 RURAL 0.7917 23104 URBAN 0.9412 18.88%

BOX ELDER UT 46 RURAL 0.8877 36260 URBAN 0.9259 4.30%

AUGUSTA VA 49 RURAL 0.7694 44420 URBAN 0.8357 8.62%

BUCKINGHAM VA 49 RURAL 0.7694 16820 URBAN 0.9087 18.11%
CMS-1614-P 77 

 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 

2015 CBSA Delineations 

 County Name State CBSA 

Urban 

/ Rural 

Wage 

Index 

Value CBSA 

Urban 

/ Rural 

Wage 

Index 

Value 

Change 

In 

Value 

CULPEPER VA 49 RURAL 0.7694 47894 URBAN 1.0418 35.40%

FLOYD VA 49 RURAL 0.7694 13980 URBAN 0.8504 10.53%

RAPPAHANNOCK VA 49 RURAL 0.7694 47894 URBAN 1.0418 35.40%

STAUNTON CITY VA 49 RURAL 0.7694 44420 URBAN 0.8357 8.62%

WAYNESBORO CITY VA 49 RURAL 0.7694 44420 URBAN 0.8357 8.62%

COLUMBIA WA 50 RURAL 1.0932 47460 URBAN 1.0974 0.38%

PEND OREILLE WA 50 RURAL 1.0932 44060 URBAN 1.1467 4.89%

STEVENS WA 50 RURAL 1.0932 44060 URBAN 1.1467 4.89%

WALLA WALLA WA 50 RURAL 1.0932 47460 URBAN 1.0974 0.38%

FAYETTE WV 51 RURAL 0.7391 13220 URBAN 0.8037 8.74%

RALEIGH WV 51 RURAL 0.7391 13220 URBAN 0.8037 8.74%

GREEN WI 52 RURAL 0.9074 31540 URBAN 1.1190 23.32%

The wage index values of rural areas are typically lower than that of urban areas. 

Therefore, ESRD facilities located in a county that is currently designated as urban under the 

ESRD PPS wage index that would become rural if we adopt the new CBSA delineations may 

experience a decrease in their wage index values. We have identified 39 counties and 29 ESRD 

facilities that would move from urban to rural status if we adopt the new CBSA delineations 

beginning in CY 2015. Table 11: (CY 2015 Proposed Urban to Rural CBSA Crosswalk) shows 

the CBSA delineations for CY 2014 and the proposed urban wage index values for CY 2015 

based on those delineations, compared with the proposed CBSA delineations and wage index 

values for CY 2015 based on those delineations, and the percentage change in these values for 

those counties that would change from urban to rural if we adopt the new CBSA delineations. If 

we adopted the new CBSA delineations illustrated in Table 11 below, approximately 30 facilities 

would experience a decrease in their wage index values. 
CMS-1614-P 78 

 

TABLE 11: CY 2015 PROPOSED URBAN to RURAL CBSA CROSSWALK 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 2015 

CBSA Delineations 

County Name State CBSA 

Urban / 

Rural 

Wage 

Index 

Value CBSA 

Urban / 

Rural 

Wage 

Index 

Value 

Change 

in Value 

GREENE AL 46220 URBAN 0.8336 01 RURAL 0.6930 -16.9% 

FRANKLIN AR 22900 URBAN 0.7593 04 RURAL 0.7265 -4.3% 

POWER ID 38540 URBAN 0.9707 13 RURAL 0.7425 -23.5% 

FRANKLIN IN 17140 URBAN 0.8942 15 RURAL 0.8454 -5.5% 

GIBSON IN 21780 URBAN 0.8524 15 RURAL 0.8454 -0.8% 

GREENE IN 14020 URBAN 0.9096 15 RURAL 0.8454 -7.1% 

TIPTON IN 29020 URBAN 0.9023 15 RURAL 0.8454 -6.3% 

FRANKLIN KS 28140 URBAN 0.9454 17 RURAL 0.7811 -17.4% 

GEARY KS 31740 URBAN 0.7225 17 RURAL 0.7811 8.1% 

NELSON KY 31140 URBAN 0.8313 18 RURAL 0.7774 -6.5% 

WEBSTER KY 21780 URBAN 0.8524 18 RURAL 0.7774 -8.8% 

FRANKLIN MA 44140 URBAN 1.0309 22 RURAL 1.1596 12.5% 

IONIA MI 24340 URBAN 0.8998 23 RURAL 0.8313 -7.6% 

NEWAYGO MI 24340 URBAN 0.8998 23 RURAL 0.8313 -7.6% 

GEORGE MS 37700 URBAN 0.7423 25 RURAL 0.7584 2.2% 

STONE MS 25060 URBAN 0.8209 25 RURAL 0.7584 -7.6% 

CRAWFORD MO 41180 URBAN 0.9457 26 RURAL 0.7827 -17.2% 

HOWARD MO 17860 URBAN 0.8349 26 RURAL 0.7827 -6.3% 

WASHINGTON MO 41180 URBAN 0.9457 26 RURAL 0.7827 -17.2% 

ANSON NC 16740 URBAN 0.9283 34 RURAL 0.7880 -15.1% 

GREENE NC 24780 URBAN 0.9405 34 RURAL 0.7880 -16.2% 

ERIE OH 41780 URBAN 0.7792 36 RURAL 0.8338 7.0% 

OTTAWA OH 45780 URBAN 0.9152 36 RURAL 0.8338 -8.9% 

PREBLE OH 19380 URBAN 0.8918 36 RURAL 0.8338 -6.5% 

WASHINGTON OH 37620 URBAN 0.8167 36 RURAL 0.8338 2.1% 

STEWART TN 17300 URBAN 0.7554 44 RURAL 0.7297 -3.4% 

CALHOUN TX 47020 URBAN 0.8504 45 RURAL 0.7909 -7.0% 

DELTA TX 19124 URBAN 0.9751 45 RURAL 0.7909 -18.9% 

SAN JACINTO TX 26420 URBAN 0.9881 45 RURAL 0.7909 -20.0% 

SUMMIT UT 41620 URBAN 0.9548 46 RURAL 0.8993 -5.8% 

CUMBERLAND VA 40060 URBAN 0.9556 49 RURAL 0.7573 -20.8% 

DANVILLE CITY VA 19260 URBAN 0.7985 49 RURAL 0.7573 -5.2% 
CMS-1614-P 79 

 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 2015 

CBSA Delineations 

KING AND QUEEN VA 40060 URBAN 0.9556 49 RURAL 0.7573 -20.8% 

LOUISA VA 40060 URBAN 0.9556 49 RURAL 0.7573 -20.8% 

PITTSYLVANIA VA 19260 URBAN 0.7985 49 RURAL 0.7573 -5.2% 

SURRY VA 47260 URBAN 0.9156 49 RURAL 0.7573 -17.3% 

MORGAN WV 25180 URBAN 0.9113 51 RURAL 0.7249 -20.5% 

PLEASANTS WV 37620 URBAN 0.8167 51 RURAL 0.7249 -11.2% 

We note that facilities in some urban CBSAs could experience a change in their wage 

index values even though they remain urban because an urban CBSA’s boundaries and/or the 

counties included in that CBSA could change. Table 12 (CY 2015 Proposed Urban to a 

Different Urban CBSA Crosswalk) shows the CBSA delineations for CY 2014 and urban wage 

index values for CY 2015 based on those delineations, compared with the proposed CBSA 

delineations and urban wage index values for CY 2015 based on those delineations, and the 

percentage change in these values for counties that would remain urban even though the CBSA 

boundaries and/or counties included in that CBSA would change. 

 
CMS-1614-P 80 

 

TABLE 12: CY 2015 PROPOSED URBAN to a DIFFERENT URBAN CBSA 

CROSSWALK

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 2015 

CBSA Delineations 

County Name State CBSA 

Urban / 

Rural 

Wage 

Index 

Value CBSA 

Urban / 

Rural 

Wage 

Index 

Value Change 

In Value 

MARIN CA 41884 URBAN 1.7049 42034 URBAN 1.7317 1.6%

FLAGLER FL 37380 URBAN 0.8494 19660 URBAN 0.8407 -1.0%

DE KALB IL 16974 URBAN 1.0368 20994 URBAN 1.0347 -0.2%

KANE IL 16974 URBAN 1.0368 20994 URBAN 1.0347 -0.2%

MADISON IN 11300 URBAN 1.0115 26900 URBAN 1.0170 0.5%

MEADE KY 31140 URBAN 0.8313 21060 URBAN 0.7650 -8.0%

ESSEX MA 37764 URBAN 1.0808 15764 URBAN 1.1196 3.6%

OTTAWA MI 26100 URBAN 0.8167 24340 URBAN 0.8832 8.1%

JACKSON MS 37700 URBAN 0.7423 25060 URBAN 0.7927 6.8%

BERGEN NJ 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

HUDSON NJ 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

MIDDLESEX NJ 20764 URBAN 1.1085 35614 URBAN 1.2887 16.3%

MONMOUTH NJ 20764 URBAN 1.1085 35614 URBAN 1.2887 16.3%

OCEAN NJ 20764 URBAN 1.1085 35614 URBAN 1.2887 16.3%

PASSAIC NJ 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

SOMERSET NJ 20764 URBAN 1.1085 35084 URBAN 1.1520 3.9%

BRONX NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

DUTCHESS NY 39100 URBAN 1.1576 20524 URBAN 1.1387 -1.6%

KINGS NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

NEW YORK NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

ORANGE NY 39100 URBAN 1.1576 35614 URBAN 1.2887 11.3%

PUTNAM NY 35644 URBAN 1.3136 20524 URBAN 1.1387 -13.3%

QUEENS NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

RICHMOND NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

ROCKLAND NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

WESTCHESTER NY 35644 URBAN 1.3136 35614 URBAN 1.2887 -1.9%

BRUNSWICK NC 48900 URBAN 0.8899 34820 URBAN 0.8641 -2.9%

BUCKS PA 37964 URBAN 1.0934 33874 URBAN 1.0236 -6.4%

CHESTER PA 37964 URBAN 1.0934 33874 URBAN 1.0236 -6.4%

MONTGOMERY PA 37964 URBAN 1.0934 33874 URBAN 1.0236 -6.4%
CMS-1614-P 81 

 

 

ESRD PPS CY 2014 CBSA 

Delineations 

Proposed ESRD PPS CY 2015 

CBSA Delineations 

County Name State CBSA 

Urban / 

Rural 

Wage 

Index 

Value CBSA 

Urban / 

Rural 

Wage 

Index 

Value Change 

In Value 

ARECIBO PR 41980 URBAN 0.4471 11640 URBAN 0.4229 -5.4%

CAMUY PR 41980 URBAN 0.4471 11640 URBAN 0.4229 -5.4%

CEIBA PR 21940 URBAN 0.4000 41980 URBAN 0.4460 11.5%

FAJARDO PR 21940 URBAN 0.4000 41980 URBAN 0.4460 11.5%

GUANICA PR 49500 URBAN 0.4000 38660 URBAN 0.4169 4.2%

GUAYANILLA PR 49500 URBAN 0.4000 38660 URBAN 0.4169 4.2%

HATILLO PR 41980 URBAN 0.4471 11640 URBAN 0.4229 -5.4%

LUQUILLO PR 21940 URBAN 0.4000 41980 URBAN 0.4460 11.5%

PENUELAS PR 49500 URBAN 0.4000 38660 URBAN 0.4169 4.2%

QUEBRADILLAS PR 41980 URBAN 0.4471 11640 URBAN 0.4229 -5.4%

YAUCO PR 49500 URBAN 0.4000 38660 URBAN 0.4169 4.2%

ANDERSON SC 11340 URBAN 0.8775 24860 URBAN 0.9025 2.8%

GRAINGER TN 34100 URBAN 0.7002 28940 URBAN 0.7039 0.5%

LINCOLN WV 16620 URBAN 0.8017 26580 URBAN 0.8773 9.4%

PUTNAM WV 16620 URBAN 0.8017 26580 URBAN 0.8773 9.4%

Likewise, ESRD facilities currently located in a rural area may remain rural under the 

new CBSA delineations but experience a change in their rural wage index value due to 

implementation of the new CBSA delineations. Table 13 (CY 2015 Proposed Changes to the 

Statewide Rural Wage Index Crosswalk) shows the CBSA numbers for CY 2014 and the 

proposed rural statewide wage index values for CY 2015, compared with the proposed statewide 

rural wage index values for CY 2015, and the percentage change in these values. 

 
CMS-1614-P 82 

 

TABLE 13: CY 2015 PROPOSED CHANGES to the STATEWIDE RURAL WAGE 

INDEX CROSSWALK 

 

ESRD PPS 

CY 2014 

CBSA 

Delineations 

 

Proposed 

ESRD PPS 

CY 2015 

CBSA 

Delineations 

 

 

State CBSA 

Urban 

/Rural 

Wage 

IndexValue CBSA 

Urban 

/Rural 

Wage 

Index 

Value 

Change 

In Value

AL 01 RURAL 0.6981 01 RURAL 0.6930 -0.73%

AZ 03 RURAL 0.9159 03 RURAL 0.9253 1.03%

CT 07 RURAL 1.1292 07 RURAL 1.1337 0.40%

FL 10 RURAL 0.8010 10 RURAL 0.8394 4.79%

GA 11 RURAL 0.7425 11 RURAL 0.7439 0.19%

HI 12 RURAL 0.9953 12 RURAL 1.0276 3.25%

IL 14 RURAL 0.8363 14 RURAL 0.8365 0.02%

KS 17 RURAL 0.7838 17 RURAL 0.7811 -0.34%

KY 18 RURAL 0.7770 18 RURAL 0.7774 0.05%

LA 19 RURAL 0.7608 19 RURAL 0.7135 -6.22%

MD 21 RURAL 0.8586 21 RURAL 0.8778 2.24%

MA 22 RURAL 1.3971 22 RURAL 1.1596 -17.00%

MI 23 RURAL 0.8232 23 RURAL 0.8313 0.98%

MS 25 RURAL 0.7603 25 RURAL 0.7584 -0.25%

NE 28 RURAL 0.8957 28 RURAL 0.8909 -0.54%

NY 33 RURAL 0.8226 33 RURAL 0.8208 -0.22%

NC 34 RURAL 0.7963 34 RURAL 0.7880 -1.04%

OH 36 RURAL 0.8315 36 RURAL 0.8338 0.28%

OR 38 RURAL 1.0120 38 RURAL 0.9985 -1.33%

PA 39 RURAL 0.8730 39 RURAL 0.8079 -7.46%

SC 42 RURAL 0.8381 42 RURAL 0.8357 -0.29%

TN 44 RURAL 0.7387 44 RURAL 0.7297 -1.22%

TX 45 RURAL 0.7917 45 RURAL 0.7909 -0.10%

UT 46 RURAL 0.8877 46 RURAL 0.8993 1.31%

VA 49 RURAL 0.7694 49 RURAL 0.7573 -1.57%

WA 50 RURAL 1.0932 50 RURAL 1.0917 -0.14%

WV 51 RURAL 0.7391 51 RURAL 0.7249 -1.92%

WI 52 RURAL 0.9074 52 RURAL 0.9120 0.51%
CMS-1614-P 83 

 

While we believe that the new CBSA delineations would result in wage index values that 

are more representative of the actual costs of labor in a given area, we also recognize that use of 

the new CBSA delineations would result in reduced payments to some facilities. In particular, 

approximately 30 facilities would experience reduced payments if we adopt the new CBSA 

delineations. At the same time, use of the new CBSA delineations would result in increased 

payments for approximately 100 facilities, while the majority of facilities would experience no 

change in payments due to the implementation of the new CBSA delineations. We are proposing 

to implement the new CBSA delineations using a 2-year transition with a 50/50 blended wage 

index value for all facilities in CY 2015 and 100% of the wage index based on the new CBSA 

delineations in CY 2016. 

c. Transition Period 

We considered having no transition period and fully implementing the proposed new 

CBSA delineations beginning in CY 2015, which would mean that all facilities would have 

payments based on the new delineations starting on January 1, 2015. However, because more 

facilities would have increased rather than decreased payments beginning in CY 2015, and 

because the overall amount of ESRD payments would increase slightly due to the new CBSA 

delineations, the wage index budget neutrality factor would be higher. This higher factor would 

reduce the ESRD PPS per treatment base rate for all facilities paid under the ESRD PPS, despite 

the fact that the majority of ESRD facilities are unaffected by the new CBSA delineations. 

Thus, we believe that it would be appropriate to provide for a transition period to mitigate any 

resulting short-term instability of a lower ESRD PPS base rate as well as any negative impacts to 

facilities that experience reduced payments. In addition, we note that for CY 2015, section 

1881(b)(14)(F)(i)(III), as added by section 217 of PAMA, requires a 0.0 payment update (for 
CMS-1614-P 84 

 

further discussion on this update please see section II.B.1.a.ii of this rule), and thus, there is no 

possibility of offsetting any reduction, even a slight reduction, to the ESRD PPS base rate in CY 

2015. 

Therefore, we are proposing a two-year transition blended wage index for all facilities. 

Facilities would receive 50 percent of their CY 2015 wage index value based on the CBSA 

delineations for CY 2014 and 50 percent of their CY 2015 wage index value based on the 

proposed new CBSA delineations. This results in an average of the two values. We propose that 

facilities’ CY 2016 wage index values would be based 100 percent on the new CBSA 

delineations. We believe a two-year transition strikes an appropriate balance between ensuring 

that ESRD PPS payments are as accurate and stable as possible while giving facilities time to 

adjust to the new CBSA delineations. 

In the CY 2011 ESRD PPS final rule (75 FR 49117), we finalized a policy to use the 

labor-related share of 41.737 percent for the ESRD PPS. For the CY 2015 ESRD PPS, we 

propose to use a labor-related share of 50.673 percent, which we propose to transition over a 2-

year period with the labor-related share in CY 2015 based 50 percent on the old labor-related 

share and 50 percent on the new labor-related share, and the labor-related share in CY 2016 

based 100 percent on the new labor-related share. For a complete discussion of the proposed 

changes in the CY 2015 ESRD PPS market basket and labor-related share, as well as the 

transition of the labor-related share; please see sections II.B.2.e and XII.B.1.a of this proposed 

rule. 

4. Proposed Revisions to the Outlier Policy 

Section 1881(b)(14)(D)(ii) of the Act requires that the ESRD PPS include a payment 

adjustment for high cost outliers due to unusual variations in the type or amount of medically 
CMS-1614-P 85 

 

necessary care, including variability in the amount of erythropoiesis stimulating agents (ESAs) 

necessary for anemia management. Our regulations at 42 CFR 413.237(a)(1) provide that ESRD 

outlier services are the following items and services that are included in the ESRD PPS bundle: 

(i) ESRD-related drugs and biologicals that were or would have been, prior to January 1, 2011, 

separately billable under Medicare Part B; (ii) ESRD-related laboratory tests that were or would 

have been, prior to January 1, 2011, separately billable under Medicare Part B; (iii) 

medical/surgical supplies, including syringes, used to administer ESRD-related drugs, that were 

or would have been, prior to January 1, 2011, separately billable under Medicare Part B; and (iv) 

renal dialysis service drugs that were or would have been, prior to January 1, 2011, covered 

under Medicare Part D, excluding ESRD-related oral-only drugs. 

In the CY 2011 ESRD PPS final rule (75 FR 49142), we stated that for purposes of 

determining whether an ESRD facility would be eligible for an outlier payment, it would be 

necessary for the facility to identify the actual ESRD outlier services furnished to the patient by 

line item on the monthly claim. The ESRD-related drugs, laboratory tests, and medical/surgical 

supplies that we would recognize as outlier services were specified in Attachment 3 of Change 

Request 7064, Transmittal 2033 issued August 20, 2010, rescinded and replaced by Transmittal 

2094, dated November 17, 2010. With respect to the outlier policy, Transmittal 2094 identified 

additional drugs and laboratory tests that may be eligible for ESRD outlier payment. Transmittal 

2094 was rescinded and replaced by Transmittal 2134, dated January 14, 2011, which was issued 

to correct the subject on the Transmittal page and made no other changes. 

In the CY 2012 ESRD PPS final rule (76 FR 70246), we eliminated the issuance of a 

specific list of eligible outlier service drugs which were or would have been separately billable 

under Medicare Part B prior to January 1, 2011. However, we use separate guidance to continue 
CMS-1614-P 86 

 

to identify renal dialysis service drugs which were or would have been covered under Part D for 

outlier eligibility purposes in order to provide unit prices for calculating imputed outlier services. 

We also can identify, through our monitoring efforts, items and services that are incorrectly 

being identified as eligible outlier services in the claims data. Information about these items and 

services and any updates to the list of renal dialysis items and services that qualify as outlier 

services are made through administrative issuances, if necessary. 

Our regulations at 42 CFR 413.237 specify the methodology used to calculate outlier 

payments. An ESRD facility is eligible for an outlier payment if its actual or imputed Medicare 

Allowable Payment (MAP) amount per treatment for ESRD outlier services exceeds a threshold. 

The MAP amount represents the average incurred amount per treatment for services that were or 

would have been considered separately billable services prior to January 1, 2011. The threshold 

is equal to the ESRD facility’s predicted ESRD outlier services MAP amount per treatment 

(which is case-mix adjusted) plus the fixed dollar loss amount. In accordance with §413.237(c) 

of the regulations, facilities are paid 80 percent of the per treatment amount by which the 

imputed MAP amount for outlier services (that is, the actual incurred amount) exceeds this 

threshold. ESRD facilities are eligible to receive outlier payments for treating both adult and 

pediatric dialysis patients. 

 In the CY 2011 ESRD PPS final rule, using 2007 data, we established the outlier 

percentage at 1.0 percent of total payments (75 FR 49142 through 49143). We also established 

the fixed dollar loss amounts that are added to the predicted outlier services MAP amounts. The 

outlier services MAP amounts and fixed dollar loss amounts are different for adult and pediatric 

patients due to differences in the utilization of separately billable services among adult and 

pediatric patients (75 FR 49140). 
CMS-1614-P 87 

 

 As we explained in the CY 2011 ESRD PPS final rule (75 FR 49138 and 49139), the 

predicted outlier services MAP amounts for a patient are determined by multiplying the adjusted 

average outlier services MAP amount by the product of the patient-specific case-mix adjusters 

applicable using the outlier services payment multipliers developed from the regression analysis 

to compute the payment adjustments. For CY 2014, the outlier services MAP amounts and fixed 

dollar loss amounts were based on 2012 data (78FR 72180). Therefore, the outlier thresholds for 

CY 2014 were based on utilization of ESRD-related items and services furnished under the 

ESRD PPS. Because of the utilization of epoetin and other outlier services has continued to 

decline under the ESRD PPS, we lowered the MAP amounts and fixed dollar loss amounts for 

CYs 2013 and 2014 to allow for an increase in payments for ESRD beneficiaries requiring 

higher resources. 

a. Proposed Changes to the Outlier Services MAP Amounts and Fixed Dollar Loss Amounts 

For CY 2015, we are not proposing any changes to the methodology used to compute the 

MAP or fixed dollar loss amounts. Rather, in this proposed rule, we are updating the outlier 

services MAP amounts and fixed dollar loss amounts to reflect the utilization of outlier services 

reported on the 2013 claims using the December 2013 claims file. The impact of this update is 

shown in Table 14, which compares the outlier services MAP amounts and fixed dollar loss 

amounts used for the outlier policy in CY 2014 with the updated estimates for this proposed rule. 

The estimates for the proposed outlier CY 2015 outlier policy, which are included in Column II 

of Table 14, were inflation-adjusted to reflect projected 2015 prices for outlier services. 
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TABLE 14: 

OUTLIERPOLICY: IMPACT of USING UPDATED DATA to DEFINE the 

OUTLIER POLICY 

Column I 

Final outlier policy for CY 

2014 (based on 2012 data 

price inflated to 2014)* 

Column II 

Proposed outlier policy for 

CY 2015 (based on 2013 data 

price inflated to 2015)* 

Age

< 18 

Age

>= 18 

Age

< 18 

Age 

>= 18 

Average outlier services MAP 

amount per treatment1 $37.29 $51.97 $40.05 $52.61 

Adjustments 

Standardization for 

outlier services2 1.1079 0.9866 1.1182 0.9899 

 MIPPA reduction 0.98 0.98 0.98 0.98 

Adjusted average 

outlier services 

MAP amount3 

$40.49 $50.25 $43.89 $51.04 

Fixed dollar loss amount that 

is added to the predicted MAP 

to determine the outlier 

threshold4 

$54.01 $98.67 $56.30 $85.24 

Patient months qualifying for 

outlier payment 

6.7% 5.3% 6.2% 6.3% 

 

* The outlier services MAP amounts and fixed dollar loss amounts were inflation adjusted to reflect 

updated prices for outlier services (that is, 2014 prices in Column I and projected 2015 prices in 

Column II).

1

Excludes patients for whom not all data were available to calculate projected payments. 

The outlier services MAP amounts are based on 2013 data. The medically unbelievable edits of 400,000 units for 

EPO and 1,200 mcg for Aranesp that are in place under the ESA claims monitoring policy were applied. 

2

Applied to the average outlier MAP per treatment. Standardization for outlier services is based on 

existing case mix adjusters for adult and pediatric patient groups. 

3

This is the amount to which the separately billable (SB) payment multipliers are applied to calculate 

the predicted outlier services MAP for each patient. 4

The fixed dollar loss amounts were calculated using 2013 data to yield total outlier payments that 

represent 1% of total projected payments for the ESRD PPS. 

 As seen in Table 14, the estimated fixed dollar loss amount that determines the CY 2015 

outlier threshold amount for adults (Column II) is lower than that used for the CY 2014 outlier 

policy (Column I). The threshold is lower in spite of the fact that the average outlier services 

MAP per treatment has increased. Between 2012 and 2013, the variation in outlier services 

across patients declined among adults. The net result is an increase in the percentage of patientmonths qualifying for outlier payment (6.3 percent based on 2013 data versus 5.3 percent based 

on 2012 data) but a decrease in the average outlier payment per case. The estimated fixed dollar 
CMS-1614-P 89 

 

loss amount that determines the CY 2015 outlier threshold amount for pediatric patients (Column 

II) is higher than that used for the CY 2014 outlier policy (Column I). 

 For pediatric patients, there was an increase in the overall average outlier service MAP 

amount between 2012 ($37.29 per treatment as shown in Column I) and 2013 ($40.05 per 

treatment, as shown in Column II). In addition, there was a continuing tendency in 2013 for a 

relatively small percentage of pediatric patients to account for a disproportionate share of the 

total outlier service MAP amounts. The one percent target for outlier payments is therefore 

expected to be achieved based on a smaller percentage of pediatric outlier cases using 2013 data 

compared to 2012 data (6.2 percent of pediatric patient months are expected to qualify for outlier 

payments rather than 6.7 percent). These patterns led to the estimated fixed dollar loss amount 

for pediatric patients being higher for the outlier policy for CY 2015 compared to the outlier 

policy for CY 2014. Generally, there is a relatively higher likelihood for pediatric patients that 

the outlier threshold may be adjusted to reflect changes in the distribution of outlier service MAP 

amounts. This is due to the much smaller overall number of pediatric patients compared to adult 

patients, and therefore to the fact that the outlier threshold for pediatric patients is calculated 

based on data for a much smaller number of pediatric patients compared to adult patients. 

We propose to update the fixed dollar loss amounts that are added to the predicted MAP 

amounts per treatment to determine the outlier thresholds for CY 2015 from $98.67 to $85.24 for 

adult patients and from $54.01 to $56.30 for pediatric patients compared with CY 2014 amounts. 

We estimate that the percentage of patient months qualifying for outlier payments under the 

current policy will be 6.3 percent and 6.2 percent for adult and pediatric patients, respectively, 

based on the 2013 data. The pediatric outlier MAP and fixed dollar loss amounts continue to be 

lower for pediatric patients than adults due to the continued lower use of outlier services 
CMS-1614-P 90 

 

(primarily reflecting lower use of epoetin and other injectable drugs). 

b. Outlier Policy Percentage 

42 CFR 413.220(b)(4) stipulates that the per treatment base rate is reduced by 1 percent 

to account for the proportion of the estimated total payments under the ESRD PPS that are 

outlier payments. Based on the 2013 claims, outlier payments represented approximately 0.5 

percent of total payments, again falling short of the 1 percent target due to further declines in the 

use of outlier services. Use of 2013 data to recalibrate the thresholds, which reflect lower 

utilization of EPO and other outlier services and reduced variation in outlier services among 

adults, is expected to result in aggregate outlier payments close to the 1 percent target in CY 

2015. We believe the proposed update to the outlier MAP and fixed dollar loss amounts for CY 

2015 will increase payments for ESRD beneficiaries requiring higher resource utilization and 

come closer to meeting our 1 percent outlier policy. 

 We note that recalibration of the fixed dollar loss amounts in this proposed rule for CY 

2015 outlier payments results in no change in payments to ESRD facilities for beneficiaries with 

renal dialysis items and services that are not eligible for outlier payments, but increases 

payments to providers for beneficiaries with renal dialysis items and services that are eligible for 

outlier payments. Therefore, beneficiary co-insurance obligations would also increase for renal 

dialysis services eligible for outlier payments. 

C. Restatement of Policy Regarding Reporting and Payment for More than Three Dialysis 

Treatments per Week 

1. Reporting More than Three Dialysis Treatments per Week on Claims 

 Since the composite payment system was implemented in the 1980s, CMS has 

reimbursed ESRD facilities based upon three hemodialysis treatments per week and allowed for 
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the payment of additional weekly dialysis treatments with medical justification. When a dialysis 

modality regimen requires more than three weekly dialysis treatments, such as with short, 

frequent hemodialysis (HD) and peritoneal dialysis (PD) modalities, we apply payment edits to 

ensure that Medicare payment on the monthly claim is consistent with the three times-weekly 

dialysis treatment payment limit, which translates to payment for 13 treatments for a 30-day 

month and 14 treatments for a 31-day month. 

Under section 1881(b)(14)(C) of the Act, the ESRD PPS may provide for payment on the 

basis of renal dialysis services furnished during a week, or month, or such other appropriate unit 

of payment as the Secretary specifies. In the CY 2011 ESRD PPS final rule (75 FR 49064), 

CMS finalized the per treatment basis of payment in which ESRD facilities are paid for up to 

three treatments per week, unless there is medical justification for more than three treatments per 

week. We codified the per-treatment unit of payment under the ESRD PPS at 42 CFR 

413.215(a). Also in the CY 2011 ESRD PPS final rule (75 FR 49078), we explained how we 

converted patient weeks to HD-equivalent sessions for PD patients. Specifically, we noted that 

one week of PD was considered equivalent to three HD treatments. For example, a patient on 

PD for 21 days would have (21/7) x 3 or 9 HD-equivalent sessions. Our policy is that ESRD 

facilities treating patients on PD or home HD will be paid for up to three HD-equivalent sessions 

for each week of dialysis, unless there is medical justification for furnishing additional 

treatments. 

Increasingly, some ESRD facilities have begun to offer dialysis modalities where the 

standard treatment regimen is more than three treatments per week. Also, we have observed a 

payment variance among Medicare Administrative Contractors (MACs) in processing claims for 

dialysis treatments for modalities that require more frequent dialysis, resulting in payment of 
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more than 14 treatments per month without medical justification. Lastly, CMS has received 

several requests for clarification regarding Medicare payment and billing policies for dialysis 

treatments for modalities requiring more than three treatments per week that are furnished infacility or in the patient’s home. Specifically, ESRD facilities, renal physician groups, and 

MACs have requested billing guidance regarding whether all of the dialysis treatments furnished 

to the patient during the billing month should be reported on the claim form, even though the 

Medicare benefit only provides for payment of three dialysis treatments per week. 

For these reasons, we are reiterating our policy with respect to payment for more than 

three dialysis treatments per week. We note that we are not changing our policy for reporting 

extra non-medically necessary dialysis sessions. ESRD facility claims should continue to include 

all dialysis treatments furnished during the month on claims, but payment is limited to three 

dialysis treatments per week through the payment edits of 13 treatments for a 30-day month or 

14 treatments for a 31-day month. For example, an ESRD facility that furnishes dialysis 

services to patients who dialyze using modalities requiring shorter, more frequent dialysis (for 

example, a dialysis regimen of 4, 5, 6 or 7 days a week in-facility or at home), should report all 

of the patient’s dialysis treatments on the monthly claim. However, payment for these services 

will reflect existing claims processing system edits, and the monthly Medicare payment would 

mirror the Medicare ESRD benefit of three dialysis treatments per week. 

2. Medical Necessity for More Than Three Treatments per Week 

 Under the ESRD benefit, we have always recognized that some patient conditions benefit 

from more than three dialysis sessions per week and as such, the Medicare policy for medically 

necessary additional dialysis treatments was developed. Under this policy, the MACs determine 

whether additional treatments furnished during a month are medically necessary. While 
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Medicare does not define specific patient conditions that meet the requirements of medical 

necessity, we do furnish instructions to MACs to consider appropriate patient conditions that 

would result in a patient’s medical need for additional dialysis treatments (for example, excess 

fluid of five or more pounds). When such patient conditions are indicated with the claim 

requesting payment, we instruct MACs to consider medical justification and the appropriateness 

of payment for the additional sessions. 

 In section 50.A of the Medicare Benefit Policy Manual (Pub. 100-02), we explained our 

policy regarding payment for hemodialysis-equivalent PD and payment for more than three 

dialysis treatments per week under the ESRD PPS. We restated that ESRD facilities are paid for 

a maximum of 13 treatments during a 30 day month and 14 treatments during a 31-day month 

unless there is medical justification for additional treatments. The only time facilities should 

seek payment for additional dialysis sessions, including payment for shorter, more frequent 

modalities, is when the patient has a medical need for additional dialysis and the facility has 

furnished supporting medical justification for the extra treatments. Modality choice does not 

constitute medical justification. 

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

As we discussed in the CY 2014 ESRD PPS final rule (78 FR 72185 through 72186), 

section 1881(b)(14)(A)(i) of the Act, as added by section 153(b) of the Medicare Improvements 

for Patients and Providers Act of 2008 (MIPPA), requires the Secretary to implement a payment 

system under which a single payment is made to a provider of services or a renal dialysis facility 

for “renal dialysis services” in lieu of any other payment. Section 1881(b)(14)(B) of the Act 

defines renal dialysis services, and subclause (iii) of that section states that these services include 

“other drugs and biologicals that are furnished to individuals for the treatment of ESRD and for 
CMS-1614-P 94 

 

which payment was (before the application of this paragraph) made separately under this title, 

and any oral equivalent form of such drug or biological[.]” 

 We interpreted this provision as including not only injectable drugs and biologicals used 

for the treatment of ESRD (other than ESAs, which are included under clause (ii) of section 

1881(b)(14)(B)), but also all non-injectable oral drugs used for the treatment of ESRD furnished 

under title XVIII of the Act. We also concluded that, to the extent ESRD-related oral-only drugs 

do not fall within clause (iii) of the statutory definition of renal dialysis services, such drugs 

would fall under clause (iv), and constitute other items and services used for the treatment of 

ESRD that are not described in clause (i) of section 1881(b)(14)(B). As such, CMS finalized and 

promulgated the payment policies for oral-only drugs used for the treatment of ESRD in the CY 

2011 ESRD PPS final rule (75 FR 49038 through 49053), and we defined “renal dialysis 

services” at 42 CFR 413.171(3) as including, among other things “other drugs and biologicals 

that are furnished to individuals for the treatment of ESRD and for which payment was (prior to 

January 1, 2011) made separately under Title XVIII of the Act (including drugs and biologicals 

with only an oral form).” 

Although ESRD-related oral-only drugs are included in the definition of renal dialysis 

services, in the CY 2011 ESRD PPS final rule (75 FR 49044), we also finalized a policy to delay 

payment for these drugs under the PPS until January 1, 2014. We stated that there were certain 

advantages to delaying the implementation of payment for oral-only drugs, including allowing 

ESRD facilities additional time to make operational changes and logistical arrangements in order 

to furnish oral-only ESRD-related drugs and biologicals to their patients. Accordingly, 42 CFR 

413.174(f)(6) provides that payment to an ESRD facility for renal dialysis service drugs and 

biologicals with only an oral form is incorporated into the PPS payment rates effective January 1, 
CMS-1614-P 95 

 

2014. 

On January 3, 2013, the Congress enacted ATRA. Section 632(b) of ATRA states that 

the Secretary “may not implement the policy under section 413.176(f)(6) of title 42, Code of 

Federal Regulations (relating to oral-only ESRD-related drugs in the ESRD prospective payment 

system), prior to January 1, 2016.” Accordingly, in the CY 2014 ESRD PPS final rule (78 FR 

72185 through 72186), we delayed payment for ESRD-related oral-only drugs under the ESRD 

PPS until January 1, 2016, instead of on January 1, 2014, which is the original date we finalized 

for payment of ESRD-related oral-only drugs under the ESRD PPS. We implemented this delay 

by revising the effective date for providing payment for oral-only ESRD-related drugs under the 

ESRD PPS at 42 CFR 413.174(f)(6) from January 1, 2014 to January 1, 2016. In addition, we 

also changed the date when oral-only drugs would be eligible outlier services under the outlier 

policy described in 42 CFR 413.237(a)(1)(iv) from January 1, 2014 to January 1, 2016. 

On April 1, 2014, PAMA was enacted. Section 217(a)(1) of PAMA amended section 

632(b)(1) of ATRA, which now provides that the Secretary “may not implement the policy under 

section 413.174(f)(6) of title 42, Code of Federal Regulations (relating to oral-only ESRD drugs 

in the ESRD prospective payment system), prior to January 1, 2024.” Accordingly, payment for 

ESRD-related oral-only drugs will not be made under the ESRD PPS prior to January 1, 2024 

instead of on January 1, 2016, which is the date we finalized for payment of ESRD-related oralonly drugs under the ESRD PPS in the CY 2014 ESRD PPS final rule (78 FR 72186). 

We propose to implement this delay by modifying the effective date for providing 

payment for oral-only ESRD-related drugs and biologicals under the ESRD PPS at 42 CFR 

413.174(f)(6) from January 1, 2016 to January 1, 2024. We also propose to change the date in 

42 CFR 413.237(a)(1)(iv) regarding outlier payments for oral-only ESRD-related drugs made 
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under the ESRD PPS from January 1, 2016 to January 1, 2024. We continue to believe that oralonly drugs used for the treatment of ESRD are an essential part of the ESRD PPS payment 

bundle and should be paid for under the ESRD PPS as soon as possible, or beginning January 1, 

2024. 

 In addition to the delay of payment for oral-only ESRD-related drugs, section 217(a)(2) 

of PAMA further amends section 632(b)(1) of ATRA by adding a new sentence that provides, 

“[n]otwithstanding section 1881(b)(14)(A)(ii) of the Social Security Act (42 U.S.C. 

1395rr(b)(14)(A)(ii)), implementation of the policy described in the previous sentence shall be 

based on data from the most recent year available.” We interpret this provision to mean that we 

are not to use per patient utilization data from 2007, 2008, or 2009 (whichever has the lowest per 

patient utilization) as we were required for the original ESRD PPS in implementing payment for 

oral-only ESRD drugs under the ESRD PPS. We will make proposals consistent with section 

632(b)(1) of ATRA, as amended by section 217(a)(2) of PAMA, in future rulemaking. 

 Section 217(c) of PAMA requires the Secretary, as part of the CY 2016 ESRD PPS 

rulemaking, to establish a process for “(1) determining when a product is no longer an oral-only 

drug; and (2) including new injectable and intravenous products into the bundled payment under 

such system.” Consistent with this statutory requirement, we plan to propose a drug designation 

process in our CY 2016 rulemaking cycle and we are seeking industry and stakeholder comments 

on the components and elements of such a process for our consideration next year. 

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

In the CY 2011 ESRD PPS final rule (75 FR 49050), we finalized Table 4, (Renal 

Dialysis Service ESRD Drug Categories Included in the Final ESRD PPS Base Rate), and have 

included Table 15 below for the purpose of this discussion. In that rule, we noted that the 
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categories of drugs and biologicals used for access management, anemia management, antiinfectives, bone and mineral metabolism and cellular management would always be considered 

ESRD-related drugs when furnished to an ESRD patient, and that payment for such drugs would 

be included in the ESRD PPS payment bundle. As such, beginning January 1, 2011, Medicare 

no longer makes a separate payment when a drug or biological (except for oral-only ESRD–

related drugs for which we are proposing to delay payment under the ESRD PPS until January 1, 

2024) identified in the categories listed in the following table is furnished to a Medicare ESRD 

beneficiary. 

TABLE 15: RENAL DIALYSIS SERVICE ESRD DRUG CATEGORIES INCLUDED in 

the FINAL ESRD PPS BASE RATE 

Drug Category Rationale for Inclusion 

Access Management Drugs used to ensure access by removing clots from grafts, 

reverse anticoagulation if too much medication is given, and 

provide anesthetic for access placement. 

Anemia Management Drugs used to stimulate red blood cell production and/or treat or 

prevent anemia. This category includes ESAs as well as iron. 

Anti-infectives Vancomycin and daptomycin used to treat access site infections.

Bone and Mineral Metabolism Drugs used to prevent/treat bone disease secondary to dialysis. 

This category includes phosphate binders and calcimimetics. 

Cellular Management Drugs used for deficiencies of naturally occurring substances 

needed for cellular management. This category includes 

levocarnitine. 

 

In the CY 2011 ESRD PPS final rule (75 FR 49050), we noted that we included the antiinfective drugs of vancomycin and daptomycin because these drugs were routinely furnished for 

the ESRD-related conditions of access site infections and peritonitis. However, in the CY 2012 

ESRD PPS final rule (76 FR 70242 through 70243), we responded to public comments that noted 

that vancomycin is a common anti-infective drug appropriate for treating infections that are both 
CMS-1614-P 98 

 

ESRD- and non-ESRD-related by modifying our policy to eliminate the payment restriction for 

vancomycin when it is furnished for non-ESRD related conditions. In addition, we finalized the 

use of CMS payment modifier AY (Item or service furnished to an End Stage Renal Disease 

(ESRD) patient that is not for the treatment of ESRD) and instructed facilities to append the 

modifier to the claim reporting vancomycin to indicate that the drug was furnished for reasons 

other than ESRD. The presence of the AY modifier on the claim allows the MAC to make a 

separate payment for the drug when it is furnished by the facility to a Medicare beneficiary for 

reasons other than ESRD. 

In the CY 2013 ESRD PPS final rule (77 FR 67461), we further amended this policy to 

allow ESRD facilities to bill separately for daptomycin when it is furnished to ESRD 

beneficiaries for reasons other than ESRD. Once again, we instructed facilities to append claims 

reporting daptomycin furnished for reasons other than ESRD with the AY modifier so that 

MACs would be able to make a separate payment. 

Because we have removed the payment limitation for both vancomycin and daptomycin, 

and because we believe that anti-infectives are a drug category that may be furnished for both 

ESRD- and non-ESRD-related reasons, we have updated the list of drug categories that are 

always considered ESRD-related under the ESRD PPS by removing the drug category for antiinfectives. We have included Table 16 (Renal Dialysis Service ESRD Drug Categories Included 

in the ESRD PPS Base Rate and Not Separately Payable) below to appropriately recognize the 

drug categories that are always considered ESRD-related and we confirm that the revised table 

reflects policy changes made in the CY 2012 and CY 2013 ESRD PPS rulemaking cycles and 

does not constitute new policy. 

Over the past few years, we have received payment and billing inquiries requesting 
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clarification for the payment for drugs represented by one of the drug categories included in the 

ESRD PPS, but not furnished for the treatment of ESRD. Therefore, we clarify that any drug 

included in the drug categories of access management, anemia management, bone and mineral 

metabolism and cellular management is not separately paid by Medicare regardless of why the 

drug is being furnished. In addition, the facility may not furnish a prescription for such drugs 

with the expectation that a Medicare Part D payment would be made, as the payment for the drug 

is included in the ESRD PPS payment bundle. 

TABLE 16: RENAL DIALYSIS SERVICE ESRD DRUG CATEGORIES INCLUDED in 

the ESRD PPS BASE RATE and NOT SEPARATELY PAYABLE 

Drug Category Rationale for Inclusion 

Access Management Drugs used to ensure access by removing clots from grafts, 

reverse anticoagulation if too much medication is given, and 

provide anesthetic for access placement. 

Anemia Management Drugs used to stimulate red blood cell production and/or treat or 

prevent anemia. This category includes ESAs as well as iron. 

Bone and Mineral Metabolism Drugs used to prevent/treat bone disease secondary to dialysis. 

This category includes phosphate binders and calcimimetics. 

Cellular Management Drugs used for deficiencies of naturally occurring substances 

needed for cellular management. This category includes 

levocarnitine. 

The drug categories that may be separately paid by Medicare when furnished for nonESRD patient conditions are included in Table 5 (ESRD Drug Categories Included in the ESRD 

PPS Base Rate But May be Used for Dialysis and non-Dialysis Purposes) (75 FR 49051). This 

table is included below for the purpose of this discussion. When any drug identified in the drug 

categories listed in Table 17 (antiemetic, anti-infectives, antipruritic, anxiolytic, excess fluid 

management, fluid and electrolyte management or pain management), is furnished for the 

treatment of ESRD, payment for the drug is included in the ESRD PPS payment and may not be 
CMS-1614-P 100 

 

paid separately. If a drug represented by a drug category in Table 17 is furnished for reasons 

other than ESRD, a separate Medicare payment is permitted when the AY modifier is indicated 

on the claim line reporting the drug for payment. 

TABLE 17: ESRD DRUG CATEGORIES INCLUDED in the ESRD BASE RATE but 

MAY be USED for DIALYSIS and NON-DIALYSIS PURPOSES 

Antiemetic Used to prevent or treat nausea and vomiting secondary to dialysis. 

Excludes antiemetics used in conjunction with chemotherapy as 

these are covered under a separate benefit category. 

Anti-infectives Used to treat infections. May include antibacterial and antifungal 

drugs. 

Antipruritic Drugs in this classification have multiple clinical indications and are 

included for their action to treat itching secondary to dialysis. 

Anxiolytic Drugs in this classification have multiple actions but are included for 

the treatment of restless leg syndrome secondary to dialysis. 

Excess Fluid 

Management 

Drug/fluids used to treat fluid excess/overload. 

Fluid and Electrolyte 

Management Including 

Volume Expanders 

Intravenous drugs/fluids used to treat fluid and electrolyte needs. 

Pain Management Drugs used to treat graft site pain and to treat pain medication 

overdose. 

F. Low-Volume Payment Adjustment 

1. Background 

 Section 1881(b)(14)(D)(iii) of the Act requires a payment adjustment that “reflects the 

extent to which costs incurred by low-volume facilities (as defined by the Secretary) in 

furnishing renal dialysis services exceed the costs incurred by other facilities in furnishing such 

services, and for payment for renal dialysis services furnished on or after January 1, 2011, and 

before January 1, 2014, such payment adjustment shall not be less than 10 percent.” As a result 

of this provision and the regression analysis conducted for the ESRD PPS, effective January 1, 

2011, the ESRD PPS provides a facility-level payment adjustment of 18.9 percent to ESRD 

facilities that meet the definition of a low-volume facility. 
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 Under 42 CFR 413.232(b), a low-volume facility is an ESRD facility that: (1) Furnished 

less than 4,000 treatments in each of the 3 cost reporting years (based on as-filed or final settled 

12-consecutive month cost reports, whichever is most recent) preceding the payment year; and 

(2) Has not opened, closed, or received a new provider number due to a change in ownership in 

the 3 cost reporting years (based on as-filed or final settled 12-consecutive month cost reports, 

whichever is most recent) preceding the payment year. Under §413.232(c), for purposes of 

determining the number of treatments furnished by the ESRD facility, the number of treatments 

equals the aggregate number of treatments furnished by other ESRD facilities that are both under 

common ownership and 25 road miles or less from the ESRD facility in question. This 

geographic proximity criterion is only applicable to ESRD facilities that were Medicare certified 

on or after January 1, 2011. 

 For purposes of determining eligibility for the low-volume payment adjustment (LVPA), 

“treatments” means total hemodialysis (HD) equivalent treatments (Medicare and nonMedicare). For peritoneal dialysis (PD) patients, one week of PD is considered equivalent to 3 

HD treatments. In the CY 2012 ESRD PPS final rule (76 FR 70236), we clarified that we base 

eligibility on the three years preceding the payment year and those years are based on cost 

reporting periods. We further clarified that the ESRD facility’s cost reports for the cost reporting 

periods ending in the three years preceding the payment year must report costs for 12-

consecutive months. 

 In order to receive the LVPA under the ESRD PPS, an ESRD facility must submit a 

written attestation statement to its Medicare Administrative Contractor (MAC) that it qualifies as 

a low-volume ESRD facility and that it meets all of the requirements specified at 42 CFR 

§413.232. In the CY 2012 ESRD PPS final rule (76 FR 70236), we finalized a yearly November 
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1 deadline for attestation submission and we revised the regulation at §413.232(f) to reflect this 

date. We noted that this timeframe provides 60 days for a MAC to verify that an ESRD facility 

meets the LVPA eligibility criteria. Further information regarding the administration of the 

LVPA is provided in CMS Pub. 100-02, Medicare Benefit Policy Manual, chapter 11, section 

60.B.1. 

2. The United States Government Accountability Office Study on the LVPA 

 The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required 

the United States Government Accountability Office (the GAO) to study the LVPA. The GAO 

examined (1) the extent to which the LVPA targeted low-volume, high-cost facilities that 

appeared necessary for ensuring access to care; and (2) CMS’s implementation of the LVPA, 

including the extent to which CMS paid the 2011 LVPA to facilities eligible to receive the 

adjustment. To do this work, the GAO reviewed Medicare claims, facilities’ annual cost reports, 

and data on dialysis facilities’ locations to identify and compare facilities that were eligible for 

the LVPA with those that received the adjustment. The GAO published a report 13-287 on 

March 1, 2013, entitled, “End-Stage Renal Disease: CMS Should Improve Design and 

Strengthen Monitoring of Low-Volume Adjustment”. The report found multiple discrepancies in 

the identification of low-volume facilities which are summarized below. 

a. The GAO’s Main Findings 

 The GAO found that many of the facilities eligible for the LVPA were located near other 

facilities, indicating that they might not have been necessary for ensuring access to care. They 

also identified certain facilities with relatively low volume that were not eligible for the LVPA 

but had above-average costs and appeared to be necessary for ensuring access to care. Lastly, 

they stated the design of the LVPA provides facilities with an adverse incentive to restrict their 
CMS-1614-P 103 

 

service provision to avoid reaching the 4,000 treatment threshold. The GAO calculated that 

Medicare overpaid an estimated $5.3 million for the LVPA to dialysis facilities that did not meet 

the eligibility requirements established by CMS. They indicated in their report that the guidance 

that CMS issued for implementation of the regulatory requirements was sometimes unclear and 

not always available when needed, and the misunderstanding of LVPA eligibility likely was 

exacerbated because CMS conducted limited monitoring of the Medicare contractors’ 

administration of LVPA payments. 

b. The GAO’s Recommendations 

 In the conclusion of their study, the GAO provided Congress with the following 

recommendations: 1) To more effectively target facilities necessary for ensuring access to care, 

the Administrator of CMS should consider restricting the LVPA to low-volume facilities that are 

isolated; 2) To reduce the incentive for facilities to restrict their service provision to avoid 

reaching the LVPA treatment threshold, the Administrator of CMS should consider revisions 

such as changing the LVPA to a tiered adjustment; 3) To ensure that future LVPA payments are 

made only to eligible facilities and to rectify past overpayments, the Administrator of CMS 

should take the following four actions: require Medicare contractors to promptly recoup 2011 

LVPA payments that were made in error; investigate any errors that contributed to eligible 

facilities not consistently receiving the 2011 LVPA and ensure that such errors are corrected; 

take steps to ensure that CMS regulations and guidance regarding the LVPA are clear, timely, 

and effectively disseminated to both dialysis facilities and Medicare contractors; and improve the 

timeliness and efficacy of CMS’s monitoring regarding the extent to which Medicare contractors 

are determining LVPA eligibility correctly and promptly redetermining eligibility when all 

necessary data become available. 
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 In response to the GAO’s recommendations, we concurred with the need to ensure that 

the LVPA is targeted effectively at low-volume high-cost facilities in areas where beneficiaries 

may lack other dialysis care options. We also agreed to take action to ensure appropriate 

payment is made in the following ways: 1) evaluating our policy guidance and contractor 

instructions to ensure appropriate application of the LVPA; 2) using multiple methods of 

communication to MACs and ESRD facilities to deliver clear and timely guidance; and 3) 

improving our monitoring of MACs and considering measures that provide specific expectations. 

3. Clarification of the LVPA Policy 

 For CY 2015, we are not proposing to make changes to the eligibility criteria for the 

adjustment or to the magnitude of the adjustment value. In accordance with section 632(c) of 

ATRA, for CY 2016 we will assess and address other necessary LVPA policy changes when we 

use updated data and reevaluate all of the patient- and facility-level adjustments together in a 

regression analysis similar to the analysis that is discussed in the CY 2011 ESRD PPS final rule 

(75 FR 49083 ). At this time, we are not proposing to change the criteria in such a way that the 

number of low-volume facilities would deviate substantially from the number of facilities 

originally modeled to receive the adjustment in the first year of implementation. This is because 

of the interaction of the LVPA with other payment adjustments under the ESRD PPS. As 

discussed in the CY 2011 ESRD PPS final rule (75 FR 49081), we standardized the ESRD PPS 

base rate to account for the payment variables and it would not be appropriate to make changes 

to one variable in the regression when it could potentially affect the other adjustments or the 

standardization factor. However, there are two clarifications under the LVPA policy (discussed 

below) that we can address in this year’s rulemaking that we believe are responsive to 

stakeholder’s concerns and GAO’s concern that the LVPA should effectively target low-volume, 
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high cost-facilities. 

a. Hospital-Based ESRD Facilities 

 As stated above, for purposes of determining eligibility for the LVPA, “treatments” 

means total hemodialysis (HD) equivalent treatments (Medicare and non-Medicare) and for 

peritoneal dialysis (PD) patients, one week of PD is considered equivalent to 3 HD treatments. 

Once a MAC receives an attestation from an ESRD facility, it reviews the ESRD facility’s cost 

reports to verify that the facility meets the low-volume criteria specified at 42 CFR §413.232(b). 

Specifically, the ESRD facility cost report is used to verify the total treatment count that an 

ESRD facility furnishes in its fiscal year, which includes Medicare and non-Medicare treatments. 

For independent ESRD facilities, this information is provided on Worksheet C of the Form 

CMS-265-11 form (previously Form CMS-265-94) and for hospital-based ESRD facilities, this 

information is on Worksheet I-4 of the Form CMS-2552-10. 

 After the LVPA was implemented, we began hearing concerns from multiple 

stakeholders, including members of Congress and rural hospital-based ESRD facilities, about the 

MACs’ LVPA eligibility determinations. The stakeholders indicated that because hospitalbased ESRD facilities are financially integrated with a hospital, their costs and treatment data are 

aggregated in the I-series of the hospital’s cost report. This means that if there is more than one 

ESRD facility that is affiliated with a hospital, the cost and treatment data for all facilities are 

aggregated on Worksheet I-4, typically causing the facilities’ treatment counts to exceed the 

4,000-treatment criterion. 

 We have learned that some MACs accepted treatment counts from hospital-based ESRD 

facilities other than those provided on the hospital’s cost report and, as a result, certain hospitalbased ESRD facilities received the LVPA. Other MACs solely used the aggregated treatment 
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counts from the hospital’s cost report to verify LVPA eligibility, which resulted in denials for 

many hospital-based facilities that would have qualified for the adjustment if the MACs had 

considered other supporting documentation. 

 We agree with stakeholders that limiting the MAC review to the hospital cost reports for 

verification of LVPA eligibility for hospital-based ESRD facilities places these facilities at a 

disadvantage and does not comport with the intent of our policy. We believe it can be necessary 

for MACs to use other supporting data to verify the treatment counts for individual hospitalbased facilities that would meet the eligibility criteria for the LVPA if their treatment counts had 

not been aggregated with one or more other facilities on their hospitals’ cost reports. Because 

LVPA eligibility is based on cost report information and the individual hospital-based facility 

treatment counts is the source of the aggregated treatment counts reported in the cost report, 

however, we continue to believe that cost report data is an integral part of the process of 

verifying whether a hospital-based facility meets the LVPA eligibility criteria. 

 For these reasons, we are clarifying that MACs may consider other supporting data, such 

as a hospital-based facility’s total treatment count, along with the facility’s cost reports and 

attestation, to verify it meets the low-volume eligibility criteria provided at 42 CFR §413.232(b). 

The attestation should continue to be configured around the parent hospital’s cost reports, that is, 

it should be for the same fiscal periods. The MAC can consider other supporting data in addition 

to the total treatments reported in each of the 12-consecutive month cost reports, such as the 

individual facility’s total treatment counts, rather than the hospital’s cost report alone, to verify 

the number of treatments that were furnished by the individual hospital-based facility that is 

seeking the adjustment. Consistent with this policy clarification, hospital-based ESRD facilities’ 

eligibility for the LVPA should be determined at an individual facility level and their total 
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treatment counts should not be aggregated with other ESRD facilities that are affiliated with the 

hospital unless the affiliated facilities are commonly owned and within 25 miles. 

 MACs have discretion as to the format of the attestation and any supporting data, 

however, the facility must provide the total number of Medicare and non-Medicare treatments 

for the three cost reporting years preceding the payment year for all of the hospital-based 

facilities for which treatment counts appear on the hospital’s cost report. This will allow MACs 

to determine which treatments on the cost report were furnished by the individual hospital-based 

facility that is seeking the LVPA and which treatments were furnished by other affiliated 

facilities. Finally, we propose to amend the regulation text by adding a new paragraph (h)(1) to 

§413.232 to reflect this clarification of current policy under which MACs can verify hospitalbased ESRD facilities’ eligibility for the LVPA using supporting data in addition to hospital cost 

reports. We are soliciting comment on the proposed changes at §413.232(h)(1). 

b. Cost Reporting Periods Used for Eligibility 

 In the CY 2012 ESRD PPS final rule (76 FR 70236), we clarified that for purposes of 

eligibility under 42 CFR §413.232(b), we base eligibility on the three years preceding the 

payment year and those years are based on cost reporting periods. We further clarified that the 

ESRD facility’s cost reports for the cost reporting periods ending in the three years preceding the 

payment year must report costs for 12 consecutive months. 

 After the LVPA was implemented, we began hearing concerns from the industry that 

there is a conflict within our policy. Currently, our policy allows an ESRD facility to remain 

eligible for the LVPA when they have a change of ownership (CHOW) that does not result in a 

new Provider Transaction Access Number (PTAN). However, our regulations at 42 CFR 

§413.232(b) suggest that MACs must verify treatment counts using cost reports for 12-
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consecutive month cost periods even though CHOWs often result in costs reports that are 

nonstandard, that is, longer or shorter than 12 months. In particular, the previous owner’s final 

cost report may not coincide with the ESRD facility’s cost report fiscal year end under its new 

ownership, resulting in two costs reports that are not 12-consecutive month cost reports. For 

example, where a CHOW occurs in the middle of the cost reporting period and the new owner 

wishes to retain the established cost report fiscal year end, the previous owner submits a final 

cost report covering their period of ownership and the new owner submits a cost report covering 

the remainder of the cost reporting period. Alternatively, a new owner could also choose not to 

retain the previous owner’s established cost reporting fiscal year end, in which case the CHOW 

could result in a cost reports that exceed twelve months when combined. Further details 

regarding the policies for filing cost reports during a CHOW are available in the Provider 

Reimbursement Manual – Part 1, chapter 15, “Change of Ownership.” 

 We agree with the industry that there is a conflict in the policies governing LVPA that 

may prevent an otherwise qualified ESRD facility from receiving the adjustment. We have 

always intended that if an ESRD facility has a CHOW where the new owner accepts the previous 

owner’s assets and liabilities by retaining the facility’s PTAN, they should continue to be eligible 

for the LVPA. However, some MACs used a strict reading of the regulatory language and 

denied these providers the LVPA. Other MACs added short cost reports together or prorated 

treatment counts for cost reporting periods spanning greater than 12 months. 

 In order to ensure consistent verification of LVPA eligibility, we are restating our 

intention that when there is a CHOW that does not result in a new PTAN but creates two nonstandard cost reporting periods (that is, periods that are shorter or longer than 12 months) the 

MAC is either to add the two non-standard cost reporting periods together where combined they 
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would equal 12 consecutive months or prorate the data when they would exceed 12 consecutive 

months to determine the total treatments furnished for a full cost reporting period as if there had 

not been a CHOW. 

 For example, prior to a CHOW, Facility A had a cost reporting period that spanned 

January 1 through December 31. Facility A had a CHOW mid-year that did not result in a new 

PTAN but caused a break in the cost reporting period. Consistent with the clarification of our 

policy, the MAC would add Facility A’s cost report that spanned January 1 through May 31 to its 

cost report that spanned June 1 through December 31 to verify the total treatment count. 

 The other situation that could occur is when a CHOW results in a change of the original 

fiscal period. For example, prior to a CHOW, Facility B had a cost reporting period that spanned 

January 1 through December 31 and, based on its cost reports for 2012 and 2013, it met the 

LVPA eligibility criteria. Then, Facility B had a CHOW in the beginning of 2014 that did not 

result in a new PTAN, but changed its cost reporting period to that of its new owner, October 1, 

2014 through September 30, 2015. This scenario would create a short and a long cost report that 

would not total 12 months that the MAC would need to review for verification. That is, Facility 

B would have a cost report that spanned January 1, 2014 through July 31, 2014 (7 months) and a 

cost report that spanned August 1, 2014 through September 30, 2015 (14 months). 

 In this situation, the MAC should combine the two non-standard cost reporting periods 

that in combination may exceed 12-consecutive months and prorate the data to equal a full 12-

consecutive month period. Finally, we propose to amend the regulation text by adding a new 

paragraph (h)(2) to §413.232 to clarify the verification process for ESRD facilities that 

experience a CHOW with no change in the PTAN. We are soliciting comments on the proposed 

changes at §413.232(h)(2). 
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 Section 413.232(f) requires ESRD facilities to submit LVPA attestations by November 1 

of each year. However, the changes we are proposing to the LVPA regulation text would not be 

finalized in enough time to give the ESRD facilities the opportunity to learn about the policy 

clarifications and provide an attestation to their MAC by November 1, 2014. For these reasons, 

we are proposing to amend §413.232(f) to extend the deadline for CY 2015 LVPA attestations 

until December 31, 2014. This timeframe would allow ESRD facilities to reassess their 

eligibility and apply for the LVPA for CY 2015. It would also give MACs an opportunity to 

verify any new attestations and reassess LVPA eligibility verifications made since 2011. We 

will issue guidance with additional detail regarding this policy clarification, which will include 

details about the process ESRD facilities should follow to seek the LVPA for past years. 

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

the Comorbidity Payment Adjustment 

Section 1881(b)(14)(D)(i) of the Act requires that the ESRD PPS include a payment 

adjustment based upon case mix that may take into account, among other things, patient 

comorbidities. Comorbidities are specific patient conditions that coexist with the patient’s 

principal diagnosis that necessitates dialysis. The comorbidity payment adjustments recognize 

the increased costs associated with comorbidities and provide additional payment for certain 

conditions that occur concurrently with the need for dialysis. For a detailed discussion of our 

approach to developing the comorbidity payment adjustment, see the CY 2011 ESRD PPS final 

rule (75 FR 49094 through 49108). 

In the CY 2011 ESRD PPS final rule, we finalized six comorbidity categories that are 

eligible for a comorbidity payment adjustment, each with associated International Classification 

of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) diagnosis codes (75 FR 49100). 
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These categories include three acute, short-term diagnostic categories (pericarditis, bacterial 

pneumonia, and gastrointestinal tract bleeding with hemorrhage) and three chronic diagnostic 

categories (hereditary hemolytic sickle cell anemia, myelodysplastic syndrome, and monoclonal 

gammopathy). The comorbidity categories eligible for an adjustment and their associated ICD9-CM codes were published in the Appendix of the CY 2011 ESRD PPS final rule as Table E: 

ICD-9-CM-Codes Recognized for the Comorbidity Payment Adjustment (75 FR 49211). 

In the CY 2012 ESRD PPS final rule (76 FR 70252), we clarified that the ICD-9-CM 

codes eligible for the comorbidity payment adjustment are subject to the annual ICD-9-CM 

coding updates that occur in the hospital IPPS final rule and are effective October 1st every year. 

We explained that any updates to the ICD-9-CM codes that affect the categories of comorbidities 

and the diagnoses within the comorbidity categories that are eligible for a comorbidity payment 

adjustment would be communicated to ESRD facilities through sub-regulatory guidance. 

 Together with the rest of the healthcare industry, CMS was scheduled to implement the 

10th revision of the ICD coding scheme – ICD-10 – on October 1, 2014. Hence, in the CY 2014 

ESRD PPS (78 FR 72175 through 72179), we finalized a policy that ICD-10-CM codes will be 

eligible for a comorbidity payment adjustment where they crosswalk from ICD-9-CM codes that 

are eligible for a comorbidity payment adjustment with two exceptions. 

On April 1, 2014, PAMA was enacted. Section 212 of PAMA, titled “Delay in 

Transition from ICD-9 to ICD-10 Code Sets,” provides that “[t]he Secretary of Health and 

Human Services may not, prior to October 1, 2015, adopt ICD-10 code sets as the standard for 

code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) and section 

162.1002 of title 45, Code of Federal Regulations.” On May 1, 2014, the Secretary announced 

that HHS expects to issue an interim final rule that will require use of ICD-10 beginning October 
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1, 2015 and continue to require use of ICD-9-CM through September 30, 2015. This 

announcement is available on the CMS Web site at 

http://cms.gov/Medicare/Coding/ICD10/index.html. Before the passage of PAMA, our policy 

required facilities to utilize ICD-10-CM codes to identify comorbidities eligible for the 

comorbidity payment adjustment beginning October 1, 2014. However, in light of section 212 of 

PAMA and the Secretary’s announcement of the new compliance date for ICD-10, we are 

proposing to require use of ICD-10-CM to identify comorbidities beginning on October 1, 2015. 

Until that time, we will continue to require use of the ICD-9-CM codes to identify comorbidities 

eligible for the comorbidity payment adjustment. The ICD-9-CM codes that are eligible for the 

comorbidity payment adjustment are listed in the crosswalk tables below. 

Because facilities will begin using ICD-10 during the calendar year to which this rule 

applies, we are correcting several typographical errors and omissions in the Tables that appeared 

in the CY 2015 ESRD PPS final rule. First, we are correcting one ICD-9-CM diagnosis code 

that was incorrectly identified due to a typographical error in Table 1- ONE ICD-9-CM CODE 

CROSSWALKS TO ONE ICD-10-CM CODE (78 FR 72176). In Table 2- ONE ICD-9-CM 

CODE CROSSWALKS TO MULTIPLE ICD-10-CM CODES (78 FR 72177), we are 

correcting two ICD-10-CM codes because of typographical errors and proposing two additional 

ICD-10-CM codes that were inadvertently omitted from the crosswalk. Lastly, in Table 3 - 

MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE (78 FR 72178), 

we are proposing to include 9 additional ICD-10-CM crosswalk codes for eligibility for the 

comorbidity payment adjustment. These codes were omitted in error from the CY 2014 ESRD 

PPS final rule, and we have furnished an updated Table 20 below reflecting the additional codes. 

We note that the ICD-10-CM codes that facilities will be required to use to identify 
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eligible comorbidities when ICD-10 becomes the required medical data code set on October 1, 

2015 are those that were finalized in the CY 2014 ESRD PPS final rule at 78 FR 72175 to 78 FR 

72179 with the corrections and proposed additions included below. 

Table 18– ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE (78 FR 72175 

through 78 FR 72176)

Table 18 lists all the instances in which one ICD-9-CM code crosswalks to one ICD-10-

CM code. We finalized a policy in last year’s rule that all identified ICD-10-CM codes would 

receive a comorbidity adjustment with the exception of K52.81 Eosinophilic gastritis or 

gastroenteritis. We have since discovered that under the section titled Myelodysplastic 

Syndrome, ICD-9-CM code 238.7 Essential thrombocythemia was inaccurately identified. The 

table below has been amended to accurately identify ICD-9-CM diagnostic code 238.71 

Essential thrombocythemia. 

 
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TABLE 18: ONE ICD-9-CM CODE CROSSWALKS TO ONE ICD-10-CM CODE

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

530.21 Ulcer of esophagus with bleeding K22.11 Ulcer of esophagus with bleeding 

535.71 Eosinophilic gastritis, with hemorrhage K52.81 Eosinophilic gastritis or gastroenteritis 

537.83 Angiodysplasia of stomach and duodenum with hemorrhage K31.811 Angiodysplasia of stomach and duodenum with bleeding 

569.85 Angiodysplasia of intestine with hemorrhage K55.21 Angiodysplasia of colon with hemorrhage 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

003.22 Salmonella pneumonia A02.22 Salmonella pneumonia 

482.0 Pneumonia due to Klebsiella pneumonia J15.0 Pneumonia due to Klebsiella pneumoniae 

482.1 Pneumonia due to Pseudomonas J15.1 Pneumonia due to Pseudomonas 

482.2 Pneumonia due to Hemophilus influenzae [H. influenzae] J14 Pneumonia due to Hemophilus influenzae 

482.32 Pneumonia due to Streptococcus, group B J15.3 Pneumonia due to streptococcus, group B 

482.40 Pneumonia due to Staphylococcus, unspecified J15.20 Pneumonia due to staphylococcus, unspecified 

482.41 Methicillin susceptible pneumonia due to Staphylococcus 

aureus 

J15.211 Pneumonia due to Methicillin susceptible Staphylococcus 

aureus 

482.42 Methicillin resistant pneumonia due to Staphylococcus aureus J15.212 Pneumonia due to Methicillin resistant Staphylococcus aureus 

482.49 Other Staphylococcus pneumonia J15.29 Pneumonia due to other staphylococcus 

482.82 Pneumonia due to escherichia coli [E. coli] J15.5 Pneumonia due to Escherichia coli 

482.83 Pneumonia due to other gram-negative bacteria J15.6 Pneumonia due to other aerobic Gram-negative bacteria 

482.84 Pneumonia due to Legionnaires' disease A48.1 Legionnaires' disease 

507.0 Pneumonitis due to inhalation of food or vomitus J69.0 Pneumonitis due to inhalation of food and vomit 

507.8 Pneumonitis due to other solids and liquids J69.8 Pneumonitis due to inhalation of other solids and liquids 

510.0 Empyema with fistula J86.0 Pyothorax with fistula 

510.9 Empyema without mention of fistula J86.9 Pyothorax without fistula 

Pericarditis 

ICD-9 Descriptor ICD-10 Descriptor 

420.91 Acute idiopathic pericarditis I30.0 Acute nonspecific idiopathic pericarditis 

Hereditary Hemolytic and Sickle Cell Anemia 

ICD-9 Descriptor ICD-10 Descriptor 

282.0 Hereditary spherocytosis D58.0 Hereditary spherocytosis 

282.1 Hereditary elliptocytosis D58.1 Hereditary elliptocytosis 

282.41 Sickle-cell thalassemia without crisis D57.40 Sickle-cell thalassemia without crisis 

282.43 Alpha thalassemia D56.0 Alpha thalassemia 

282.44 Beta thalassemia D56.1 Beta thalassemia 

282.45 Delta-beta thalassemia D56.2 Delta-beta thalassemia 

282.46 Thalassemia minor D56.3 Thalassemia minor 

282.47 Hemoglobin E-beta thalassemia D56.5 Hemoglobin E-beta thalassemia 

282.49 Other thalassemia D56.8 Other thalassemias 

282.61 Hb-SS disease without crisis D57.1 Sickle-cell disease without crisis 

282.63 Sickle-cell/Hb-C disease without crisis D57.20 Sickle-cell/Hb-C disease without crisis 

282.68 Other sickle-cell disease without crisis D57.80 Other sickle-cell disorders without crisis 

Myelodysplastic Syndrome 

ICD-9 Descriptor ICD-10 Descriptor 

238.71 Essential thrombocythemia D47.3 Essential (hemorrhagic) thrombocythemia 

238.73 High grade myelodysplastic syndrome lesions D46.22 Refractory anemia with excess of blasts 2 

238.74 Myelodysplastic syndrome with 5q deletion D46.C Myelodysplastic syndrome with isolated del(5q) chromosomal 

abnormality 

238.76 Myelofibrosis with myeloid metaplasia D47.1 Chronic myeloproliferative disease 
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Table 19– ONE ICD-9-CM CODE CROSSWALKS TO MULTIPLE ICD-10-CM CODES (78 

FR 72177 through 78 FR 72178) 

Table 19 lists all of the instances in which one ICD-9-CM code crosswalks to multiple 

ICD-10-CM codes. We finalized a policy in last year’s rule that all identified ICD-10-CM codes 

would receive a comorbidity adjustment with the exception of D89.2 Hypergammaglobulinemia, 

unspecified. Under the section titled Gastrointestinal Bleeding, ICD-9-CM code 562 

Diverticulosis of small intestine with hemorrhage was inaccurately identified, as the complete 

code number is 562.02. The table below has been amended to accurately identify ICD-9-CM 

diagnostic code 562.02 Diverticulosis of small intestine with hemorrhage. 

Also under the section titled Gastrointestinal Bleeding, ICD-9-CM diagnostic code 

562.13 Diverticulitis of colon with hemorrhage did not include a complete crosswalk to ICD-10-

CM diagnostic codes. Therefore, we propose to include ICD-10-CM diagnostic codes K57.81 

Diverticulitis of intestine, part unspecified, with perforation and abscess with bleeding and 

K57.93 Diverticulitis of intestine, part unspecified, without perforation or abscess with bleeding, 

in addition to the ICD-10-CM diagnostic codes K57.21, K57.33, K57.41, and K57.53, as eligible 

for the comorbidity payment adjustment when the use of ICD-10-CM is required, on October 1, 

2015. 

Under the section titled Pericarditis, ICD-10-CM code 130.1 Infective pericarditis was 

inaccurately identified. The table below has been amended to accurately identify the ICD-10-

CM diagnostic code I30.1 Infective pericarditis as eligible for a comorbidity payment adjustment 

when the use of ICD-10-CM is required, on October 1, 2015. 

 
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TABLE 19: ONE ICD-9-CM CODE CROSSWALKS TO MULTIPLE ICD-10-CM 

CODES 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

562.02 Diverticulosis of small intestine with hemorrhage K57.11 Diverticulosis of small intestine without perforation or abscess 

with bleeding 

K57.51 Diverticulosis of both small and large intestine without 

perforation or abscess with bleeding 

562.03 Diverticulitis of small intestine with hemorrhage K57.01 Diverticulitis of small intestine with perforation and abscess 

with bleeding 

K57.13 Diverticulitis of small intestine without perforation or abscess 

with bleeding 

K57.41 Diverticulitis of both small and large intestine with perforation 

and abscess with bleeding 

K57.53 Diverticulitis of both small and large intestine without 

perforation or abscess with bleeding 

562.12 Diverticulosis of colon with hemorrhage K57.31 Diverticulosis of large intestine without perforation or abscess 

with bleeding 

K57.91 Diverticulosis of intestine, part unspecified, without 

perforation or abscess with bleeding 

K57.51 Diverticulosis of both small and large intestine without 

perforation or abscess with bleeding 

562.13 Diverticulitis of colon with hemorrhage K57.21 Diverticulitis of large intestine with perforation and abscess 

with bleeding 

K57.33 Diverticulitis of large intestine without perforation or abscess 

with bleeding 

K57.41 Diverticulitis of both small and large intestine with perforation 

and abscess with bleeding 

K57.53 Diverticulitis of both small and large intestine without 

perforation or abscess with bleeding 

K57.81 Diverticulitis of intestine, part unspecified, with perforation 

and abscess with bleeding 

K57.93 Diverticulitis of intestine, part unspecified, without perforation 

or abscess with bleeding 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

513.0 Abscess of lung J85.0 Gangrene and necrosis of lung 

J85.1 Abscess of lung with pneumonia 

J85.2 Abscess of lung without pneumonia 

Pericarditis 

ICD-9 Descriptor ICD-10 Descriptor 

420.0 Acute pericarditis in diseases classified elsewhere A18.84 Tuberculosis of heart 

I32 Pericarditis in diseases classified elsewhere 

M32.12 Pericarditis in systemic lupus erythematosus 

420.90 Acute pericarditis, unspecified I30.1 Infective pericarditis 

I30.9 Acute pericarditis, unspecified 

420.99 Other acute pericarditis I30.8 Other forms of acute pericarditis 

I30.9 Acute pericarditis, unspecified 

Hereditary Hemolytic and sickle cell anemia 
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ICD-9 Descriptor ICD-10 Descriptor 

282.2 Anemias due to disorders of glutathione metabolism D55.0 Anemia due to glucose-6-phosphate dehydrogenase [G6PD] 

deficiency 

D55.1 Anemia due to other disorders of glutathione metabolism 

282.3 Other hemolytic anemias due to enzyme deficiency D55.2 Anemia due to disorders of glycolytic enzymes 

D55.3 Anemia due to disorders of nucleotide metabolism 

D55.8 Other anemias due to enzyme disorders 

D55.9 Anemia due to enzyme disorder, unspecified 

282.42 Sickle-cell thalassemia with crisis D57.411 Sickle-cell thalassemia with acute chest syndrome 

D57.412 Sickle-cell thalassemia with splenic sequestration 

D57.419 Sickle-cell thalassemia with crisis, unspecified 

282.62 Hb-SS disease with crisis D57.00 Hb-SS disease with crisis, unspecified 

D57.01 Hb-SS disease with acute chest syndrome 

D57.02 Hb-SS disease with splenic sequestration 

282.64 Sickle-cell/Hb-C disease with crisis D57.211 Sickle-cell/Hb-C disease with acute chest syndrome 

D57.212 Sickle-cell/Hb-C disease with splenic sequestration 

D57.219 Sickle-cell/Hb-C disease with crisis, unspecified 

282.69 Other sickle-cell disease with crisis D57.811 Other sickle-cell disorders with acute chest syndrome 

D57.812 Other sickle-cell disorders with splenic sequestration 

D57.819 Other sickle-cell disorders with crisis, unspecified 

Monoclonal Gammopathy 

ICD-9 Descriptor ICD-10 Descriptor 

273.1 Monoclonal paraproteinemia D47.2 Monoclonal gammopathy 

D89.2 Hypergammaglobulinemia, unspecified 

Myelodysplastic Syndrome 

ICD-9 Descriptor ICD-10 Descriptor 

238.72 Low grade myelodysplastic syndrome lesions D46.0 Refractory anemia without ring sideroblasts, so stated 

D46.1 Refractory anemia with ring sideroblasts 

D46.20 Refractory anemia with excess of blasts, unspecified 

D46.21 Refractory anemia with excess of blasts 1 

D46.4 Refractory anemia, unspecified 

D46.A Refractory cytopenia with multilineage dysplasia 

D46.B Refractory cytopenia with multilineage dysplasia and ring 

sideroblasts 

238.75 Myelodysplastic syndrome, unspecified D46.9 Myelodysplastic syndrome, unspecified 

D46.Z Other myelodysplastic syndromes 

Table 20– MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE (78 

FR 72178)

Table 20 displays the crosswalk where multiple ICD-9-CM codes crosswalk to one ICD10-CM code. We finalized a policy in last year’s rule that all of the ICD-10-CM codes listed in 

Table 3 would be eligible for the comorbidity payment adjustment. Under the section titled 

Gastrointestinal Bleeding, nine ICD-10-CM codes (K25.0 Acute gastric ulcer with hemorrhage, 

K25.2 Acute gastric ulcer with both hemorrhage and perforation, K25.4 Chronic or unspecified 
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gastric ulcer with hemorrhage, K25.6 Chronic or unspecified gastric ulcer with both hemorrhage 

and perforation, K26.0 Acute duodenal ulcer with hemorrhage, K26.2 Acute duodenal ulcer with 

both hemorrhage and perforation, K26.4 Chronic or unspecified duodenal ulcer with 

hemorrhage, K26.6 Chronic or unspecified duodenal ulcer with both hemorrhage and 

perforation, and K27.0 Acute peptic ulcer, site unspecified, with hemorrhage) and the 

corresponding ICD-9-CM codes were inadvertently omitted from the crosswalk. We propose 

that these ICD-10-CM diagnostic codes -- K25.0, K25.2 K25.4, K25.6, K26.0, K26.2, K26.4, 

K26.6, K27.0 -- will be eligible for the comorbidity payment adjustment beginning October 1, 

2015. We also propose that the corresponding ICD-9-CM codes will be eligible for the 

comorbidity adjustment through September 30, 2015. 

TABLE 20: MULTIPLE ICD-9-CM CODES CROSSWALK TO ONE ICD-10-CM CODE 

Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

531.00 Acute gastric ulcer with hemorrhage, without mention of 

obstruction 

K25.0 Acute gastric ulcer with hemorrhage 

531.01 Acute gastric ulcer with hemorrhage, with obstruction 

531.20 Acute gastric ulcer with hemorrhage and perforation, without 

mention of obstruction 

K25.2 Acute gastric ulcer with both hemorrhage and perforation 

531.21 Acute gastric ulcer with hemorrhage and perforation, with 

obstruction 

531.40 Chronic or unspecified gastric ulcer with hemorrhage, without 

mention of obstruction 

K25.4 Chronic or unspecified gastric ulcer with hemorrhage 

531.41 Chronic or unspecified gastric ulcer with hemorrhage, with 

obstruction 

531.60 Chronic or unspecified gastric ulcer with hemorrhage and 

perforation, without mention of obstruction 

K25.6 Chronic or unspecified gastric ulcer with both hemorrhage and 

perforation 

531.61 Chronic or unspecified gastric ulcer with hemorrhage and 

perforation, with obstruction 

532.00 Acute duodenal ulcer with hemorrhage, without mention of 

obstruction 

K26.0 Acute duodenal ulcer with hemorrhage 

532.01 Acute duodenal ulcer with hemorrhage, with obstruction 

532.20 Acute duodenal ulcer with hemorrhage and perforation, 

without mention of obstruction 

K26.2 Acute duodenal ulcer with both hemorrhage and perforation 

532.21 Acute duodenal ulcer with hemorrhage and perforation, with 

obstruction 

532.40 Chronic or unspecified duodenal ulcer with hemorrhage, 

without mention of obstruction 

K26.4 Chronic or unspecified duodenal ulcer with hemorrhage 
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Gastrointestinal Bleeding 

ICD-9 Descriptor ICD-10 Descriptor 

532.41 Chronic or unspecified duodenal ulcer with hemorrhage, with 

obstruction 

532.60 Chronic or unspecified duodenal ulcer with hemorrhage and 

perforation, without mention of obstruction 

K26.6 Chronic or unspecified duodenal ulcer with both hemorrhage 

and perforation 

532.61 Chronic or unspecified duodenal ulcer with hemorrhage and 

perforation, with obstruction 

533.00 Acute peptic ulcer of unspecified site with hemorrhage, 

without mention of obstruction 

K27.0 Acute peptic ulcer, site unspecified, with hemorrhage 

533.01 Acute peptic ulcer of unspecified site with hemorrhage, with 

obstruction 

533.20 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, without mention of obstruction 

K27.2 Acute peptic ulcer, site unspecified, with both hemorrhage and 

perforation 

533.21 Acute peptic ulcer of unspecified site with hemorrhage and 

perforation, with obstruction 

533.40 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, without mention of obstruction 

K27.4 Chronic or unspecified peptic ulcer, site unspecified, with 

hemorrhage 

533.41 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage, with obstruction 

533.60 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, without mention of obstruction 

K27.6 Chronic or unspecified peptic ulcer, site unspecified, with both 

hemorrhage and perforation 

533.61 Chronic or unspecified peptic ulcer of unspecified site with 

hemorrhage and perforation, with obstruction 

534.00 Acute gastrojejunal ulcer with hemorrhage, without mention of 

obstruction 

K28.0 Acute gastrojejunal ulcer with hemorrhage 

534.01 Acute gastrojejunal ulcer, with hemorrhage, with obstruction 

534.20 Acute gastrojejunal ulcer with hemorrhage and perforation, 

without mention of obstruction 

K28.2 Acute gastrojejunal ulcer with both hemorrhage and 

perforation 

534.21 Acute gastrojejunal ulcer with hemorrhage and perforation, 

with obstruction 

534.40 Chronic or unspecified gastrojejunal ulcer with hemorrhage, 

without mention of obstruction 

K28.4 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

534.41 Chronic or unspecified gastrojejunal ulcer, with hemorrhage, 

with obstruction 

534.60 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, without mention of obstruction 

K28.6 Chronic or unspecified gastrojejunal ulcer with both 

hemorrhage and perforation 

534.61 Chronic or unspecified gastrojejunal ulcer with hemorrhage 

and perforation, with obstruction 

Bacterial Pneumonia 

ICD-9 Descriptor ICD-10 Descriptor 

482.30 Pneumonia due to Streptococcus, unspecified J15.4 Pneumonia due to other streptococci 

482.31 Pneumonia due to Streptococcus, group A 

482.39 Pneumonia due to other Streptococcus 

482.81 Pneumonia due to anaerobes J15.8 Pneumonia due to other specified bacteria 

482.89 Pneumonia due to other specified bacteria 

 
CMS-1614-P 120 

 

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

A. Background 

For more than 30 years, monitoring the quality of care provided by dialysis facilities to 

patients with end-stage renal disease (ESRD) has been an important component of the Medicare 

ESRD payment system. The ESRD Quality Incentive Program (QIP) is the most recent step in 

fostering improved patient outcomes by establishing incentives for dialysis facilities to meet or 

exceed performance standards established by CMS. The ESRD QIP is authorized by section 

1881(h) of the Social Security Act (the Act), which was added by section 153(c) of the Medicare 

Improvements for Patients and Providers Act (MIPPA). 

Specifically, section 1881(h) requires the Secretary to establish an ESRD QIP by (i) 

selecting measures; (ii) establishing the performance standards that apply to the individual 

measures; (iii) specifying a performance period with respect to a year; (iv) developing a 

methodology for assessing the total performance of each facility based on the performance 

standards with respect to the measures for a performance period; and (v) applying an appropriate 

payment reduction to facilities that do not meet or exceed the established Total Performance 

Score (TPS). This proposed rule discusses each of these elements and our proposals for their 

application to the ESRD QIP, including for PYs 2017 and 2018. 

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

Throughout the past decade, Medicare has been transitioning from a program that pays 

for healthcare based on particular services furnished to a beneficiary to a program that bases 

payments to providers and suppliers on the quality of services they furnish. By paying for the 

quality of care rather than simply the quantity of care, and by focusing on better care and lower 

costs through improvement, prevention and population health, expanded healthcare coverage, 
CMS-1614-P 121 

 

and enterprise excellence, we are strengthening the healthcare system while also advancing the 

National Strategy for Quality Improvement in Health Care (that is, the National Quality Strategy 

(NQS)). We are also working to update a set of domains and specific quality measures for our 

VBP programs, and to link the aims of the NQS with our payment policies on a national scale. 

We are working in partnership with beneficiaries, providers, advocacy groups, the National 

Quality Forum (NQF), the Measures Application Partnership, operating divisions within the 

Department of Health and Human Services (HHS), and other stakeholders to develop new 

measures where gaps exist, refine measures where necessary, and remove measures when 

appropriate. We are also collaborating with stakeholders to ensure that the ESRD QIP serves the 

needs of our beneficiaries and also advances the goals of the NQS to improve the overall quality 

of care, improve the health of the U.S. population, and reduce the cost of quality healthcare.2

 

We believe that the development of an ESRD QIP that is successful in supporting the 

delivery of high-quality healthcare services in dialysis facilities is paramount. We seek to adopt 

measures for the ESRD QIP that promote better, safer, and more coordinated care. Our measure 

development and selection activities for the ESRD QIP take into account national priorities such 

as those established by the HHS Strategic Plan (http://www.hhs.gov/strategicplan/priorities.html), the NQS 

(http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm), and the HHS National Action 

Plan to Prevent Healthcare Associated Infections (HAIs) 

(http://www.hhs.gov/ash/initiatives/hai/esrd.html). To the extent feasible and practicable, we 

have sought to adopt measures that have been endorsed by a national consensus organization; 

recommended by multi-stakeholder organizations; and developed with the input of providers, 

 

2

 2013 Annual Progress Report to Congress: National Strategy for Quality Improvement in Health Care, 

http://www.ahrq.gov/workingforquality/nqs/nqs2013annlrpt.htm. 
CMS-1614-P 122 

 

beneficiaries, health advocacy organizations, and other stakeholders. 

C. Websites for Measure Specifications 

In an effort to ensure that facilities and the general public are able to continue accessing 

the specifications for the measures that are being proposed for and have been adopted in the 

ESRD QIP, we are now posting these measure specifications on a CMS Web site, instead of 

posting them on www.dialysisreports.org as we have in the past. Measure specifications from 

previous years, as well as those proposed for the PY 2017 and PY 2018 programs, can be found 

at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

D. Updating the NHSN Bloodstream Infection in Hemodialysis Outpatients Clinical Measure for 

the PY 2016 ESRD QIP and Future Payment Years 

The NHSN Bloodstream Infection in Hemodialysis Outpatients clinical measure (that is, 

NHSN Bloodstream Infection clinical measure) that we adopted beginning with the PY 2016 

ESRD QIP is based on NQF #1460. At the time we adopted it, the measure included a risk 

adjustment for patients’ vascular access type but did not include any reliability adjustments to 

account for differences in the amount of exposure or opportunity for healthcare associated 

infections (HAIs) among patients. On April 4, 2014, in response to a measure update proposal 

submitted by CDC, NQF endorsed a reliability adjustment for volume of exposure and 

unmeasured variation across facilities to NQF #1460. This reliability adjustment is called the 

Reliability-Adjusted Standardized Infection Ratio or Adjusted Ranking Metric (ARM). As a 

result of this change to the NQF-endorsed measure specifications, a facility’s performance on 

NQF #1460 will be adjusted towards the mean (that is, facilities with low exposure volume will 

be adjusted more than facilities with high exposure volume, and the performance rate will be 
CMS-1614-P 123 

 

adjusted up or down depending on the facility estimate and mean) to account for the differences 

in the reliability of the infection estimates based on the number of patient-months at a facility 

and any unmeasured variation across facilities. Because the adjustment is based on the volume 

of exposure, facility scores will be adjusted more if there are fewer patient-months in the 

denominator, and facility scores will be adjusted less if there are many patient-months in the 

denominator. 

We propose to adopt the same reliability adjustment for purposes of calculating facility 

performance on the NHSN Bloodstream Infection clinical measure, beginning with the PY 2016 

ESRD QIP. We believe that the inclusion of this reliability adjustment, in addition to the risk 

factor adjustment, will enable us to better differentiate among facility performance on this 

measure, because it accounts not only for the variation in patient risk by vascular access type, but 

also for variation in the number of patients a facility treats in a given month. The ARM will be 

incorporated into the existing risk-adjustment methodology, which will also continue to include a 

risk adjustment for patient vascular access type. Further information about the reliability 

adjustment, and the NHSN Bloodstream Infection measure specifications can be found at 

http://www.cdc.gov/nhsn/PDFs/dialysis/NHSN-ARM.pdf, 

http://www.cdc.gov/nhsn/dialysis/dialysis-event.html, and 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

E. Oral-Only Drugs Measures in the ESRD QIP 

Section 217(d) of the Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), 

enacted on April 1, 2014, amends section 1881(h)(2) of the Act to require the Secretary, for PY 

2016 and subsequent years, to adopt measures (outcome-based, to the extent feasible) in the 
CMS-1614-P 124 

 

ESRD QIP that are specific to the conditions treated with oral-only drugs. We believe that the 

Hypercalcemia clinical measure adopted beginning with the PY 2016 program (78 FR 72200 

through 72203) meets this new statutory requirement because hypercalcemia is a condition that 

is treated with oral-only drugs. The Hypercalcemia clinical measure is not an outcome-based 

measure, and we have considered the possibility of adopting outcomes-based measures that 

pertain to conditions treated with oral-only drugs. However, we have determined that it is not 

feasible to propose to adopt an outcome-based measure on this topic at this time because we are 

not aware of any outcome measures developed on this topic. 

F. Proposed Requirements for the PY 2017 ESRD QIP 

1. Proposed Revision to the Expanded ICH CAHPS Reporting Measure 

For the ICH CAHPS reporting measure, we are proposing one change to the reporting 

requirements finalized in the CY 2014 ESRD PPS Final Rule for PY 2017. In the CY 2014 

ESRD PPS final rule, we finalized that facilities would be eligible to receive a score on the 

measure if they treated 30 or more survey-eligible patients during the performance period (78 FR 

72220 through 72221). Subsequently, we were made aware that facilities may not know whether 

they will have enough survey-eligible patients during the performance period to be eligible for 

the ICH CAHPS measure when they are making decisions about whether or not they will 

contract with a vendor to administer the survey. We agree that it would be preferable if facilities 

knew at the beginning of the performance period if they will be eligible to receive a score on the 

ICH CAHPS measure, because this would allow facilities to make informed decisions about 

whether they should contract with a vendor to administer the survey. For this reason, we propose 

that beginning with the PY 2017 program, facilities will be eligible to receive a score on the ICH 

CAHPS measure if they treat 30 or more survey-eligible patients during the “eligibility period,” 
CMS-1614-P 125 

 

which we define as the CY before the performance period. However, even if a facility is eligible 

to receive a score on the measure because it has treated at least 30 survey-eligible patients 

according to the ICH CAHPS Survey measure specifications during the calendar year prior to the 

performance period, we are proposing that the facility will still not receive a score for 

performance during the performance period if it cannot collect 30 survey completes during the 

performance period. We believe that facilities should be able to determine quickly the number of 

survey-eligible patients that they treated during the eligibility period, and that reaching this 

determination should not impact facilities’ ability to contract with a vender in time to meet the 

semiannual survey administration requirements. Technical specifications for the ICH CAHPS 

reporting measure can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We seek comments on this proposal. 

2. Proposed Measures for the PY 2017 ESRD QIP 

a. PY 2016 Measures Continuing in PY 2017 and Future Payment Years 

We previously finalized 11 measures in the CY 2014 ESRD PPS Final Rule for the PY 

2016 ESRD QIP, and these measures are summarized in Table 21 below. In accordance with our 

policy to continue using measures unless we propose to remove or replace them (77 FR 67477), 

we will continue to use 10 of these 11 measures in the PY 2017 ESRD QIP. As we discuss in 

more detail below, we are proposing to remove one measure, Hemoglobin Greater than 12 g/dL, 

beginning with the PY 2017 measure set (see Table 22 below). 
CMS-1614-P 126 

 

TABLE 21: PY 2016 ESRD QIP Measures Being Continued in PY 2017

NQF # Measure Title and Description

0249 Hemodialysis Adequacy: Minimum delivered hemodialysis dose 

Percent of hemodialysis patient-months with spKt/V greater than or equal to 1.2. 

0318 Peritoneal Dialysis Adequacy: Delivered dose above minimum 

Percent of peritoneal dialysis patient-months with spKt/V greater than or equal to 1.7 (dialytic + 

residual) during the four month study period. 

1423 Pediatric Hemodialysis Adequacy: Minimum spKt/V 

Percent of pediatric in-center hemodialysis patient-months with spKt/V greater than or equal to 1.2. 

0257 Vascular Access Type: AV Fistula 

Percentage of patient-months on hemodialysis during the last hemodialysis treatment of the month 

using an autogenous AV fistula with two needles. 

0256 Vascular Access Type: Catheter > 90 days 

Percentage of patient-months for patients on hemodialysis during the last hemodialysis treatment of 

month with a catheter continuously for 90 days or longer prior to the last hemodialysis session. 

N/A1 National Healthcare Safety Network (NHSN) Bloodstream Infection in Hemodialysis Patients 

Number of hemodialysis outpatients with positive blood cultures per 100 hemodialysis patient-months.2

1454 Hypercalcemia 

Proportion of patient-months with 3-month rolling average of total uncorrected serum calcium greater 

than 10.2 mg/dL. 

N/A3

In-Center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) 

Survey Administration 

Facility administers, using a third-party CMS-approved vendor, the ICH CAHPS survey in accordance 

with survey specifications and submits survey results to CMS. 

N/A4 Mineral Metabolism Reporting

Number of months for which facility reports serum phosphorus for each Medicare patient. 

N/A Anemia Management Reporting 

Number of months for which facility reports ESA dosage (as applicable) and hemoglobin/hematocrit for 

each Medicare patient. 1 We note that this measure is based on a current NQF-endorsed bloodstream infection measure (NQF#1460). 2

 We are proposing a new method of calculating performance on this measure using the ARM methodology. If we decide to 

finalize this proposal based on public comments, the NHSN Bloodstream Infection clinical measure description will be updated 

to read: “ARM of Bloodstream Infection will be calculated among inpatients receiving hemodialysis at outpatient hemodialysis 

centers.” 

3

 We note that a related measure utilizing the results of this survey has been NQF-endorsed (#0258). We are proposing to adopt 

NQF #0258 in the PY 2018 program. 

4

 We note that this measure is based upon a current NQF-endorsed serum phosphorus measure (NQF #0255).

 
CMS-1614-P 127 

 

TABLE 22: Measure Proposed for Removal Beginning with the PY 2017 ESRD QIP 

NQF# Measure Title 

N/A Anemia Management: Hgb >12 

Percentage of Medicare patients with a mean hemoglobin value greater than 12 g/dL. 

b. Proposal to Determine when a Measure is “Topped-Out” in the ESRD QIP, and Proposal to 

Remove a Topped-Out Measure from the ESRD QIP, Beginning with PY 2017 

In the CY 2013 ESRD PPS final rule (77 FR 67475), we finalized a list of seven criteria 

we would consider when making determinations about whether to remove or replace a measure: 

“(1) measure performance among the majority of ESRD facilities is so high and unvarying that 

meaningful distinctions in improvements or performance can no longer be made; (2) 

performance or improvement on a measure does not result in better or the intended patient 

outcomes; (3) a measure no longer aligns with current clinical guidelines or practice; (4) a more 

broadly applicable (across settings, populations, or conditions) measure for the topic becomes 

available; (5) a measure that is more proximal in time to desired patient outcomes for the 

particular topic becomes available; (6) a measure that is more strongly associated with desired 

patient outcomes for the particular topic becomes available; or (7) collection or public reporting 

of a measure leads to negative unintended consequences.” 

In the CY 2014 ESRD PPS final rule (78 FR 72192), we stated that we were in the 

process of evaluating all of the ESRD QIP measures against the criteria. Subsequent to the 

publication of the CY 2014 ESRD PPS final rule, we completed our evaluation and determined 

that none of the measures finalized in the PY 2016 ESRD QIP met criteria 2 through 7, as listed 

above. With respect to the first criterion, we are proposing to more specifically define when 

performance on a clinical measure is so high and unvarying that the measure no longer reflects 

meaningful distinctions in improvements or performance. The statistical definitions that we are 

proposing to adopt will align our methodology with that used by the Hospital VBP program to 
CMS-1614-P 128 

 

determine when a measure is topped out (76 FR 26496 through 26497). Under this 

methodology, a clinical measure is considered to be topped out if national measure data show (1) 

statistically indistinguishable performance levels at the 75th and 90th percentiles; and (2) a 

truncated coefficient of variation (CV) of less than or equal to 0.1. 

To determine whether a clinical measure is topped out, we initially focused on the top 

distribution of facility performance on each measure and noted if their 75th and 90th percentiles 

were statistically indistinguishable. Then, to ensure that we properly accounted for the entire 

distribution of scores, we analyzed the truncated coefficient of variation (CV) for each of the 

clinical measures. 

The CV is a common statistic that expresses the standard deviation as a percentage of the 

sample mean in a way that is independent of the units of observation. Applied to this analysis, a 

large CV would indicate a broad distribution of individual facility scores, with large and 

presumably meaningful differences between hospitals in relative performance. A small CV 

would indicate that the distribution of individual facility scores is clustered tightly around the 

mean value, suggesting that it is not useful to draw distinctions between individual facility 

performance scores. We used a modified version of the CV, namely a truncated CV, for each 

clinical measure, in which the 5 percent of facilities with the lowest scores, and the 5 percent of 

facilities with the highest scores were first truncated (set aside) before calculating the CV. This 

was done to avoid undue effects of the highest and lowest outlier facilities; if included, they 

would tend to greatly widen the dispersion of the distribution and make the clinical measure 

appear to be more reliable or discerning. For example, a clinical measure for which most facility 

scores are tightly clustered around the mean value (a small CV) might actually reflect a more 

robust dispersion if there were also a number of facilities with extreme outlier values, which 
CMS-1614-P 129 

 

would greatly increase the perceived variance in the measure. Accordingly, the truncated CV of 

less than or equal to 0.10 was added as a criterion for determining whether a clinical measure is 

topped out. 

We seek comments on this proposal. 

We evaluated each of the clinical measures finalized in the PY 2016 ESRD QIP against 

these proposed statistical conditions. The full analysis is available at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. The results of that analysis appear 

below in Table 23. 

 
CMS-1614-P 130 

 

TABLE 23: PY 2016 Clinical Measures using CROWNWeb and Medicare Claims Data 

from January 2013 – December 2013 

Measure N 75th

percentile 

90th

percentile 

Std. 

Error 

Statistically 

Indistinguishable 

Truncated 

CV 

TCV

< 

0.10 

Adult HD Kt/V 5665 96.1 97.4 0.13 No 0.04 Yes 

Adult PD Kt/V 1176 92.9 94.8 0.55 No 0.15 No 

Pediatric HD 

Kt/V 

10 94.5 97.1 2.71 Yes 0.08 Yes 

Hgb > 12 5521 0.0 0.0 0.02 Yes < 0.01 Yes 

Fistula Use 5561 72.3 77.0 0.16 No 0.14 No 

Catheter Use 5586 5.9 2.8 0.10 No < 0.01 Yes 

Hypercalcemia 5685 0.3 0.0 0.04 No < 0.01 Yes 

 

As the information presented in Table 23 suggests, the Hemoglobin Greater than 12 g/dL 

measure meets the proposed criteria for determining when a clinical measure is topped-out in the 

ESRD QIP. Accordingly, we propose to remove the Hemoglobin Greater than 12 g/dL measure 

from the ESRD QIP, beginning with the PY 2017 program. We recognize that the Pediatric 

Hemodialysis Adequacy measure also meets the conditions for being a topped-out clinical 

measure in the ESRD QIP. However, we are not proposing to remove the Pediatric 

Hemodialysis Adequacy measure from the ESRD QIP because we have determined that 

removing the measure will not be useful for dialysis facilities. There are currently very few 

measures available that focus on the care furnished to pediatric patients with ESRD, and we are 

reticent to remove a measure that addresses the unique needs of this population. In addition, 

although only 10 facilities were eligible to receive a score on the Pediatric Hemodialysis 

Adequacy measure (based on CY 2013 data), we believe that the publicly reported performance 

of these facilities can influence the standard of care furnished by other facilities that treat 

pediatric patients, even if a facility does not treat a sufficient number of pediatric patients to be 

eligible to be scored on the measure. 
CMS-1614-P 131 

 

For these reasons, we believe that the drawbacks of removing a topped out clinical 

measure could be outweighed by the other benefits to retaining the measure. Accordingly, we 

propose that even if we determine that a clinical measure is topped out according to the statistical 

criteria we apply, we will not remove or replace it if we determine that its continued inclusion in 

the ESRD QIP measure set will continue to set a high standard of care for dialysis facilities. 

We seek comments on these proposals. 

c. New Measures Proposed for PY 2017 and Future Payment Years 

As the program evolves, we believe it is important to continue to evaluate and expand the 

measures selected for the ESRD QIP. Therefore, for the PY 2017 ESRD QIP and future 

payment years, we are proposing to adopt one new clinical measure that addresses care 

coordination (see Table 24). 

TABLE 24: New Measure Proposed for the PY 2017 ESRD QIP 

NQF# Measure Title 

N/A1 Standardized Readmission Ratio, a clinical measure 

Risk-adjusted standardized hospital readmissions ratio 1 We note that this measure is currently under review at NQF. 

i. Proposed Standardized Readmission Ratio (SRR) Clinical Measure 

Background 

At the end of 2011, 615,899 patients were being dialyzed, 115,643 of whom were new 

(incident) patients with ESRD.3

 The SRR measure assesses the rate of unplanned readmissions 

of ESRD patients to an acute care hospital within 30 days of an index discharge from an acute 

care hospital, thereby identifying potentially poor or incomplete quality of care in the dialysis 

facility. In addition, the SRR reflects an aspect of ESRD care that is especially resourceintensive. In 2011, the total amount paid by Medicare for the ESRD program was approximately 

 

3

 United States Renal Data System, USRDS 2013 Annual Data Report: Atlas of Chronic Kidney Disease and EndStage Renal Disease in the United States, National Institutes of Health, National Institute of Diabetes and Digestive 

and Kidney Diseases, Bethesda, MD, 2013. 
CMS-1614-P 132 

 

$34.3 billion, a 5.4 percent increase from 2010.2 In particular, Medicare paid more than $10.5 

billion for costs associated with hospitalized ESRD patients in 2011. In 2011, ESRD dialysis 

patients were admitted to the hospital twice on average, and spent an average of 12 total days in 

the hospital over the year, accounting for approximately 38 percent of Medicare expenditures for 

patients with ESRD.2

 Furthermore, a substantial percentage (30 percent) of ESRD patients 

discharged from the hospital have an unplanned readmission within 30 days.2

 In the non-ESRD 

population, clinical studies have demonstrated that improved care coordination and discharge 

planning may reduce readmission rates. The literature also reports a wide range of estimates of 

the percentage of readmissions that may be preventable. One literature review of more than 30 

studies found the median proportion of readmissions that may be preventable was 27%, with a 

range of 5% to 79%.4

 Preventability varied widely across diagnoses. Readmissions were more 

likely to be preventable in patients with more severe conditions. Therefore, a systematic 

measure on unplanned readmissions is essential for controlling escalating medical costs; it can 

identify where readmission rates are unusually high, and help facilities to provide cost-effective 

healthcare. 

Overview of Measure

The SRR is a one-year risk-standardized measure of a facility’s 30-day, all-cause rate of 

unplanned hospital readmissions among Medicare-covered ESRD dialysis patients. The number 

of expected readmissions is determined by a risk-adjustment model that accounts for the hospital 

where the index discharge took place, certain patient characteristics (including age, sex, and 

comorbidities), and the national median expected performance for all dialysis facilities, given the 

same patient case mix. 

 

4 van Walraven C, Bennett C, Jennings A, Austin PC, Forster AJ. Proportion of hospital readmissions deemed 

avoidable: a systematic review. CMAJ. 2011;183(7):E391–E402. 
CMS-1614-P 133 

 

We are proposing to adopt the SRR measure currently under review by NQF (NQF 

#2496). Section 1881(h)(2)(B)(i) of the Act requires that, unless the exception set forth in 

section 1881(h)(2)(B)(ii) of the Act applies, the measures specified for the ESRD QIP under 

section 1881(h)(2)(A)(iv) of the Act must have been endorsed by the entity with a contract under 

section 1890(a) of the Act (that entity currently is NQF). Under the exception set forth in section 

1881(h)(2)(B)(ii) of the Act, in the case of a specified area or medical topic determined 

appropriate by the Secretary for which a feasible and practical measure has not been endorsed by 

the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure 

that is not so endorsed, so long as due consideration is given to measures that have been 

endorsed or adopted by a consensus organization identified by the Secretary. 

We have given due consideration to endorsed measures, as well as those adopted by a 

consensus organization, and we are proposing this measure under the authority of 

1881(h)(2)(B)(ii) of the Act. Although the NQF has endorsed an all-cause hospital readmission 

measure (NQF #1789), we do not believe it is feasible to adopt this measure in the ESRD QIP 

because NQF #1789 is specified for use in hospitals, not dialysis facilities. In addition, NQF 

#1789 is intended to evaluate readmissions across all patient types, whereas the proposed SRR 

measure is specified for the unique population of ESRD dialysis patients, which have a different 

risk profile than the general population captured in NQF #1789. Because the proposed SRR 

measure has been developed specifically for the dialysis-facility setting, and because the measure 

has the potential to improve clinical practice and decrease healthcare costs, we believe it is 

appropriate to adopt the SRR in the ESRD QIP at this time. 

We have analyzed the measure’s reliability, the results of which are provided below and 

in greater detail in the SRR Measure Methodology report, available at: 
CMS-1614-P 134 

 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. The Inter-Unit Reliability (IUR) was 

calculated for the proposed SRR using data from 2012 and a “bootstrap” approach, which uses a 

resampling scheme to estimate the within-facility variation that cannot be directly estimated by 

the analysis of variance (ANOVA). The SRRs that we calculated for purposes of this analysis 

were for dialysis facilities that had at least 11 patients who had been discharged from a hospital 

during 2012. A small IUR (near 0) reveals that most of the variation of the measures between 

facilities is driven by “random noise,” indicating the measure would not be a reliable 

characterization of the differences among facilities, whereas a large IUR (near 1) indicates that 

most of the variation between facilities is due to the real differences between facilities. The IUR 

for the proposed SRR measure was found to be 0.49, indicating that about one-half of the 

variation in the SRR can be attributed to between-facility differences, and about half to withinfacility variation. This value of IUR indicates that an average-size facility would achieve a 

moderate degree of reliability for this measure. This level of reliability is consistent with the 

reliability of other outcome measures in CMS quality-reporting and VBP programs, such as the 

30-day Risk-Standardized All-Cause Acute Myocardial Infarction, Heart Failure, and Pneumonia 

Readmission and Mortality measures used in the Hospital IQR and VBP Programs. We 

therefore believe that facilities can be reliably scored on the proposed SRR measure. 

We convened a technical expert panel (TEP) in May 2012 for the purpose of evaluating 

this measure, but the TEP did not reach a final consensus and declined to support the 

measure. Some members of the TEP were concerned that we did not risk-adjust for the 

nephrologist treating the patients, because actions taken by nephrologists can impact readmission 

rates. After reviewing the TEP’s arguments, we determined that the suggested risk adjustment 
CMS-1614-P 135 

 

for nephrologist care would constitute a reversal of CMS policy not to risk adjust for factors 

related to care for which the provider is responsible. We do not think that it is appropriate to 

risk-adjust the measure for the nephrologist because the nephrologist is part of the facility’s 

multi-disciplinary team, and medical directors, as employees of the dialysis facilities, are 

responsible for ensuring that appropriate care is provided by a multi-disciplinary team. The 

Measures Application Partnership reviewed this measure in February 2013 and supported the 

direction of the measure, advising CMS that the measure would require additional development 

prior to implementation. Subsequently, we released draft specifications for the measure to the 

public for a 30-day comment period and, based on comments received, finalized measure 

specifications in September 2013. We also, on a voluntary basis, provided individual dialysis 

facilities with a facility-specific report that calculated their SRR measure results and compared 

those results to SRR measure results at the state and national level, as well as discharge-level 

data upon request. Facilities also had an opportunity to submit questions to CMS regarding the 

measure and their reports. We therefore believe that the proposed SRR measure risk-adjusts 

appropriately for patient condition and comorbidities at the start of care for which the facility is 

not responsible. We also believe that the measure is ready for adoption because, as explained 

above, it achieves a moderate degree of reliability. 

Data Sources 

The data we will use to calculate the proposed SRR measure come from various CMSmaintained data sources for ESRD patients including the CROWNWeb database, the CMS 

Annual Facility Survey (Form CMS-2744), Medicare claims, the CMS Medical Evidence Form 

(Form CMS-2728), transplant data from the Organ Procurement and Transplant Network 

(OPTN), the Death Notification Form (Form CMS-2746), the Nursing Home Minimum Dataset, 
CMS-1614-P 136 

 

and the Social Security Death Master File. These data sources include all Medicare-covered 

patients with ESRD. Information on hospitalizations is obtained from Medicare Inpatient Claims 

Standard Analysis Files (SAFs) and past-year comorbidity is obtained from Medicare Claims 

SAFs (inpatient, outpatient, physician/supplier, home health, hospice, and skilled nursing facility 

claims). 

Outcome

The outcome for this measure is 30-day all-cause, unplanned readmission defined as a 

hospital readmission for any cause beginning within 30 days of the discharge date of an index 

discharge, with the exclusion of planned readmissions. This 30-day readmission period is 

consistent with other publicly reported readmission measures endorsed by NQF and currently 

implemented in the Hospital Inpatient Quality Reporting Program and Hospital Readmission 

Reduction Program, and reflects an industry standard. 

Cohort 

All discharges of Medicare ESRD dialysis patients from an acute care hospital in a 

calendar year are considered eligible for this measure, with the exception of the exclusions listed 

in the next section. 

Inclusion and Exclusion Criteria 

The proposed SRR measure excludes from the measure cohort hospitalizations: 1) where 

the patient died during the index hospitalization; 2) where the patient dies within 30 days of the 

index discharge with no readmission; 3) where the patient is discharged against medical advice; 

4) where the patient was admitted with a primary diagnosis of certain conditions related to 

cancers, mental health conditions, or rehabilitation procedures (because these patients possess 

radically different risk profiles, and therefore cannot reasonably be compared to other patients 
CMS-1614-P 137 

 

discharged from hospitals); 5) where the patient is discharged from a PPS-exempt cancer 

hospital (because these hospitals care for a unique population of patients that cannot reasonably 

be compared to the patients admitted to other hospitals); 6) where the patient is transferred to 

another acute care hospital; and 7) where the patient has already been discharged 12 times during 

the same calendar year (to respond to concerns raised by the TEP that patients who are 

hospitalized this frequently during a calendar year could unduly skew the measure rates for small 

facilities). 

Risk Adjustment 

The measure adjusts for differences across facilities with regard to their patient case 

mix. Consistent with NQF guidelines, the model does not adjust for socioeconomic status or 

race, because risk adjusting for these characteristics would hold facilities with a large proportion 

of patients who are minorities and/or who have low socioeconomic status to a different standard 

of care than other facilities. One goal of this measure is to illuminate quality differences that 

such risk adjustment would obscure. As with the Hospital-Wide Readmission measure 

employed by the Hospital Readmissions Reduction program, the SRR employs a hierarchical 

logistic regression model to estimate the expected number of readmissions to an acute care 

hospital, taking into account the performance of all dialysis facilities, the discharging hospital, 

and the facility’s patient case-mix. 

Although the SRR risk-adjustment model is generally aligned with the Hospital-Wide 

Readmission measure risk-adjustment methodology, we are proposing to modify it to account for 

comorbidities and patient characteristics relevant to the ESRD population. The proposed SRR 

measure includes the following patient characteristics as risk adjustors, which are obtained from 

the following data sources: 
CMS-1614-P 138 

 

Risk Adjustor Data Source 

Sex CMS Form 2728 

Age REMIS database 

Years on ESRD CMS Form 2728 

Diabetes as cause of ESRD CMS Form 2728 

BMI at incidence of ESRD CMS Form 2728 

Days hospitalized during index admission Part A Medicare Inpatient Claims SAFs 

23 past-year comorbidities (e.g., 

cardiorespiratory failure/shock; drug and 

alcohol disorders) 

Medicare Claims SAFs: Part A Inpatient, home 

health, hospice, and skilled nursing facility; 

and Part B Outpatient 

Discharged with any of 11 high-risk conditions 

(for example, cystic fibrosis, and hepatitis) 

Part A Medicare Inpatient Claims SAFs 

More details on the risk-adjustment calculations, and the rationale for selecting these risk 

adjustors and not others, can be found at: http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. We are 

proposing to risk adjust the proposed SRR measure based on sex, because we have determined 

that patients’ sex affects the measure in ways that are beyond the control of dialysis facilities. 

We reached this determination by examining the effects of the risk adjusters, both independently 

and in combination, on rates of unplanned readmissions. This analysis yielded two 

conclusions. First, the analysis indicated that females are generally more likely than males to 

experience an unplanned readmission, even when accounting for the other risk adjustors. 

Second, the disparate effects of gender were substantially impacted by the effects of age: females 

aged 15 to 45 were much more likely to experience an unplanned readmission than males of the 

same age, but this disparity was significantly reduced for men and women younger than 15 and 

older than 45. Based on these two conclusions, we believe that women in the 15-45 age range 

face a greater risk of experiencing an unplanned readmission, as compared to men of the same 

age with similar risk profiles. This does not appear to be a consequence of facility performance, 

however, because the disparity is not generally applicable to women, but only to a limited age 
CMS-1614-P 139 

 

group. We therefore believe it is essential to risk-adjust for sex to ensure that facilities with 

larger numbers of women aged 15 to 45 are not inappropriately disadvantaged, because not riskadjusting for sex would potentially incentivize facilities to deny access to these individuals. 

As indicated in the table above, the measure is risk-adjusted, in part, based on 23 

comorbidities that develop in the year prior to the index hospitalization, as well as 11 high-risk 

conditions that are present at the time of the index discharge. These data are taken from 

Medicare claims submitted by hospitals, dialysis facilities, and other types of long-term and postacute care facilities. 

We believe that this proposed approach to risk-adjusting the SRR measure is consistent 

with NQF guidelines for measure developers. NQF evaluates measures on the basis of four 

criteria: importance, scientific acceptability, feasibility, and usability. The validity and reliability 

of a measure’s risk-adjustment calculations fall under the “scientific acceptability” criterion, and 

Measure Evaluation Criterion 2b4 specifies NQF’s preferred approach for risk-adjusting 

outcome measures 

(http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion 

states that patient comorbidities should only be included in risk-adjustment calculations if they 

are 1) present at the start of care and 2) not indicative of disparities or deficiencies in the quality 

of care provided. As indicated in the “Inclusion and Exclusion Criteria” subsection above, as 

well as the measure specifications that are currently under review at NQF, the start of care is 

defined as the index hospitalization. Accordingly, we believe that NQF Measure Evaluation 

Criterion 2b4 supports risk adjusting the proposed SRR measure on the basis of patient 

comorbidity data collected in the year prior to the index hospitalization, because these 

comorbidities are likely present at the start of care (that is, the date(s) that the patient spends in 
CMS-1614-P 140 

 

the hospital during the index hospitalization). For these reasons, we believe that the riskadjustment methodology for the proposed SRR measure is consistent with NQF guidelines for 

measure developers and is appropriate for this measure. 

Full documentation of the SRR risk-adjustment methodology is available at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

Calculating the SRR Measure 

The SRR measure is calculated as the ratio of the number of observed unplanned 

readmissions to the number of expected unplanned readmissions. Facilities that have more 

unplanned readmissions than would be expected for an average facility with a similar case-mix 

would have a ratio greater than one. Facilities having fewer unplanned readmissions than would 

be expected for an average facility with a similar case mix would have a ratio less than one. This 

ratio calculation is consistent with that employed by one NQF-endorsed outcome measure for 

ESRD, the Standardized Hospitalization Ratio (NQF #1463). 

Hospitalizations are counted as events in the numerator if they meet the definition of 

unplanned readmission—which is that they (a) occurred within 30 days of the index discharge 

and (b) are not preceded by a “planned” readmission that also occurred within 30 days of the 

index discharge. Planned readmissions are defined as readmissions that do not bear on the 

quality of care furnished by the dialysis facility, that occur as a part of ongoing appropriate care 

of patients, or that involve elective care. Building on the algorithm developed for the HospitalWide Readmission measure (NQF #1789), the proposed planned readmission list incorporates 

minor changes appropriate to the ESRD population as suggested by technical experts. The full 

planned readmission list and algorithm are available at: http://www.cms.gov/Medicare/Quality-
CMS-1614-P 141 

 

Initiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. In 

general, a readmission is considered “planned” under two scenarios. 

1. The patient undergoes a procedure that is always considered planned (example, bone 

marrow transplant) or has a primary diagnosis that always indicates the hospitalization is 

planned (for example, maintenance chemotherapy). 

2. The patient undergoes a procedure that may be considered planned if it is not 

accompanied by an acute diagnosis. For example, a hospitalization involving a heart -

valve procedure accompanied by a primary diagnosis of acute myocardial infraction 

would be considered unplanned, whereas a hospitalization involving a heart-valve 

procedure accompanied by a primary diagnosis of diabetes would be considered planned 

(because acute myocardial infraction is a plausible alternative acute indication for 

hospitalization). 

The expected number of readmissions is calculated using hierarchical logistic modeling 

(HLM). This approach accounts for the hospital from which the patient was discharged and the 

patient case mix (as defined by factors such as age, sex, and patient comorbidities), as well as the 

national median performance of all dialysis facilities. The HLM is an appropriate statistical 

approach to measuring quality based on patient outcomes when patients are clustered within 

facilities (and therefore the patients’ outcomes are not statistically independent), and when the 

number of qualifying patients for the measure varies from facility to facility. The HLM 

approach is also currently used to calculate readmission and mortality measures that are used in 

several quality-reporting and VBP programs by CMS, such as the Heart Failure and Pneumonia 

Mortality measures in the Hospital IQR and Hospital VBP Programs. 

The proposed SRR measure is a point estimate—the best estimate of a facility’s 
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can collect a full 12 months of data and still implement the PY 2017 payment reductions. 

Therefore, we propose to establish CY 2015 as the performance period for PY 2017 ESRD QIP. 

 We seek comments on this proposal. 

4. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the PY 2017 

ESRD QIP 

 We are proposing to adopt performance standards for the PY 2017 ESRD QIP measures 

similar to those we finalized for PY 2016 (78 FR 72211 through 72213). Section 1881(h)(4)(A) 

of the Act provides that “the Secretary shall establish performance standards with respect to 

measures selected . . . for a performance period with respect to a year.” Section 1881(h)(4)(B) of 

the Act further provides that the “performance standards . . . shall include levels of achievement 

and improvement, as determined appropriate by the Secretary.” We use the performance 

standards to establish the minimum score a facility must achieve to avoid a Medicare payment 

reduction. We use achievement thresholds and benchmarks to calculate scores on the clinical 

measures. 

a. Proposed Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures in the PY 2017 ESRD QIP 

 With the exception of the NHSN Bloodstream Infection clinical measure, we propose to 

set the performance standards, achievement thresholds, and benchmarks for the PY 2017 clinical 

measures at the 50th, 15th, and 90th percentile, respectively, of national performance in CY 

2013, because this will give us enough time to calculate and assign numerical values to the 

proposed performance standards for the PY 2017 program prior to the beginning of the 

performance period. We continue to believe that these standards will provide an incentive for 

facilities to continuously improve their performance, while not reducing incentives to facilities 
CMS-1614-P 144 

 

that score at or above the national performance rate for the clinical measures. As stated in the 

CY 2014 ESRD PPS Final Rule (78 FR 72213 through 72215), CY 2014 is the first year for 

which we will have data for the NHSN Bloodstream Infection clinical measure. Accordingly, we 

propose to set the performance standard, achievement threshold, and benchmark for the NHSN 

Bloodstream Infection clinical measure based on the 50th, 15th, and 90th percentiles, 

respectively, of national performance in CY 2014. 

 We seek comments on these proposals. 

b. Estimated Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures Proposed for the PY 2017 ESRD QIP 

 At this time, we do not have the necessary data to assign numerical values to the 

proposed performance standards, achievement thresholds, and benchmarks for the clinical 

measures, because we do not yet have complete data from CY 2013. Nevertheless, we are able 

to estimate these numerical values based on the most recent data available. For all of the 

proposed clinical measures except the proposed SRR measure, this partial data comes from the 

period of January through December 2013. For the proposed SRR measure, this partial data 

comes from the period of January through December 2012. In Table 25, we have provided the 

estimated numerical values for all of the proposed PY 2017 ESRD QIP clinical measures except 

the NHSN Bloodstream Infection clinical measure. We will publish updated values for the 

clinical measures, using data from the first part of CY 2014, in the CY 2015 ESRD PPS final 

rule. 

 
CMS-1614-P 145 

 

TABLE 25: Estimated Numerical Values for the Performance Standards for the PY 2017 

ESRD QIP Clinical Measures Using the Most Recently Available Data 

Measure Performance 

Standard 

Achievement 

Threshold 

Benchmark 

Vascular Access Type 

 %Fistula 64.49% 52.43% 78.64%

 %Catheter 9.9% 18.36% 3.21%

Kt/V 

 Adult Hemodialysis 93.65% 86.97% 97.55%

 Adult Peritoneal Dialysis 87.50% 70.42% 95.74%

Pediatric Hemodialysis 92.48% 79.55% 97.98%

Hypercalcemia 1.32% 4.78% 0.00%

NHSN Bloodstream Infection 50th percentile of 

eligible facilities’ 

performance 

during CY 2014

15th percentile of 

eligible facilities’ 

performance 

during CY 2014 

90th percentile of 

eligible facilities’ 

performance 

during CY 2014

Standardized Readmission Ratio 0.996 1.242 0.658

 We believe that the ESRD QIP should not have lower performance standards than in 

previous years. In accordance with our statements in the CY 2012 ESRD PPS final rule (76 FR 

70273), if the final numerical value for a performance standard, achievement threshold, and/or 

benchmark is worse than it was for that measure in the PY 2016 ESRD QIP, then we propose to 

substitute the PY 2016 performance standard, achievement threshold, and/or benchmark for that 

measure. 

 We seek comments on this proposal. 

c. Proposed Performance Standards for the PY 2017 Reporting Measures 

 In the CY 2014 ESRD PPS Final Rule, we finalized performance standards for the 

Anemia Management, Mineral Metabolism, and ICH CAHPS reporting measures (78 FR 72213). 

We are proposing to continue to use these performance standards for these measures in the PY 

2017 ESRD QIP. We seek comments on this proposal. 
CMS-1614-P 146 

 

5. Proposal for Scoring the PY 2017 ESRD QIP Measures 

a. Scoring Facility Performance on Clinical Measures Based on Achievement 

In the CY 2014 ESRD PPS Final Rule, we finalized a policy for scoring performance on 

clinical measures based on achievement (78 FR 72215). In determining a facility’s achievement 

score for each measure under the PY 2017 ESRD QIP, we propose to continue using this 

methodology for all clinical measures. Under this methodology, facilities receive points along 

an achievement range based on their performance during the proposed performance period for 

each measure, which we define as a scale between the achievement threshold and the 

benchmark. 

b. Scoring Facility Performance on Clinical Measures Based on Improvement 

In the CY 2014 ESRD PPS Final Rule, we finalized a policy for scoring performance on 

clinical measures based on improvement (78 FR 72215 through 72216). In determining a 

facility’s improvement score for each measure under the PY 2017 ESRD QIP, we propose to 

continue using this methodology for all clinical measures. Under this methodology, facilities 

receive points along an improvement range, defined as a scale running between the improvement 

threshold and the benchmark. We propose to define the improvement threshold as the facility’s 

performance on the measure during CY 2014. The facility’s improvement score would be 

calculated by comparing its performance on the measure during CY 2015 (the proposed 

performance period) to its performance rate on the measure during CY 2014. 

6. Weighting the Total Performance Score 

 We continue to believe that while the reporting measures are valuable, the clinical 

measures evaluate actual patient care and therefore justify a higher combined weight (78 FR 

72217). We are therefore not proposing to change our policy, finalized most recently in the CY 
CMS-1614-P 147 

 

2014 ESRD PPS (78 FR 72217), to weight clinical measures as 75 percent and reporting 

measures as 25 percent of the TPS. We are also not proposing any changes to the policy that 

facilities must be eligible to receive a score on at least one reporting measure and at least one 

clinical measure to be eligible to receive a TPS, or the policy that a facility’s TPS will be 

rounded to the nearest integer, with half of an integer being rounded up. 

7. Proposed Minimum Data for Scoring Measures for the PY 2017 ESRD QIP and Proposal for 

Changing Attestation Process for Patient Minimums 

For the same reasons described in the CY 2013 ESRD PPS final rule (77 FR 67510 

through 67512), for PY 2017 we propose to only score facilities on clinical and reporting 

measures for which they have a minimum number of qualifying patients during the performance 

period. Our current policy is that a facility must treat at least 11 qualifying patients during the 

performance period in order to be scored on a clinical measure (77 FR 67510 through 67511). 

We are not proposing any changes to this policy. 

However, with respect to the proposed SRR measure, we propose that facilities with 

fewer than 11 index discharges will not be eligible to receive a score on that measure. We 

considered proposing to adopt the 11 qualifying patient minimum that we use for the other 

clinical measures. We decided, however, to base facility eligibility for the measure on the 

number of index discharges attributed to a facility, because the measure calculations are 

determined by the number of index discharges, adjusted for patient case-mix. We decided to set 

the minimum number of index discharges at 11 because this is consistent with reporting for the 

proposed SRR measure during the dry run conducted earlier this year, as well as with the 

implementation of outcome measures in the Hospital Readmission Reduction Program, which 

base case minimums on the number of index discharges attributable to the facility. 
CMS-1614-P 148 

 

Additionally, for the proposed SRR measure, we propose to apply the small-facility 

adjuster to facilities that treat 41 or fewer index discharges because we determined that this was 

the minimum number of index discharges needed to achieve an IUR of 0.4 (that is, moderate 

reliability) for the proposed SRR measure. Because the small-facility adjuster gives facilities the 

benefit of the doubt when measure scores can be unduly influenced by a few outlier patients, we 

believe that setting the threshold at 41 index discharges will not unduly penalize facilities that 

treat small numbers of patients. 

In the CY 2014 ESRD PPS Final Rule, we finalized that the case minimum for the 

Mineral Metabolism and Anemia Management reporting measures is one, and that facilities that 

treat one qualifying patient could attest to this in CROWNWeb in order to avoid being scored on 

the measures (78 FR 72197 through 72199 and 72220 through 72221). In the process of 

responding to questions from facilities about the attestation requirements for the PY 2015 

program, however, we found that facilities were confused by this requirement. For this reason, 

we propose to remove the option for facilities to attest that they did not meet the case minimum 

for these measures. Accordingly, facilities that meet the case minimum of one qualifying patient 

would be scored on these measures, facilities with between 2 and 11 qualifying patients would be 

required to report data for all but one qualifying patient, and facilities with 11 or more qualifying 

patients would be required to report data for all patients. Due to facility confusion with the 

attestation process, we also propose to remove the option for facilities to attest that they did not 

meet the case minimum for the ICH CAHPS survey reporting measure. As we stated above, we 

are not proposing any further changes to the 30 survey-eligible case minimum for this measure. 

We are proposing that the ESRD QIP program will determine facility eligibility for these 
CMS-1614-P 149 

 

measures based on available data submitted to CROWNWeb, in Medicare claims, and to other 

CMS administrative data sources. 

We seek comments on this proposal. 

We are proposing to continue our policies that govern when a newly opened facility 

would be eligible to be scored on measures as follows. 

• Facilities with a CCN open date on or after July 1 of the performance period (for PY 

2017, this would be July 1, 2015) are not eligible to be scored on any reporting measures 

except the ICH CAHPS reporting measure. 

• Facilities with a CCN open date on or after January 1 of the performance period (for PY 

2017, this would be January 1, 2015) are not eligible to receive a score on the ICH 

CAHPS reporting measure in the PY 2017 program, due to the time it takes to contract 

with a CMS-approved third-party vendor to administer the survey. 

• Facilities are eligible to receive a score on all of the clinical measures except the NHSN 

Bloodstream Infection clinical measure if they have a CCN open date at any time before 

the end of the performance period. 

• Facilities with a CCN open date after January 1 of the performance period (for PY 2017, 

this would be January 1, 2015) are not eligible to receive a score on the NHSN 

Bloodstream Infection clinical measure, due to the need to collect 12 months of data to 

accurately score the measure. 

 We are also proposing to continue our policy that a facility will not receive a TPS unless 

it receives a score on at least one clinical measure and at least one reporting measure. We note 

that as a result, facilities will not be eligible for a payment reduction under the PY 2017 ESRD 

QIP if they have a CCN open date on or after July 1, 2015. 
CMS-1614-P 150 

 

We seek comments on these proposals. 

Table 26 displays the proposed patient minimum requirements for each of the reporting 

measures, as well as the CCN open dates after which a facility will not be eligible to receive a 

score on a reporting measure. 

TABLE 26: Proposed Minimum Data Requirements for the PY 2017 ESRD QIP 

Measure Minimum Data 

Requirements 

CCN Open Date Small Facility 

Adjuster 

Adult Hemodialysis Adequacy 

(Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Adult Peritoneal Dialysis 

Adequacy (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Pediatric Hemodialysis 

Adequacy (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Vascular Access Type: 

Catheter (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Vascular Access Type: Fistula 

(Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Hypercalcemia (Clinical) 11 qualifying patients N/A 11 – 25 patients 

NHSN Bloodstream Infection 

(Clinical) 

11 qualifying patients On or before January 

1, 2015 

11 – 25 patients 

SRR (Clinical) 11 index discharges N/A 11 – 41 index 

discharges 

ICH CAHPS (Reporting) Facilities with 30 or 

more survey-eligible 

patients during the 

calendar year 

preceding the 

performance period 

must submit survey 

results. Facilities will 

not receive a score if 

they do not obtain a 

total of at least 30 

completed surveys 

during the 

performance period. 

Before January 1, 

2015 

N/A 

Anemia Management 

(Reporting) 

Facilities with 11 or 

more qualifying 

patients must report 

data for all patients. 

Before July 1, 2015 N/A 
CMS-1614-P 151 

 

Measure Minimum Data 

Requirements 

CCN Open Date Small Facility 

Adjuster 

Facilities with between 

2 and 11 qualifying 

patients must report 

data on all but 1 

qualifying patient. 

Facilities with 1 

qualifying patient must 

report for that patient. 

Mineral Metabolism 

(Reporting) 

Facilities with 11 or 

more qualifying 

patients must report 

data for all patients. 

Facilities with between 

2 and 11 qualifying 

patients must report 

data on all but 1 

qualifying patient. 

Facilities with 1 

qualifying patient must 

report for that patient. 

Before July 1, 2015 N/A 

8. Proposed Payment Reductions for the PY 2017 ESRD QIP 

 Section 1881(h)(3)(A)(ii) of the Act requires the Secretary to ensure that the application 

of the scoring methodology results in an appropriate distribution of payment reductions across 

facilities, such that facilities achieving the lowest TPSs receive the largest payment reductions. 

For PY 2017, we are proposing that a facility will not receive a payment reduction if it achieves 

a minimum TPS that is equal to or greater than the total of the points it would have received if: 

• It performed at the performance standard for each clinical measure; 

• It received zero points for each clinical measure that does not have a numerical value 

for the performance standard established through the rulemaking process before the 

beginning of the PY 2017 performance period; and 

• It received 10 points (which is the 50th percentile of facility performance on the PY 
CMS-1614-P 152 

 

2015 reporting measures) for each reporting measure. 

 We recognize that these conditions are more stringent than the conditions used to 

establish the minimum TPS in the PY 2016 ESRD QIP, because this proposal increases the 

number of points a facility would have to receive on each reporting measure from 5 to 10. The 

PY 2015 program is the most recent year for which we will have calculated final measure scores 

before the beginning of the proposed performance period for PY 2017 (i.e., CY 2015). We note 

that facility performance on the Anemia Management, Mineral Metabolism, NHSN Dialysis 

Event, and ICH CAHPS reporting measures in the PY 2015 program is so high that the median 

score on each of the measures was 10 points. We are proposing to increase the number of points 

a facility would have to achieve for each reporting measure to the 50th percentile of facility 

performance on the PY 2015 reporting measures (i.e., the average of the median scores for each 

reporting measure), because a score of 5 on each of these reporting measures is indicative of a 

below-average performance, and we want to incentivize facilities to provide above-average care. 

 We seek comments on this proposal. 

 Section 1881(h)(3)(A)(ii) of the Act requires that facilities achieving the lowest TPSs 

receive the largest payment reductions. In the CY 2014 ESRD PPS Final Rule (78 FR 72223 

through 72224), we finalized a payment reduction scale for PY 2016 and future payment years, 

such that for every 10 points a facility falls below the minimum TPS, the facility would receive 

an additional 0.5 percent reduction on its ESRD PPS payments, with a maximum reduction of 

2.0 percent. We are not proposing any changes to this policy at this time. 

 Because we are not yet able to calculate the performance standards for each of the 

clinical measures, we are likewise not able to calculate the minimum TPS at this time. Based on 

the estimated performance standards listed above, we estimate that a facility must meet or exceed 
CMS-1614-P 153 

 

a minimum TPS of 58 for PY 2017. For all of the clinical measures except the NHSN 

Bloodstream Infection clinical measure, these data come from CY 2013. For the NHSN 

Bloodstream Infection clinical measure, we set the performance standard to zero for purposes of 

this estimate, because we are not able to establish a numerical value for the performance standard 

through the rulemaking process before the beginning of the PY 2017 performance period. We 

are proposing that facilities failing to meet the minimum TPS, as established in the CY 2015 

ESRD PPS Final Rule, will receive payment reductions based on the estimated TPS ranges 

indicated in Table 27 below. 

TABLE 27: Estimated Payment Reduction Scale for PY 2017 based on the Most Recently 

Available Data from CY 2013 

Total Performance Score Reduction 

100 – 58 0% 

57 – 48 0.5% 

47 – 38 1.0% 

37 – 28 1.5% 

27 – 0 2.0% 

9. Proposal for Data Validation 

 One of the critical elements of the ESRD QIP’s success is ensuring that the data 

submitted to calculate measure scores and TPSs are accurate. We began a pilot data-validation 

program in CY 2013 for the ESRD QIP, and we have procured the services of a data-validation 

contractor that is tasked with validating a national sample of facilities’ records as they report CY 

2014 data to CROWNWeb. Our first priority was to develop a methodology for validating data 

submitted to CROWNWeb under the pilot data-validation program, and this continues to be our 

goal. Once this methodology has been fully developed, we will propose to adopt it through the 

rulemaking process. For the PY 2016 ESRD QIP (78 FR 72223 through 72224), we finalized a 
CMS-1614-P 154 

 

requirement to sample approximately 10 records from 300 randomly selected facilities; these 

facilities will have 60 days to comply once they receive requests for records. We are proposing 

to continue this pilot for the PY 2017 ESRD QIP. Under this continued validation study, we will 

sample the same number of records (approximately 10 per facility) from the same number of 

facilities (that is, 300) during CY 2015. If a facility is randomly selected to participate in the 

pilot validation study but does not provide CMS with the requisite medical records within 60 

days of receiving a request, then we propose to deduct 10 points from the facility’s TPS. Once 

we have developed and adopted a methodology for validating the CROWNWeb data, we intend 

to consider whether payment reductions under the ESRD QIP should be based, in part, on 

whether a facility has met our standards for data validation. 

We seek comments on this proposal. 

We are also proposing a feasibility study for validating data reported to CDC’s NHSN 

Dialysis Event Module for the NHSN Bloodstream Infection clinical measure. HAIs are 

relatively rare, and we are proposing that the feasibility study would target records with a higher 

probability of including a dialysis event, because this would enrich the validation sample while 

reducing the burden on facilities. The methodology for this proposed feasibility study would 

resemble the methodology used by the Hospital Inpatient Quality Reporting Program to validate 

the central line-associated bloodstream infection measure, the catheter-associated urinary tract 

infection measure, and the surgical site infection measure (77 FR 53539 through 535553). 

Specifically, we propose to randomly select nine facilities to participate in the feasibility 

study. A CMS contractor will send these facilities quarterly requests for lists of all positive 

blood cultures drawn from its patients during the quarter, including any positive blood cultures 

that were collected from the facility’s patients on the day of, or the day following, their 
CMS-1614-P 155 

 

admission to a hospital. Facilities will have 60 days to respond to quarterly requests for lists of 

positive blood cultures. A CMS contractor will then develop a methodology for determining 

when a positive blood culture qualifies as a “candidate dialysis event,” and is therefore 

appropriate for further validation. Once the contractor determines a methodology for identifying 

candidate dialysis events, the contractor will analyze the records of patients who had a positive 

blood culture in order to determine if the facility reported dialysis events for those patients in 

accordance with the NHSN Dialysis Event Protocol. If the contractor determines that additional 

medical records are needed from a facility to validate whether the facility accurately reported the 

dialysis events, then the contractor will send a request for additional information to the facility, 

and the facility will have 60 days from the date of the letter to respond to the request. Overall, 

we estimate that, on average, quarterly lists will include two positive blood cultures per facility, 

but we recognize these estimates may vary considerably from facility to facility. If a facility is 

randomly selected to participate in the feasibility study but does not provide CMS with the 

requisite lists of positive blood cultures or the requisite medical records within 60 days of 

receiving a request, then we propose to deduct 10 points from the facility’s TPS. 

The goals of the proposed feasibility study will be five-fold: 1) to estimate the burden and 

associated costs to facilities of validating the NHSN Bloodstream Infection clinical measure; 2) 

to assess the costs to CMS to validate this measure; 3) to develop a methodology for identifying 

candidate dialysis events from lists of positive blood cultures; 4) to develop a methodology for 

determining whether a facility accurately reported dialysis events under the NHSN Bloodstream 

Infection clinical measure; and 5) to reach some preliminary conclusions about whether facilities 

are accurately reporting data under the NHSN Bloodstream Infection clinical measure. Based on 

the results of this study, we will consider the feasibility of proposing in future rulemaking to 
CMS-1614-P 156 

 

validate the NHSN Bloodstream Infection clinical measure for all facilities. 

We seek comments on this proposal. 

10. Proposal to Monitor Access to Dialysis Facilities 

Public comments on the proposal to adopt the Standardized Hospitalization Ratio 

measure in the PY 2014 ESRD QIP (76 FR 70267) expressed concerns that “the measure may 

lead to ‘cherry-picking’ of patients based on their risk of hospitalizations, causing access to care 

issues for patients with more severe illness.” We share commenters’ concerns about the SHR 

measure, and we believe that these concerns equally apply to other outcome measures proposed 

for the ESRD QIP. We recognize that, in general, inadequate risk adjustment in outcome 

measure calculations can create an incentive for facilities to deny services to sicker patients, 

because these patients’ illnesses would not be properly accounted for in the risk-adjustment 

calculations. We believe that outcome measures proposed and adopted for the ESRD QIP 

properly risk adjust for patients with severe illnesses, but we remain concerned that 

misperceptions to the contrary might negatively impact access to dialysis therapy. 

Since we are proposing to adopt the SRR clinical measure for the PY 2017 program, and 

below we are proposing to adopt the STrR clinical measure for the PY 2018 program, we 

propose to initiate a monitoring program focused on access to dialysis therapy. This program 

would compare dialysis data before and after the adoption of an outcome measure, looking for 

changes in admission and discharge practices, as well as changes in rates and patterns of 

involuntary discharges. Specifically, this program would assess and analyze the characteristics 

of beneficiaries admitted to dialysis centers (stratified by location, size, and setting) in order to 

determine when and if selective admission and discharge practices are coupled with negative 
CMS-1614-P 157 

 

patient attributes and trends over time. We believe this program will enable us to identify 

patterns that are indicative of diminished access to dialysis therapy. 

We seek comments on this proposal. 

11. Proposed Extraordinary Circumstances Exception 

 Many comments on the CY 2014 ESRD PPS proposed rule included the recommendation 

to exempt a facility from all the requirements of the ESRD QIP clinical and reporting measures 

during the time the facility was forced to close temporarily due to a natural disaster or other 

extraordinary circumstances. In response to these comments, we agreed that “there are times 

when facilities are unable to submit required quality data due to extraordinary circumstances that 

are not within their control, and we do not wish to penalize facilities for such circumstances or 

unduly increase their burden during these times” (78 FR 72209). 

 Section 1881(h)(3)(A)(i) of the Act states, “[T]he Secretary shall develop a methodology 

for assessing the total performance of each provider of services and renal dialysis facility based 

on performance standards with respect to the measures selected under paragraph (2) for a 

performance period established under paragraph (4)(D).” Given the possibility that facilities 

could be unfairly penalized for circumstances that are beyond their control, we believe the best 

way to implement an extraordinary circumstances exception is under the authority of this section. 

We are therefore proposing to interpret section 1881(h)(3)(A)(i) of the Act to enable us to 

configure the methodology for assessing facilities’ total performance such that we will not 

require a facility to submit, nor penalize a facility for failing to submit, data on any ESRD QIP 

quality measure data from any month in which a facility is granted an extraordinary 

circumstances exception. 

 Under this policy, we propose that, in the event of extraordinary circumstances not within 
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the control of the facility (such as a natural disaster), for the facility to receive consideration for 

an exception from all ESRD QIP requirements during the period in which the facility was closed, 

the facility would need to submit a CMS Disaster Extension/Exception Request Form through 

www.qualitynet.org within 90 calendar days of the date of the disaster or extraordinary 

circumstance. We are proposing that the facility would need to provide the following 

information on the form: 

• Facility CCN; 

• Facility name; 

• CEO name and contact information; 

• Additional contact name and contact information; 

• Reason for requesting an exception; 

• Dates affected; 

• Date facility will start submitting data again, with justification for this date; and 

• Evidence of the impact of the extraordinary circumstances, including but not limited 

to photographs, newspaper, and other media articles. 

 Incomplete forms will be returned to the facility without further review of their content. 

We will evaluate the request and provide the facility with a response. If we determine that the 

facility was, in fact, closed for a period of time due to extraordinary circumstances, then we will 

exempt the facility from the ESRD QIP requirements for any month during which the facility 

was closed due to the extraordinary circumstances. As such, a facility granted a temporary 

exception will be scored on each measure only for the months during a performance period not 

covered by the exception. For example, if a facility is granted an extraordinary circumstances 

exception for the time period between January 15 and February 15, 2015, then the facility will 
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not be required to report, and will not be penalized for not reporting, data on any ESRD QIP 

measure data for January and February of CY 2015. The effect of this proposal is that if a 

facility, because it has been granted an exception, cannot meet the reporting requirements that 

apply to a measure, the facility will not receive a score on the measure. For example, if a facility 

is granted an extraordinary circumstances exception for February 2015, then that facility would 

not be scored on the NHSN Bloodstream Infection clinical measure for the applicable payment 

year, because this measure requires facilities to submit 12 months of data in order to avoid 

receiving zero points on the measure. 

This policy does not preclude us from granting exceptions to facilities that have not 

requested them when we determine that an extraordinary circumstance (for example, a hurricane 

or other act of nature) affects an entire region or locale. If we make the determination to grant an 

exception to facilities in a region or locale, then we propose to communicate this decision 

through routine communication channels to facilities, vendors, and Networks, including but not 

limited to issuing memoranda, emails, and notices on a CMS-approved Web site. 

We seek comments on this proposal. 

G. Proposed Requirements for the PY 2018 ESRD QIP 

1. Proposal to Modify the Mineral Metabolism Reporting Measure Beginning in PY 2018

In the CY 2013 ESRD QIP, we adopted a reporting measure focused on mineral 

metabolism, which was based in part on NQF #0255 (77 FR 67487 through 67487). In the CY 

2014 ESRD PPS, we finalized two revisions to the Mineral Metabolism reporting measure: (1) to 

include home peritoneal dialysis patients in the measure; and (2) to remove serum calcium 

reporting from the measure because of its reporting under the Hypercalcemia clinical measure 

(78 FR 72197 through 72198). Accordingly, in order to meet the requirements for the Mineral 
CMS-1614-P 160 

 

Metabolism reporting measure, facilities currently must report serum phosphorus values for each 

qualifying patient treated at the facility on a monthly basis. 

Since the publication of the CY 2014 ESRD PPS final rule, members of the renal 

community requested an ad hoc NQF review of measure #0255, focusing in particular on 

whether the measure should be updated to allow for the reporting of plasma phosphorus data. 

The NQF Consensus Standards Approval Committee (CSAC) reviewed the measure and 

recommended that the phosphorus reporting measure (NQF #0255) be modified to allow for the 

reporting of plasma phosphorus data as an alternative to serum phosphorus data. Although our 

TEP reviewed this issue and concluded that measure #0255 should remain unchanged, we concur 

with the CSAC’s recommendation due to the CSAC’s ad hoc review of lab data demonstrating 

the equivalency of plasma and serum measurements of phosphorus, as well as an additional 

concurrent internal review of the data by CMS and our measure development contractor. We are 

in agreement with the CSAC that readings of phosphorus using either plasma or serum are 

appropriate for the measure. As the measure developer for NQF#255, we are also in the process 

of revising the specifications for that measure and plan to submit the revised measure 

specifications to the NQF for endorsement. We believe the change to these specifications is nonsubstantive because plasma readings are an alternative method of reporting on phosphorus data 

and, as we state above, are roughly equivalent to serum phosphorus readings. 

We considered proposing to allow facilities to report plasma phosphorus data for the 

Mineral Metabolism reporting measure in the PY 2017 program, but we have determined that it 

is not operationally feasible to configure the relevant data fields in CROWNWeb to accept 

plasma phosphorus readings prior to January 1, 2015, the beginning of the performance period 

for that program year. For this reason, we propose to modify the measure specifications for the 
CMS-1614-P 161 

 

Mineral Metabolism reporting measure to allow facilities to report either serum phosphorus data 

or plasma phosphorus data, beginning with the PY 2018 program. We further clarify that we are 

not proposing any other changes to the measure specifications for the Mineral Metabolism 

reporting measure. 

2. Proposed New Measures for the PY 2018 ESRD QIP and Future Payment Years 

For the PY 2018 ESRD QIP, we are proposing to continue to use all of the measures 

proposed for the PY 2017 ESRD QIP, with the exception of the ICH CAHPS reporting measure, 

which we are proposing to convert to a clinical measure. We are also proposing to adopt five 

new measures. The proposed new measures include one new outcome measure evaluating 

transfusions in the ESRD population, one measure on pediatric peritoneal dialysis adequacy, one 

measure on pain assessment, one measure on clinical depression screening, and one measure on 

healthcare personnel influenza vaccination (see Table 28). 

TABLE 28: New Measures Proposed for the PY 2018 ESRD QIP 

NQF# Measure Title 

N/A 

Pediatric Peritoneal Dialysis Adequacy, a clinical measure 

Percentage of pediatric peritoneal dialysis patient-months with spKt/V greater than or equal to 1.8 

(dialytic + residual). 

0258 

In-Center Hemodialysis Consumer Assessment of Providers and Systems Survey,1

 a clinical 

measure 

Proportion of responses to rating items grouped into three composite measures and three global 

ratings. 

N/A Standardized Transfusion Ratio, a clinical measure 

Risk-adjusted standardized transfusion ratio for dialysis facility patients. 

N/A2

Pain Assessment and Follow-Up, a reporting measure 

Percentage of adult patients with documentation of pain assessment through discussion with the 

patient including the use of a standardized tool(s) on each visit and documentation of a follow-up 

place when pain is present. 

N/A3

Depression Screening and Follow-Up, a reporting measure 

Percentage of adult patients screened for clinical depression using a standardized tool and follow-up 

plan is documented. 

N/A4 NHSN Healthcare Personnel Influenza Vaccination, a reporting measure 1

 The proposed dimensions of the ICH CAHPS survey for use in the PY 2018 ESRD QIP are: Nephrologists’ Communication 

and Caring, Quality of Dialysis Center Care and Operations, Providing Information to Patients, Overall Rating of the 

Nephrologists, Overall Rating of the Dialysis Center Staff, and Overall Rating of the Dialysis Facility. 2

 We note that the NQF has previously endorsed a pain measure (NQF #0420) upon which this measure is based. 3

 We note that the NQF has previously endorsed a depression measure (NQF #0418) upon which this measure is based. 4

 We note that the NQF has previously endorsed a vaccination measure (NQF #0431) upon which this measure is based. 
CMS-1614-P 162 

 

a. Proposed Standardized Transfusion Ratio (STrR) Clinical Measure 

 
CMS-1614-P 163 

 

Background 

We are concerned that the inclusion of erythropoiesis-stimulating agents (ESAs) in the 

ESRD PPS and the removal of the Hemoglobin Less than 10 g/dL clinical measure from the 

ESRD QIP measure set could result in the underutilization of ESAs to manage anemia in ESRD 

patients, with the result that these patients have lower achieved hemoglobin levels and more 

frequently need red-blood-cell transfusions. 

 In addition, patients with ESRD who are eligible to receive a kidney transplant and are 

transfused risk becoming sensitized to the donor pool, thereby making it less likely that a 

transplant will be successful. Blood transfusions also carry a small risk of transmitting bloodborne infections to the patient, and the patient could additionally develop a transfusion reaction. 

Furthermore, using infusion centers or hospitals to transfuse patients is expensive, inconvenient, 

and could compromise future vascular access. 

Overview of Measure 

 The Standardized Transfusion Ratio (STrR) for all adult Medicare ESRD patients is a 

ratio of the number of observed eligible blood transfusion events occurring in patients dialyzing 

at a facility to the number of eligible transfusions that would be expected from a predictive 

model that accounts for patient characteristics within each facility. Eligible transfusions are 

those that do not have any claims pertaining to the comorbidities identified for exclusion in the 

12 months immediately prior to the transfusion date. 

 We plan to submit the STrR measure to NQF for review at the next available call for 

measures. Section 1881(h)(2)(B)(i) of the Act requires that, unless the exception set forth in 

section 1881(h)(2)(B)(ii) of the Act applies, the measures specified for the ESRD QIP under 

section 1881(h)(2)(A)(iv) of the Act must have been endorsed by the entity with a contract under 
CMS-1614-P 164 

 

section 1890(a) of the Act (which is currently NQF). Under the exception set forth in section 

1881(h)(2)(B)(ii) of the Act, in the case of a specified area or medical topic determined 

appropriate by the Secretary for which a feasible and practical measure has not been endorsed by 

the entity with a contract under section 1890(a) of the Act, the Secretary may specify a measure 

that is not so endorsed, so long as due consideration is given to measures that have been 

endorsed or adopted by a consensus organization identified by the Secretary. 

We have given due consideration to endorsed measures, as well as those adopted by a 

consensus organization, and we are proposing this measure under the authority of 

1881(h)(2)(B)(ii) of the Act. NQF has not endorsed and a consensus organization has not 

adopted a measure on transfusions. Because the proposed STrR measure has the potential to 

decrease transfusions resulting from underutilization of anemia medications, we believe it is 

appropriate to adopt the STrR in the PY 2018 ESRD QIP. We considered proposing to adopt the 

measure for the PY 2017, but we recognized that this is a new measure, and wanted to give 

facilities more time to familiarize themselves with it. The Measure Application Partnership, in 

its February 1, 2013 Pre-Rulemaking Report, supported the direction of the measure, stating that 

it “addresses an important concept, but the establishment of guidelines for hemoglobin range is 

needed.” We have received public comments and input from a TEP that we convened on a 

prototype STrR measure, and finalized development of the proposed STrR measure in September 

2013. The resulting measure specifications did not include hemoglobin thresholds, as no input 

from the TEP or public comments supported moving forward with thresholds included in the 

measure. We therefore believe these efforts meet the requirements for further development of 

the STrR prior to implementation in the ESRD QIP. 
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In the process of preparing to submit the measure for NQF review, we conducted 

analyses on the reliability of the STrR measure. The full analysis is available at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. The STrR is not a simple average; 

instead, we estimate the IUR using a bootstrap approach, which uses a resampling scheme to 

estimate the within facility variation that cannot be directly estimated by ANOVA. A small IUR 

(near 0) reveals that most of the variation of the measures between facilities is driven by 

“random noise,” indicating the measure would not be a reliable characterization of the 

differences among facilities, whereas a large IUR (near 1) indicates that most of the variation 

between facilities is due to the real difference between facilities. We have determined that the 

average IUR for the STrR measure is 0.54, meaning that about half of the variation in the 

measure can be attributed to between-facility differences, and about half to within-facility 

variation. This value of IUR indicates a moderate degree of reliability and is consistent with the 

reliability of other outcome measures in CMS quality reporting and VBP programs. We 

therefore believe that facilities can be reliably scored on the proposed STrR measure. 

Data Sources

 Data for the measure come from various CMS-maintained data sources for ESRD 

patients including Program Medical Management and Information System (PMMIS/REMIS), 

Medicare claims, the CROWNWeb database, the CMS Annual Facility Survey (Form CMS2744), Medicare dialysis and hospital payment records, the CMS Medical Evidence Form (Form 

CMS-2728), transplant data from the OPTN, the Death Notification Form (Form CMS-2746), 

the Nursing Home Minimum Dataset, and the Social Security Death Master File. These data 
CMS-1614-P 166 

 

sources include all Medicare patients. Information on transfusions is obtained from Medicare 

Inpatient and Outpatient Claims SAFs. 

Outcome 

 The outcome of interest for the STrR is blood transfusion events (defined as the transfer 

of one or more units of blood or blood products into the recipient’s blood stream) among 

Medicare ESRD patients dialyzing at the facility during the inclusion time periods. 

Cohort

 The cohort for the STrR includes all adult Medicare ESRD dialysis patients who have 

been documented as having had ESRD for at least 90 days. 

Inclusion and Exclusion Criteria 

 Patients will not be included in the STrR during the first 90 days of ESRD dialysis 

treatment. Starting with day 91 after onset of ESRD, a patient is attributed to a facility once he 

or she has been receiving dialysis there for 60 days. When a patient transfers from one facility to 

another, we are proposing that the patient would continue to be attributed to the original facility 

for 60 days from the date of the transfer. Starting on day 61, the patient would be attributed to 

the transferee facility. Patients would be excluded from the measure for three days prior to the 

date they receive a transplant to avoid including transfusions associated with the transplant 

hospitalization. 

We are also proposing to require that patients reach a certain level of Medicare-paid 

dialysis bills to be included in the STrR, or that patients have Medicare-paid inpatient claims 

during the period. This requirement is intended to assure completeness of transfusion 

information for all patients included in the measure calculation by excluding non-Medicare 

patients and patients for whom Medicare is a secondary payer, because they are not expected to 
CMS-1614-P 167 

 

have complete information on transfusion available in the claims data. For each patient, a month 

is included as a month at risk for transfusion if that month in the period is considered “eligible.” 

A month is considered eligible if it is within two months of a month in which a patient has $900 

of Medicare-paid claims or at least one Medicare-paid inpatient claim. The $900 amount 

represents approximately the tenth percentile of monthly dialysis claims per patient. 

In addition, a transfusion event is eligible for inclusion in the STrR measure if the patient 

did not present with certain comorbid conditions during the 12 month period immediately prior 

to the date of the transfusion event. We are proposing to exclude these transfusion events 

because the identified comorbid conditions are associated with a higher risk of transfusion and 

require different anemia management practices that the measure is not intended to address. 

Specifically, we are proposing that a transfusion event will be excluded from the measure if the 

patient, during the 12 month look back period, had a Medicare claim for: hemolytic and aplastic 

anemia; solid organ cancer (breast, prostate, lung, digestive tract and others); lymphoma; 

carcinoma in situ; coagulation disorders; multiple myeloma; myelodysplastic syndrome and 

myelofibrosis; leukemia; head and neck cancer; other cancers (connective tissue, skin, and 

others); metastatic cancer; or sickle cell anemia. The specific diagnoses used to identify each of 

these conditions are listed in the proposed measure specifications, which are available at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

Risk Adjustment 

The denominator of the STrR uses expected transfusions calculated from a Cox model 

that is extended to handle repeated events. For computational purposes, the proposed STrR 

measure adopts a model with piecewise-constant baseline rates. A stage 1 model is fitted to the 
CMS-1614-P 168 

 

national data with piecewise-constant baseline rates across facilities. Transfusion rates are 

adjusted for: patient age; diabetes as a cause of ESRD; duration of ESRD; nursing home status; 

BMI at incidence; comorbidity index at incidence; and calendar year. This model allows 

baseline transfusion rates to vary between facilities, and applies the regression coefficients for 

the risk-adjustment model to each facility identically. This approach is robust to possible 

differences between facilities in the patient mix being treated. The second stage uses the riskadjustment factor from the first stage as an offset. The stage 2 model then calculates the national 

baseline transfusion rate. 

The STrR measure includes the following risk adjustors, which are obtained from the 

following data sources: 

Risk Adjustor Data Source 

Age REMIS database 

Diabetes as cause of ESRD CMS Form 2728 

BMI at incidence of ESRD CMS Form 2728 

Comorbidity index CMS Form 2728 

Nursing home status Nursing Home Minimum Dataset 

Duration of ESRD CMS Form 2728 

More details on the risk-adjustment calculations, and the rationale for selecting these risk 

adjustors and not others, can be found at: http://www.cms.gov/Medicare/Quality-InitiativesPatient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. 

As indicated in the table above, the proposed STrR measure risk adjusts predominantly 

on the basis of patient characteristics collected on CMS Form 2728, and we believe that this riskadjustment methodology is reliable and valid. 

NQF evaluates measures on the basis of four criteria: importance, scientific acceptability, 

feasibility, and usability. The validity and reliability of a measure’s risk-adjustment calculations 

fall under the “scientific acceptability” criterion, and Measure Evaluation Criterion 2b4 specifies 
CMS-1614-P 169 

 

NQF’s preferred approach for risk adjusting outcome measures 

(http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx#scientific). This criterion 

states that patient comorbidities should only be included in risk-adjustment calculations if they 

are 1) present at the start of care and 2) not indicative of disparities or deficiencies in the quality 

of care provided. As indicated in the “Inclusion and Exclusion Criteria” subsection above, the 

proposed STrR clinical measure includes Medicare patients who have been documented as 

having had ESRD for at least 90 days and are not excluded for other reasons. Accordingly, we 

believe that NQF Measure Evaluation Criterion 2b4 supports risk-adjusting the proposed STrR 

measure on the basis of incident patient comorbidity data collected on CMS Form 2728, because 

these comorbidities are likely present at the start of care. Moreover, comorbidities that develop 

after the 90th day of chronic dialysis treatment, and are statistically associated with transfusions, 

can be reflective of the quality of care provided by the facility. Therefore, we do not believe that 

NQF Measure Evaluation Criterion 2b4 supports risk adjusting the proposed STrR measure on 

the basis of updated comorbidity data, because doing so may mask disparities or deficiencies in 

the quality of care provided, thereby obscuring assessments of facility performance. For these 

reasons, we believe that the risk-adjustment methodology for the proposed STrR measure is 

consistent with NQF guidelines for measure developers. Testing that we have undertaken has 

confirmed the validity and reliability of the proposed STrR measure using these data. We 

anticipate submitting the measure to the NQF for endorsement in CY 2015. 

Full documentation of the STrR risk-adjustment methodology is available at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

Calculating the STrR Measure 
CMS-1614-P 170 

 

 The STrR measure is calculated as the ratio of the number of observed transfusions to the 

number of expected transfusions. The ratio is greater than one for facilities that have more 

transfusions than would be expected for an average facility with similar cases, and less than one 

if the facility has fewer transfusions than would be expected for an average facility with similar 

cases. This ratio is calculated in terms of patient-years at risk. “Patient-year at risk” means that 

the denominator of the rate calculation is obtained by adding exposure times of all patients until 

a censoring event (that is, death, transplant, or end of the time period) because each patient’s 

time at risk varies based on these censoring events. Time at risk is the time period in which each 

patient is eligible to have the transfusion event occur for the purposes of the measure calculation, 

exclusive of all days that have claims pertaining to the exclusionary comorbidities identified 

within the previous 12 months. 

 The predicted value from stage 1 of the model and the baseline rate from stage 2 of the 

model, as described above, are then used to calculate the expected number of transfusion events 

for each patient over the period during which the patient is seen to be at risk for a transfusion 

event. 

 The STrR is a point estimate—the best estimate of a facility’s transfusion rate based on 

the facility’s case mix. For more detailed information on the calculation methodology, please 

refer to our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We seek comments on this proposal to adopt the proposed STrR clinical measure. 

b. Proposal to Adopt the Pediatric Peritoneal Dialysis Adequacy Clinical Measure and Add the 

Proposed Measure to the Dialysis Adequacy Measure Topic 

 Section 1881(h)(2)(A)(i) states that the ESRD QIP must evaluate facilities based on 
CMS-1614-P 171 

 

measures of dialysis adequacy. Beginning with the PY 2018 ESRD QIP, we propose to add a 

new measure of pediatric peritoneal dialysis adequacy to the Dialysis Adequacy measure topic. 

If this proposal is finalized, then the modified Dialysis Adequacy measure topic would include 

four clinical measures on dialysis adequacy—(1) Adult Hemodialysis Adequacy; (2) Adult 

Peritoneal Dialysis Adequacy; and (3) Pediatric Hemodialysis Adequacy; and (4) Pediatric 

Peritoneal Dialysis Adequacy. 

 Approximately 900 pediatric patients in the United States receive peritoneal dialysis.5 

Although recent studies suggest improvement in mortality rates among pediatric patients 

receiving maintenance dialysis over time, mortality in this patient population remains high.6

 

Despite a lack of long-term outcome studies on pediatric peritoneal dialysis patients, outcome 

studies performed in the adult ESRD population have shown an association between the dose of 

peritoneal dialysis and clinical outcomes,7

 which could suggest that improved quality of dialysis 

care in the fragile pediatric patient population may further improve survival in those patients. 

 Section 1881(h)(2)(A)(iv) gives the Secretary authority to adopt measures for the ESRD 

QIP that cover a wide variety of topics. Section 1881(h)(2)(B)(ii) of the Act states that “In the 

case of a specified area or medical topic determined appropriate by the Secretary for which a 

feasible and practical measure has not been endorsed by the entity with a contract under section 

1890(a) of Act [in this case NQF], the Secretary may specify a measure that is not so endorsed so 

long as due consideration is given to measures that have been endorsed or adopted by a 

 

5 U.S. Renal Data System, USRDS 2012 Annual Data report: Atlas of Chronic Kidney Disease and End-stage Renal Disease in 

the United States, National Institutes of Health, National Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 

2012. 

6 U.S. Renal Data System, USRDS 2012 Annual Data report: Atlas of Chronic Kidney Disease and End-stage Renal Disease in 

the United States, National Institutes of Health, National Institute of Diabetes and Digestive and Kidney Diseases, Bethesda, MD, 

2012. 

7 Paniagua R, Amato D, Vonesh E, et al. “Effects of increased peritoneal clearance on mortality rates in peritoneal dialysis: 

ADEMEX, a prospective, randomized, controlled trial.” Journal of the American Society of Nephrology: JASN (2002) 13:1307-

1320. PMID: 11961019; See also Lo WK, Lui SL, Chan TM, et al. “Minimal and optimal peritoneal Kt/V targets: Results of 

anuric peritoneal dialysis patient’s survival analysis.” Kidney international (2005) 67:2032-2038. PMID: 15840054. 
CMS-1614-P 172 

 

consensus organization identified by the Secretary.” We have given due consideration to 

endorsed measures, as well as those adopted by a consensus organization. Because no NQFendorsed measures or measures adopted by a consensus organization on pediatric peritoneal 

dialysis adequacy currently exist, we are proposing to adopt the Pediatric Peritoneal Dialysis 

Adequacy clinical measure under the authority of section 1881(h)(2)(B)(ii) of the Act. 

 The Measure Application Partnership expressed conditional support for measure 

XCBMM, “Pediatric Peritoneal Dialysis Adequacy: Achievement of Target Kt/V” in its January 

2014 Pre-Rulemaking Report, noting it would “consider this measure for inclusion in the 

program once it has been reviewed for endorsement.” However, we believe the measure is ready 

for adoption in the ESRD QIP because it has been fully tested for reliability and has received 

consensus support from the TEP that was tasked with developing it. We intend to submit this 

measure to the NQF for endorsement in late 2014 or early 2015. 

For PY 2018 and future payment years, we propose to adopt the Pediatric Peritoneal 

Dialysis Adequacy clinical measure, which assesses the percentage of eligible pediatric 

peritoneal dialysis patient-months in which a Kt/V of greater than or equal to 1.8 was achieved 

during the performance period. Qualifying patient-months are defined as months in which a 

peritoneal dialysis patient is under the age of 18 and has been receiving peritoneal dialysis 

treatment for 90 days or longer. Performance on this measure will be expressed as a proportion 

of patient-months meeting the measure threshold of 1.8, and the measure will be scored based on 

Kt/V data entered on Medicare 72x claims. The measure is a complement to the existing Kt/V 

dialysis adequacy measures previously adopted in the ESRD QIP. Technical specifications for 

the proposed pediatric peritoneal dialysis adequacy clinical measure can be found at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
CMS-1614-P 173 

 

Instruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We seek comments on this proposal to adopt the Pediatric Peritoneal Dialysis Adequacy 

measure. 

c. Proposed ICH CAHPS Clinical Measure 

Section 1881(h)(2)(A)(ii) of the Act states that the Secretary shall specify, to the extent 

feasible, measures of patient satisfaction. Patients with ESRD are an extremely vulnerable 

population: They are completely reliant on ESRD providers for life-saving care, and they are 

often reluctant to express concerns about the care they receive from an array of staff, both 

professional and non-professional. Patient-centered experience is an important measure of the 

quality of patient care, and it is a component of the 2013 NQS, which emphasizes patientcentered care by rating patient experience as a means for empowering patients and improving the 

quality of their care. 

Following a rigorous process, the ICH CAHPS Survey was developed to capture the 

experience of in-center hemodialysis patients. The NQF endorsed and the Measures Application 

Partnership supported this quality measure (NQF #0258: CAHPS In-Center Hemodialysis 

Survey). The ICH CAHPS Survey captures the experience of in-center hemodialysis patients on 

three dimensions: “nephrologists’ communication and caring;” “quality of dialysis center care 

and operations;” and “providing information to patients.” Three global ratings are also part of 

the standardized ICH CAHPS Survey: rating of the nephrologist; rating of the staff; and rating 

of the facility. 

We believe that this measure enables patients to rate their experience of in-center dialysis 

treatment without fear of retribution. Public reporting of results from the ICH CAHPS survey, 

once enough data are available, will satisfy requests to provide consumers (patients and family 
CMS-1614-P 174 

 

members alike) with desired information on viewpoints from patients. In addition, collecting 

and reporting ICH CAHPS survey results assists facilities with their internal quality 

improvement efforts and external benchmarking with other facilities, and it provides CMS with 

information that can be used to monitor the experience of patients with ESRD. 

 Starting with the PY 2014 program, we have taken steps to develop the baseline data 

necessary to propose and implement NQF #0258 as a clinical measure in PY 2018. In the PY 

2014 and PY 2015 programs, we adopted a reporting measure related to the ICH CAHPS survey, 

which required that facilities attest they had administered the survey according to the 

specifications set by the Agency for Healthcare Research and Quality (AHRQ). In the CY 2014 

ESRD PPS final rule, we: 1) expanded the ICH CAHPS reporting measure to require facilities to 

submit (via CMS-approved vendors) their survey results to CMS; 2) increased the patient 

minimum for the measure from 11 to 30 survey-eligible patients; 3) required that facilities (via 

CMS-approved vendors) administer the survey according to specifications set by CMS; and 4) 

required facilities (via CMS-approved vendors) to administer the survey twice during each 

performance period, and to report both sets of survey results by the date specified on 

http://ichcahps.org, starting in PY 2017 (78 FR 72193 through 72196). 

 By CY 2016 (the proposed performance period for the PY 2018 ESRD QIP), we will 

have worked with dialysis facilities for four years to help them become familiar with the ICH 

CAHPS survey. By that time, we believe that facilities will be sufficiently versed in the survey 

administration process to be reliably evaluated on the NQF-endorsed ICH CAHPS measure 

(NQF #0258). Because facilities (and CMS-approved vendors) will be familiar enough with the 

ICH CAHPS survey instrument to be reliably scored on the basis of their survey results, we 

believe it is reasonable to expand the ICH CAHPS reporting measure into a clinical measure for 
CMS-1614-P 175 

 

the PY 2018 ESRD QIP. 

 For these reasons, and because a clinical measure would have a greater impact on clinical 

practice by holding facilities accountable for their actual performance, we propose to replace the 

ICH CAHPS reporting measure that we adopted in the CY 2014 ESRD PPS Final Rule with a 

new clinical measure for PY 2018 and future payment years. This proposed ICH CAHPS 

clinical measure is NQF #0258: CAHPS In-Center Hemodialysis Survey. We are not proposing 

to change the semiannual survey administration and reporting requirements. The proposed 

scoring methodology for the ICH CAHPS clinical measure is discussed below in section 

III.G.4.c. Technical specifications for the ICH CAHPS clinical measure can be found at: 

http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We seek comments on this proposal. 

d. Proposed Screening for Clinical Depression and Follow-Up Reporting Measure 

 Depression is the most common psychological disorder in patients with ESRD. 

Depression causes suffering, a decrease in quality of life, and impairment in social and 

occupational functions; it is also associated with increased health care costs. Current estimates 

put the depression prevalence rate as high as 20 percent to 25 percent in patients with ESRD.8 

Studies have also shown that depression and anxiety are the most common comorbid illnesses in 

patients with ESRD.9

 Moreover, depressive affect and decreased perception of social support 

have been associated with higher rates of mortality in the ESRD population, and some studies 

 

8 Kimmel PL, Cuckor D, Cohen SD, Peterson RA. Depression in end-stage renal disease patients: a critical review. 

Advances in Chronic Kidney Disease. 2007:14(4):328-34. 

9 Feroze, U., Martin, D., Reina-Patton, A., Kalantar-Zadeh, K., & Kopple, J. D. (2010). Mental health, depression, and anxiety in 

patients on maintenance dialysis. Iranian Journal of Kidney Diseases, 4(3), 173-80. 
CMS-1614-P 176 

 

suggest that this association is as strong as that between medical risk factors and mortality.10 

Nevertheless, depression and anxiety remain under-recognized and under-treated, despite the 

availability of reliable screening instruments.11 Therefore, a measure that assesses whether 

facilities screen patients for depression, and develop follow-up plans when appropriate, offers an 

opportunity to improve the health of patients with ESRD. 

 We are proposing to adopt a depression measure that is based on an NQF-endorsed 

measure (NQF #0418: Screening for Clinical Depression). NQF #0418 assesses the percentage 

of patients screened for clinical depression using an age-appropriate standardized tool and 

documentation of a follow-up plan where necessary. The Measures Application Partnership 

supported the use of NQF #0418 in the ESRD QIP in its January 2014 Pre-Rulemaking Report, 

because the measure “addresses a National Quality Strategy [NQS] aim not adequately addressed 

in the program measure set” and promotes person- and family-centered care. We are proposing 

to adopt a reporting measure based on this NQF-endorsed measure so that we can collect data 

that we can use in the future to calculate both achievement and improvement scores, should we 

propose to adopt the clinical version of this measure in future rulemaking. Although we 

recognize that we recently adopted the NHSN Bloodstream Infection clinical measure despite a 

lack of baseline data to calculate achievement and improvement scores, we believe that measure 

warranted special treatment in light of the fact that it addresses patient safety. Because the 

proposed screening for clinical depression measure addresses quality of life and patient wellbeing, and not patient safety, we think it is appropriate to adopt it as a reporting measure until 

 

10 Cukor, D., Cohen, S. D., Peterson, R. A., & Kimmel, P. L. (2007). Psychosocial aspects of chronic disease: ESRD as a 

paradigmatic illness. Journal of the American Society of Nephrology, 18(12), 3042-3055; and Kimmel, P. L., Peterson, R. A., 

Weihs, K. L., Simmens, S. J., Alleyne, S., Cruz, I., & Veis, J. H. (2000). Multiple measurements of depression predict mortality 

in a longitudinal study of chronic hemodialysis outpatients. Kidney International, 57(5), 2093-2098. 

11 Preljevic, V. T., Østhus, T. B. H., Sandvik, L., Opjordsmoen, S., Nordhus, I. H., Os, I., & Dammen, T. (2012). Screening for

anxiety and depression in dialysis patients: Comparison of the Hospital Anxiety and Depression Scale and the Beck Depression 

Inventory. Journal of Psychosomatic Research, 73(2), 139-144. 
CMS-1614-P 177 

 

such time that we can collect the baseline data needed to score it as a clinical measure. 

Section 1881(h)(2)(B)(ii) of the Act states that “In the case of a specified area or medical 

topic determined appropriate by the Secretary for which a feasible and practical measure has not 

been endorsed by the entity with a contract under section 1890(a) [in this case NQF], the 

Secretary may specify a measure that is not so endorsed as long as due consideration is given to 

measures that have been endorsed or adopted by a consensus organization identified by the 

Secretary.” Because we have given due consideration to endorsed measures as well as those 

adopted by a consensus organization and determined it is not practical or feasible to adopt NQF 

#0418 as a clinical measure in the ESRD QIP at this time, we are proposing to adopt the 

Screening for Clinical Depression and Follow-Up Plan reporting measure under the authority of 

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

 For PY 2018 and future payment years, we propose that facilities must report one of the 

following conditions in CROWNWeb, at least once per performance period, for each qualifying 

patient (defined below): 

1. Screening for clinical depression is documented as being positive, and a follow-up plan is 

documented 

2. Screening for clinical depression documented as positive, and a follow-up plan not 

documented, and the facility possess documentation stating the patient is not eligible 

3. Screening for clinical depression documented as positive, the facility possesses no 

documentation of a follow-up plan, and no reason is given 

4. Screening for clinical depression is documented as negative, and a follow-up plan is not 

required 

5. Screening for clinical depression not documented, but the facility possesses 
CMS-1614-P 178 

 

documentation stating the patient is not eligible 

6. Clinical depression screening not documented, and no reason is given 

For this proposed measure, qualifying patients are defined as patients 12 years or older 

who have been treated at the facility for 90 days or longer. This proposed measure will collect 

the same data described in NQF #0418, but we are proposing to score facilities based on whether 

they successfully report the data, and not the measure results. More specifically, facilities will be 

scored on whether they report one of the above conditions for each qualifying patient once 

before February 1 of the year directly following the performance period. Technical 

specifications for the Screening for Clinical Depression and Follow-Up reporting measure can be 

found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We seek comments on these proposals. 

e. Proposed Pain Assessment and Follow-Up Reporting Measure 

 Pain is one of the most common symptoms in patients with ESRD.12 Studies have shown 

that pain is a significant problem for more than 50 percent of patients with ESRD, and up to 82 

percent of those patients report moderate to severe chronic pain.13 Pain is commonly associated 

with quality of life in early- and late-stage chronic kidney disease patients, but it is not 

effectively managed in the ESRD patient population and chronic pain often goes untreated.14 

Observational studies suggest that under-managed pain has the potential to induce or exacerbate 

 

12 Cohen, S. D., Patel, S. S., Khetpal, P., Peterson, R. A., & Kimmel, P. L. (2007). Pain, sleep disturbance, and quality of life in 

patients with chronic kidney disease. Clinical Journal of the American Society of Nephrology, 2(5), 919-925.

13 Davison SN. Pain in hemodialysis patients: prevalence, cause, severity, and management. American Journal of Kidney 

Disease. 2003; 42:1239–1247

14 Davison, S. N. (2007). The prevalence and management of chronic pain in end-stage renal disease. Journal of Palliative 

Medicine, 10(6), 1277-1287. 
CMS-1614-P 179 

 

comorbid conditions in ESRD, which may in turn adversely affect dialysis treatment.15 Patients 

with ESRD frequently experience pain that has a debilitating impact on their daily lives, and 

research has shown a lack of effective pain management strategies currently in place in dialysis 

facilities.16 Therefore, a measure that assesses whether facilities regularly assess their patients’ 

pain, and develop follow-up plans as necessary, offers the possibility of improving the health and 

well-being of patients with ESRD. 

 We are proposing to adopt a pain measure that is based on an NQF-endorsed measure 

(NQF #0420: Pain Assessment and Follow-Up). NQF #0420 assesses the percentage of patients 

with documentation of a pain assessment using a standardized tool, and documentation of a 

follow-up plan when pain is present. The Measures Application Partnership supported the use of 

NQF #0420 in the ESRD QIP in its January 2014 Pre-Rulemaking Report, because the measure 

“addresses a National Quality Strategy [NQS] aim not adequately addressed in the program 

measure set” and promotes person- and family-centered care. We are proposing to adopt a 

reporting measure based on this NQF-endorsed measure so that we can collect data that we can 

use in the future to calculate both achievement and improvement scores, should we propose to 

adopt the clinical version of this measure in future rulemaking. Although we recognize that we 

recently adopted the NHSN Bloodstream Infection clinical measure despite a lack of baseline 

data to calculate achievement and improvement scores, we believe that measure warranted 

special treatment in light of the fact that it addresses patient safety. Because the proposed 

screening for pain measure addresses quality of life and patient well-being, and not patient 

 

15 De Castro C. (2013). Pain assessment and management in hemodialysis patients. CANNT Journal; 23(3):29-32; 

Weisbord SD, Fried LF, Arnold RM, Fine MJ, Levenson DJ, et al. Prevalence, severity, and importance of physical 

and emotional symptoms in chronic hemodialysis patients. (2005) Journal of the American Society of Nephrology; 

16(8):2487-2494. 

16 De Castro C. (2013). Pain assessment and management in hemodialysis patients. CANNT Journal; 23(3):29-32; 

Wyne A, Rai R, Cuerden M, Clark WF, Suri RS. (2011). Opioid and benzodiazepine use in end-stage renal disease: 

a systematic review. Clinical Journal of the American Society of Nephrology. 6(2):326-333. 
CMS-1614-P 180 

 

safety, we think it is appropriate to adopt it as a reporting measure until such time that we can 

collect the baseline data needed to score it as a clinical measure. 

Section 1881(h)(2)(B)(ii) of the Act states that “In the case of a specified area or medical 

topic determined appropriate by the Secretary for which a feasible and practical measure has not 

been endorsed by the entity with a contract under section 1890(a) of the Act [in this case NQF], 

the Secretary may specify a measure that is not so endorsed so long as due consideration is given 

to measures that have been endorsed or adopted by a consensus organization identified by the 

Secretary.” Because we have given due consideration to endorsed measures, as well as those 

adopted by a consensus organization, and determined it is not practical or feasible to adopt those 

measures in the ESRD QIP, we are proposing to adopt the Pain Assessment and Follow-Up 

reporting measure under the authority of section1881(h)(2)(B)(ii) of the Act. 

 For PY 2018 and future payment years, we propose that facilities must report one of the 

following conditions in CROWNWeb, once every six months per performance period, for each 

qualifying patient (defined below): 

1. Pain assessment using a standardized tool is documented as positive, and a follow-up 

plan is documented 

2. Pain assessment documented as positive, a follow-up plan is not documented, and the 

facility possesses documentation that the patient is not eligible 

3. Pain assessment documented as positive using a standardized tool, a follow-up plan is not

documented, and no reason is given 

4. Pain assessment using a standardized tool is documented as negative, and no follow-up 

plan required 

5. No documentation of pain assessment, and the facility possesses documentation the 
CMS-1614-P 181 

 

patient is not eligible for a pain assessment using a standardized tool 

6. No documentation of pain assessment, and no reason is given 

For this measure, a qualifying patient is defined as a patient aged 18 years or older who 

has been treated at the facility for 90 days or longer. This proposed measure will collect the 

same data described in NQF #0420, but we are proposing a few modifications to the NQFendorsed version. First, we are proposing that facilities must report data for each patient once 

every six months, whereas NQF #0420 requires facilities to report the data based on each visit. 

We are proposing this modification because we agree with public comments reflected on the 

Measures Application Partnership’s January 2014 Pre-Rulemaking Report, which stated that 

conducting a pain assessment every time a patient receives dialysis would be unduly burdensome 

for facilities. Second, we are proposing that conditions covering the first six months of the 

performance period must be reported in CROWNWeb before August 1 of the performance 

period, and that conditions covering the second six months of the performance period must be 

reported in CROWNWeb before February 1 of the year directly following the performance 

period. We believe this reporting schedule will ensure regular monitoring and follow-up of 

patients’ pain without imposing an undue burden on facilities. Third, we are proposing to score 

facilities based on whether they successfully report the data, and not based on the measure 

results. Technical specifications for the Pain Assessment and Follow-Up reporting measure can 

be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

We seek comments on this proposal. 

f. Proposed NHSN Healthcare Personnel Influenza Vaccination Reporting Measure 

 Infection is the second most common cause of death in patients with ESRD, following 
CMS-1614-P 182 

 

cardiovascular causes,17 and influenza accounts for significant morbidity and mortality in 

patients receiving hemodialysis.18 Healthcare personnel (HCP) can acquire influenza from 

patients and transmit influenza to patients and other HCP; decreasing transmission of influenza 

from HCP to persons at high risk likely reduces influenza-related deaths among persons at high 

risk for complications from influenza, including patients with ESRD.19 Vaccination is an 

effective preventive measure against influenza that can prevent many illnesses, deaths, and losses 

in productivity.20 In addition, HCP are considered high priorities for vaccine use. Achieving and 

sustaining high influenza vaccination coverage among HCP is intended to help protect HCP and 

their patients, and to reduce disease burden and healthcare costs. Results of studies in post-acute 

care settings similar to the ESRD facility setting indicate that higher vaccination coverage among 

HCP is associated with lower all-cause mortality.21 We therefore propose to adopt an NHSN 

HCP Influenza Vaccination reporting measure for PY 2018 and future payment years.

We are proposing to use a measure that is based on an NQF-endorsed measure (NQF 

#0431: Influenza Vaccination Coverage Among Healthcare Personnel) of the percentage of 

qualifying HCP who a) received an influenza vaccination; b) were determined to have a medical 

contraindication; c) declined influenza vaccination; or d) were of an unknown vaccination status. 

A “qualifying HCP” is defined as an employee, licensed independent practitioner, or adult 

 

17 Soni R, Horowitz B, Unruh M. Immunization in end-stage renal disease: opportunity to improve outcomes. 

Semin, Dial. 2013 Jul-Aug;26(4):416-26. 

18 Fiore AE, Shay DK, Haber P, et al. Prevention and control of influenza. Recommendations of the Advisory 

Committee on Immunization Practices (ACIP). MMWR Recomm Rep. 2007;56:1-54. 

19 Pearson ML, Bridges CM, Harper SA. Influenza vaccination of health-care personnel: Recommendations of the 

Healthcare Infection Control Practices Advisory Committee (HICPAC) and the Advisory Committee on 

Immunization Practices (ACIP). MMWR. 2006:55:1-16. 

20 Talbot TR, Bradley SE, Cosgrove SE, et al. Influenza vaccination of healthcare workers and vaccine allocation for 

healthcare workers during vaccine shortages. Infect Control Hosp Epidemiol. 2005;26(11):882-90. 

21 Carman WF, Elder AG, Wallace LA, et al. Effects of influenza vaccination of health-care workers on mortality of 

elderly people in long-term care: a randomized controlled trial. Lancet. 2000;355(9198):93-7; see also Potter J, Stott 

DJ, Roberts MA, et al. Influenza vaccination of health care workers in long-term-care hospitals reduces the mortality 

of elderly patients. J infect Dis. 1997;175(1):1-6.
CMS-1614-P 183 

 

student/trainee/volunteer who works in a facility for at least one day between October 1 and 

March 31. The Measures Application Partnership supported the use of NQF #0431 in the ESRD 

QIP in its January 2014 Pre-Rulemaking Report because the measure is NQF-endorsed for use in 

the dialysis facility care setting. We are proposing to adopt a reporting measure based on this 

NQF-endorsed measure so that we can collect data that we can use in the future to calculate both 

achievement and improvement scores, should we propose to adopt the clinical version of this 

measure in future rulemaking. Although we recognize that we recently adopted the NHSN 

Bloodstream Infection clinical measure despite a lack of baseline data to calculate achievement 

and improvement scores, we believe that measure warranted special treatment in light of the fact 

that it addresses patient safety. Because the proposed NHSN HCP Influenza Vaccination 

reporting measure addresses population health, and not patient safety, we think it is appropriate 

to adopt it as a reporting measure until such time that we can collect the baseline data needed to 

score it as a clinical measure. 

Section 1881(h)(2)(B)(ii) of the Act states that “In the case of a specified area or medical 

topic determined appropriate by the Secretary for which a feasible and practical measure has not 

been endorsed by the entity with a contract under section 1890(a) [in this case, NQF], the 

Secretary may specify a measure that is not so endorsed as long as due consideration is given to 

measures that have been endorsed or adopted by a consensus organization identified by the 

Secretary.” Because we have given due consideration to endorsed measures as well as those 

adopted by a consensus organization, and determined it is not practical or feasible to adopt this 

measure in the ESRD QIP, we are proposing to adopt the NHSN Healthcare Personnel Influenza 

Vaccination reporting measure under the authority of section 1881(h)(2)(B)(ii) of the Act 

 For PY 2018 and future payment years, we propose that facilities must submit, on an 
CMS-1614-P 184 

 

annual basis, an HCP Influenza Vaccination Summary Form to CDC’s NHSN system, according 

to the specifications available in the NHSN Healthcare Personnel Safety Component Protocol 

(http://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf). This 

proposed measure differs from NQF #0431 in that we are proposing to collect the same data but 

will score facilities on the basis of whether they submit this data, rather than on the percentage of 

HCP vaccinated. We propose that the deadline for reporting this information to NHSN be May 

15th of each year. This date is consistent with the reporting deadline established by CMS for 

other provider types reporting HCP vaccination data to NHSN. Because the flu season typically 

spans from October to April, NHSN protocols submitted by May 15 would document 

vaccinations received during the preceding flu season. For example, NHSN HCP Influenza 

Vaccination Summary Forms submitted by May 15, 2016, would contain data from October 1, 

2015 to March 31, 2016, and would be used for the PY 2018 ESRD QIP; NHSN protocols 

submitted by May 15, 2017, would contain data from October 1, 2016 to March 31, 2017, and 

would be used for the PY 2019 ESRD QIP, and so on. Technical specifications for this measure 

can be found at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/ESRDQIP/061_TechnicalSpecifications.html. 

 We request comments on this proposal. 

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CMS-1614-P 186 

 

Measures in the PY 2018 ESRD QIP 

 For the same reasons stated in the CY 2013 ESRD PPS final rule (77 FR 67500 through 

76502), we are proposing for PY 2018 to set the performance standards, achievement thresholds, 

and benchmarks based on the 50th, 15th, and 90th percentile, respectively, of national 

performance in CY 2014 for all the clinical measures except for the proposed ICH CAHPS 

clinical measure. As finalized in the CY 2014 ESRD PPS Final Rule (78 FR 72213), facilities 

are not required to administer the ICH CAHPS survey (via a CMS-approved third-party vendor) 

on a semiannual basis until CY 2015, the proposed performance period for the PY 2017 ESRD 

QIP. We believe that ICH CAHPS data collected during CY 2014 will not be reliable enough to 

use for the purposes of establishing performance standards, achievement thresholds, and 

benchmarks, because facilities are only required to administer the survey once in CY 2014. 

Therefore, we propose to set the performance standards, achievement thresholds, and 

benchmarks based on the 50th, 15th, and 90th percentile, respectively, of national performance 

in CY 2015 for the proposed ICH CAHPS clinical measure. 

 We seek comments on these proposals. 

b. Estimated Performance Standards, Achievement Thresholds, and Benchmarks for the Clinical 

Measures Proposed for the PY 2018 ESRD QIP 

 At this time, we do not have the necessary data to assign numerical values to the 

proposed performance standards for the clinical measures, because we do not yet have data from 

CY 2014 or the first portion of CY 2015. We will publish values for the clinical measures, using 

data from CY 2014 and the first portion of CY 2015, in the CY 2016 ESRD PPS Final Rule. 

c. Proposed Performance Standards for the PY 2018 Reporting Measures 

 In the CY 2014 ESRD PPS Final Rule, we finalized performance standards for the 
CMS-1614-P 187 

 

Anemia Management and Mineral Metabolism reporting measures (78 FR 72213). We are not 

proposing any changes to this policy beyond the proposal to modify the reporting requirements 

for the Mineral Metabolism reporting measure, which appears above in Section III.G.1. 

 For the Screening for Clinical Depression and Follow-Up reporting measure, we propose 

to set the performance standard as successfully reporting one of the above-listed clinical 

depression and follow-up screening conditions for each qualifying patient in CROWNWeb 

before the February 1st directly following the performance period. 

 For the Pain Assessment and Follow-Up reporting measure, we propose to set the 

performance standard as successfully reporting one of the above-listed pain assessment and 

follow-up conditions for each qualifying patient in CROWNWeb twice annually: once before 

August 1st for the first 6 months of the performance period, and once before the February 1st

directly following the performance period for the last six months of the performance period. 

 For the NHSN Healthcare Provider Influenza Vaccination reporting measure, we propose 

to set the performance standard as successfully submitting the HCP Influenza Vaccination 

Summary Form to CDC’s NHSN system by May 15, 2017. 

 We seek comments on these proposals. 

4. Proposal for Scoring the PY 2018 ESRD QIP Measures 

a. Scoring Facility Performance on Clinical Measures Based on Achievement 

 In the CY 2014 ESRD PPS Final Rule, we finalized a policy for scoring performance on 

clinical measures based on achievement (78 FR 72215). In determining a facility’s achievement 

score for each measure under the PY 2018 ESRD QIP, we propose to continue using this 

methodology for all clinical measures except the ICH CAHPS clinical measure. Under this 

methodology, facilities receive points along an achievement range based on their performance 
CMS-1614-P 188 

 

during the proposed performance period for each measure, which we define as a scale between 

the achievement threshold and the benchmark. 

b. Scoring Facility Performance on Clinical Measures Based on Improvement 

 In the CY 2014 ESRD PPS Final Rule, we finalized a policy for scoring performance on 

clinical measures based on improvement (78 FR 72215 through 72216). In determining a 

facility’s improvement score for each measure under the PY 2018 ESRD QIP, we propose to 

continue using this methodology for all clinical measures except the ICH CAHPS clinical 

measure. Under this methodology, facilities receive points along an improvement range, defined 

as a scale running between the improvement threshold and the benchmark. We propose to define 

the improvement threshold as the facility’s performance on the measure during CY 2015. The 

facility’s improvement score would be calculated by comparing its performance on the measure 

during CY 2016 (the proposed performance period) to its performance rate on the measure 

during CY 2015. 

c. Proposal for Scoring the ICH CAHPS Clinical Measure 

 For PY 2018 and future payment years, we propose the following scoring methodology 

for the ICH CAHPS clinical measure. We propose to score the measure on the basis of three 

composite measures and three global ratings. 

Composite Measures: 

• Nephrologists’ Communication and Caring; 

• Quality of Dialysis Center Care and Operations; and 

• Providing Information to Patients. 

Global Ratings: 

• Overall rating of the nephrologists (Question 8) 
CMS-1614-P 189 

 

• Overall rating of the dialysis center staff (Question 32) 

• Overall rating of the dialysis facility (Question 35) 

The composite measures are groupings of questions that measure the same dimension of 

healthcare. (Groupings of questions and composite measures can be found at 

https://ichcahps.org/Portals/0/ICH_Composites_English.pdf.) Global ratings questions employ a 

scale of 0 to 10, worst to best; each of the questions within a composite measure use either “Yes” 

or “No” responses, or response categories ranging from “Never” to “Always,” to assess the 

patient’s experience of care at a facility. Facility performance on each composite measure will 

be determined by the percent of patients who choose “top-box” responses (i.e., most positive or 

“Always”) to the ICH CAHPS survey questions in each domain. Examples of questions and topbox responses are displayed below: 

Q11: In the last 3 months, how often did the dialysis center staff explain things in a way that was easy for 

you to understand? 

Top-box response: “Always” 

Q19: The dialysis center staff can connect you to the dialysis machine through a graft, fistula, or catheter. 

Do you know how to take care of your graft, fistula or catheter? 

Top-box response: “Yes” 

 We propose that a facility will receive an achievement score and an improvement score 

for each of the composite measures and global ratings in the ICH CAHPS survey instrument. 

For purposes of calculating achievement scores for the ICH CAHPS clinical measure, we 

propose to base the score on where a facility’s performance rate falls relative to the achievement 

threshold and the benchmark for that measure. We propose that facilities will earn between 0 to 

10 points for achievement based on where its performance for the measure falls relative to the 

achievement threshold. If a facility’s performance rate during the performance period is: 
CMS-1614-P 190 

 

• Equal to or greater than the benchmark, then the facility would receive 10 points for 

achievement; 

• Less than the achievement threshold, then the facility would receive 0 points for 

achievement; or 

• Equal to or greater than the achievement threshold, but below the benchmark, then 

the following formula would be used to derive the achievement score: 

[9 * ((Facility’s performance period rate – achievement threshold) / (benchmark – 

achievement threshold))] + .5, with all scores rounded to the nearest integer, with 

half rounded up. 

 For the purposes of calculating improvement scores for the ICH CAHPS clinical 

measure, we propose that the improvement threshold will be defined as facility performance in 

CY 2015, and further propose to base the score on where a facility’s performance rate falls 

relative to the improvement threshold and the benchmark for that measure. We propose that a 

facility can earn between 0 to 9 points based on how much its performance on the measure 

during the performance period improves from its performance on the measure during the 

baseline period. If a facility’s performance rate during the performance period is: 

• Less than the improvement threshold, then the facility would receive 0 points for 

improvement; or 

• Equal to or greater than the improvement threshold, but below the benchmark, then 

the following formula would be used to derive the improvement score: 

[10 * ((Facility performance period rate – Improvement threshold) / (Benchmark 

– Improvement threshold))] – .5, with all scores rounded to the nearest integer, 

with half rounded up. 
CMS-1614-P 191 

 

 We further propose that a facility’s ICH CAHPS score will be based on the higher of the 

facility’s achievement or improvement score for each of the composite measures and global 

ratings. Additionally, we propose that achievement and/or improvement scores on the three 

composite measures and the three global ratings will be averaged together to yield an overall 

score on the ICH CAHPS clinical measure. 

 The timing and frequency of administering the ICH CAHPS survey is critical to 

obtaining reliable results. For example, if a facility did not conduct two semiannual surveys 

during a given performance period, then patient experiences during the 6-month period(s) 

covered by the missed survey(s) would not be captured. Additionally, if facilities (via CMSapproved vendors) do not report their ICH CAHPS survey results to CMS, then these results 

cannot be taken into account when establishing national performance standards for the measure, 

thereby diminishing the measure’s reliability. Because timely survey administration and data 

reporting is critical to reliably scoring ICH CAHPS as a clinical measure in the ESRD QIP, we 

propose that a facility will receive a score of 0 on the measure if it does not meet the survey 

administration and reporting requirements finalized in the CY 2014 ESRD PPS Final Rule (78 

FR 72193 through 72196). 

 We seek comments on these proposals to score the ICH CAHPS clinical measure. 

d. Proposals for Calculating Facility Performance on Reporting Measures 

 In the CY 2014 ESRD PPS Final Rule, we finalized policies for scoring performance on 

the Anemia Management and Mineral Metabolism reporting measures in the ESRD QIP (78 FR 

72216). We are not proposing any changes to these policies beyond the proposals that were 

made beginning with the PY 2017 program, which appear in section III.F.7 above. 

 With respect to the Screening for Clinical Depression and Follow-up, Pain Assessment 
CMS-1614-P 192 

 

and Follow-Up, and NHSN Healthcare Provider Influenza Vaccination reporting measures, we 

propose that facilities will receive a score of 10 on the measures if they meet the proposed 

performance standards for the measures, and a score of 0 on the measure if they do not. We are 

proposing to score these reporting measures differently than the Anemia Management and 

Mineral Metabolism reporting measures because they require annual or semiannual reporting, 

and therefore scoring based on monthly reporting rates is not feasible. 

 We seek comments on these proposals. 

5. Proposed Minimum Data for Scoring Measures for the PY 2018 ESRD QIP 

 With the following exceptions discussed below, we are not proposing to change the 

minimum data policies for the PY 2018 ESRD QIP from that proposed above for the PY 2017 

ESRD QIP. We are also proposing that the 30 survey-eligible patient minimum during the 

eligibility period and 30 survey complete minimum during the performance period that we 

proposed to adopt for the ICH CAHPS reporting measure will also apply to the ICH CAHPS 

clinical measure. We have determined that the ICH CAHPS survey is satisfactorily reliable 

when a facility obtains a total of at least 30 completed surveys during the performance period. 

Therefore, even if a facility meets the 30 survey-eligible patient minimum during the eligibility 

period and the survey administration and reporting requirements, if the facility is only able to 

obtain 29 or fewer survey completes during the performance period, the facility will not be 

eligible to receive a score on the ICH CAHPS clinical measure. 

We further propose the facilities with fewer than 10 patient-years at risk will not be 

eligible to receive a score on the proposed STrR clinical measure. We considered adopting the 

11-patient minimum requirement that we use for the other clinical measures. We decided, 

however, to base facilities’ eligibility for the measure in terms of the number of patient-years at 
CMS-1614-P 193 

 

risk, because facility performance rates are based on the number of patient-years at risk, not the 

number of patients. Additionally, we decided to set the minimum data requirements at 10 

patient-years at risk because, based on national average event rates, this is the time required to 

achieve an average of 5 transfusion events. The 5 expected transfusion events requirement 

translates to a standard deviation of approximately 0.45 if the facility has rates exactly 

corresponding to the national average. In addition, 10 patient-years at risk is the threshold used 

in the Dialysis Facility Compare program, and we believe that public-reporting and VBP 

programs for ESRD should adopt consistent measure specifications where feasible. 

For the proposed STrR measure, we propose to apply the small-facility adjuster to 

facilities with 21 or fewer patient-years at risk. We decided to base the threshold for applying 

the small-facility adjuster on the number of patient-years at risk, because facility performance 

rates are based on the number of patient-years at risk, not the number of patients. We are 

proposing to set the threshold at 21 patient-years at risk, because we determined that this was the 

minimum number of patient-years at risk needed to achieve an IUR of 0.4 (that is, moderate 

reliability) for the proposed STrR measure. Because the small-facility adjuster gives facilities 

the benefit of the doubt when measure scores can be unduly influenced by a few outlier patients, 

we believe that setting the threshold at 21 qualifying patient-years at risk will not unduly 

penalize facilities that treat small numbers of patients on the proposed STrR clinical measure. 

With these exceptions, we are not proposing to change the policy, finalized most recently 

in the CY 2014 ESRD PPS Final Rule (78 FR 72220 through 72221), that facilities must have at 

least 11 qualifying patients for the entire performance period in order to be scored on a clinical 

measure. 

We currently have a policy, most recently finalized in the CY 2014 ESRD PPS final rule 
CMS-1614-P 194 

 

(78 FR 72197 through 72198 and 72220 through 72221), to score facilities on reporting 

measures only if they have a minimum number of qualifying patients during the performance 

period. As discussed in Section III.F.7 above, we are proposing to modify the case minimum 

requirements for the Anemia Management and Mineral Metabolism reporting measures 

beginning with the PY 2017 ESRD QIP. We are not proposing any additional changes in the 

patient minimum requirements for the Anemia Management and Mineral Metabolism reporting 

measures in the PY 2018 program. 

For the Screening for Clinical Depression and Follow-Up and the Pain Assessment and 

Follow-Up reporting measures, we propose a case minimum of one qualifying patient. We 

believe this patient minimum requirement will enable us to gather a sufficient amount of data to 

calculate future performance standards, benchmarks, and achievement thresholds, should we 

propose to adopt clinical versions of these measures in the future. 

As discussed in Section III.G.2.f, we are not proposing that a facility will have to meet a 

patient minimum in order to receive a score on the NHSN Healthcare Provider Influenza 

Vaccination reporting measure. We believe it is standard practice for all HCP to receive 

influenza vaccinations and, as discussed above, HCP vaccination is likely to reduce influenzarelated deaths and complications among the ESRD population. Accordingly, we are proposing 

that all facilities, regardless of patient population size, will be scored on the influenza 

vaccination measure. 

Under our current policy, we begin counting the number of months for which a facility is 

open on the first day of the month after the facility’s CCN open date. Only facilities with a CCN 

open date before July 1, 2016, are eligible to be scored on the Anemia Management and Mineral 

Metabolism reporting measures in the PY 2018 program. We are proposing to apply this 
CMS-1614-P 195 

 

finalized policy to the proposed Screening for Depression and Follow-Up and the Pain 

Assessment and Follow-Up reporting measures. We further propose that facilities with a CCN 

open date after January 1, 2016, will not be eligible to receive a score on the NHSN Healthcare 

Personnel Influenza Vaccination reporting measure in the PY 2018 program. Due to the time it 

takes for facilities to register with NHSN and become familiar with the NHSN Healthcare 

Personnel Safety Component Protocol, we do not believe it is reasonable to expect facilities with 

CCN open dates after January 1, 2016, to submit an HCP Influenza Vaccination Summary Form 

to CDC’s NHSN system before the May 15, 2016, deadline. 

As finalized in the CY 2014 ESRD PPS Final Rule (78 FR 72220), facilities are generally 

eligible to receive a score on the clinical measures if their CCN open date occurs before the end 

of the performance period. However, facilities with a CCN open date after January 1 of the 

performance period are not eligible to receive a score on the NHSN Bloodstream Infection 

clinical measure, due to the need to collect 12 months of data to accurately score the measure. 

We are now proposing that facilities with a CCN open date after January 1, 2016, will also not be 

eligible to receive a score on the ICH CAHPS clinical measure in the PY 2018 program. Due to 

the additional time needed to arrange to contract with CMS-approved third-party vendors, and 

for vendors to administer the survey twice and report the results to CMS, we do not believe 

facilities with CCN open dates after January 1, 2016, can reasonably be expected to meet the 

requirements associated with the proposed ICH CAHPS clinical measure for that performance 

period. 

As discussed in the Section III.G.7 below, we are continuing our policy that a facility will 

not receive a TPS unless it receives a score on at least one clinical measure and at least one 

reporting measure. We note that finalizing the above proposals would result in facilities not 
CMS-1614-P 196 

 

being eligible for a payment reduction for the PY 2018 ESRD QIP if they have a CCN open date 

on or after July 1, 2016. 

We seek comments on these proposals. 

Table 29 displays the proposed patient minimum requirements for each of the measures, 

as well as the proposed CCN open dates after which a facility will not be eligible to receive a 

score on a reporting measure. 

 
CMS-1614-P 197 

 

TABLE 29: Proposed Minimum Data Requirements for the PY 2018 ESRD QIP 

Measure Minimum Data 

Requirements 

CCN Open Date Small Facility 

Adjuster 

Adult Hemodialysis Adequacy 

(Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Adult Peritoneal Dialysis 

Adequacy (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Pediatric Hemodialysis 

Adequacy (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Pediatric Peritoneal Dialysis 

Adequacy (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Vascular Access Type: 

Catheter (Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Vascular Access Type: Fistula 

(Clinical) 

11 qualifying patients N/A 11 – 25 patients 

Hypercalcemia (Clinical) 11 qualifying patients N/A 11 – 25 patients 

NHSN Bloodstream Infection 

(Clinical) 

11 qualifying patients Before January 1, 

2016 

11 – 25 patients 

SRR (Clinical) 11 index discharges N/A 11 – 41 index 

discharges 

STrR (Clinical) 10 patient-years at risk N/A 10 – 21 patient-years 

at risk 

ICH CAHPS (Clinical) Facilities with 30 or 

more survey-eligible 

patients during the 

calendar year 

preceding the 

performance period 

must submit survey 

results. Facilities will 

not receive a score if 

they do not obtain a 

total of at least 30 

completed surveys 

during the 

performance period. 

Before January 1, 

2016 

N/A 

Anemia Management 

(Reporting) 

Facilities with 11 or 

more qualifying 

patients must report 

data for all patients. 

Facilities with between 

2 and 11 qualifying 

patients must report 

data on all but 1 

Before July 1, 2016 N/A 
CMS-1614-P 198 

 

Measure Minimum Data 

Requirements 

CCN Open Date Small Facility 

Adjuster 

qualifying patient. 

Facilities with 1 

qualifying patient must 

report for that patient. 

Mineral Metabolism 

(Reporting) 

Facilities with 11 or 

more qualifying 

patients must report 

data for all patients. 

Facilities with between 

2 and 11 qualifying 

patients must report 

data on all but 1 

qualifying patient. 

Facilities with 1 

qualifying patient must 

report for that patient. 

Before July 1, 2016 N/A 

Depression Screening and 

Follow-Up (Reporting) 

One qualifying patient. Before July 1, 2016 N/A 

Pain Assessment and FollowUp (Reporting) One qualifying patient. Before July 1, 2016 N/A 

NHSN HCP Influenza 

Vaccination (Reporting) 

N/A Before January 1, 

2016 

N/A 

6. Proposal for Calculating the Clinical Measure Domain Score 

 As the ESRD QIP evolves and we continue to adopt new clinical measures that track the 

goals of the NQS, we do not believe that the current scoring methodology provides the program 

with enough flexibility to strengthen incentives for quality improvement in areas where quality 

gaps continue to exist. Therefore, under the authority of Section 1881(h)(3)(A)(i) of the Act, we 

are proposing to revise the scoring methodology beginning with the PY 2018 ESRD QIP so that 

we assign measure scores on the basis of two domains: a Clinical Measure Domain and a 

Reporting Measure Domain. 

 First, we propose to establish a Clinical Measure Domain, which we define as an 

aggregated metric of facility performance on the clinical measures and measure topics in the 
CMS-1614-P 199 

 

ESRD QIP. Under this proposed approach, we would score individual clinical measures and 

measure topics using the methodology we finalize for that measure or measure topic. Clinical 

measures and measure topics would then be grouped into subdomains within the Clinical 

Measure Domain, according to quality categories. Within these subdomains, measure scores 

would be multiplied by a weighting coefficient, weighted measure scores would be summed 

together to determine subdomain scores, and then subdomain scores would be summed together 

to determine a facility’s Clinical Measure Domain score. This scoring methodology provides 

more flexibility to focus on quality improvement efforts, because it makes it possible to group 

measures according to quality categories and to weight each category according to opportunities 

for quality improvement. 

We further propose to divide the clinical measure domain into three subdomains for the 

purposes of calculating the Clinical Measure Domain score: 

• Safety 

• Patient and Family Engagement/Care Coordination 

• Clinical Care 

 We took several considerations into account when selecting these particular subdomains. 

First, safety, patient engagement, care coordination, and clinical care are all NQS goals for which 

the ESRD QIP has proposed and/or finalized measures. We are attempting to align all CMS 

quality improvement efforts with the NQS because its patient-centered approach prioritizes 

measures across our quality reporting and pay-for-performance programs to ensure that the 

measurement approaches in these programs, as a whole, can make meaningful improvements in 

the quality of care furnished in a variety of settings. We also believe that adopting an NQSbased subdomain structure for the clinical measures in the ESRD QIP is responsive to 
CMS-1614-P 200 

 

stakeholder requests that we align our measurement approaches across HHS programs. 

 Second, we are proposing to combine the NQS goals of Care Coordination and Patientand Caregiver-Centered Experience of Care into one subdomain because we believe the two 

goals complement each other. “Care Coordination” refers to the NQS goal of promoting 

effective communication and coordination of care. “Patient- and Caregiver- Centered 

Experience of Care” refers to the NQS goal of ensuring that each patient and family is engaged 

as a partner in care. In order to engage patients and families as partners, we believe that effective 

communication and coordination of care must coexist, and that patient and family engagement 

cannot occur independently of effective communication and care coordination. We therefore 

believe that it is appropriate to combine measures of care coordination with those of patient and 

family engagement for the purposes of calculating a facility’s clinical measure domain score. 

 For PY 2018 and future payment years, we propose to include the following measures in 

the following subdomains of the proposed clinical measure domain (see Table 30): 

TABLE 30: Proposed Subdomains in the Clinical Measure Domain 

Subdomain Measures and Measure Topics

Safety Subdomain 

 NHSN Bloodstream Infection 

measure

Patient and Family Engagement/Care 

Coordination Subdomain 

 ICH CAHPS measure

 SRR measure

Clinical Care Subdomain 

 STrR measure

 Dialysis Adequacy measure 

topic

 Vascular Access Type measure 

topic

 Hypercalcemia measure

We seek comments on these proposals to adopt a Clinical Measure Domain that includes 
CMS-1614-P 201 

 

three subdomains (safety, patient and family engagement/care coordination, and clinical care) for 

the purpose of calculating a facility’s clinical measure domain score for PY 2018. 

 In deciding how to weight the proposed subdomains that comprise the clinical measure 

domain score, we took the following considerations into account: (1) the number of measures 

and measure topics in a proposed subdomain; (2) how much experience facilities have had with 

the measures and measure topics in a proposed subdomain; and (3) how well the measures align 

with CMS’s highest priorities for quality improvement for patients with ESRD. Because the 

proposed Clinical Care subdomain contains the largest number of measures, and facilities have 

the most experience with the measures in this subdomain, we are proposing to weight the 

Clinical Care subdomain significantly higher than the other subdomains. Facilities have more 

experience with the NHSN Bloodstream Infection measure in the proposed Safety subdomain 

than they do with the SRR measure in the proposed Patient and Family Engagement/Care 

Coordination subdomain, but we are proposing to include a larger number of measures in the 

Patient and Family Engagement/Care Coordination subdomain. We are proposing to give the 

Patient and Family Engagement/Care Coordination subdomain slightly more weight than the 

Safety subdomain, because it includes two measures, whereas only one measure appears in the 

proposed Safety subdomain. In future rulemaking, we will consider revising these weights based 

on facility experience with the measures contained within these proposed subdomains. 

 For these reasons, we propose the following weights for the three subdomains in the 

clinical measure domain score for PY 2018: 

Subdomain Weight in the 

clinical measure 

domain score 

Safety 20% 

Patient and Family Engagement/Care Coordination 30% 

Clinical Care 50% 
CMS-1614-P 202 

 

We seek comments on this proposal. 

 In deciding how to weight measures and measure topics within a proposed subdomain, 

we took into account the same considerations we considered when deciding how to weight the 

proposed subdomains. Because the NHSN Bloodstream Infection clinical measure is the only 

measure in the proposed Safety subdomain, we are proposing to assign the entire subdomain 

weight to that measure. We additionally note that improving patient safety and reducing 

bloodstream infections in patients with ESRD is one of our highest priorities for quality 

improvement, so we believe it is appropriate to weight the NHSN Bloodstream Infection clinical 

measure at 20 percent of a facility’s Clinical Measure Domain Score. Because facilities have 

substantially more experience with the ICH CAHPS clinical measure, as compared with the SRR 

clinical measure, we are proposing to give the proposed ICH CAHPS measure twice as much 

weight as the proposed SRR measure. Additionally, we note that improving patients’ experience 

of care is as high a priority for CMS quality improvement efforts as improving patient safety, so 

we believe it is appropriate to assign the ICH CAHPS clinical measure the same weight as the 

NHSN Bloodstream Infection clinical measure. We are proposing to give the Dialysis Adequacy 

and Vascular Access Type measure topics the most weight in the Clinical Care subdomain 

because facilities have substantially more experience with these measure topics, as compared to 

the other measures in the Clinical Care subdomain. We are proposing to assign equal weights to 

the STrR and Hypercalcemia measures because PY 2018 would be the first program year in 

which facilities are measured on the STrR measure, and because the clinical significance of the 

Hypercalcemia measure is diminished in the absence of other information about mineral 

metabolism (for example, a patient’s phosphorus and plasma parathyroid hormone levels), which 

would provide a more comprehensive assessment of mineral metabolism (78 FR 72217). For 
CMS-1614-P 203 

 

these reasons, we propose to use the following weighting system for calculating a facility’s 

Clinical Measure domain score: 

Measures/Measure Topics by Subdomain Measure Weight in the 

Clinical Measure Domain 

Score 

Safety Subdomain 20% 

 NHSN Bloodstream Infection measure 20%

Patient and Family Engagement/Care 

Coordination Subdomain 

30% 

 ICH CAHPS measure 20%

 SRR measure 10%

Clinical Care Subdomain 50% 

 STrR measure 7%

 Dialysis Adequacy measure topic 18%

 Vascular Access Type measure topic 18%

 Hypercalcemia measure 7%

We seek comments on this proposal for weighting individual measures within the Clinical 

Measure Domain. 

7. Proposal for Calculating the Reporting Measure Domain Score, the Reporting Measure 

Adjuster, and the TPS for the PY 2018 ESRD QIP 

 Starting with the PY 2014 program, the ESRD QIP has used a scoring methodology in 

which the clinical measures receive substantially more weight than the reporting measures in the 

TPS, and the weighting coefficients for the two types of measures total 100 percent of the TPS. 

We continue to believe it is appropriate to incorporate reporting measure scores in the TPS 

calculations because “reporting is an important component in quality improvement” (76 FR 

70274); we also continue to believe that clinical measures should carry substantially more weight 

than reporting measures because clinical measures “score providers/facilities based upon actual 

outcomes” (76 FR 70275). These statements reflect the fact that clinical and reporting measures 

serve different functions in the ESRD QIP. Clinical measures provide a direct assessment of the 

quality of care a facility provides, relative to either the facility’s past performance or standards of 
CMS-1614-P 204 

 

care nationwide. Reporting measures create an incentive for facilities to monitor significant 

indicators of health and illness, and they help facilities become familiar with CMS data systems. 

In addition, they allow the ESRD QIP to collect the robust clinical data needed to establish 

performance standards for clinical measures. 

 As we continue to add reporting measures to the ESRD QIP measure set, it becomes 

increasingly challenging to not weight them so heavily that they dilute the significance of the 

clinical measures, while still ensuring that we do not weight the reporting measures so lightly 

that facilities are not incentivized to meet the reporting measure requirements. 

 Although we considered the possibility of abandoning the use of reporting measures, we 

determined that this is not feasible because doing so would make it impossible to calculate 

performance standards for many clinical measures that promise to promote high-quality care. 

We also considered the possibility of weighting the reporting measures such that each reporting 

measure comprised a smaller percentage of the TPS. We believe, however, that doing so would 

result in the reporting measures not carrying enough weight to provide facilities with an 

incentive to meet the reporting requirements, particularly if additional reporting measures were 

added to the program. For example, if 5 reporting measures were adopted in the ESRD QIP, and 

the reporting measures collectively were weighted at 5 percent of a facility’s TPS (in order to 

preserve the significance of the clinical measures), then each reporting measure would only 

comprise 1 percent of a facility’s TPS. Under such conditions, we believe that facilities may 

choose not to meet the reporting measure requirements, because not doing so would have a 

negligible impact on their overall TPS. If enough facilities reached this determination, then we 

would not be able to establish reliable baselines, should we propose to adopt clinical measure 

versions of the reporting measures. For these reasons, we are proposing the following scoring 
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CMS-1614-P 207 

 

determined by its Clinical Measure Domain score if it receives full credit on the reporting 

measures; the TPS would be slightly decreased if the facility received high (but not perfect) 

scores on the reporting measures; and the TPS would be significantly decreased if it performed 

poorly on the reporting measures. For these reasons, we propose to calculate a facility’s TPS by 

subtracting the facility’s RMA from its Clinical Measure Domain score. Additionally, we 

propose to continue our policy to require a facility to be eligible for a score on at least one 

reporting and one clinical measure in order to receive a TPS (78 FR 72217). 

In an effort to estimate the impact of this proposed change for the ESRD QIP’s scoring 

methodology, we conducted an analysis of how the proposed scoring methodology affected 

payment reduction distributions, based on data from CY 2012 and CY 2013. This analysis 

compared the scoring methodology proposed in this section and the previous section to the 

scoring methodology finalized for the PY 2016 program. In order to ensure that the analysis 

reliably estimated the impact on facilities’ payment reductions, the proposed scoring 

methodology and the methodology finalized for the PY 2016 program were each applied to the 

PY 2016 measure set. The full analysis is available at: http://www.cms.gov/Medicare/QualityInitiatives-Patient-Assessment-Instruments/ESRDQIP/061_TechnicalSpecifications.html. The 

results of this analysis are presented below in Table 31. 

 
CMS-1614-P 208 

 

TABLE 31: Expected Impact of Proposed Scoring Methodology on the Distribution of 

Payment Reductions, Using Measures and Measure Weights Finalized for the PY 2016 

ESRD QIP and Data from CY 2012 and CY 2013 

Payment 

Reduction 

Finalized Scoring 

Methodology for PY 

2016, Applied to 

Measures and Measure 

Weights Finalized in the 

PY 2016 Program 

Proposed Scoring 

Methodology for PY 

2018, Applied to 

Measures and Measure 

Weights Finalized in 

the PY 2016 Program 

Number of 

Facilities 

Percent Number of 

Facilities 

Percent 

0% 4,828 79.4 4,606 75.7

0.5% 884 14.5 739 12.2

1.0% 242 4.0 306 5.0

1.5% 69 1.1 108 1.8

2.0% 59 1.0 323 5.3

As illustrated in Table 31, we expect that 4.3 percent more facilities (222 overall) would receive 

a payment reduction under the proposed methodology for PY 2018, as compared with the 

scoring methodology that we will use for the PY 2016 program. We therefore believe that 

adopting the scoring methodology proposed in this section and the previous section will not 

appreciably change the distribution of facility payment reductions, as is our intention. 

We seek comments on these proposals for calculating a facility’s reporting measure 

domain score, to calculate the RMA, and to determine the TPS. 

 Although we believe advantages are afforded by adopting the scoring methodology 

proposed in this section and the previous section, we also recognize that there may be advantages 

associated with maintaining consistency with previous years' scoring methodology. 

Accordingly, as an alternative to the scoring methodology proposed in this section and the 

previous section, we are also seeking public comments on whether we should continue to use the 

same methodology we currently use to weight measures in the ESRD QIP and calculate a 
CMS-1614-P 209 

 

facility’s TPS, with the exception that the clinical and reporting measures would be weighted at 

90 percent and 10 percent, respectively, of a facility’s TPS. 

8. Example of the Proposed PY 2018 ESRD QIP Scoring Methodology 

 In this section, we provide an example to illustrate the proposed scoring methodology for 

PY 2018 and future payment years. Figures 3 – 7 illustrate how to calculate the clinical measure 

domain score, the reporting measure domain score, the RMA, and the TPS. Note that for this 

example, Facility A, a hypothetical facility, has performed very well. Figure 1 illustrates the 

general methodology used to calculate domain scores for the clinical measure domain, as well as 

the example calculations for Facility A. 
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CMS-1614-P 214 

 

PY 2016 program. 

We seek comments on this proposal. 

 Section 1881(h)(3)(A)(ii) of the Act requires that facilities achieving the lowest TPSs 

receive the largest payment reductions. In the CY 2014 ESRD PPS Final Rule (78 FR 72223 

through 72224), we finalized a payment reduction scale for PY 2016 and future payment years: 

For every 10 points a facility falls below the minimum TPS, the facility would receive an 

additional 0.5 percent reduction on its ESRD PPS payments for PY 2016 and future payment 

years, with a maximum reduction of 2.0 percent. We are not proposing any changes to this 

policy at this point. 

 Because we are not yet able to calculate the performance standards for each of the 

clinical measures, we are also not able to calculate a proposed minimum TPS at this time. We 

will publish the minimum TPS, based on data from CY 2014 and the first part of CY 2015, in the 

CY 2016 ESRD PPS Final Rule. 

We seek comments on this proposal. 

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

CMS recognizes that individuals with both Medicare and Medicaid (also known as “dualeligible beneficiaries”), comprise a relatively large proportion of Medicare enrollees with ESRD. 

Because ESRD programs have a long history of performance measurement linked with public 

reporting, and because there are a large number of dual-eligible beneficiaries receiving ESRD 

care, we are considering stratifying ESRD QIP measures for Medicare-Medicaid enrollees. 

Measure reporting under the ESRD QIP does not currently allow us to separately review 

results for dual-eligible beneficiaries or compare those results with results achieved by other 

patients with ESRD, so it is not currently known if their experiences are better, worse, or the 
CMS-1614-P 215 

 

same as other patients. Even the basic demographics of dual-eligible beneficiaries receiving 

ESRD care are not well understood. After discussion of the pros and cons that included input 

from the ESRD provider community, the Measures Application Partnership’s dual-eligible 

workgroup recommended that CMS take the first step in exploring the feasibility of requiring 

facilities to separately report ESRD QIP measures for Medicare-Medicaid enrollees by analyzing 

the composition of the dual-eligible beneficiary population receiving ESRD care and 

determining potential ways in which stratified reporting may further quality improvement efforts. 

Furthermore, the Measures Application Partnership recommended, in the context of measure 

development, that CMS explore whether other risk factors unique to the dual-eligible population 

receiving ESRD care would present significant hurdles to measure stratification along these 

lines. We are therefore seeking comments on whether it would be feasible to stratify ESRD QIP 

measures based on whether the beneficiary is a dual eligible. We are interested in whether 

stakeholders recommend stratification and, if so, for what specific measures stakeholders would 

find stratification most compelling. 

We are particularly interested in public comments on whether Medicare-Medicaid 

stratified quality measures under the ESRD QIP should be reported publicly, and how we should 

factor those measures into our scoring methodology. We seek comments on the meaningfulness 

of stratifying measures, and the feasibility and burden associated with reporting stratified 

measures. 

IV. Technical Corrections for 42 Part 405 

In the April 15, 2008, final rule “Conditions for Coverage for End-Stage Renal Disease 

Facilities,” (73 FR 20370) we revised the health and safety standards for Medicare-participating 

End-Stage Renal Disease (ESRD) facilities. This rule made the first comprehensive revisions to 
CMS-1614-P 216 

 

the ESRD Conditions for Coverage (CfCs) since they were adopted in 1976. The original ESRD 

CfCs at 42 CFR Part 405 Subpart U were deleted and new conditions were issued at 42 CFR 

Part 494. Subpart U now only addresses certain requirements for ESRD networks. 

As a part of these revisions, we intended to delete most of the terms and definitions set 

out in Part 405 Subpart U, and create new definitions in Part 494. This is discussed in the 2008 

final rule and in the corresponding proposed rule (70 FR 6184), and is laid out in the final rule 

crosswalk (comparing the old CfCs with the new ones) at 73 FR 20451. 

While we intended to delete most of the definitions at Part 405 Subpart U, we 

inadvertently omitted the regulations text that would have made those changes. Subpart U, at 

§405.2102, still has 32 definitions, most of them unnecessary and several of them obsolete. This 

creates confusion for ESRD stakeholders, patients, and suppliers. 

We propose to make a technical correction that deletes the outdated terms and definitions 

at §405.2102. Specifically, we propose to delete these terms and definitions: agreement, 

arrangement, dialysis, end-stage renal disease (ESRD), ESRD facility, renal dialysis center, renal 

dialysis facility, self-dialysis unit, special purpose renal dialysis facility, ESRD service, dialysis 

service, inpatient dialysis, outpatient dialysis, staff-assisted dialysis, self-dialysis, home dialysis, 

self-dialysis and home dialysis training, furnishes directly, furnishes on the premises, medical 

care criteria, medical care norms, medical care standards, medical care evaluation study (MCE), 

qualified personnel, chief executive officer, dietitian, medical record practitioner, nurse 

responsible for nursing service, physician-director, and social worker. We also propose to delete 

the term and definition for “ESRD network organization,” as it is duplicated within § 405.2102 

as “network organization.” We would retain the terms and definitions for “network, ESRD,” and 

“network organization.” These changes are also outlined in Table 32 below.” 
CMS-1614-P 217 

 

TABLE 32: Technical Corrections to §405.2102

Term Proposed Action Other FR Location 

Agreement Delete -- 

Arrangement Delete -- 

Dialysis Delete -- 

End-Stage Renal Disease (ESRD) Delete 406.13(b) 

ESRD facility introductory text Delete -- 

Renal dialysis center Delete -- 

Renal dialysis facility Delete 494.10 

Self-dialysis unit Delete -- 

Special purpose renal dialysis facility Delete 494.120 

ESRD Network organization Delete -- 

ESRD service introductory text Delete -- 

Dialysis service Delete -- 

Inpatient dialysis Delete -- 

Outpatient dialysis Delete -- 

Staff-assisted dialysis Delete -- 

Self-dialysis Delete 494.10 

Home dialysis Delete 494.10 

Self-dialysis and home dialysis training Delete -- 

Furnishes directly Delete 494.10 

Furnishes on the premises Delete 494.180(d) 

Medical care criteria Delete -- 

Medical care norms Delete -- 

Medical care standards Delete -- 

Medical care evaluation study (MCE) Delete -- 

Network, ESRD Retain N/A 

Network organization Retain N/A 

Qualified personnel Delete -- 

Chief executive officer Delete -- 

Dietitian Delete 494.140(c) 

Medical record practitioner Delete -- 

Nurse responsible for nursing service Delete 494.140(b) 

Physician-director Delete 494.140(a) 

Social worker Delete 494.140(d) 

V. Methodology for Adjusting DMEPOS Payment Amounts using Information from 

Competitive Bidding Programs 

A. Background 

1. Payment Basis for Certain DMEPOS 
CMS-1614-P 218 

 

Section 1834(a) of the Act governs payment for durable medical equipment (DME) 

covered under Part B and under Part A for a home health agency and provides for the 

implementation of a fee schedule payment methodology for DME furnished on or after 

January 1, 1989. Sections 1834(a)(2) through (a)(7) of the Act set forth separate payment 

categories of DME and describe how the fee schedule for each of the following categories is 

established: 

● Inexpensive or other routinely purchased items, 

● Items requiring frequent and substantial servicing, 

● Customized items, 

● Oxygen and oxygen equipment, 

● Other covered items (other than DME), and 

● Other items of DME (capped rental items). 

Section 1834(h) of the Act governs payment for prosthetic devices, prosthetics, and 

orthotics (P&O) and sets forth fee schedule payment rules for P&O. Effective for items 

furnished on or after January 1, 2002, payment is also made on a national fee schedule basis for 

parenteral and enteral nutrition (PEN) in accordance with the authority under section 1842(s) of 

the Act. The term “enteral nutrition” will be used throughout this document to describe enteral 

nutrients supplies and equipment covered as prosthetic devices in accordance with section 

1861(s)(8) of the Act and paid for on a fee schedule basis and enteral nutrients under DMEPOS 

Competitive Bidding Program (CBP), as authorized under section 1847(a)(2)(B) of the Act. 

Section 1842(o)(1)(D) of the Act mandates that payment for infusion drugs furnished through a 

covered item of DME on or after January 1, 2004, is equal to 95 percent of the average wholesale 

price for such drug in effect on October 1, 2003. 
CMS-1614-P 219 

 

For DMEPOS items subject to payment under 1834 of the Act (not subject to the CBP), 

the Medicare’s allowed payment amount is equal to the lesser of the actual charge for the item or 

the fee schedule amount for the item. The fee schedule amounts are based on average payments 

made under the previous payment methodology of reasonable charges, which utilized supplier 

charges for furnishing items and services in local areas throughout the nation to establish the 

Medicare allowed payment amounts for the items and services. The reasonable charge data used 

is from a specific period of time that varies slightly by payment class (for example, July 1986 

through June 1987 for inexpensive DME). The fee schedule amounts for most items are updated 

on an annual basis by covered item update factors provided in the statute for DME under section 

1834(a)(14) of the Act, for P&O under section 1834(h)(4)(A) of the Act, and for enteral nutrition 

under section 1842(s)(1)(B) of the Act. 

The rules pertaining to the calculation of reasonable charges are located at 42 CFR Part 

405, Subpart E of our regulations. Under this general methodology, several factors were taken 

into consideration in determining the reasonable charge for an item. Each supplier’s “customary 

charge” for an item, or the 50th percentile of charges for an item over a 12-month period, was 

one factor used in determining the reasonable charge. The “prevailing charge” in a local area, or 

the 75th percentile of suppliers’ customary charges for the item in the locality, was also used in 

determining the reasonable charge. For PEN items and services only, the “lowest charge level 

(LCL)” was also taken into consideration and was based on the 25th percentile of all charges for 

an item. For the purpose of calculating prevailing charges, a “locality” is defined at 42 CFR 

§405.505 and “may be a State (including the District of Columbia, a territory, or a 

Commonwealth), a political or economic subdivision of a state, or a group of states.” The 

regulation further specifies that the locality “should include a cross section of the population with 
CMS-1614-P 220 

 

respect to economic and other characteristics.” For PEN items and services only, the entire 

nation was used as the locality for the purpose of calculating the LCL and prevailing charges. 

Effective for items furnished on or after October 1, 1985, an additional factor, the 

inflation-indexed charge (IIC) as cited at 42 CFR §405.509, was added to the factors taken into 

consideration in determining the reasonable charge for an item. The IIC is equal to the lowest of 

the customary charge, prevailing charge, LCL (if applicable), and IIC from the previous year 

updated by an inflation adjustment factor. To summarize, the reasonable charges for each item 

that were used to calculate the fee schedule amounts are equal to the lower of: 

• the supplier’s actual charge on the claim; 

• the supplier’s customary charge for the item; 

• the prevailing charge in the locality for the item; 

• the LCL in the locality for the item, if applicable; or 

• the IIC. 

 Under the reasonable charge payment methodology, it is assumed that suppliers took all 

of their costs of furnishing various items and services in various localities throughout the nation 

into account in setting the prices they charge for covered items and services. 

We implemented the fee schedule payment methodologies for PENs at 42 CFR Part 414, 

Subparts C, and for DME prosthetic devices, prosthetics, orthotics, and surgical dressings at 42 

CFR Part 414, Subpart D of our regulations. In accordance with section 1834(a)(10) of the Act, 

the Secretary may adjust DMEPOS fee schedule amounts in situations where it is determined 

that the amounts are not inherently reasonable. This “inherent reasonableness” authority for 

adjusting fee schedule payment amounts is governed by paragraphs (8) and (9) of section 
CMS-1614-P 221 

 

1842(b) of the Act and implemented at 42 CFR Part 405, Subpart E of our regulations. Finally, 

in the case of DMEPOS furnished on or after January 1, 2011, under section 1834(a)(1)(F)(ii) of 

the Act, the Secretary may (in beginning January 1, 2016, must) use information on the payment 

determined under the CBP in accordance with section 1847 of the Act to adjust the fee schedule 

payment amounts for DME that are not in a competitive bidding area (CBA), and the inherent 

reasonableness authority does not apply. Adjustment of fee schedule amounts based on CBP 

payment information (and the limitation on using inherent reasonableness) is also authorized 

under section 1834(h)(1)(H)(ii) of the Act for certain orthotics and section 1842(s)(3)(B) of the 

Act for enteral nutrition in non-competitive bid areas. 

2. Fee Schedule Payment Methodologies 

 Section 4062(b) of the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), Public 

Law 100-203, added section 1834(a) of the Act and mandated the implementation of local fee 

schedule amounts in 1989 for DME and P&O based on the average of reasonable charges for 

items and services furnished in carrier service areas throughout the United States. The carriers 

were (now Medicare administrative contractors) responsible for processing claims for Part B 

items and services in accordance with section 1842(a) of the Act. The carrier service areas used 

in establishing the fee schedule amounts could not exceed an entire state. A few states were 

made up of two carrier service areas and the State of New York had three carrier service areas. 

A carrier service area is not to be confused with a locality established for the purpose of 

calculating reasonable charges as described above. For example, although claims for items 

furnished in the State of Texas were processed by a single carrier, for reasonable charge 

calculation purposes, Texas was divided into more than 50 different localities. In 1993, the local 

fee schedule amounts for states with more than one carrier service areas were transitioned to 
CMS-1614-P 222 

 

statewide fee schedule amounts. The reasonable charge data used to calculate the statewide fee 

schedule amounts therefore reflected the average payment made under the supplier charge based 

reasonable charge payment methodology for items and services furnished throughout the state, 

including both rural and urban areas of the state. 

Section 4062(b) of OBRA 87 mandated that local fee schedule amounts for both DME 

and P&O be transitioned to regional fee schedule amounts as part of a multi-year phase in ending 

in 1993. Section 4152(b) of the Omnibus Budget Reconciliation Act of 1990 (OBRA 90), Public 

Law 101-508, eliminated the regional fee schedule transition for DME and amended section 

1834(a) of the Act to mandate that the local (statewide) fee schedule amounts be limited by a 

national ceiling (upper) limit, based on the median of the statewide fee schedule amounts, and a 

national floor (lower limit), based on 85 percent of the median of the statewide fee schedule 

amounts. The fee schedule ceiling and floor limits for DME were phased in from 1991 through 

1993. The conversion to regional fee schedule amounts therefore never took place for DME and 

instead the statewide fee schedule amounts were limited so that they could not vary by more than 

15 percent from the national ceiling to the national floor. The fee schedule amounts for areas 

outside the contiguous United States are not subject to the national ceiling and floor limits. The 

transition to regional fee schedule amounts was retained for P&O, although OBRA 90 changed 

the phase in schedule so that the regional fee schedule amounts were not fully phased in until 

January 1, 1994, rather than January 1, 1993. As explained in more detail below, the regional fee 

schedule methodology allows for regional geographic variation in fee schedule payment amounts 

and a wider range in fees across the nation than the fee schedule methodology used for DME 

which caps the local, statewide fee schedule amounts at the national median. That being said, we 

have not seen any problems associated with access to either P&O or DME in rural areas or any 
CMS-1614-P 223 

 

areas of the country since payments have been made based on these fee schedule methodologies. 

This has been the case even though the average reasonable charges used to compute the 

statewide fee schedule amounts include a comingling of reasonable charge data for items and 

services furnished in both urban and rural areas. In addition, we have not seen any problems 

with access to PEN in rural areas or any areas of the country since payments have been made 

based on national fee schedule amounts. 

3. Regional Fee Schedule Payment Methodology for P&O 

The regional fee schedules for P&O are mandated by section 1834(h)(2)(B) of the Act. 

The regional fee schedule amounts only apply to areas within the contiguous United States. The 

regional fee schedule amounts are calculated based on the weighted average (weighted by total 

Part B claims volume) of statewide fee schedule amounts for states in each of the ten CMS 

Regional Office boundaries identified below. The statewide fee schedule amounts are based on 

average reasonable charges (statewide fees) for items furnished from July 1, 1986 through June 

30, 1987. 

The ten CMS Regional Office boundaries are: 

• Boston (Region One), including the six states of Connecticut, Maine, Massachusetts, 

New Hampshire, Rhode Island and Vermont; 

• New York (Region Two), including the two states of New Jersey and New York; 

• Philadelphia (Region Three), including the five states of Delaware, Maryland, 

Pennsylvania, Virginia, West Virginia and the District of Columbia; 

• Atlanta (Region Four), including the eight states of Alabama, North Carolina, South 

Carolina, Florida, Georgia, Kentucky, Mississippi, and Tennessee; 
CMS-1614-P 224 

 

• Chicago (Region Five), including the six states of Illinois, Indiana, Michigan, 

Minnesota, Ohio and Wisconsin; 

• Dallas (Region Six), including the five states of Arkansas, Louisiana, New Mexico, 

Oklahoma and Texas; 

• Kansas City (Region Seven), including the four states of Iowa, Kansas, Missouri and 

Nebraska; 

• Denver (Region Eight), including the six states of Colorado, Montana, North Dakota, 

South Dakota, Utah and Wyoming; 

• San Francisco (Region Nine), including the three states of Arizona, California and 

Nevada; and 

• Seattle (Region Ten), including the three states of Idaho, Oregon and Washington. 

As an example, the regional fee schedule amounts for Region Nine are based on the 

weighted average of the statewide fees for Arizona, California, and Nevada. Since California 

accounts for the largest volume of Part B claims in the region, the California statewide fees are 

weighted more heavily in determining the regional fee schedule amounts than the statewide fees 

for Arizona or Nevada. Once all of the regional fee schedule amounts are established, the 

regional fee schedule amounts are further limited by a national ceiling equal to 120 percent of the 

average of the regional fee schedule amounts for all the states and a national floor equal to 90 

percent of the average of the regional fee schedule amounts for all the states. 

 The national ceiling and floor limits for DME and P&O set national parameters on how 

much the statewide or regional fee schedule amounts can vary. For DME, the upper payment 

limit or ceiling is based on the national median of the statewide fees, essentially bringing half of 
CMS-1614-P 225 

 

the state fees down to the national median. The lower limit or floor is based on 85 percent of the 

national median and brings those state fees below the floor amount up to the floor amount. In 

contrast, the national ceiling and floor parameters for P&O are based on 120 percent and 90 

percent, respectively, of the average of the various regional fee schedule amounts. Differences 

in reasonable charge based fees in various geographic regions of the country are maintained 

within the parameters of the national ceilings and floors for P&O. 

4. DMEPOS Competitive Bidding Programs Payment Rules 

Section 1847(a) of the Act, as amended by section 302(b)(1) of the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), requires the 

Secretary to establish and implement CBPs in CBAs throughout the United States for contract 

award purposes for the furnishing of certain competitively priced DMEPOS items and services. 

The programs mandated by section 1847(a) of the Act are collectively referred to as the 

“Medicare DMEPOS Competitive Bidding Program.” Section 1847(a)(2) of the Act provides 

that the items and services to which competitive bidding applies are: 

• Off-the-shelf (OTS) orthotics for which payment would otherwise be made under section 

1834(h) of the Act; 

• Enteral nutrients, equipment and supplies described in section 1842(s)(2)(D) of the Act; 

and 

• Certain DME and medical supplies, which are covered items (as defined in section 

1834(a)(13) of the Act) for which payment would otherwise be made under section 

1834(a) of the Act. 

The DME and medical supplies category includes items used in infusion and drugs (other 

than inhalation drugs) and supplies used in conjunction with DME, but excludes class III devices 
CMS-1614-P 226 

 

under the Federal Food, Drug, and Cosmetics Act and Group 3 or higher complex rehabilitative 

power wheelchairs and related accessories when furnished with such wheelchairs. Sections 

1847(a) and (b) of the Act specify certain requirements and conditions for implementation of the 

Medicare DMEPOS CBP. 

 On July 15, 2008, the Medicare Improvements for Patients and Providers Act (MIPPA) 

was enacted. Section 154 of the MIPPA amended section 1847 of the Act to make certain 

limited changes to the Medicare DMEPOS CBP, including a revised timeframe for phasing in 

the programs. 

 On March 23, 2010, the Affordable Care Act was enacted. Section 6410(a) of the 

Affordable Care Act amended section 1847(a)(1) of the Act, mandating the phase in of 21 

additional Metropolitan Statistical Areas (MSAs). 

 Section 1847(a) of the Act requires that the DMEPOS CBP be phased in so that 

competition under the programs occurs in 9 of the largest Metropolitan Statistical Areas (MSAs) 

in 2009, 91 additional large MSAs in 2011, and additional areas after 2011 (or, in the case of 

national mail order for items and services, after 2010). Section 1847(a)(1)(D)(ii) of the Act 

provides discretion to subdivide MSAs and through notice and comment rulemaking we 

subdivided the New York-Northern New Jersey-Long Island, NY-NJ-PA; Los Angeles-Long 

Beach-Santa Ana, CA; and Chicago-Naperville-Joliet, IL-IN-WI MSAs. The final rule was 

published in the Federal Register on November 29, 2010 (75 FR 73454) and divided the New 

York-Northern New Jersey-Long Island, NY-NJ-PA MSA into six CBAs. In addition, the Los 

Angeles-Long Beach-Santa Ana, CA MSA was divided into two CBAs and the ChicagoNaperville-Joliet, IL-IN-WI MSA was divided into four CBAs (75 FR 73460). Altogether this 
CMS-1614-P 227 

 

created a total of 100 CBAs for the competitions occurring in the 91 MSAs in 2011, or a total of 

109 CBAs for the competitions occurring in 100 MSAs in 2009 and 2011. 

 Finally, section 1847(a)(1)(D)(iii) of the Act specifies that competitions occurring before 

2015 for items and services other than national mail order, may not include rural areas or MSAs 

with a population of less than 250,000. 

 In addition to the national mail order program for diabetic supplies, the product 

categories (PCs) that have been phased in thus far in 100 Round 2 CBAs and 9 Round 1 CBAs 

include the following: 

Round 2 CBAs (contract period July 1, 2013, thru June 30, 2016) 

• Oxygen, oxygen equipment, and supplies 

• Standard (Power and Manual) wheelchairs, scooters, and related accessories 

• Enteral nutrients, equipment, and supplies 

• Continuous Positive Airway Pressure (CPAP) devices and Respiratory Assist Devices 

(RADs) and related supplies and accessories 

• Hospital beds and related accessories 

• Walkers and related accessories 

• Negative Pressure Wound Therapy pumps and related supplies and accessories 

• Support surfaces (Group 2 mattresses and overlays) 

Round 1 CBAs (contract period January 1, 2014, thru December 31, 2016) 

• Respiratory Equipment and Related Supplies and Accessories 

o includes oxygen, oxygen equipment, and supplies; CPAP devices and RADs and related 

supplies and accessories; and standard nebulizers 
CMS-1614-P 228 

 

• Standard Mobility Equipment and Related Accessories 

o includes walkers, standard power and manual wheelchairs, scooters, and related 

accessories 

• General Home Equipment and Related Supplies and Accessories 

o includes hospital beds and related accessories, group 1 and 2 support surfaces, 

transcutaneous electrical nerve stimulation (TENS) devices, commode chairs, patient 

lifts, and seat lifts 

• Enteral Nutrients, Equipment and Supplies 

• Negative Pressure Wound Therapy Pumps and Related Supplies and Accessories 

• External Infusion Pumps and Supplies 

 In addition, contracts and SPAs were in effect in the 9 Round 1 CBAs from January 1 2011 thru 

December 31, 2013, for the items listed below which are not included in current Round 1 or 2 

PCs: 

• Complex Rehabilitative Power Wheelchairs and Related Accessories (Group 2) 

• Adjustable Wheelchair Seat Cushions 

5. Adjusting Payment Amounts using Information from the DMEPOS Competitive Bidding 

Program 

Section 1834(a)(1)(F)(ii) of the Act provides authority for using information from the 

DMEPOS CBPs to adjust the DME payment amounts for covered items furnished on or after 
CMS-1614-P 229 

 

January 1, 2011, in areas where competitive bidding is not implemented for the items. Similar 

authority exists at section 1834(h)(1)(H)(ii) of the Act for OTS orthotics, and at section 

1842(s)(3)(B) of the Act for enteral nutrition. Section 1834(a)(1)(F) also requires adjustments to 

the payment amounts for all DME items subject to competitive bidding furnished in areas where 

CBPs have not been implemented on or after January 1, 2016. 

For items furnished on or after January 1, 2016, section 1834(a)(1)(F)(iii) requires us to 

continue to make such adjustments to DME payment amounts where CBPs have not been 

implemented, as additional covered items are phased in or information is updated as contracts are 

recompeted. 

Section 1834(a)(1)(G) of the Act requires that the methodology used to adjust payment 

amounts for DME and OTS orthotics using information from the CBPs be promulgated through 

notice and comment rulemaking, which is the purpose of this proposed rule. Section 

1834(a)(1)(G) of the Act also requires that we consider the “costs of items and services in areas 

in which such provisions [sections 1834(a)(1)(F)(ii) and 1834(h)(1)(H)(ii)] would be applied 

compared to the payment rates for such items and services in competitive acquisition 

[competitive bidding] areas.” We are proposing to apply the same methodology for making 

adjustments to the payment amounts for enteral nutrition as authorized by section 1842(s)(3)(B) 

of the Act. 

6. Diversity of Costs 

As mentioned above, under section 1834(a)(1)(G) of the Act we must consider the costs 

of furnishing items and services in areas where prices will be adjusted compared to the payment 

rates for the items and services furnished in CBAs. We believe that the methodology for using 

the single payment amounts (SPAs) as a basis for adjusting payment rates in other areas needs to 
CMS-1614-P 230 

 

ensure that adjusted payment amounts in an area are adequate to cover the unique costs of 

furnishing the items and services in those areas. 

The SPAs are based on the median of successful bids for furnishing items and services in 

MSAs, which are mainly urban areas, from suppliers with costs and characteristics that may or 

may not be similar to suppliers in other areas. In addition, under the DMEPOS CBP, many low 

population density areas within MSAs were excluded from the CBAs as authorized by statute, 

making the geographic bidding areas smaller and more densely populated than they would have 

been if the initial MSA boundaries had been retained for bidding purposes. 

Regarding the size of suppliers submitting the bids used to generate the SPAs compared 

to the size of suppliers in areas where price adjustments based on the SPAs would occur, it is 

important to note that small suppliers are given special considerations under the CBP and that a 

majority of contracts are offered to small suppliers. Section 1847(b)(6)(D) of the Act requires 

that, in developing procedures relating to bidding and the awarding of contracts, CMS "take 

appropriate steps to ensure that small suppliers of items and services have an opportunity to be 

considered for participation in the program." We have established a number of provisions to 

ensure that small suppliers are given an opportunity to participate in the DMEPOS CBP. For 

example, under 42 CFR §414.414(g)(1)(i), we have established a 30 percent target for small 

supplier participation; thereby, ensuring efforts are made to award at least 30 percent of contracts 

to small suppliers. Also, CMS worked in coordination with the Small Business Administration 

(SBA) to develop an appropriate definition of a "small supplier" for this program. Under 42 

CFR §414.402, a small supplier is one that generates gross revenues of $3.5 million or less in 

annual receipts, including Medicare and non-Medicare revenue. Under 42 CFR §414.418, small 

suppliers may join together in "networks" in order to submit bids that meet the various program 
CMS-1614-P 231 

 

requirements. For contracts taking effect on July 1, 2013 in Round 2, in 100 CBAs throughout 

the country, 63 percent of all contract suppliers are small suppliers, with only 10 percent of 

contract suppliers being new to the areas. In addition, for contracts taking effect on January 1, 

2014 in the Round 1 Recompete, in the 9 initial CBAs, 58 percent of all contract suppliers are 

small suppliers, with only 3 percent of contract suppliers being new to the areas. Therefore, the 

majority of bids used in establishing the SPAs come from small suppliers with a history of 

furnishing the items in the CBAs. 

Prior to awarding contracts, each supplier is carefully screened to ensure that it is 

accredited under applicable Medicare quality standards and meets rigid financial standards, 

specific Medicare supplier enrollment requirements, and applicable state licensing standards. 

Each bid is screened to ensure that it is a bona fide bid, and those that fail are excluded from the 

competition. Approximately 94 percent of bids screened as part of the Round 2 and Round 1 

Recompete competitions were determined to be bona fide. The invoices and purchase orders 

submitted by bidding suppliers to support their bids reflected prices already paid by the supplier 

(that is, prior to becoming a contract supplier) and for the most part did not reflect large volume 

purchasing discounts. Once non-bona fide bids are excluded, suppliers are ranked in order based 

on bid amounts, and the median of bids from the number of suppliers determined to be necessary 

to meet projected demand are used to establish the SPAs. The projected demand for items and 

services in a CBA is intentionally overstated for the purpose of ensuring that contracts are 

awarded to more than a sufficient number of suppliers to serve the beneficiaries in the area. The 

establishment of the demand level is explained in detail in the competitive bidding final rule 

(Medicare Program; Competitive Acquisition for Certain DMEPOS and Other issue) published 

April 10, 2007 (72 FR 18039). Thus, the SPAs are higher than they would otherwise be if 
CMS-1614-P 232 

 

demand was not overstated because the high demand generally results in an increase in the 

number of contract suppliers which in most cases increases the median bid amount. CMS also 

conducts its review of supplier capacity and expansion plans during the bid evaluation process. 

If a supplier is new to an area, new to a PC, or submits estimated capacity that represents 

substantial growth over current levels, CMS may conduct a more detailed evaluation of that 

supplier's expansion plan to verify the supplier's ability to provide items and services in the CBA 

on day one of the contract period. If a bidder's financial data and expansion plan do not support 

the supplier's estimated capacity, CMS will adjust the capacity to the supplier's historic level, 

which would be zero for a new supplier. CMS uses the estimated capacity information and the 

bid amounts to determine the array of winning suppliers in a CBA. 

Under Round 2 and the Round 1 Recompete competitions, 92 percent of suppliers 

accepted contract offers at the SPAs set through the competitions. In addition, CMS reviewed all 

contract suppliers based on financial standards when evaluating their bids. This process includes 

review of tax records, credit reports, and other financial data, which leads to the calculation of a 

score, similar to processes used by lenders when evaluating the viability of a company. All 

contract suppliers met the financial standards established for the program. 

From January 1, 2011, when the initial Round 1 contracts and SPAs took effect, to 

present, we have seen no indication that beneficiaries have been denied access to necessary items 

and services subject to the programs in CBAs as a result of the SPAs. In addition, we have been 

closely monitoring inquiries as well as real time claims and health outcomes data and have seen 

no negative impacts on access to items and services under the program. Therefore, the SPAs 

appear to be sufficient to cover the costs of the suppliers furnishing items in the 109 CBAs. 

 In previous legislation, which we will discuss below, the Congress mandated that the 
CMS-1614-P 233 

 

costs of furnishing DME in different geographic regions of the country be studied. Section 135 

of the Social Security Act Amendments of 1994, Public Law 103-432, required an examination 

of the geographic variations in DME supplier costs in order to determine whether the fee 

schedules are reasonably adjusted to account for any geographic differences. Jing Xing Health 

and Safety Resources, Inc. provided assistance to the Health Care Financing Administration, 

now CMS, in conducting this study. The project entitled "Durable Medical Equipment Supplier 

Product and Service Cost Study", was completed under Contract Number HCFA 500-95-0044 

and submitted to the agency in June 1996. As part of the study, a Federal Advisory Panel was 

convened, a formal meeting with representatives of the DME industry was held, and a literature 

review was conducted. The general consensus among industry representatives and government 

agencies that participated in the study was that there is no conclusive evidence that urban and 

rural costs differed significantly or that the costs of furnishing DME items and services were 

higher in urban areas versus rural areas or vice versa. 

 The 109 CBAs where competitive bidding has been phased in include a wide range of 

different size urban areas with surrounding counties, and suppliers take the costs of furnishing 

items and services in these different areas into account when submitting bids under the programs. 

They include one CBA (Honolulu, HI) that is not within the contiguous Unites States and CBAs 

that range in population size from approximately 300 thousand to 10 million (See Table 33). 

There are 7 CBAs with a population of less than 500,000, 42 CBAs with a population of more 

than 500,000, but less than 1 million, 27 CBAs with a population of more than 1 million, but less 

than 2 million, 19 CBAs with a population of 2 to 4 million, and 14 CBAs with a population of 

over 4 million. 

 
CMS-1614-P 234 

 

TABLE 33: CBA POPULATION SIZE 

CBA Population 

Los Angeles County CBA 9,453,357 

Nassau-Brooklyn-Queens-Richmond County Metro CBA 6,630,278 

Dallas-Fort Worth-Arlington, TX 6,554,334 

Central-Chicago Metro CBA 6,179,455 

Houston-Sugar Land-Baytown, TX 6,152,650 

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 5,995,992 

Washington-Arlington-Alexandria, DC-VA-MD-WV 5,662,358 

Miami-Fort Lauderdale-Pompano Beach, FL 5,604,979 

Atlanta-Sandy Springs-Marietta, GA 5,293,136 

Boston-Cambridge-Quincy, MA-NH 4,595,431 

San Francisco-Oakland-Fremont, CA 4,407,286 

Detroit-Warren-Livonia, MI 4,256,579 

Phoenix-Mesa-Glendale, AZ 4,251,146 

Riverside-San Bernardino-Ontario, CA 4,157,332 

Seattle-Tacoma-Bellevue, WA 3,522,509 

Northern NJ Metro CBA 3,473,815 

Minneapolis-St. Paul-Bloomington, MN-WI 3,326,864 

San Diego-Carlsbad-San Marcos, CA 3,118,844 

Orange County CBA 3,067,829 

Southern NY Metro CBA 3,015,460 

Bronx-Manhattan NY CBA 2,983,009 

St. Louis, MO-IL 2,844,160 

Tampa-St. Petersburg-Clearwater, FL 2,810,479 

Baltimore-Towson, MD 2,751,529 

Denver-Aurora-Broomfield, CO 2,568,221 

Pittsburgh, PA 2,361,317 

Portland-Vancouver-Hillsboro, OR-WA 2,259,089 

San Antonio-New Braunfels, TX 2,223,779 

Orlando-Kissimmee-Sanford, FL 2,176,846 

Sacramento--Arden-Arcade--Roseville, CA 2,174,556 

Cincinnati-Middletown, OH-KY-IN 2,121,660 

Cleveland-Elyria-Mentor, OH 2,074,790 

Kansas City, MO-KS 2,050,306 

Las Vegas-Paradise, NV 1,967,341 

San Jose-Sunnyvale-Santa Clara, CA 1,898,173 

Columbus, OH 1,844,571 

Charlotte-Gastonia-Rock Hill, NC-SC 1,832,391 

Austin-Round Rock-San Marcos, TX 1,813,495 
CMS-1614-P 235 

 

CBA Population 

Indianapolis-Carmel, IN 1,764,136 

Virginia Beach-Norfolk-Newport News, VA-NC 1,673,547 

Nashville-Davidson--Murfreesboro--Franklin, TN 1,607,708 

Providence-New Bedford-Fall River, RI-MA 1,603,029 

Milwaukee-Waukesha-West Allis, WI 1,570,548 

Suffolk County CBA 1,488,017 

South-West-Chicago-Metro CBA 1,464,818 

Jacksonville, FL 1,371,407 

North East NY CBA Metro 1,363,882 

Memphis, TN-MS-AR 1,309,806 

Louisville/Jefferson County, KY-IN 1,277,282 

Oklahoma City, OK 1,276,642 

Richmond, VA 1,262,088 

Hartford-West Hartford-East Hartford, CT 1,214,313 

Raleigh-Cary, NC 1,190,534 

Northern-Chicago Metro CBA 1,187,661 

New Orleans-Metairie-Kenner, LA 1,182,382 

Salt Lake City, UT 1,158,617 

Buffalo-Niagara Falls, NY 1,133,325 

Birmingham-Hoover, AL 1,121,219 

Rochester, NY 1,062,561 

Tucson, AZ 1,004,374 

Honolulu, HI 962,112 

Fresno, CA 949,093 

Tulsa, OK 945,366 

Bridgeport-Stamford-Norwalk, CT 922,063 

Albuquerque, NM 896,202 

Omaha-Council Bluffs, NE-IA 883,233 

Albany-Schenectady-Troy, NY 866,077 

New Haven-Milford, CT 862,551 

Dayton, OH 839,984 

Oxnard-Thousand Oaks-Ventura, CA 830,680 

Allentown-Bethlehem-Easton, PA-NJ 826,740 

El Paso, TX 826,163 

Baton Rouge, LA 811,243 

Bakersfield-Delano, CA 810,348 

Worcester, MA 800,404 

McAllen-Edinburg-Mission, TX 799,023 

Grand Rapids-Wyoming, MI 783,733 

Columbia, SC 767,793 
CMS-1614-P 236 

 

CBA Population 

Greensboro-High Point, NC 746,685 

Little Rock-North Little Rock-Conway, AR 710,371 

North Port-Bradenton-Sarasota, FL 708,687 

Indiana-Chicago Metro CBA 706,110 

Knoxville, TN 705,446 

Springfield, MA 698,926 

Akron, OH 687,788 

Stockton, CA 685,542 

Greenville-Mauldin-Easley, SC 683,793 

Charleston-North Charleston-Summerville, SC 682,539 

Syracuse, NY 671,076 

Poughkeepsie-Newburgh-Middletown, NY 665,524 

Colorado Springs, CO 665,484 

Toledo, OH 649,956 

Wichita, KS 634,116 

Boise City-Nampa, ID 634,037 

Cape Coral-Fort Myers, FL 631,611 

Lakeland-Winter Haven, FL 602,671 

Augusta-Richmond County, GA-SC 570,656 

Scranton--Wilkes-Barre, PA 556,282 

Youngstown-Warren-Boardman, OH-PA 553,382 

Palm Bay-Melbourne-Titusville, FL 550,416 

Jackson, MS 544,285 

Chattanooga, TN-GA 533,309 

Deltona-Daytona Beach-Ormond Beach, FL 501,906 

Visalia-Porterville, CA 439,968 

Flint, MI 435,877 

Asheville, NC 434,665 

Beaumont-Port Arthur, TX 397,872 

Ocala, FL 323,229 

Huntington-Ashland, WV-KY-OH 289,474 

Source: U.S. Census Bureau, Population Division, 2012 Population Estimates 

Population estimates for MSAs and counties were adjusted to reflect CBA boundaries 

7. Advanced Notice of Proposed Rulemaking 

CMS issued an Advance Notice of Proposed Rulemaking (ANPRM): Medicare Program; 
CMS-1614-P 237 

 

Methodology for Adjusting Payment Amounts for Certain Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies (DMEPOS) using Information From Competitive Bidding 

Programs. The ANPRM was published in the Federal Register on February 26, 2014 (79 FR 

10754) and solicited comments on several aspects to consider in developing the proposed 

methodology to adjust DMEPOS fee schedule amounts or other payment amounts in noncompetitive areas based on DMEPOS competitive bidding payment information. Specific 

questions related to this topic were presented in the notice, including: 

• Do the costs of furnishing various DMEPOS items and services vary based on the 

geographic area in which they are furnished? 

• Do the costs of furnishing various DMEPOS items and services vary based on the size of 

the market served in terms of population and/or distance covered or other logistical or 

demographic reasons? 

• Should an interim or different methodology be used to adjust payment amounts for items 

that have not yet been included in all CBPs (for example, items such as TENS devices 

that have only been phased into the nine Round 1 areas thus far)? 

 The comment period for the ANPRM ended on March 28, 2014, and CMS received 

approximately 185 comments from suppliers, manufacturers, professional, state and national 

trade associations, physicians, physical therapists, beneficiaries and their caregivers, and one 

state government office. 

Commenters generally agreed that costs do vary by geographic region and that costs in 

rural and non-contiguous areas are higher than costs in urban areas. However, few commenters 

offered specific proposals or suggestions for addressing these costs differences and the 

suggestions that were provided were vague (for example, use the 75th percentile of SPAs rather 
CMS-1614-P 238 

 

than the national median SPA). Several commenters stated that the costs of furnishing DMEPOS 

items and services in different regions of the country do vary. One commenter representing 

many suppliers said that there exists no reliable cost data. Another commenter representing 

many manufacturers and suppliers listed several key variables or factors that influence the cost of 

furnishing items and services in different areas that should be considered, but the commenter did 

not provide information on how valid and reliable information related to these factors could be 

obtained. This commenter stated that information of all bids submitted under the programs 

should also be considered and not just the bids of winning suppliers. Some commenters 

expressed concern that the SPAs assume a significant increase in volume to offset lower payment 

amounts. Some commenters suggested that the price adjustments be phased in rather than 

making full, one-time adjustments. 

B. Proposed Provisions 

We propose establishing three methodologies for adjusting DMEPOS fee schedule 

amounts in areas where CBPs have not been established for these items and services based on 

SPAs established in accordance with the payment rules at §414.408. Use of SPAs that may be 

established in accordance with the special payment rules proposed in section V to adjust 

DMEPOS fee schedule amounts in areas where CBPs have not been established for these items 

and services would be addressed in future notice and comment rulemaking. One proposed 

methodology is described in subsection 1 below and would utilize regional adjustments limited 

by national parameters for items bid in more than 10 CBAs throughout the country. A second 

proposed methodology is described in subsection 2 below and would be used for lower volume 

items or other items that were bid in no more than 10 CBAs for various reasons. A third 

proposed methodology is described in subsection 5 and would be used for mail order items 
CMS-1614-P 239 

 

furnished in the Northern Mariana Islands. We are also proposing rules that would apply to all 

of these proposed methodologies. 

1. Proposed Regional Adjustments Limited by National Parameters 

CBPs are currently in place in 100 of the largest MSAs in the country for items and 

services that make up over 80 percent of the total allowed charges for items subject to the 

DMEPOS CBP. SPAs are currently used in 109 CBAs that include areas in every state 

throughout the country except for Alaska, Maine, Montana, North Dakota, South Dakota, 

Vermont, and Wyoming. The number of CBAs, as listed in Table 33 that are fully or partially 

located within a given state range from one to twelve. The Honolulu CBA was phased in under 

Round 2 of the program. Suppliers submitting bids for furnishing items and services in these 

areas have received extensive education that they should factor all costs of furnishing items and 

services in an area as well as overhead and profit into their bids. 

For items and services that are subject to competitive bidding and have been included in 

more than 10 CBAs throughout the country, we propose to adjust the fee schedule payment 

amounts for these items and services using a methodology that is modeled closely after the 

regional fee schedule payment methodology in effect for P&O to allow for variations in payment 

based on bids for furnishing items and services in different parts of the country. Under the 

proposed methodology, adjusted fee schedule amounts for areas within the contiguous United 

States would be determined based on regional SPAs or RSPAs limited by a national floor and 

ceiling. The RSPA would be established using the average of the SPAs for an item from all 

CBAs that are fully or partially located in the region. The adjusted payment amount for the item 

would be equal to its RSPA but not less than 90 percent and not more than 110 percent of the 
CMS-1614-P 240 

 

national average, which is the average of the RSPAs weighted by the number of states in the 

region. 

We believe modeling the proposed methodology on the regional fee schedule payment 

methodology for P&O is appropriate because the regional fee schedule payment methodology for 

P&O allows for variations in Medicare fee schedule amounts based on supplier charges for 

furnishing items and services in different regions of the country. The regional fee schedule 

payment methodology for P&O adjusts the Medicare allowed payments for entire regions of the 

country, including low population density or rural areas, based primarily on supplier information 

for furnishing items and services in urban areas. The regional fee schedule payment 

methodology for P&O has been fully phased in since 1994 in the contiguous United States and 

has not resulted in any barriers to access since then in any specific region of the country in which 

it has been applied. The DME and P&O fee schedule amounts are based in a part on statewide 

average reasonable charges calculated using supplier charges for furnishing items and services in 

localities throughout each state. Supplier charges for furnishing items in rural areas of the state 

are combined with charges for furnishing items in urban areas of the state, which represents the 

bulk of the charges since the vast majority of beneficiaries in each state reside in urban areas 

rather than rural areas. Although the fee schedule payments are based heavily on charges for 

furnishing items and services in urban areas, this has not affected access to items and services in 

rural areas that are paid based on these fee schedule amounts. 

We considered modeling the proposed methodology on the fee schedule payment 

methodology for DME which establishes an upper limit on all fee schedule amounts based on the 

median of the state fee schedule amounts; however, this methodology does not allow for regional 

variations in fee schedule amounts, allows for 0 percent variations in state fee schedule amounts 
CMS-1614-P 241 

 

above the national median amount, and only allows for up to 15 percent variation in state fee 

schedule amounts below the national median amount. The statewide average reasonable charges 

for DME are updated by an annual covered item update factor and are then limited by a national 

ceiling and floor based on the median of the statewide amounts and 85 percent of the median of 

the statewide amounts. The DME fee schedule methodology allows for no variation in payment 

whatsoever above the national median statewide amount. The maximum variation in fee 

schedule amounts that is allowed is 15 percent below the national median statewide amount. By 

contrast, the regional fee schedule methodology for P&O allows for regional variation in fee 

schedule payment amounts by as much as 10 percent below the national average amount and 20 

percent above the national average amount. Similarly, the fee schedules for enteral nutrition are 

based on national average reasonable charges, and therefore, do not allow for any regional 

variation in fee schedule amounts. We believe that the model whereby regional fee schedule 

amounts for P&O are based on supplier charges for furnishing items and services within each 

region should be adopted when using SPAs to adjust fee schedule payment amounts in a way that 

reflects bidding in different regions of the country. The regional adjusted amounts are based on 

supplier bids for furnishing items and services within each region, as explained below. 

a. Regional Payment Adjustments 

Rather than adjusting state, regional, or national fee schedule amounts or infusion drug 

payment amounts based on all bids for an item in all CBAs across the country or based on all 

bids for an item in all CBAs within each state, we propose to adjust the payment amounts based 

on the average of bids for an item in CBAs that are fully or partially located in different regions 

of the country. In the first step of the proposed methodology we propose to calculate RSPAs or 

the average of the SPAs for an item and service in different regions of the country. In keeping 
CMS-1614-P 242 

 

with the example established by the P&O regional fee schedule payment methodology, this 

would allow variation in payment amounts for different regions of the country. For the purpose 

of establishing the boundaries for the regions, we propose using 8 regions developed for 

economic analysis purposes by the Bureau of Economic Analysis (BEA) within the Department 

of Commerce. These regions are proposed based on research and analysis conducted by the 

BEA indicating that the states in each region share economic ties. Further information can be 

obtained at https://www.bea.gov/regional/definitions/nextpage.cfm?key=Regions

The information provided at this link states that: 

BEA Regions are a set of Geographic Areas that are aggregations of the states. The 

following eight regions are defined: Far West, Great Lakes, Mideast, New England, 

Plains, Rocky Mountain, Southeast, and Southwest. The regional classifications, which 

were developed in the mid-1950s, are based on the homogeneity of the states in terms of 

economic characteristics, such as the industrial composition of the labor force, and in 

terms of demographic, social, and cultural characteristics. For a brief description of the 

regional classification of states used by BEA, see U.S. Department of Commerce, Census 

Bureau, Geographic Areas Reference Manual, Washington, DC, U.S. Government 

Printing Office, November 1994, pp. 6-18;6-19. 

 Therefore, we propose to revise the definition of region in §414.202 to mean a region 

developed for economic analysis purposes by the Bureau of Economic Analysis (BEA) within 

the Department of Commerce for the purpose of calculating regional single payment amounts 

(RSPAs); the definition of region for the purposes of the P&O regional fee schedule would also 

continue to apply for those items and services not adjusted based on prices in competitively bid 

areas. According to the BEA, the regional classifications are based on the homogeneity of the 
CMS-1614-P 243 

 

states in terms of economic characteristics, such as the industrial composition of the labor force, 

and in terms of demographic, social, and cultural characteristics. The contiguous areas of the 

United States that fall under the 8 BEA regions under our proposal are listed in Table 34 below. 

Further information can be obtained at http://www.bea.gov/

TABLE 34: Bureau of Economic Analysis Regions 

Region Name States/Areas (count) 

1 New England Connecticut, Maine, Massachusetts, New 

Hampshire, Rhode Island, and Vermont (6) 

2 Mideast Delaware, District of Columbia, Maryland, New 

Jersey, New York, and Pennsylvania (6) 

3 Great Lakes Illinois, Indiana, Michigan, Ohio, and Wisconsin 

(5) 

4 Plains Iowa, Kansas, Minnesota, Missouri, Nebraska, 

North Dakota, and South Dakota (7) 

5 Southeast 

Alabama, Arkansas, Florida, Georgia, Kentucky, 

Louisiana, Mississippi, North Carolina, South 

Carolina, Tennessee, Virginia, and West Virginia 

(12) 

6 Southwest Arizona, New Mexico, Oklahoma, and Texas (4) 

7 Rocky Mountain Colorado, Idaho, Montana, Utah, and Wyoming 

(5) 

8 Far West California, Nevada, Oregon, and Washington (4) 

 We are soliciting public comments on whether different regional boundaries (e.g. CMS 

regions or Census Divisions) should be considered that would better reflect potential regional 

differences in the costs of furnishing items and services subject to the DMEPOS CBP. In 

addition to the CMS regions listed in section A.3 above, other established regional boundaries 

include those defined by the United States Census Bureau in the Department of Commerce for 

the purpose of reporting and analyzing census data. The Census Bureau uses 4 regions that are 

further divided into 9 divisions. The Census divisions are as follows: 

• New England (Division 1); including the 6 states Connecticut, Maine, 
CMS-1614-P 244 

 

Massachusetts, New Hampshire, Rhode Island and Vermont. 

• Middle Atlantic (Division 2); including the 3 states New Jersey, New York and 

Pennsylvania. 

• East North Central (Division 3); including the 5 states Illinois, Indiana, Michigan, 

Ohio and Wisconsin. 

• West North Central (Division 4); including the 7 states Iowa, Kansas, Minnesota, 

Missouri, Nebraska, North Dakota and South Dakota. 

• South Atlantic (Division 5); including the 9 states Delaware, District of Columbia, 

Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West 

Virginia. 

• East South Central (Division 6); including the 4 states Alabama, Kentucky, 

Mississippi and Tennessee. 

• West South Central (Division 7); including the 4 states Arkansas, Louisiana, 

Oklahoma, and Texas. 

• Mountain (Division 8); including the 8 states Arizona, Colorado, Idaho, Montana, 

Nevada, New Mexico, Utah and Wyoming. 

• Pacific (Division 9); including the 5 states Alaska, California, Hawaii, Oregon and 

Washington. 

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

regions, and census divisions. 
CMS-1614-P 245 

 

TABLE 35: States and Number of Current CBAs per CMS Region, BEA Region, and 

Census Division 

10 CMS Regions 9 Census Divisions 8 BEA Regions 

Region States CBAs Division States CBAs Region States CBAs 

Boston CT,ME,MA, 

NH,RI,VT 7 New England

CT,ME,MA, 

NH,RI,VT 7 New England

CT,ME,MA, 

NH,RI,VT 7 

New 

York NJ,NY 13 Middle Atlantic NJ,NY,PA 15 Mideast DE,DC,MD, NJ,NY,PA 17 

Phila. DE,DC,MD, 

PA,VA,WV 9 

Atlanta 

AL,FL,GA, 

KY,MS,NC, 

SC,TN 

28 South 

Atlantic

DE,DC,FL, 

GA,MD,NC, 

SC,VA,WV

30 Southeast

AL,AR,FL, 

GA,KY,LA, 

MS,NC,SC, 

TN,VA,WV 

34 

 

East 

South 

Central

AL,KY,MS, 

TN 7 

Chicago IL,IN,MI, 

MN,OH,WI 19 

East 

North 

Central

IN,IL,MI, 

OH,WI 19 Great Lakes 

IL,IN,MI, 

OH,WI 

19 

Dallas AR,LA,NM, 

OK,TX 14 

West 

South 

Central

AR,LA,OK, 

TX 13 SouthwestAZ,NM,OK, TX 11 

Kansas 

City 

IA,KS,MO, 

NE 4 

West 

North 

Central

IA,KS,MN, 

MO,NE,ND, 

SD 

5 Plains 

IA,KS,MN, 

MO,NE,ND, 

SD 

5 

Denver CO,MT,ND, 

SD,UT,WY 3 Mountain

AZ,CO,ID, 

NM,MT,UT, 

NV,WY 

8 Rocky 

Mountain

CO,ID,MT, 

UT,WY 4 

San 

Fran. AZ,CA,NV 16 Pacific CA,OR,WA 15 Far West CA,NV,OR, WA 16 

Seattle ID,OR,WA 3 

The regional fee schedule amounts for P&O are based on the average of the statewide 

fees for P&O, weighted by total Part B claims for paid claims with dates of service from July 1, 

1991, thru June 30, 1992, which results in fees for states with a greater volume of Part B claims 

having more influence on the regional fee schedule amounts than states with a smaller volume of 

Part B claims. We believe this aspect of the regional fee schedule payment methodology for 
CMS-1614-P 246 

 

P&O tends to favor more heavily populated states. The statewide fees for larger, more urban 

states where the most Medicare claims are processed, for example, Massachusetts for Region 1, 

play a larger role in determining the regional price than the statewide fees for smaller, more rural 

states in the region, for example, Vermont. Table 36 below shows the relative weighs applied to 

the statewide fees used in calculating the regional P&O fees for the CMS Boston Region or 

Region 1. 

TABLE 36: P&O Regional Fee Weights – CMS Region 1 (Boston) (Weighted by Total Paid 

Claims for Dates of Service from July 1, 1991, thru June 30, 1992) 

State Total Part B Claims Percent of Total for Region 

MA 11,710,121 48% 

CT 6,288,638 26% 

RI 2,251,892 9% 

ME 2,012,385 8% 

NH 1,571,936 6% 

VT 759,242 3% 

Region 24,594,214 

 As can be seen in this table, the regional P&O fees for the Boston Region are weighted 

heavily in favor of the statewide fees and average reasonable charges from 1986/87 for the more 

heavily populated urban states of Massachusetts and Connecticut with a greater utilization of 

Part B items and services, whereas the fees for more rural States like Vermont and Maine have a 

very minor impact in determining the regional fees. In contrast, we are proposing that the 

RSPAs be calculated based on a simple average of the SPAs for CBAs in each region, without 
CMS-1614-P 247 

 

weighting in favor of larger, more heavily populated CBAs. Using the New England BEA 

Region that is comprised of the same 6 states that make up the CMS Boston Region as an 

example, the proposed RSPA for this region would be based on the average of the SPAs for the 

following 7 CBAs, with estimated 2012 population in parentheses: 

• Boston-Cambridge-Quincy, MA-NH (4,640,802) 

• Providence-New Bedford-Fall River, RI-MA (1,601,374) 

• Hartford-West Hartford-East Hartford, CT (1,214,400) 

• Bridgeport-Stamford-Norwalk, CT (933,835) 

• Worcester, MA (923,762) 

• New Haven-Milford, CT (862,813) 

• Springfield, MA (625,718) 

 Therefore, rather than weighting the average of the SPAs in favor of more heavily 

populated CBAs, we propose that the RSPA be based on the simple average of the SPAs for the 

CBAs in the region, with the SPA for the much smaller Springfield, MA CBA and the SPA for 

the much larger Boston-Cambridge-Quincy, MA-NH Springfield, MA CBA contributing equally 

toward calculation of the RSPA. We believe this approach would result in adjustments that 

factor in the regional costs associated with furnishing items and services in the New England 

region of the country, while not giving undue weight to the costs of furnishing items and services 

in larger markets. 

b. National Parameters 

As explained above, the regional fee schedule amounts for P&O are limited by a national 

ceiling equal to 120 percent of the average of the regional fee schedule amounts for all the states 

and a national floor equal to 90 percent of the average of the regional fee schedule amounts for 
CMS-1614-P 248 

 

all the states. This limits the range in the regional fee schedule amounts from highest to lowest 

to no more than 30 percent, 20 percent above the national average and 10 percent below the 

national average. By contrast, the fee schedule payment methodology for DME only allows for a 

variation in statewide fees of 15 percent below the median of statewide fees for all the states. 

The national limits to the fee schedule amounts for P&O and DME have not resulted in a barrier 

to access to items and services in any part of the country. We believe this reflects the fact that 

the costs of furnishing DMEPOS items and services do not vary significantly from one part of 

the country to another and that national limits on regional prices is warranted. We therefore 

propose to limit the variation in the RSPAs using a national ceiling and floor in order to prevent 

unnecessarily high or low regional amounts that vary significantly from the national average 

prices for the items and services. The national ceiling and floor limits would be based on 110 

percent and 90 percent, respectively, of the average of the RSPAs applicable to each of the 48 

contiguous states and the District of Columbia (that is, the average of RSPAs is weighted by the 

number of contiguous states including the District of Columbia per region). We propose that any 

RSPA above the national ceiling would be brought down to the ceiling and any RSPA below the 

national floor would be brought up to the floor. We propose that the national ceiling would 

exceed the average of the RSPAs by the same percentage that the national floor would be under 

the average of the RSPAs. This allows for a maximum variation of 20 percent from the lowest 

RSPA to the highest RSPA. We believe that a variation in payment amounts both above and 

below the national average price should be allowed, and we believe that allowing for the same 

degree of variation (10 percent) above and below the national average price is more equitable 

and less arbitrary than allowing a higher degree of variation (20 percent) above the national 

average price than below (10 percent), as in the case of the national ceiling and floor for the 
CMS-1614-P 249 

 

P&O fee schedule, or allowing for only 15 percent variation below the national average price, as 

in the case of the national ceiling and floor for the DME fee schedule. 

c. Rural and Frontier State Adjustments 

 Under the DMEPOS CBP, the statute prohibits competitions before 2015 in new CBAs 

that are rural areas or MSAs with a population of less than 250,000. Even if competitions were 

to begin in these areas in 2015, it is very unlikely that the SPAs from these areas would be 

computed and finalized by January 1, 2016. Therefore, we propose that the proposed RSPAs 

initially be based solely on information from existing programs implemented in 100 MSAs, 

which are generally comprised of more densely populated, urban areas than areas outside MSAs. 

We therefore believe that the initial RSPAs would not directly account for unique costs that may 

be associated with furnishing DMEPOS in states that have few MSAs and are predominantly 

rural or cover large geographic areas and are sparsely populated. However, in keeping with the 

discussion above, we do not believe that the cost of furnishing DMEPOS in these areas should 

deviate significantly from the national average price established based on supplier bids for 

furnishing items and services in different areas throughout the country. 

 As explained above, the DMEPOS fee schedule amounts are based primarily on supplier 

charges for furnishing items and services in urban areas and this has not resulted in problems 

associated with access to these items and services in rural areas or large, sparsely populated 

areas. Nonetheless, for the purpose of ensuring access to necessary items and services in states 

that are more rural or sparsely populated than others, we propose that the adjusted fee schedule 

amounts for states that are more rural than urban and defined as “rural states” or states where a 

majority of the counties are sparsely populated and defined as “frontier states” would be no 

lower than the national ceiling amount discussed in section b above. 
CMS-1614-P 250 

 

 We propose in §414.202 that a rural state be defined as a state where more than 50 

percent of the population lives in rural areas within the state as determined through census data, 

since a majority of the general population of the state lives in rural areas, it is likely that a 

majority of DMEPOS items and services are furnished in rural settings in the state. This is in 

contrast to other states where the majority of the general population of the state lives in urban 

areas, making it more likely that a majority of DMEPOS items and services are furnished in 

urban settings or in MSAs. We believe that for states where a majority of the general population 

lives in rural areas, adjustments to the fee schedule amounts should be based on the national 

ceiling amount if the RSPA is lower than the national ceiling amount. This higher level of 

payment would provide more assurance that access to items and services in states within a region 

that are more rural than urban is preserved in the event that costs of furnishing DMEPOS items 

and services in rural areas is higher than the costs of furnishing DMEPOS items and services in 

urban areas. 

 We propose in §414.202 that a frontier state, would be defined as a state where at least 

50 percent of counties in the state have a population density of 6 people or less per square mile. 

In such states, the majority of counties where DMEPOS items and services may be needed are 

very sparsely populated and suppliers may therefore have to drive considerably longer distances 

in furnishing these items and services as opposed to other states where the beneficiaries live 

closer to one another. The designation of states as frontier states or frontier areas is currently 

used under Medicare Part A to make adjustments to the wage index for hospitals in these remote 

areas in order to ensure access to services in these areas. The definition of frontier state that is 

proposed above for the purpose of implementing section 1834(a)(1)(F) and (G) of the Act is 

consistent with the current definition in section 1886(d)(3)(E)(iii)(II) and (III) of the Act and 42 
CMS-1614-P 251 

 

CFR 412.64(m) of the regulations related to implementation of the hospital wage index 

adjustments and prospective payment system for hospitals under Part A. We believe that states 

designated as frontier states have a significant amount of area that is sparsely populated and are 

more likely to be geographically removed from (that is, a considerable driving distance from) 

areas where population is more concentrated. However, we solicit comments on alternative 

definitions of frontier states. 

 Based on the 2010 Census data, states designated as rural would include Vermont, Maine, 

West Virginia, and Mississippi. Other than one CBA that is fully located in Mississippi, one 

CBA that is partially located in Mississippi, and two CBAs that are partially located in West 

Virginia, the RSPAs would not include SPAs that reflect the costs of furnishing items and 

services in these states based on where the CBAs are currently located. Current frontier states 

include North Dakota, South Dakota, Montana, and Wyoming, and the RSPAs would not include 

SPAs that reflect the costs of furnishing items and services in any of these states based on where 

the CBAs are currently located. We propose that the designation of rural and frontier states 

could change as the U.S. Census information changes. We propose that when a state that is not 

designated as a rural state or frontier becomes a rural state or frontier state based on new, 

updated information from the U.S. Census Bureau, that adjustments to the fee schedule amounts 

in accordance with the proposed provision of this section would take effect as soon as such 

changes can be implemented. Likewise, we propose that at any time a state that is designated as 

a rural state or frontier no longer meets the proposed definition in this section for rural state or 

frontier state based on new, updated information from the U.S. Census Bureau, that adjustments 

to the fee schedule amounts in accordance with the proposed provision of this section would take 

effect as soon as such changes can be implemented. We propose that the changes to the state 
CMS-1614-P 252 

 

designation would occur based on the decennial Census. The decennial Census uses total 

population of the state to determine whether the state is predominately rural or frontier. The U.S. 

Census Bureau also uses current population estimates every 1, 3, and 5 years through the 

American Community Survey but only samples a small percentage of the population every year, 

not the total population. Therefore, we propose that the designation of a rural or frontier state 

occur approximately every 10 years when the total population data is available. For the current 

proposed fee schedule adjustments, we propose to use the 2010 Census Data. The next update 

would reflect the 2020 Census Data and any changes in the designation of a rural or frontier state 

and corresponding fee schedule changes would be implemented after the 2020 Census Data 

becomes available. For this and subsequent updates, we propose to include a listing of the 

qualifying rural and frontier States in program guidance that is issued quarterly and to provide at 

least 6 months advance notice of any adjustments. 

Some of the comments received on the ANPRM indicated that the costs of furnishing 

DMEPOS items and services in rural areas is significantly higher than the costs of furnishing 

DMEPOS items and services in urban areas. Other commenters suggested that the adjustments 

to the payment amounts based on information from CBPs be phased in to give suppliers time to 

adjust to the new payment levels. Although we believe that the costs of furnishing items and 

services in rural areas are different than the costs of furnishing items and services in urban areas, 

there is no evidence to support a statement that the difference in costs is significant. However, in 

order to proceed cautiously on this matter in the interest of ensuring access to covered DMEPOS 

items and services, we are proposing to phase in the price adjustments, as explained below, so 

that we can monitor the impact of the adjustments as they are gradually phased in. 

In summary, we propose that adjustments to payment amounts for areas within different 
CMS-1614-P 253 

 

regions of the contiguous United States would be based on the un-weighted average of SPAs 

from CBAs that are fully or partially located within these regions. The regional amounts would 

be limited by a national ceiling and floor and the adjusted payment amounts for all states 

designated as rural or frontier states would be equal to the national ceiling. In addition, we are 

soliciting public comments on whether payment in rural areas of states that are not designated as 

rural or frontier states should be set differently. 

d. Areas Outside the Contiguous United States 

 Given the unique costs of furnishing DMEPOS items and services in remote, isolated 

areas outside the contiguous United States such as Alaska, Guam, Hawaii, Puerto Rico, the 

United States Virgin Islands and other areas, we propose that any SPAs from programs in these 

areas be excluded from the calculation of the RSPAs in section a. In addition, we propose that 

the adjustments to the fee schedule amounts for areas outside the contiguous United States would 

not be based on the RSPAs. Rather, we propose that the adjustments to the fee schedule amounts 

for these areas be based on the higher of the average of SPAs for CBAs in areas outside the 

contiguous United States (for example, Honolulu) or the national ceiling limit applied to the 

payment adjustments for areas within the contiguous United States. We believe that, to the 

extent that SPAs from non-contiguous areas are available, these amounts should be used in 

making adjustments to the payment amounts for other areas outside the contiguous United States 

since the challenges and costs of furnishing DMEPOS items and services in all remote, isolated 

areas is similar. We also believe that the payment adjustments for these areas, like those for the 

proposed rural and frontier states, should not be lower than the national ceiling established for 

items and services furnished in the contiguous United States. Areas outside the contiguous 

United States generally have higher shipping fees and other costs. We believe the SPAs in 
CMS-1614-P 254 

 

Honolulu and other areas outside the contiguous United States reflect these costs and could be 

used to adjust the fee schedule amounts for these areas without limiting access to DMEPOS 

items and services. However, in the event that the national ceiling limit described in section b 

above is greater than the average of the SPAs for CBPs in areas outside the contiguous United 

States, we propose that the higher national ceiling amount be used in adjusting the fee schedule 

amounts for areas outside the contiguous United States in order to better ensure access to 

DMEPOS items and services. 

We are soliciting comments on these proposals. 

2. Methodology for Items and Services Included in Limited Number of Competitive Bidding 

Programs 

In some cases, there may not be a sufficient number of CBAs and SPAs available for use 

in computing RSPAs, and therefore, a different methodology for implementing section 

1834(a)(1)(F)(ii) of the Act would be necessary. For items and services that are subject to 

competitive bidding and have been included in CBP in no more than 10 CBAs, we propose that 

payment amounts for these items in all non-competitive bidding areas be adjusted based on 110 

percent of the average of the SPAs for the areas where CBPs are implemented. Using a straight 

average of the SPAs rather than a weighted average of the SPAs gives SPAs for the various 

CBAs equal weight regardless of the size of the CBA. We believe this avoids giving undo 

weight to SPAs for more heavily populated areas. We are proposing the additional 10 percent 

adjustment to the average of the SPAs to account for unique costs such as delivering items in 

remote, isolated locations, but would make this a uniform adjustment for program simplification 

purposes. This issue is discussed in more detail below. 

Under the DMEPOS CBP, there may be items and services for which implementation of 
CMS-1614-P 255 

 

CBPs could generate significant savings for the beneficiary and/or program, but which are 

furnished infrequently in most MSAs. In some cases, such items and services could be 

combined with other items and services under larger PCs or included in mail order competitions, 

to the extent that these are feasible options. For example, combining infrequently used traction 

equipment and frequently used hospital beds in the same product for bidding purposes would 

ensure that any beneficiary that needs traction equipment in the CBA would have access to the 

item from the suppliers also contracted to furnish hospital beds in the area. This would make it 

feasible to include traction equipment in numerous MSAs throughout the country and would 

allow use of the RSPA methodology described above. However, if a PC was established just for 

traction equipment for bidding purposes, the volume of items furnished in certain MSAs may not 

be sufficient to generate viable competitions under the program because there may be a limited 

number of suppliers interested in competing to furnish the items in local areas. Nonetheless, if 

significant savings for the beneficiary and/or program are possible for the equipment, we are 

mandated to phase the items in under the DMEPOS CBP. 

In addition, for lower volume items within large PCs, such as wheelchair accessories, we 

propose to include these items in a limited number of local competitions rather than in all CBAs 

to reduce the burden for suppliers submitting bids under the programs as a whole. In these 

cases, for the purposes of implementing section 1834(a)(1)(G) of the Act, we propose that 

payment amounts for these items in all areas where CBPs are not implemented be adjusted based 

on 110 percent of the average of the SPAs for the areas where CBPs are implemented. We are 

proposing the additional 10 percent adjustment to the national average price to account for 

unique costs in certain areas of the country such as delivering items in remote, isolated 

locations. For example, the PC for standard mobility in the 9Round 1 CBAs includes 25 HCPCS 
CMS-1614-P 256 

 

codes for low volume wheelchair accessories that are not included in the PC for standard 

wheelchairs, scooters, and related accessories in the 100 Round 2 CBAs. We propose that 

payment amounts for these items in areas where CBPs are not implemented be adjusted based on 

110 percent of the average of the SPAs for the 9Round 1 areas where CBPs are 

implemented. Alternatively, we could include these low volume items in all PCs in all 109 

CBAs and suppliers would need to develop bid amounts and enter bids for these 25 codes for 

low volume items such as toe loop holders, shock absorbers and IV hangers. Including these 25 

Healthcare Common Procedure Coding System (HCPCS) codes for low volume wheelchair 

accessories in the PCs under the 9 Round 1CBAs means that suppliers submitting bids for 

wheelchairs have 25 bid amounts to develop and enter per CBA for these items, or a total of 225 

bid amounts to develop and enter for these low volume items if bidding for wheelchairs in all 9 

Round 1 CBAs. In contrast, including these codes in the PCs under all 109CBAs means that 

suppliers submitting bids for wheelchairs have 2,725 bid amounts to develop and enter for these 

low volume items, if biding for wheelchairs in all 109 CBAs. We believe that adjusting fee 

schedule amounts based on SPAs from 10 or fewer CBAs achieve the savings mandated by the 

statute for these items while greatly reducing the burden on suppliers and the program in holding 

competitions for these items in all 109 CBAs across the country. 

Finally, if contracts and SPAs for low volume items included in a limited number of 

CBAs expire and the items are not included in future CBPs, we propose to use the information 

from the past competitions to adjust the payment amounts for these items nationally based on 

110 percent of the average of the SPAs for the areas where CBPs were implemented. Even 

though the SPAs may no longer be in effect, we believe it is reasonable to use the information to 

reduce excessive payment amounts for items and services as long as the SPAs did not result in a 
CMS-1614-P 257 

 

negative impact on access to quality items and services while they were in effect and as long as 

the amounts are adjusted to account for increases in costs over time. For example, 4 codes for 

adjustable wheelchair seat cushions were included in the Round 1 Rebid, with SPAs that were 

approximately 25 percent below the fee schedule amounts being in effect in 9 CBAs from 

January 2011 thru December 2013. These items were not bid in future rounds due to the low 

volume of use relative to other wheelchair seat cushions. During the course of the 3-year 

contract period when the SPAs were in effect in the 9 areas, there were no reports of access 

problems and there were no negative health outcomes as a result of including these items under 

CBPs. For the future, savings for these items could be achieved by including them in future 

competitions or by using the previous SPAs, updated by an economic update factor to account 

for increases in costs. If the decision is made not to include these items in future competitions, 

we believe savings can and should still be obtained based on information from the previous 

competitions. 

We are soliciting comments on these proposals. 

3. Adjusted Payment Amounts for Accessories used with Different Types of Base Equipment 

There may be situations where the same accessory or supply identified by a HCPCS code 

is used with different types of base equipment, and the item (HCPCS code) is included in one or 

more PCs under competitive bidding for use with some, but not all of the different types of base 

equipment it is used with. For these situations, we propose to use the weighted average of the 

SPAs from CBPs and PCs where the item is included for use in adjusting the payment amounts 

for the item (HCPCS code). We believe that it would be unnecessarily burdensome to have 

different fee schedule amounts for the same item (HCPCS code) when it is used with similar, but 
CMS-1614-P 258 

 

different types of base equipment. We believe that the costs of furnishing the accessory or 

supply should not vary significantly based on the type of base equipment it is used with. 

Therefore, we seek public comments on addressing situations where an accessory or 

supply identified by a HCPCS code is included in one or more PCs under competitive bidding 

for use with more than one type of base equipment. In these situations, we propose to calculate 

the SPA for each CBA by weighting the SPAs from each PC in that CBA by national allowed 

services. This would result in the calculation of a single SPA for the item for each CBA. The 

single SPA per code per CBA would then be used in applying the payment adjustment 

methodologies proposed above. For example, HCPCS code Exxx1 describes a tray used on a 

wheelchair. Exxx1 was included in a PC for manual wheelchairs in all CBAs and in a separate, 

second PC for power wheelchairs in all CBAs. SPAs for Exxx1 under the manual wheelchair PC 

are different than the SPAs for Exxx1 under the power wheelchair PC. 

Under the proposal, national allowed services would be used to compute a weighted 

average of the SPAs for Exxx1 in each of the CBAs. So, rather than having 2 different SPAs for 

the same code in the same CBA, we would have 1 SPA for the code for the CBA. If the item is 

included in only one PC, we propose to use the SPAs for the item from that PC in applying the 

payment adjustment methodologies proposed above. 

We are soliciting comments on these proposals. 

4. Adjustments to Single Payment Amounts that Result from Unbalanced Bidding 

 Within the HCPCS there are instances where there are multiple codes for an item that are 

distinguished by the addition of a hierarchal feature(s). For example, one code may describe an 

enteral nutrition infusion pump with an alarm and another code may describe a less sophisticated 

pump without an alarm. Under competitive bidding, the code with the higher utilization would 
CMS-1614-P 259 

 

receive a higher weight and the bid for this item would have a greater impact on the composite 

bid and competitiveness of the supplier’s overall bid for the PC within the CBP than the bid for 

the less frequently used alternative. This can result in unbalanced bidding where the bids and 

SPAs for the item without the additional features is higher than the bids and SPAs for the item 

with the additional features due to the fact that the item with the features is utilized more than the 

item without the features and therefore receives a higher weight. We believe that it is not 

inherently reasonable for payment amounts for equipment with fewer features or functionality to 

be higher than payment amounts for equipment with additional features or functionality. 

 For example, HCPCS code B9000 describes an enteral nutrition infusion pump without 

alarm, whereas code B9002 describes an enteral nutrition infusion pump with alarm. Both codes 

have identical fee schedule amounts. Based on paid claims data, only 176 Medicare 

beneficiaries received the pump without the alarm in 2012, whereas 52,531 Medicare 

beneficiaries received the pump with the alarm in 2012. Both pumps are included in the PC for 

enteral nutrients, supplies, and equipment. As a result of the significantly higher utilization of 

code B9002, this code received a much higher item weight under the CBP than code B9000, and, 

as a result, a supplier could submit a much higher bid for B9000 than for B9002 with virtually no 

impact on their composite bid. Under Round 2, unbalanced bidding resulted in SPAs for code 

B9000 without the alarm being 6 percent higher on average than the SPAs for code B9002 with 

alarm. Unbalanced bidding also occurred under Round 2 in the case of standard power 

wheelchairs, with SPAs for infrequently used Group 1, standard weight power wheelchairs 

(codes K0815 and K0816) being 16 percent higher on average than the SPAs for the much more 

frequently used Group 2 versions (codes K0822 and K0823). Based on paid claims data, only 

474 Medicare beneficiaries received Group 1 power wheelchairs described by codes K0815 and 
CMS-1614-P 260 

 

K0816 in 2012, whereas 196,968 Medicare beneficiaries received higher performing Group 2 

power wheelchairs described by codes K0822 and K0823 in 2012. The long term solution for 

avoiding cases of unbalanced bidding is to eliminate duplicate codes in the HCPCS. For the 

purpose of implementing section 1834(a)(1)(G) of the Act, and in making adjustments to 

payment amounts under sections 1834(a)(1)(F)(ii), 1834(h)(1)(H)(ii), and 1842(s)(3)(B) of the 

Act, we propose that the payment amounts for infrequently used codes that describe items and 

services with fewer features than codes with more features be adjusted so that they are no higher 

than the payment amounts for the more frequently used codes with more features. For example, 

the adjusted fee schedule amounts for code B9000 would be set so that they are no higher than 

the adjusted fee schedule amounts for code B9002. We believe that without this provision, 

unbalanced bidding could result in fee schedule amounts for items that essentially represent 

lower levels of service being higher than fee schedule amounts for items representing higher 

levels of service, based on bids being higher for infrequently used items with lower weights and 

less features than bids for frequently used items with higher weights and more features. This 

could result in beneficiaries receiving the item with fewer features and functionality simply 

because the supplier has a financial incentive to furnish that item. This is especially important in 

light of the fact that use of the inherent reasonableness authority provided by section 1842(b)(8) 

and (9) of the Act cannot be used to further adjust payment amounts that are adjusted based on 

the mandate of section 1834(a)(1)(F)(ii) and the authority provided by sections 1834(h)(1)(H)(ii) 

and 1842(s)(3)(B) of the Act. 

 We seek public comments on this issue and our proposed provision to address this issue. 

5. National Mail Order Program - Northern Mariana Islands 

While Section 1847(a)(1)(A) of the Act provides that CPBs be established throughout the 
CMS-1614-P 261 

 

United States, the definition of United States at section 210(i) of the Act does not include the 

Northern Mariana Islands. We therefore previously determined that the Northern Mariana 

Islands are not considered an area eligible for inclusion under a national mail order CBP. For the 

purpose of implementing the requirements of section 1834(a)(1)(F)(ii) of the Act, we are 

proposing that the payment amounts established under a national mail order CBP would be used 

to adjust the fee schedule amounts for mail order items furnished to beneficiaries in the Northern 

Mariana Islands. We propose that the adjusted fee schedule amounts would be equal to 100 

percent of the amounts established under the national mail order CBP. 

We are soliciting comments on these proposals. 

6. Updating Adjusted Payment Amounts 

In accordance with section 1834(a)(1)(F)(iii) of the Act, the adjusted payment amounts 

for DME must be updated as additional items are phased in or information is updated. We 

propose to add regulation text indicating that we would revise the adjusted payment amounts for 

DME, enteral nutrients, supplies, and equipment, and OTS orthotics each time a SPA is updated 

following one or more new competitions, which may occur at the end of a contract period, as 

additional items are phased in, or as new programs in new areas are phased in. This is required 

by section 1834(a)(1)(F)(iii) for DME. Since we believe it is reasonable to assume that updated 

information from CBPs would better reflect current costs for furnishing items and services, we 

are proposing regulations to require similar updates for enteral nutrients, supplies, and 

equipment, and OTS orthotics. 

As we indicated above, if the only SPAs available for an item are those that were 

established under CBP that are no longer in effect, we propose to use these SPAs to adjust 

payment amounts using the methodologies described above and we propose to do so following 
CMS-1614-P 262 

 

application of inflation adjustment factors. We propose that the inflation adjustment factor 

would be based on the percentage change in the Consumer Price Index for all Urban Consumers 

(CPI-U) from the mid-point of the last year the SPAs were in effect to the month ending 6 

months prior to the date the initial payment adjustments would go into effect. The adjusted 

payment amounts would continue to be updated every 12 months using the percentage change in 

the CPI-U for the 12-month period ending 6 months prior to the date the updated payment 

adjustments would go into effect. Use of the CPI-U as the update factor is consistent with how 

pricing amounts for DMEPOS have been updated since October 1, 1985, when the CPI-U was 

used in calculating the IIC for use in calculating reasonable charges. The CPI-U was used in 

updating reasonable charge data for use in calculating the initial fee schedule amounts and is 

used in determining the covered item update factors at sections 1834(a)(14), 1834(h)(4)(A), 

1834(i)(1)(B), 1842(s)(1)(B) of the Act. If CBPs are subsequently established for the item, we 

propose that the SPAs established under these programs would be used in applying the payment 

adjustment methodologies described above. 

If finalized, the payment amounts that would be adjusted in accordance with sections 

1834(a)(1)(F)(ii) and (iii) of the Act for DME, section 1834(h)(2)(H)(ii) of the Act for orthotics, 

and section 1842(s)(2)(B) of the Act for enteral nutrients, supplies, and equipment shall be used 

to limit bids submitted under future competitions of the DMEPOS CBP in accordance with 

regulations at §414.414(f). Section 1847(b)(2)(A)(iii) prohibits the awarding of contracts under 

a CBP unless we are sure that total payments made to contract suppliers in the CBA are less than 

the payment amounts that would otherwise be made. In order to assure savings under a CBP, the 

fee schedule amount that would otherwise be paid is used to limit the amount a supplier may 

submit as their bid for furnishing the item in the CBA. If finalized, the payment amounts that 
CMS-1614-P 263 

 

would be adjusted in accordance with sections 1834(a)(1)(F)(ii) and (iii) of the Act for DME, 

section 1834(h)(2)(H)(ii) of the Act for orthotics, and section 1842(s)(2)(B) of the Act for enteral 

nutrients, supplies, and equipment would be the payment amounts that would otherwise be made 

if payments for the items and services were not made through implementation of a CBP. 

Therefore, the adjusted fee schedule amounts would become the new bid limits. 

We are soliciting comments on these proposals. 

7. Summary of Proposed Methodologies 

 To summarize, under the proposed methodology in subsection 1 above which applies to 

items and services included in more than 10 CBAs, adjusted fee schedule amounts would be 

determined based on RSPAs limited by a national floor and ceiling. The RSPA would be 

established using the average of the SPAs for an item from all CBAs that are fully or partially 

located in the region. The payment amount for the item, with limited exceptions for areas 

outside the contiguous United States, would be equal to its RSPA but not less than 90 percent 

and not more than 110 percent of the national average, which is the average of the RSPAs 

weighted by the number of states in the region. The proposed methodology is modeled closely 

after the regional fee schedule payment methodology in effect today for P&O. For the purpose 

of establishing the regional boundaries, we propose to use 8 regions developed by the Bureau of 

Economic Analysis (BEA) within the Department of Commerce: New England, Mideast, Great 

Lakes, Plains, Southeast, Southwest, Rocky Mountain, and Far West. For rural and frontier 

states, we propose that the payment amount would be 110 percent of the national average. For 

areas outside the contiguous United States, the payment amount would be the greater of the 

average of the SPAs in the non-contiguous areas or 110 percent of the national average. As 

described in subsection 2 above, we propose a different methodology for low volume items with 
CMS-1614-P 264 

 

a limited number of SPAs. In addition, we propose to apply update factors to SPAs no longer in 

effect to adjust fee schedule amounts if no other data is available. Finally, we propose that 

adjustments would be made to account for SPAs for lower levels of service that are higher than 

SPAs for higher levels of service. 

 A summary of the proposed methodologies is provided in Table 37 below. 

TABLE 37 - Summary of Proposed Methodologies for Adjusting Payment in Non-Bid 

Areas 

Proposed Methodology Calculations 

1) Adjustments for Items Included in More than 10 

CBAs* 

Regional Adjustments Limited by National Parameters for 

Items Furnished Within the Contiguous United States 

Adjusted payment equal to the RSPA 

(calculated using the un-weighted average 

of SPAs from CBAs that are fully or 

partially located with a BEA region) limited 

by a national floor and ceiling. The 

national ceiling and floor would be set at 

110 percent and 90 percent, respectively, of 

the national weighted RSPA average 

(average of the RSPAs applicable to each of 

the 48 contiguous states and DC). 

Adjustments for Rural and Frontier States Adjusted payment for designated States 

based on 110 percent of the national 

weighted RSPA average 

Adjustments for Items Furnished Outside the Contiguous 

United States 

Adjusted payment for non-contiguous areas 

(e.g., Alaska, Guam, Hawaii) based on the 

higher of the average of SPAs for CBAs in 

areas outside the contiguous U.S. or 110 

percent of the national weighted RSPA 

average applied to adjustments within the 

contiguous U.S. 

2) Adjustments for Lower Volume or Other Items 

Included in 10 or Fewer CBAs* 

Adjusted payment based on 110 percent of 

the un-weighted average of the SPAs for the 

areas where CBPs are implemented for 

contiguous and non-contiguous areas of the 

United States. 

3) Adjustments for Items Where the Only Available 

SPA is from a CBP No Longer in Effect 

Payment based on adjusted payment 

determined under 1) or 2) above and 

adjusted on an annual basis based on the 

CPI-U update factors from the mid-point of 

the last year the SPAs were in effect to the 

month ending 6 months prior to the date the 

initial payment adjustments would go into 
CMS-1614-P 265 

 

Proposed Methodology Calculations 

effect. 

4) Adjustments for Accessories Used with Different 

Types of Base Equipment 

Adjustments for Accessories Included in One CBP 

Product Category 

SPAs for the item from that one Product 

Category would be used in determining the 

adjusted payment amounts under 

methodologies 1) or 2) 

Adjustments for Accessories Included in One or More 

CBP Product Category 

A weighted average of the SPAs for the 

item in each CBA where the item is 

included in more than one Product Category 

would be used to determine the adjusted 

payment amounts under methodologies 1) 

or 2) 

5) Payment Adjustments to Northern Mariana Islands 

Using the National Mail Order SPAs 

Fee schedule amounts adjusted to equal the 

SPAs under the national mail order CBP 

*Note: We are also proposing to adjust the SPAs for a lower level of service item to not exceed the SPAs of a 

higher level of service item prior to applying the methodologies in 1) and 2) above in instances where the SPA for 

the lower level of service item exceeds the higher level of service item. 

VI. Proposed Payment Methodologies and Payment Rules for Durable Medical 

Equipment and Enteral Nutrition Furnished under the Competitive Bidding Program 

A. Background 

The payment rules for DME have changed significantly over the years since 1965, 

resulting in the replacement of the original monthly rental payment methodology with lump sum 

purchase and capped rental payment rules, as well as separate payment for repairs, maintenance 

and servicing, and replacement of expensive accessories for beneficiary-owned equipment. In 

our experience, these payment rules have been burdensome to administer and have added 

program costs associated with expensive wheelchair repairs and payment for loaner equipment, 

and have significantly increased costs associated with frequent replacement of expensive 

accessories at regular intervals for items such as CPAP devices. We estimate that separate 

payments for CPAP accessories have increased annual expenditures by approximately $200 
CMS-1614-P 266 

 

million. In some cases, the costs associated with maintaining DME owned by beneficiaries 

equals or exceeds any savings that might be generated from capping rental payments. In the case 

of repairs, suppliers are not mandated to service the equipment they furnish once title transfers to 

the beneficiary – any supplier can provide these services. This could create a hardship for the 

beneficiary since they must find a supplier willing to repair the equipment and their separate 

coinsurance payments could be substantial if the repair services are extensive. According to § 

414.408(h)(3) of our regulations, payment on a capped rental basis also results in the restart of 

periods of continuous use for capped rental items, and according to § 414.408(i)(2) of our 

regulations, an extension in the rental cap periods for oxygen equipment when a beneficiary 

transitions from a non-contract supplier to a contract supplier at the start of a new CBP. These 

issues were discussed in the February 26, 2014, ANPRM noted above (79 FR 10758). It is not 

clear, however, the extent to which the capped rental requirement, combined with separate 

payments for supplies, accessories, repairs, and program administration, overall results in net 

savings or net costs to the Medicare program, particularly if we examine the effects of the policy 

on specific DME items and services. 

Under the Social Security Amendments of 1965 (P.L. 89-97) enacted on July 30, 1965, 

Medicare Part B covered only rental of DME items. The Social Security Amendments of 1967 

(P.L. 90–248), approved January 2, 1968, revised the statute to provide authority for making 

payment for DME on a purchase basis as well as on a rental basis. On May 12, 1972, the 

Government Accountability Office (GAO) issued a report to the Congress entitled “Need for 

Legislation to Authorize More Economical Ways of Providing Durable Medical Equipment 

under Medicare” (B-164031(4), May 12, 1972) that led to Social Security Amendment (section 

245) in 1972. Section 245 of the Social Security Amendments of 1972 (Public Law 92-603) 
CMS-1614-P 267 

 

enacted on October 30, 1972, modified the payment provisions for specific equipment items to 

LCL of reasonable charges to contain the costs of DME. This law allowed the Department of 

Health and Human Services (HHS) to experiment with reimbursement approaches and 

implement any purchase approach found to be feasible and economical in order to avoid 

prolonged rental payments for expensive DME. Furthermore, section 16 of the MedicareMedicaid Anti-Fraud and Abuse Amendments (Public Law 95-142), enacted on October 25, 

1977, amended section 1833(f) of the Act to read as follows: 

In the case of durable medical equipment to be furnished an individual as described in 

section 1861(s)(6), the Secretary shall determine, on the basis of such medical and other 

evidence as he finds appropriate (including certification by the attending physician with 

respect to expected duration of need), whether the expected duration of the medical need 

for the equipment warrants a presumption that purchase of the equipment would be less 

costly or more practical than rental. If the Secretary determines that such a presumption 

does exist, he shall require that the equipment be purchased, on a lease-purchase basis or 

otherwise, and shall make payment in accordance with the lease-purchase agreement (or 

in a lump sum amount if the equipment is purchased other than on a lease-purchase 

basis); except that the Secretary may authorize the rental of the equipment 

notwithstanding such determination if he determines that the purchase of the equipment 

would be inconsistent with the purposes of this title or would create an undue financial 

hardship on the individual who will use it. 

This law required HHS to make lease-purchase decisions on a case-by-case basis based 

on whether purchase would be less costly or more practical than rental and reimburse on the 

basis of a lump-sum purchase or a lease/purchase arrangement. To implement the change in the 
CMS-1614-P 268 

 

law, HHS issued final regulations (45 FR 44287) on July 1, 1980. This regulation provided that 

the purpose of the lease purchase payment arrangement for new and used DME was to reduce 

program costs caused by long and costly rentals of the equipment and reduce beneficiary 

expenses for annual deductibles and coinsurance for unnecessarily long rentals. However, the 

regulations were not implemented until 1985 because of uncertainty as to whether they would 

result in program savings. During the same time period, amidst growing concerns by the agency 

about prolonged and excessive rentals, Williams College under a grant administered by HCFA 

(now CMS) issued a report entitled “Determinants of Current and Future Expenditures on 

Durable Medical Equipment by Medicare and its Program Beneficiaries” on April 1983. This 

report estimated the excess rentals at about 14 percent of rental payments. Following this report, 

a GAO report titled “Procedures for avoiding excess rental payments for durable medical 

equipment should be modified” issued on July 30, 1985, showed that excess rentals represented 

about 54 percent of the amounts allowed for lower cost items ($120 or less) and 34 percent for 

higher cost items. In the GAO report, excess rental payments represented the difference between 

total Medicare rental payments for an item of equipment and Medicare reimbursement for the 

item if it had been purchased. GAO data showed substantially fewer short-term rentals than 

Williams' data (22 percent versus 64 percent for episodes lasting 1 or 2 months) and substantially 

more long-term rentals (33 percent. versus 8 percent for episodes lasting more than 12 months). 

GAO concluded that savings would result for reimbursing low-cost items on a purchase 

basis because about two-thirds of the rented items in its study costing $100 or less would have 

been cheaper to buy. GAO also found that sufficient data was not available to reliably predict 

when purchasing a high cost item would be less costly than renting it. The report indicated that 

purchase price was reached by about month 7, with additional monthly rental payments beyond 
CMS-1614-P 269 

 

month 7 resulting in excess rental payments cost thereafter. Because of the uncertainty with 

respect to the high-cost items, GAO recommended alternative reimbursement approaches such as 

adjustment of the rental rate and requirements that suppliers accept whatever percentage is 

adopted. 

The report further discussed HHS and supplier comments on the GAO report draft. HHS 

also commented that the cap proposal did not address the issues associated with ownership of 

DME after the maximum amount of the cap had been reached. The supplier comments included 

recommendations from National Association of Medical Equipment Suppliers (NAMES) 

proposal for considering alternative methods that limited rental payments after a specified 

number of months such as 24 months for non-oxygen-related DME items (wheelchairs and 

hospital beds). At the end of the 2-year period, any item still being rented would be subject to a 

monthly maintenance fee in lieu of rental based on 30 percent of the latest allowable rental 

charge. Title to the items would remain with the supplier, and the item would be returned when 

no longer needed. 

Section 4062 of the Omnibus Budget Reconciliation (OBRA) Act of 1987 (Public Law 

100-203), was enacted on December 22, 1987. This legislation added section 1834 (a) to the 

Act, which mandated payment categories and rules for DME that dictated whether payment 

would be made on a rental and/or purchase basis for items in each category. These changes were 

intended to align payment rates and achieve savings in the Medicare program. The new payment 

categories mandated by section 1834(a) of the Act were promulgated via regulation at §414.210. 

Sections 1834(a) (2) through (a) (5) and 1834(a) (7) of the Act set forth separate payment 

categories of DME and describe how the fee schedule for each of the following categories is 

established: Inexpensive or other routinely purchased items; Items requiring frequent and 
CMS-1614-P 270 

 

substantial servicing; Customized items; Oxygen and oxygen equipment; and Other items of 

DME or capped rental items. 

Section 13543 of the Omnibus Budget Reconciliation Act (OBRA) of 1993 (Public Law 

103-66), was enacted on August 10, 1993, and amended section 1834 (a) to reclassify nebulizers, 

CPAP devices, aspirators or suction pumps, and intermittent assist or respiratory assist devices 

from the category of items requiring frequent and substantial servicing to the capped rental 

payment category. It also mandated separate payment for accessories used in conjunction with 

these items. Section 4315 of the Balanced Budget Act of 1997 (P.L. 105-33), enacted on August 

5, 1997, added section 1842(s) to the Act, to authorize a fee schedule for PEN, which was 

promulgated via regulations at § 414.100 (66 FR 45173, August 28, 2001). In 42 CFR Part 414, 

Subpart C of the regulations, govern payment on a fee schedule basis for PEN nutrients, 

equipment and supplies. Payment for PEN items and services is made in a lump sum for 

nutrients and supplies that are purchased and on a monthly basis for equipment that is rented. 

Section 1847 of the Act establishes the Medicare DMEPOS Competitive Bidding 

Program (CBP) (“Competitive Bidding Program”). Under the CBP, Medicare sets payment 

amounts for selected DMEPOS items and services furnished to beneficiaries in CBAs based on 

bids submitted by qualified suppliers and accepted by Medicare. For competitively bid items, 

these new payment amounts, referred to as “single payment amounts,” replace the fee schedule 

payment amounts. Section 1847(b)(5) of the Act provides that Medicare payment for 

competitively bid items and services is made on an assignment-related basis equal to 80 percent 

of the applicable SPA amount, less any unmet Part B deductible. 

Payment errors and increased costs can occur as a result of paying separately for 

equipment, repairs, accessories, and routine maintenance and servicing associated with 
CMS-1614-P 271 

 

beneficiary ownership of DME after the 13-month capped rental period or initial lump sum 

purchase, which have increased the risk for improper payments. The findings published in the 

August 2010 OIG report (OEI-07-08-00550) titled “A review of claims for capped rental durable 

medical equipment” reveal that from 2006 to 2008, Medicare erroneously paid separately for 

these services. Medicare paid $2.2 million for routine maintenance and servicing of capped 

rental DME; from 2006 to 2008, Medicare erroneously allowed nearly $4.4 million for repairs 

for beneficiary-owned capped rental DME that failed to meet payment requirements; and in 

2007, Medicare allowed nearly $27 million for repair claims of beneficiary-owned capped rental 

DME that failed to meet payment requirements. 

Based upon our experience, the ownership of equipment by beneficiary after lump sum 

purchase or after the end of 13 months capped rental period leads to complicated administrative 

procedures. The program must keep track of separate payment, coverage, medical necessity, and 

other rules for a number of related codes for replacement supplies and accessories used with the 

base equipment as well as labor and parts associated with repairing patient-owned equipment. In 

addition, claims processing systems must count rental months and contractors must identify 

when legitimate breaks in continuous use occur and can result in the start of new capped rental 

periods. This leads to costly and complicated claims processing systems edits for processing 

millions of claims for these items and services. Payment on a purchase or capped rental basis 

results in the need to process and pay separately for numerous items that are not DME but are 

related to furnishing DME such as repair of equipment or replacement of supplies and 

accessories used with patient-owned equipment necessary for the effective use of DME. 

B. Proposed Provisions 

We believe that we have general authority under section 1847(a) and (b) of the Act to 
CMS-1614-P 272 

 

establish payment rules for DME and enteral nutrition equipment that are different than the rules 

established under section 1834(a) of the Act for DME, section 1842(s) for enteral nutrients, 

supplies, and equipment, and, section 6112(b) of Omnibus Budget Reconciliation (OBRA) Act 

of 1989 (Public Law 101-239) for enteral pumps. We believe that lump sum purchase and 

capping rentals for certain DME and enteral nutrition may no longer be necessary to achieve 

savings under the program when competitive bidding can be used to establish a reasonable 

monthly payment. We also believe that payment on a continuous rental basis – that is, ongoing 

monthly payments not subject to a cap – could help to ensure that medically necessary DME and 

enteral nutrition equipment is kept in good working order for the entire duration of medial need 

and would make it easier for beneficiaries to change from one supplier to another since the new 

supplier would not be faced with a finite number of rental payments. Currently, there is no 

requirement that a supplier take responsibility for repairing equipment once it is owned by a 

beneficiary, which may cause difficulties for the beneficiary to find a supplier to undertake such 

services. We believe that continuous rental payment would eliminate such issues because the 

supplier of the rented equipment would always be responsible for keeping the equipment in good 

working order. We do not believe that continuous monthly rental payments for DME and enteral 

nutrition would negatively impact access to items and services and could potentially be 

implemented in a manner that does not increase program expenditures since suppliers would be 

paid based on bids for furnishing the same general items and services they would otherwise 

provide. In addition, since Medicare payment for rental of DME and enteral nutrition equipment 

include payment for maintenance and servicing of the rented equipment, the suppliers would be 

directly responsible for meeting the monthly needs of the beneficiary in terms of keeping the 

rented equipment in good working order. 
CMS-1614-P 273 

 

As indicated in section IV above, CMS issued an ANPRM: Medicare Program; 

Methodology for Adjusting Payment Amounts for Certain Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies (DMEPOS) using Information From Competitive Bidding 

Programs on February 26, 2014 (79 FR 10754). As part of this ANPRM, comments were 

solicited on whether payment on a bundled, continuous rental basis for DME and enteral 

nutrition should be adopted under the DMEPOS CBP. Some commenters were concerned that 

services such as replacement of CPAP masks and equipment repairs would not be provided if 

they were not paid for separately. Some commenters supported bundling payments for oxygen 

and enteral nutrition. Some commenters suggested that the bundling methodology be tested first 

before it is utilized on a wide scale basis. Thirteen commenters that included beneficiaries, 

beneficiary advocacy organizations, occupational therapists, and physical therapists raised 

concerns that access to items such as highly configured wheelchairs and speech generated 

devices might be disrupted under a continuous monthly bundled rental payment that includes 

equipment rental, replacement accessories and repairs. They felt that payment on a rental basis 

would result in patients losing access to these devices when they entered institutions such as 

hospitals and skilled nursing facilities where separate payment for DME is prohibited by section 

1861(n) of the Act. 

For items that continue to be paid for on a lump sum purchase basis or a capped rental 

basis where ownership of equipment transfers to the beneficiary following the capped rental 

period, we solicited comments on whether the supplier of the equipment should be responsible 

for repairing the equipment following transfer of title. Some commenters were opposed to the 

idea of making contract suppliers of purchased equipment responsible for ongoing repairs of 

equipment following transfer of title to the beneficiary. They stated that it would be a significant 
CMS-1614-P 274 

 

burden on suppliers to provide ongoing maintenance of equipment they furnished on a purchase 

basis, especially if the beneficiary moved out of the area. 

After carefully considering comments received in response to the ANPRM, we are 

proposing to update the regulations to include proposed special payment rules described below 

that would be utilized in paying claims for certain DME or enteral nutrition under a limited 

number of CBPs. As explained in more detail in the sections that follow below, we propose to 

revise the regulation by adding a new section at 42 CFR § 414.409 with special payment rules to 

replace specific payment rules at § 414.408 for these items and services in these CBPs. We also 

propose to revise § 414.412 regarding submission of bids for furnishing items and services paid 

in accordance with these special payment rules. We seek comments on these proposals. 

 We propose to phase-in the special payment rules described in sections 1 and 2 below in 

a limited number of areas for a limited number of items initially to determine whether it is in the 

best interest of the Medicare program and its beneficiaries to phase these rules in on a larger 

scale based on evaluation of the rules’ effects on Medicare program costs, and quality of/access 

to care. In order to monitor the impact of phasing in the special payment rules in no more than 

12 CBAs, we propose that, at a minimum, we would utilize evaluation criteria that are consistent 

with the current evaluation criteria for monitoring the impact of the CBP on utilizers of items and 

services in CBAs. To evaluate the quality of care for beneficiaries affected by the special 

payment rules, we propose that, at a minimum, we would utilize health status outcomes based 

criteria that would measure specific indicators such as mortality, morbidity, 

hospitalizations, emergency room and other applicable indicators unique to each product 

category. To evaluate beneficiary access to necessary items and services we propose that, at a 

minimum, we would monitor utilization trends for each product category and track beneficiary 
CMS-1614-P 275 

 

complaints related to access issues. To evaluate the cost of the program, we propose that, at a 

minimum, we would analyze the claims data for allowed services and allowed cost for each 

product category and the associated accessories, supplies and repair cost in the 12 CBAs and the 

comparator CBAs. We propose to analyze the effect of the proposed payment rules on 

beneficiary cost sharing.

 We propose that in any competition where these rules are applied, suppliers and 

beneficiaries would receive advance notice about the rules at the time the competitions that 

utilize the rules are announced. The combined, total number of CBAs where the proposed rules 

in either section 1 or 2 would apply would be limited to twelve. In other words, it would not be 

twelve CBAs for the rules in section 1 and an additional twelve CBAs for the rules in section 2, 

but 12 CBAs total. In addition, we propose that the PCs listed below would be phased in to 

include one or more of the CBAs that would number no more than twelve total. In addition, if a 

determination is made to phase-in these rules on a larger scale in additional areas and for 

additional items based on program evaluation results regarding cost, quality, and access, the 

process for phasing in the rules and the criteria for determining when the rules would be applied 

would be addressed in future notice and comment rulemaking. This rulemaking would also 

address how the methodology for using these SPAs to adjust fee schedule amounts would need 

to be revised. 

The Affordable Care Act (Patient Protection and Affordable Care Act of 2010, P.L. 111-

148 (March 23, 2010), Sec. 3021) establishes the Center for Medicare and Medicaid Innovations 

(CMMI) which is authorized to test models to reduce Medicare and Medicaid expenditures while 

preserving or improving quality for beneficiaries of those two programs. The provision includes 

appropriations of $10 billion for fiscal years 2011 through 2019. We solicit comments on the 
CMS-1614-P 276 

 

option for testing the above special payment rules for DME and enteral nutrition using the 

CMMI demonstration authority in no more than 12 CBAs that would allow us to test and 

evaluate the special payment rules on a wider scale and determine whether the special payment 

rules reduce Medicare expenditure while preserving or improving the quality for Medicare 

beneficiaries. Regardless of the authority used to phase in or test these special payment rules, we 

would undertake rigorous evaluation to determine the rules’ effects on program costs, quality, 

and access. 

 We seek comments on the specific proposals below. 

1. Payment on a continuous rental basis for select items 

We propose to revise the regulation at 42 CFR § 414.409 to allow for payment on a 

continuous monthly rental basis under future competitions in no more than 12 CBAs for one or 

more of the following categories of items and services: enteral nutrition, oxygen and oxygen 

equipment, standard manual wheelchairs, standard power wheelchairs, CPAP and respiratory 

assist devices, and hospital beds. We believe that 12 CBAs represents a limited number of CBAs 

yet would allow testing in different regions of the country. We propose that the SPAs 

established under the special payment rules would be based on bids submitted and accepted for 

furnishing rented DME and enteral nutrition on a monthly basis. We propose that the SPAs 

would represent a monthly payment for each month that rented DME or enteral nutrition is 

medically necessary. The SPA for the monthly rental of DME would include payment for each 

item and service associated with the rental equipment including the ongoing maintenance and 

servicing of the rental equipment, and replacement of supplies and accessories that are necessary 

for the effective use of the equipment. In the case of enteral nutrition, we propose that the 

monthly SPA would include payment for all nutrients, supplies and equipment. Suppliers would 
CMS-1614-P 277 

 

be responsible for furnishing all items and services in the applicable CBA needed each month 

based on the physician’s order. For example, in addition to furnishing the CPAP device, the 

supplier would be responsible for furnishing the accessories used with the device such as masks, 

tubing, headgear, humidifiers, etc., as well as all maintenance and servicing of the equipment. 

For wheelchairs, the supplier would be responsible for furnishing the type of wheelchair and all 

options and accessories used with the wheelchair that are needed by the patient, as well as well 

as all maintenance and servicing of the equipment. For hospital beds, the supplier would be 

responsible for furnishing the type of hospital bed and all accessories used with the hospital bed 

(for example, mattresses, side rails, trapeze bars, etc.) needed by the patient, as well as all 

maintenance and servicing of the equipment. As discussed in more detail below, phasing in 

these rules would help us determine the impact on Medicare expenditures as well as beneficiary 

access to items and services and other possible costs and benefits. 

We seek comments on this proposal. 

a. Enteral nutrition 

We propose to implement future competitions for enteral nutrition in no more than 12 

CBAs, where payment would be based on bids submitted for furnishing all enteral nutrients, 

supplies, and equipment needed on a monthly basis. We propose that the suppliers would submit 

a single bid for each CBA for furnishing all items and services related to furnishing such enteral 

nutrients, supplies, and equipment in the applicable CBA needed by a beneficiary on a monthly 

basis. We are soliciting comments on whether alternatives to submitting a single bid for enteral 

nutrition should be considered, such as having separate categories based on mode of delivery 

(syringe fed, pump fed, or gravity fed) or separate categories based on the type of nutrients 

delivered. We selected the category of enteral nutrition because we believe that payment on a 
CMS-1614-P 278 

 

separate, piecemeal basis for daily supplies, calories of nutrients furnished, and monthly rental of 

equipment the pumps is unnecessary and overly complex. For example, for a pump-fed patient, 

the beneficiary must choose whether they wish to rent the pump or purchase the pump. If the 

beneficiary chooses to rent the pump, the supplier is required to continue furnishing the pump 

until the capped rental period is over, but then is allowed to bill for maintenance and servicing of 

the pump once every 6 month, but only if maintenance and servicing is needed and furnished. 

The supplier must also submit claims for daily supply kits as well as feeding tubes furnished in 

addition to billing for every 100 calories of enteral nutrient furnished. Finally, the supplier must 

bill for the pole used to hold the pump; however, the monthly rental payments for the pole are 

not subject to the cap on rentals that the statute specifically requires for the pump and this is 

confusing. In addition, issues have been raised regarding replacement parts and supplies for 

beneficiary-owned enteral nutrition infusion pumps when the manufacturer elects to discontinue 

the brand and model of pump owned by the beneficiary. Neither the beneficiary nor the supplier 

is able to obtain supplies that the manufacturer no longer sells and the Medicare rules would 

generally not allow for the purchase of a new pump since this would be duplicate equipment. 

We seek comments on this proposal. 

b. Oxygen and oxygen equipment 

We propose to implement future competitions for oxygen and oxygen equipment in no 

more than 12 CBAs, where payment would be based on bids submitted for furnishing all oxygen 

and oxygen equipment needed on a monthly basis. We propose that the suppliers would submit 

a single bid for each CBA for furnishing all items and services needed on a monthly basis, 

including all rented equipment and related accessories such as regulators, flowmeters, nasal 

cannulas, masks, tubing, humidifier bottles, tank stands and carts, and transtracheal catheters, as 
CMS-1614-P 279 

 

well as well as all maintenance and servicing of the equipment and delivery of oxygen contents. 

We selected the category of oxygen and oxygen equipment because we believe the rental cap for 

oxygen equipment generates very little savings under CBPs. A small percentage of 

beneficiaries, approximately 25 percent based on our review of Medicare claims, reach the 36-

month cap, which is extended by as much as 9 months at the start of a CBP, and the SPAs for 

oxygen contents furnished after the cap are roughly the same as the SPAs for furnishing oxygen 

and oxygen equipment during the 36-month rental cap period. In addition, recent issues related 

to suppliers abandoning beneficiaries after the rental cap has resulted in the need to pay for lost 

oxygen and oxygen equipment, eliminating any savings the rental cap might have achieved. 

Although section 1834(a)(5)(F)(ii)(I) of the Act mandates that the supplier receiving payment for 

the 36th month of continuous use must continue to furnish the oxygen and oxygen equipment for 

any period of medical need for the duration of the reasonable useful lifetime of the equipment, 

certain suppliers have failed to continue providing oxygen and oxygen equipment despite this 

requirement. 

Section 414.226 provides that for oxygen and oxygen equipment, Medicare payments are 

modality neutral, with the exception that the portable oxygen equipment add-on payment for 

oxygen generating portable equipment (OGPE) is higher than the add-on payment for liquid and 

gaseous portable oxygen equipment. The Medicare monthly payment for oxygen and oxygen 

equipment includes payment for stationary equipment (concentrators, liquid, or gaseous 

stationary equipment) as well as payment for oxygen contents (stationary and portable). The 

add-on payment is only for the portable oxygen equipment and does not include payment for the 

portable oxygen contents. This fact is often confused and the portable oxygen add-on payment is 

erroneously viewed as a payment for portable oxygen contents as well as portable oxygen 
CMS-1614-P 280 

 

equipment. In a majority of cases, beneficiaries receive both stationary oxygen and oxygen 

equipment and portable oxygen and oxygen equipment, so having a separate add-on payment for 

portable oxygen equipment only seems unnecessary. Under our proposal, for oxygen and 

oxygen equipment payment under the select CBPs, we propose to eliminate the 36-month cap on 

equipment payments and eliminate separate add-on payments for portable equipment and 

separate payment for oxygen contents. Under our proposal, the contract suppliers would 

continue to be responsible for furnishing equipment consistent with the requirements in 

§414.420. 

We seek comments on this proposal. 

c. Standard manual wheelchairs 

We propose to implement future competitions for standard manual wheelchairs in no 

more than 12 CBAs, where payment would be based on bids submitted for furnishing standard 

manual wheelchairs and all accessories used in conjunction with the wheelchairs on a monthly 

basis. We propose that the suppliers would submit a single bid for each HCPCS code describing 

the wheelchair for each CBA for furnishing the wheelchair and all accessories and services 

needed on a monthly basis. We are soliciting on this proposal as well as comments on whether 

all standard manual wheelchairs should be described under one HCPCS code in order to simplify 

bidding and claims processing procedures. The current HCPCS codes for standard manual 

wheelchairs include standard, hemi (low seat), lightweight, high strength lightweight, heavy 

duty, and extra heavy duty wheelchairs described by codes K0001 thru K0004, K0006, and 

K0007 in the HCPCS. In view of comments to the ANPRM expressing concern regarding 

beneficiary impact of bundled arrangements for users of highly configured manual wheelchairs, 

we are requesting comment on what safeguards and monitoring approaches we should use to 
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ensure that access to these items is not disrupted for individuals transitioning between settings 

and/or residing in remote areas. We seek comments on this proposal. 

d. Standard power wheelchairs 

We propose to implement future competitions for standard power wheelchairs in no more 

than 12 CBAs, where payment would be based on bids submitted for furnishing standard power 

wheelchairs and all accessories used in conjunction with the wheelchairs on a monthly basis. We 

propose that the suppliers would submit a single bid for each HCPCS code describing the 

wheelchair for each CBA for furnishing the wheelchair and all accessories (including batteries) 

and services needed on a monthly basis. We are soliciting comments on whether all standard 

power wheelchairs should be described under one HCPCS code in order to simplify bidding and 

claims processing procedures. The current HCPCS codes for standard power wheelchairs 

include all group 1 and group 2 power wheelchairs that cannot accommodate rehabilitative 

accessories and features described by codes K0813 thru K0829 in the HCPCS. In view of 

comments to the ANPRM expressing concern regarding beneficiary impact of bundled 

arrangements for users of highly configured manual wheelchairs, we are requesting comment on 

what safeguards and monitoring approaches we should use to ensure that access to these items is 

not disrupted for individuals transitioning between settings and/or residing in remote areas. 

We selected the categories of standard manual and power wheelchairs because we believe 

that payment on a separate, piecemeal basis for hundreds of various wheelchair options and 

accessories is unnecessary and overly complex. In addition, issues have been raised regarding 

access to repair of beneficiary-owned wheelchairs following the 13-month capped rental period. 

For example, there are hundreds of codes for various wheelchair accessories and separate 

payment for each of these items in addition to the payment for the wheelchair. The separate 
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billing, processing and payment of these claims would not be necessary given that the supplier 

can factor the costs of accessories into their bid for furnishing the rented equipment. In addition, 

the beneficiary’s needs may change such that the beneficiary needs a different type of accessory 

from the one that was initially furnished by the supplier. Under the current rules, the accessory 

may not be covered if it is similar to the one that was already paid for by Medicare. If payments 

for all types of accessories are included in an ongoing, monthly rental amount for the wheelchair, 

the beneficiary can receive other accessories included in the program, provided such accessories 

are medically necessary. 

We seek comments on this proposal. 

e. CPAP and respiratory assist devices 

We propose to implement future competitions for CPAP and respiratory assist devices in 

no more than 12 CBAs, where payment would be based on bids submitted for furnishing the 

CPAP or respiratory assist device and supplies, accessories, and services needed on a monthly 

basis. We propose that the suppliers would submit a single bid for each device for each CBA for 

furnishing all items and services needed on a monthly basis. We are soliciting comments on our 

proposal as well as whether all CPAP and respiratory assist devices should be described under 

one HCPCS code in order to simplify bidding and claims processing procedures. We selected 

the category of CPAP and respiratory assist devices because we believe the cost of paying 

separately for the expensive accessories used with these devices may exceed the amount of 

savings achieved from capping the rental payments for the equipment. We seek comments on 

this proposal. 

f. Hospital beds 

We propose to implement future competitions for hospital beds in no more than 12 
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CBAs, where payment would be based on bids submitted for furnishing hospital beds and all 

accessories used in conjunction with the hospital beds on a monthly basis. We propose that the 

suppliers would submit a single bid for each HCPCS code describing the hospital bed for each 

CBA for furnishing the hospital bed and all accessories and services needed on a monthly basis. 

We are soliciting comments on whether all hospital beds should be described under one HCPCS 

code in order to simplify bidding and claims processing procedures. We selected the category of 

hospital beds to allow us to determine the impact of the continuous monthly rental payment rule 

under CBP on beneficiary access, utilization rate and cost for an item that currently does not 

have beneficiary access issues or issues related to excessive cost for repair and accessories. We 

seek comments on this proposal. 

g. Transition rules 

 We propose to revise the regulation at 42 CFR §414.409 to the include supplier transition 

rules for enteral nutrition, oxygen and oxygen equipment, standard manual wheelchairs, standard 

power wheelchairs, CPAP and respiratory assist devices, and hospital beds that would be paid in 

accordance with the rules proposed in this section. We also propose to revise the regulation at 42 

CFR §414.408 to provide a cross reference to proposed §414.409. We propose that changes in 

suppliers from a non-contract supplier to a contract supplier at the beginning of the CBP where 

the proposed payment rules would apply would simply result in the contract supplier taking on 

responsibility for meeting all of the beneficiary’s monthly needs while receiving payment for 

each month of service. We developed these proposed rules based on that fact that for capped 

rented DME and oxygen and oxygen equipment, since rental caps would not apply under the 

proposed rules, there would be no need to restart or extend capped rental periods when a 

beneficiary transitions from a non-contract supplier to a contract supplier. We propose that 
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supply arrangements for oxygen and oxygen equipment, and rental agreements for standard 

manual wheelchairs, standard power wheelchairs, CPAP devices, respiratory assist devices, and 

hospital beds entered into before the start of a CBP and application of the payment rules 

proposed in this section would be allowed to continue so long as the supplier agrees to furnish all 

necessary supplies and accessories used in conjunction with the rented equipment and needed on 

a monthly basis. We propose that non-contract suppliers in these cases would have the option to 

continue rental agreements; however, we propose that as part of the process of allowing the 

rental agreements to continue, the grandfathered supplier would be paid based on the payment 

rules proposed in this section and based on the SPAs established under the CBPs incorporating 

the proposed rules. 

 We solicit comments on this proposed process. 

We propose that in the event that a beneficiary relocates from a CBA where the rules 

proposed in this section apply to an area where rental cap rules apply, that a new period of 

continuous use would begin for the capped rental item, enteral nutrition equipment, or oxygen 

equipment as long as the item is determined to be medically necessary. We believe these rules 

that would result in a new period of continuous use are necessary to safeguard beneficiary access 

to covered items and services and plan to closely monitor the impact these rules have on 

beneficiary cost sharing before phasing in these rules in more than a limited number of CBAs. 

 We seek comments on these proposals. 

h. Beneficiary-owned equipment 

We propose that separate payment for all repairs, maintenance and servicing, and 

replacement of supplies and accessories for beneficiary-owned DME or enteral nutrition 

equipment would cease in the CBAs where the payment rules proposed under this section are in 
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effect. We propose that if the beneficiary has a medical need for the equipment, the contract 

supplier would be responsible for furnishing new equipment and servicing that equipment. This 

option would ensure that beneficiaries continue to receive medically necessary equipment, 

including the supplies, accessories, maintenance and servicing that may be needed for such 

equipment. Please note that this would not apply to items which are not paid on a bundled, 

continuous rental basis. We propose to revise the regulations at § 414.409 to specify that any 

beneficiary who owns DME or enteral nutrition equipment and continues to have a medical need 

for the items should these rules take effect in a CBA where they reside, would have the option to 

obtain new equipment, if medically necessary, and related servicing from a contract supplier. We 

are requesting comment as to whether a transitional process should be considered when claims 

are selected for review to determine whether they are reasonable and necessary and other 

safeguards are required to ensure timely delivery of the replacement DME so that individuals’ 

mobility and ability to live independently is not adversely impacted by delays. While this could 

potentially increase beneficiary cost sharing, it would eliminate issues associated with repair of 

beneficiary-owned equipment. We plan to closely monitor the impact of this proposed 

provision, should it be finalized. 

We seek comments on this proposal, including issues related to the ability of low income 

beneficiaries to afford additional cost sharing, and how best to monitor beneficiary impact within 

the 12 CBAs in which these new rules would be phased in. 

2. Responsibility for repair of beneficiary-owned power wheelchairs furnished under CBPs 

 We propose to revise the regulation at 42 CFR § 414.409 to add a new payment rule that 

would apply to future competitions for standard power wheelchairs in no more than 12 CBAs 

where payment is made on a capped rental basis and not on the basis of the rules proposed under 
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§1 above. In these CBPs, we propose that contract suppliers for power wheelchairs would be 

responsible for all necessary repairs and maintenance and servicing of any power wheelchairs 

they furnish during the contract period under the CBP, including repairs and maintenance and 

servicing of power wheelchairs after they have transferred title to the equipment to the 

beneficiary. We propose that this responsibility would end when the reasonable useful lifetime 

established for the power wheelchair expires, medical necessity for the power wheelchair ends, 

the contract period ends, or the beneficiary relocates outside the CBA. We propose that the 

contract supplier would not receive separate payment for these services and would factor the 

costs of these services into their bids. We believe that based on existing maintenance and 

servicing requirements, suppliers could project the cost of continuing to repair and service 

equipment of various ages once title to the equipment has transferred to the beneficiary. As 

indicated above, under existing rules, the supplier that transfers title to the equipment to the 

beneficiary after the 13 month period of continuous use is not held responsible for repairing the 

equipment they furnish after the beneficiary takes over ownership of the equipment. Therefore, 

we believe the propose rule would safeguard the beneficiary and better ensure that the 

beneficiary continues to have equipment in good working order to meet their needs. We propose 

that the contract supplier would not be responsible for repairing power wheelchairs they did not 

furnish. We propose that services to repair beneficiary-owned equipment furnished prior to the 

start of the contract period would be paid in accordance with the standard payment rules at § 

414.210(e). 

 We seek comments on this proposal. 

3. Phasing in the proposed payment rules in CBAs 
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We propose that the CBAs where the proposed rules in §§ 1 or 2 above would be applied 

would be for MSAs with a general population of at least 250,000 and a Medicare Part B 

enrollment population of at least 20,000 that are not already included in Round 1 or 2. Based on 

2012 population estimates from the Census Bureau and 2011 Medicare enrollment data, there are 

approximately 80 MSAs that would satisfy this criteria. Selecting MSAs not already included in 

Round 1 or 2 would allow competitions and rules associated with these competitions to begin 

after the final rule would take effect in areas that are comparable to existing CBAs. We propose 

that the boundaries of the CBAs would be established in accordance with the rules set forth at §§ 

414.406 and 414.410. We propose that additional CBPs for the items identified in §§ 1 and 2 

above be established in “comparator” CBAs concurrent with CBPs where the proposed rules 

would be applied. Payment for items and services in the comparator CBAs would be made in 

accordance with the existing payment rules in § 414.408. We propose that these additional 

comparator CBAs and CBPs be established to facilitate our analysis of the effect of the payment 

rules proposed in sections 1 and 2 above compared to the effect of the existing payment rules in 

§ 414.408. We propose that for each CBP where either the rules in section 1 or 2 above are 

implemented, a comparator CBA and CBP would be established. We propose that the 

comparator CBAs be selected so that they are located in the same state as the CBA where the 

special payment rules would apply and are similar to the CBAs in which the proposed payment 

rules would be implemented based on a combination of factors that could include geographic 

location (region of the country), general population, beneficiary population, patient mix, and 

utilization of items. We are proposing to establish the comparator CBAs and CBPs to enable us 

to review the impact of the proposed payment rules on expenditures, quality, and access to items 
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and services in order to determine whether to pursue future rulemaking to expand the proposed 

payment rules to additional areas and or items. 

We seek comments on this proposal. 

4. Submitting bids for items paid on a continuous rental basis 

 In accordance with section 1847(b)(2)(A)(iii) of the Act, before contracts can be 

awarded, a determination must be made that the total amounts to be paid to contract suppliers 

under a CBP are expected to be less than the total amounts that would otherwise be paid. In 

accordance with §414.414(f) of the regulations, under the DMEPOS CBP, bids amounts for an 

item or service are limited to the fee schedule amount that would otherwise be paid for the item 

or service. We propose that in order to apply the proposed rental payment rules, we would 

establish the bid limits for enteral nutrition, oxygen and oxygen equipment, standard manual 

wheelchairs, standard power wheelchairs, and hospital beds that would be paid in accordance 

with the proposed payment rules in sections 1 and 2 above based on average monthly 

expenditures per beneficiary in an area for the items and services related to furnishing the DME. 

For example, the bid limit for the continuous monthly rental of a standard manual wheelchair in 

a CBA would be based on the total payment amounts per month in the area for the wheelchair, 

repair, maintenance and servicing of the wheelchair, and accessories used with the wheelchair, 

divided by the unduplicated number of beneficiaries receiving these items and services. We 

propose to revise § 414.412 to specify that the supplier’s bid for furnishing enteral nutrition, 

oxygen and oxygen equipment, standard manual wheelchairs, standard power wheelchairs, and 

hospital beds on a continuous monthly rental basis could not be higher than the average monthly 

payment made in the area for the items and services prior to the start of the competition. In the 

case of CPAP devices and respiratory assist devices, these items were paid on a bundled, 
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continuous rental fee schedule basis from 1989 thru 1993, based on the rules mandated by 

section 4062(b) of OBRA 87, prior to the change by section 13543 of OBRA 93 that moved 

them from the payment class for items requiring frequent and substantial servicing to the 

payment class for capped rental items. Payment on a bundled, continuous rental fee schedule 

basis was mandated by OBRA 87 from 1989 thru 1993. The fee schedule for 1993 is the most 

current fee schedule where payment was based on a bundled, continuous rental basis. We 

propose to revise § 414.412 to specify that the supplier’s bid for furnishing CPAP devices and 

respiratory assist devices on a continuous monthly rental basis could not be higher than the 1993 

fee schedule amounts for these items, increased by the covered item update factors provided for 

these items in section 1834(a)(14) of the Act. We seek comments on this proposal. 

 We seek public comments on phasing in the proposed rules described in section 1 

through 4 above.

VII. Scope of Hearing Aid Coverage Exclusion

A. Background 

Section 1862(a)(7) of the Act states notwithstanding any other provision of title XVIII, 

no payment may be made under part A or part B for any expenses incurred for items or services 

“where such expenses are for . . . hearing aids or examinations therefor. . . .” This policy is 

codified in the regulation at 42 CFR 411.15(d), which specifically states that hearing aids or 

examination for the purpose of prescribing, fitting, or changing hearing aids are excluded from 

Medicare coverage. At the time of passage of the Social Security Amendments of 1965 (Public 

Law 97, 89th Congress), which added the Medicare coverage exclusion for hearing aids at section 

1862(a)(7) of the Act, all hearing aids utilized functional air and/or bone conduction pathways to 

facilitate hearing. 
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In general, to be covered by Medicare, an item or service must fall within one or more 

benefit categories contained within Part A or Part B, and must not be otherwise excluded from 

coverage. With regard to section 1862(a)(7) of the Act, we consider that a hearing aid provides 

assistance or "aid" to hearing that already exists via a functioning ear. Cochlear implants were 

the first hearing device that was not considered a hearing aid and met the benefit category of a 

prosthetic device. Prosthetic devices are a Medicare benefit category defined at section 

1861(s)(8) of the Act which, in part, states a "prosthetic devices (other than dental) which replace 

all or part of an internal body organ." A cochlear implant is considered a prosthetic device 

primarily because it replaces the function of the cochlea. A cochlear implant device differs from 

a hearing aid in that it is an electronic instrument, part of which is implanted surgically to 

directly stimulate auditory nerve fibers, and part of which is worn or carried by the individual to 

capture, analyze and code sound. Both cochlear devices and brain stem implants, which function 

in a similar manner, create the perception of sound rather than aid hearing that already exists. 

We interpret the statute as excluding devices that provide aid to extant hearing (or hearing aids) 

rather than devices that create the perception of sound and hearing, given that devices with 

technology that utilize either air or bone conduction via mechanical stimulation to aid extant 

hearing were primarily utilized when the statute was written. Moreover, we believe that 

prosthetic hearing devices are not “hearing aids” given that such devices do more than “aid” in 

hearing and instead replace the function of an internal body organ (i.e., a part of the ear). 

Historically, CMS has periodically addressed the scope of the Medicare hearing aid 

coverage exclusion through program instructions and national coverage policies or 

determinations. We briefly discuss the relevant changes that have occurred over time with 

regard to Medicare coverage and payment of hearing devices. 
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Cochlear implants were the first device covered for Medicare payment for adult 

beneficiaries in October 1986, when no other hearing device was being covered under Medicare, 

and such coverage was supported by the Office of Health Technology Assessment’s “Public 

Health Service Assessment of Cochlear Implant Devices for the Profoundly Hearing Impaired”, 

dated June 30, 1986 found at 

https://archive.org/stream/cochlearimplantd00feig/cochlearimplantd00feig_djvu.txt. Medicare 

coverage was restricted to cochlear implants that treated patients with post lingual, profound, 

bilateral, sensorineural deafness who are stimulable and who lack the unaided residual auditory 

ability to detect sound. 

Effective January 1, 2003, we clarified that the hearing aid exclusion broadly applied to 

all hearing aids that utilized functional air and/or bone conduction pathways to facilitate hearing 

(see section 15903, Hearing Aid Exclusion, Medicare Carriers Manual, Part 3 – Claims Process 

(HCFA-Pub. 14-3), which was later moved to section 100, Hearing Aids and Cochlear Implants, 

of Chapter 16, of the Medicare Benefit Policy Manual, CMS-Pub. 100-02). Any device that does 

not produce at its output an electrical signal that directly stimulates the auditory nerve is a 

hearing aid for purposes of coverage under Medicare. Devices that produce air conduction 

sound into the external auditory canal, devices that produce sound by mechanically vibrating 

bone, or devices that produce sound by vibrating the cochlear fluid through stimulation of the 

round window are considered hearing aids and excluded from Medicare coverage. 

Effective April 4, 2005, Medicare's national coverage policy for cochlear implants was 

modified through the NCD process (see section 65-14 of the Medicare Coverage Issues Manual 

(HCFA-Pub. 6), which was later moved to section 50.3, Cochlear Implantation, of Chapter 1, 

Part 1 of the Medicare National Coverage Determinations Manual (CMS-Pub. 100-03)). Our 
CMS-1614-P 292 

 

findings under the NCD, in part, state that "CMS has determined that cochlear implants fall 

within the benefit category of prosthetic devices under section 1861(s)(8) of the Social Security 

Act." Medicare is a defined benefit program. An item or device must not be statutorily excluded 

and fall within a benefit category as a prerequisite to Medicare coverage. We believe that 

prosthetic hearing devices are not “hearing aids” given that such devices do more than “aid” in 

hearing and instead replace the function of an internal body organ (i.e., a part of the ear). 

Additional changes, regarding coverage criteria, have been made to NCD 50.3 over time, 

however, the NCD decision regarding benefit category and Medicare coverage for cochlear 

implantation has remained consistent. The NCD states that a cochlear implant device is an 

electronic instrument, part of which is implanted surgically to stimulate auditory nerve fibers, 

and part of which is worn or carried by the individual to capture, analyze, and code sound. 

Cochlear implant devices are available in single-channel and multi-channel models. The purpose 

of implanting the device is to provide awareness and identification of sounds and to facilitate 

communication for persons who are moderately to profoundly hearing impaired. 

The regulations at 42 CFR §419.66 were revised to add new requirements, effective 

January 1, 2006, for transitional pass-through payments for medical devices. The auditory 

osseointegrated device, referred to as a bone anchored hearing aid (BAHA), was determined to 

be a new device category according to the new requirements for transitional pass-through 

payment. Medicare coverage was also expanded to cover auditory osseointegrated and auditory 

brainstem devices as prosthetic devices. Currently, section 100 of Chapter 16 of the Medicare 

Benefit Policy Manual (CMS Pub. 100-02) reads as follows: 

Hearing aids are amplifying devices that compensate for impaired hearing. 

Hearing aids include air conduction devices that provide acoustic energy to the cochlea 
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via stimulation of the tympanic membrane with amplified sound. They also include bone 

conduction devices that provide mechanical energy to the cochlea via stimulation of the 

scalp with amplified mechanical vibration or by direct contact with the tympanic 

membrane or middle ear ossicles. 

Certain devices that produce perception of sound by replacing the function of the 

middle ear, cochlea, or auditory nerve are payable by Medicare as prosthetic devices. 

These devices are indicated only when hearing aids are medically inappropriate or cannot 

be utilized due to congenital malformations, chronic disease, severe sensorineural hearing 

loss or surgery. 

The following are considered prosthetic devices: 

• Cochlear implants and auditory brainstem implants, that is, devices that replace 

the function of cochlear structures or auditory nerve and provide electrical energy to 

auditory nerve fibers and other neural tissue via implanted electrode arrays. 

• Osseointegrated implants, that is, devices implanted in the skull that replace the 

function of the middle ear and provide mechanical energy to the cochlea via a mechanical 

transducer. 

B. Current Issues 

We have received several benefit category determination requests in recent years for the 

consideration of non-implanted, bone conduction hearing aid devices for single-sided deafness, 

as prosthetic devices under the Medicare benefit. We have received similar requests for several 

other types of implanted and non-implanted devices as well. In response to these requests, we 

have re-examined the scope of the statutory hearing aid exclusion. Currently, we consider all air 

or bone conduction hearing devices, whether external, internal, or implanted, including, but not 
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limited to, middle ear implants, osseointegrated devices, dental anchored bone conduction 

devices, and other types of external or non-invasive devices that mechanically stimulate the 

cochlea, as hearing aids. All of these devices provide traditional "aid" to hearing and are 

excluded in accordance with section 1862(a)(7) of the Act. In order for an item to be covered by 

Medicare, it must fall into a Medicare benefit category and not be statutorily excluded. Not only 

are these devices statutorily excluded they do not fall in a benefit category. Specifically, they do 

not meet the statutory definition of a prosthetic device found at section 1861(s)(8) of the Act 

which, in part, states a "prosthetic devices (other than dental) which replace all or part of an 

internal body organ." They do not replace the function of an internal body organ and thus are not 

considered prosthetic devices under Medicare payment policy. In regard to BAHA, it is a bone 

conduction hearing aid device that is osseointegrated. There are currently only two hearing 

devices that are not statutorily excluded and are a covered Medicare item that fall into the 

prosthetic benefit category; namely, the cochlear implant and the auditory brainstem device. 

These two devices meet the definition of a prosthetic device in that they replace the function of 

the inner ear consistent with the definition of prosthetic devices described in section 1861(s)(8) 

of the Act . 

C. Proposed Provisions 

After further considering the statutory Medicare hearing aid exclusion under section 

1862(a)(7) of the Act, and re-examining the different types of external and implanted devices, we 

propose to interpret the term “hearing aid” to include all types of air or bone conduction hearing 

aid devices, whether external, internal, or implanted, including, but not limited to, middle ear 

implants, osseointegrated devices, dental anchored bone conduction devices, and other types of 

external or non-invasive devices that mechanically stimulate the cochlea. We believe, based on 
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our understanding of how such devices function, that such devices are hearing aids that are not 

otherwise covered as prosthetic devices, in that they do not replace all or part of an internal body 

organ. Therefore, we propose to modify the regulation at §411.15(d)(1) to specify that the 

hearing aid exclusion encompasses all types of air conduction and bone conduction hearing aids 

(external, internal, or implanted). Osseointegrated devices such as the BAHA are bone 

conduction hearing aids that mechanically stimulate the cochlea; therefore, we believe that the 

hearing aid exclusion applies to these devices and propose that Medicare should not cover these 

devices, consistent with our interpretation of section 1862(a)(7) of the Act. In addition, an NCD 

was issued for cochlear implant devices with the result that this determination and recent 

requests to expand coverage of hearing devices raises serious questions about the intent and 

scope of the Medicare coverage exclusion for hearing aids. It is for these reasons that we are 

addressing the hearing aid coverage exclusion in notice and comment rulemaking, and believe 

that the BAHA device qualifies as a hearing aid because it functions like other bone conduction 

hearing aids that are subject to the Medicare statutory coverage exclusion for hearing aids. 

We continue to believe that the hearing aid exclusion does not apply to brain stem 

implants and cochlear implants because these devices directly stimulate the auditory nerve, 

replacing the function of the inner ear rather than aiding the conduction of sound as hearing aids 

do. Therefore, we are not proposing any changes to our current policy about brain stem implants 

and cochlear implants and how such implants fall outside of the hearing aid statutory exclusion 

(that is, such devices would fall outside the Medicare coverage exclusion for hearing aids and 

remain covered subject to the Medicare NCD 50.3 found at https://www.cms.gov/Regulationsand-Guidance/Guidance/Manuals/downloads/ncd103c1_Part1.pdf). We propose, however, to 
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modify § 411.15(d)(2) to specifically note that such devices do not fall within the hearing aid 

exclusion. 

We seek public comment on this proposal. 

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

A. Background 

 Section 1847 (a)(1)(A) of the Act mandates the implementation of CBPs throughout the 

United States for awarding contracts for furnishing competitively priced items and services, 

including OTS orthotics described in section 1847(a)(2)(C) of the Act (leg, arm, back or neck 

braces described in section 1861(s)(9) of the Act for which payment would otherwise be made 

under section 1834(h)) which require minimal self-adjustment for appropriate use and do not 

require expertise in trimming, bending, molding, assembling, or customizing to fit the individual. 

The regulation at 42 CFR §414.402 currently defines “minimal self-adjustment” as “an 

adjustment that the beneficiary, caretaker for the beneficiary, or supplier of the device can 

perform and does not require the services of a certified orthotist (that is, an individual who is 

certified by either the American Board for Certification in Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist Certification) or an individual who has specialized training." This 

current definition was proposed in the 71 FR 25669 (May 1, 2006) Notice for Proposed 

Rulemaking (NPRM) but did not include the term "individual with specialized training." The 

definition was finalized in the 72 FR 18022 (April 10, 2007) Final Rule with the term "individual 

with specialized training" added after receiving comments that disagreed with the May 2006 

definition and pointed out that occupational therapists, physical therapists, and physicians are 

licensed and trained to provide orthotics. 

B. Current Issues 
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 Since adoption of the minimal self-adjustment definition there has been some concerns 

raised by industry and other stakeholders regarding who is considered an individual with 

specialized training. We have had many inquiries and comments that this term is too ambiguous 

and left open for interpretation. In order to identify OTS orthotics for the purpose of 

implementing CBPs for these items and services in accordance with the statute, we need a clearer 

distinction between OTS orthotics and those that require more than minimal self-adjustment and 

expertise in custom fitting. In doing so, we believe it is essential to identify the credentials and 

training a supplier needs to have in order to be considered a supplier with expertise in custom 

fitting; therefore, we believe the term "individual with specialized training" must be clarified. 

We believe these professionals must have specialized training equivalent to a certified orthotist 

for the provision of custom fitted orthotic devices such that these professionals satisfy 

requirements concerning higher education, continuing education requirements, licensing, and 

certification/registration requirements so that they meet a minimum professional skill level in 

order to ensure the highest standard of care and safety for Medicare beneficiaries. 

This would also help to prevent any supplier without expertise in custom fitting orthotics 

from potentially circumventing the competitive bidding process by furnishing custom fitting they 

are not qualified to provide in the event that they are not awarded a contract for furnishing OTS 

orthotics in their service area as the custom fitted devices are not statutorily included in the CBP. 

In addition, for claims processing and payment system purposes under the CBP, we need 

to identify OTS orthotics, which we accomplish with codes in the HCPCS. The HCPCS codes 

are used on claims to identify the items and services furnished to the beneficiary, that is, to 

identify orthotics that are furnished OTS and subject to the CBP and to identify orthotics that 

have been custom fitted by suppliers with expertise. On February 9, 2012, CMS issued initial 
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guidance identifying specific HCPCS codes considered OTS orthotics and provided a 60-day 

comment period posted at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/DMEPOSFeeSched/OTS_Orthotics.html. We received 185 comments. There was no 

general consistency between the various commenters on which specific HCPCS codes the 

commenters believed were appropriately deemed OTS. Many commenters expressed their 

support for the proposed list while others made numerous useful recommendations to improve 

the OTS list. We considered each comment and performed a thorough review of the individual 

HCPCS codes and devices included in the codes to assess appropriate orthotic categorization. 

Through this process we identified HCPCS codes that described items that we believe are never 

furnished OTS, HCPCS codes that described items that are always furnished OTS, and HCPCS 

codes that described items that may or may not be furnished OTS, depending on whether more 

than minimal fitting and adjustment of a particular device by an expert is necessary for a 

particular patient. In order to address this issue we decided to create HCPCS codes for items that 

may or may not be custom fitted, depending on individual patient’s needs, into separate codes 

that described the item when it has been furnished OTS and when it has been custom fitted. The 

new HCPCS codes were published and became effective January 1, 2014 and are published at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/DMEPOSFeeSched/OTS_Orthotics.html. 

C. Proposed Provisions 

 Prefabricated orthotics are either furnished OTS or with custom fitting and are identified 

in the HCPCS. As noted above, with regard to minimal self-adjustment, § 414.402 in part 

identifies an individual with expertise in fitting as a certified orthotist or an individual with 

specialized training. Recently a DME Medicare Administrative Contractor (MAC) Web Site 
CMS-1614-P 299 

 

Article entitled "Correct Coding - Definitions used for Off-the-Shelf versus Custom Fitted 

Prefabricated Orthotics (Braces) – Revised," was published March 27, 2014, and included: a 

physician, a treating practitioner, , an occupational therapist, or physical therapist in compliance 

with all applicable Federal and State licensure and regulatory requirements. The DME MAC 

published this article following the change in 2014 HCPCS codes for OTS and custom fitted 

orthotics as an education tool for Medicare enrolled DMEPOS suppliers. We believe physicians, 

treating practitioners, occupational therapists, and physical therapists are considered "individuals 

with specialized training" that possess training equivalent to a certified orthotist for the provision 

of custom fitted orthotic devices through their individual degree programs and continuing 

education requirements. In addition, physicians, treating practitioners, occupational therapists, 

and physical therapists possess equivalent or higher educational degrees, continuing education 

requirements, licensing, and certification and/or registration requirements. We believe these 

professionals meet a minimum professional skill level in order to ensure the highest standard of 

care and safety for Medicare beneficiaries. Each of these professionals has undergone medical 

training in various courses such as kinesiology and anatomy. For example, through coursework 

the named medical professionals gain a clinical understanding of the human body, proper 

alignment, normal range of motion, agonist and antagonist relationship, and biomechanics 

necessary to modify a custom fitted orthotic device properly. 

Clinical providers such as assistants, fitters, and manufacturer representatives that work 

under the supervision of the individual with specialized training must do so as required under 

their governing body Code of Ethics and supervision standards as well as state licensure 

requirements. These individuals are not considered to have specialized training for the purposes 
CMS-1614-P 300 

 

of providing custom fitting; therefore, orthotics adjusted by these individuals but not by 

individuals with specialized training would still be considered OTS. 

The current regulation of orthotic provision in the U.S. is inconsistent between individual 

States. There are currently 17 States that require licensure in P&O. In States that do require 

licensure for the provision of orthotics, individual states do not all recognize certified orthotic 

fitters and do not provide licensure for this level of provider. This inconsistency also prompts us 

to provide clarification on the individuals who are recognized as having specialized training for 

the purposes of determining what constitutes minimal self-adjustment of OTS orthotics. 

We propose to update the definition of minimal self-adjustment in § 414.402 to codify an 

individual with specialized training includes: a physician defined in section 1861(r) of the Act, a 

treating practitioner defined at section 1861(aa)(5) (physician assistant, nurse practitioner, or 

clinical nurse specialist), an occupational therapist defined at 42 CFR § 484.4, or physical 

therapist defined at 42 CFR § 484.4, who is in compliance with all applicable Federal and State 

licensure and regulatory requirements for reasons discussed above. We seek comments on this 

proposal. 

IX. Revision to Change of Ownership Rules to Allow Contract Suppliers to Sell Specific 

Lines of Business 

A. Background 

 Section 1847(a) of the Act, as amended by section 302(b)(1) of the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173), requires the 

Secretary to establish and implement CBPs in CBAs throughout the United States for contract 

award purposes for the furnishing of certain competitively priced DMEPOS items and services. 

The programs mandated by section 1847(a) of the Act are collectively referred to as the 
CMS-1614-P 301 

 

“Medicare DMEPOS Competitive Bidding Program.” The 2007 DMEPOS competitive bidding 

final rule (Medicare Program; Competitive Acquisition for Certain DMEPOS and Other Issues 

published in the Federal Register on April 10, 2007 (71 FR 17992)), required CBPs for certain 

Medicare Part B covered items of DMEPOS throughout the United States. The CBP, which was 

phased in over several years, utilizes bids submitted by qualified suppliers to establish applicable 

payment amounts under Medicare Part B for certain DMEPOS items for beneficiaries receiving 

services in designated CBAs. 

CMS awards contracts to those suppliers who meet all of the competitive bidding 

requirements and whose composite bid amounts fall at or below the pivotal bid (the bid at which 

the capacity provided by qualified suppliers meets the demand for the item). These qualified 

suppliers will be offered a competitive bidding contract for that PC, provided there are a 

sufficient number of qualified suppliers (there must be at a minimum of 2) to serve the area. 

Contracts are awarded to multiple suppliers for each PC in each CBA and will be re-competed at 

least once every 3 years. 

 CMS specifies the duration of the contracts awarded to each contract supplier in the 

Request for Bid Instructions. We also conduct extensive bidder education where we inform 

bidders of the requirements and obligations of contract suppliers. Each winning supplier is 

awarded a single contract that includes all winning bids for all applicable CBAs and PCs. A 

competitive bidding contract cannot be subdivided. For example, if a contract supplier breaches 

its contract, the entire contract is subject to termination. In the Physician Fee Schedule final rule 

published on November 29, 2010, we stated that “once a supplier’s contract is terminated for a 

particular round due to breach of contract under the DMEPOS CBP, the contract supplier is no 

longer a DMEPOS contract supplier for any DMEPOS CBP PC for which it was awarded under 
CMS-1614-P 302 

 

that contract. This termination applies to all areas and PCs because there is only one contract 

that encompasses all CBAs and PCs for which the supplier was awarded a contract.” (75 FR 

73578) 

A competitive bidding contract cannot be sold. However, CMS may permit the transfer 

of a contract to an entity that merges with or acquires a competitive bidding contract supplier if 

the new owner assumes all rights, obligations, and liabilities of the competitive bidding contract 

pursuant to regulations at 42 CFR §414.422(d). 

 For the transfer of a contract to be considered, the CHOW must include the assumption of 

the entire contract, including all CBAs and PCs awarded under the contract. 

B. Proposed Provisions 

 We propose to revise § 414.422(d) to permit transfer of part of a competitive bidding 

contract under specific circumstances. We believe requiring a transfer of the entire contract to a 

successor entity in all circumstances may be overly restrictive, and may be preventing routine 

merger and acquisition activity. To maintain integrity of the bidding process we award one 

contract that includes all the CBA/PCs combinations for which the supplier qualifies for and 

accepts as a contract supplier. This proposed rule would establish an exception to the prohibition 

against transferring part of a contract by allowing a contract supplier to sell a distinct company 

(for example, an affiliate, subsidiary, sole proprietor, corporation, or partnership) which 

furnishes one or more specific PCs or serves one or more specific CBAs and transfer the portion 

of the contract initially serviced by the distinct company, including the PC(s), CBA(s), and 

location(s), to a qualified successor entity who meets all competitive bidding requirements (i.e., 

financial standards, licensing, and accreditation). The proposed exception would not apply to 

existing contracts but would apply to contracts issued in all future rounds of the program, starting 
CMS-1614-P 303 

 

with the Round 2 Recompete. As required in § 414.422(d) we are also requiring a contract 

supplier that wants to sell a distinct company which furnishes one or more specific PCs or 

serves one or more specific CBAs to notify CMS 60 days before the anticipated date of a change 

of ownership. If documentation is required to determine if a successor entity is qualified that 

documentation must be submitted within 30 days of anticipated change of ownership, pursuant to 

§ 414.422(d)(2)(ii). We propose that CMS would then modify the contract of the original 

contract supplier by removing the affected PC(s), CBA(s) and locations from the original 

contract. For CMS to approve the transfer, we propose that several conditions would have to be 

met. First, we propose that every CBA, PC, and location of the company being sold must be 

transferred to the new owner. Second, we propose that all CBAs and PC's in the original 

contract that are not explicitly transferred by CMS must remain unchanged in that original 

contract for the duration of the contract period unless transferred by CMS pursuant to a 

subsequent CHOW. Third, we propose that all requirements in 42 CFR § 414.422 (d)(2) must be 

met. Fourth, we propose that the sale of the company must include all of the company’s assets 

associated with the CBA and/or PC(s). Finally, we propose that CMS must determine that 

transferring part of the original contract will not result in disruption of service or harm to 

beneficiaries. No transfer will be permitted for purposes of this program if we determine that the 

new supplier does not meet the competitive bidding requirements (such as financial 

requirements) and does not possess all applicable licenses and accreditation for the product(s). 

In order for the transfer to occur, the contract supplier and successor entity must enter into a 

novation agreement with CMS and the successor entity must accept all rights, responsibilities 

and liabilities under the competitive bidding contract. Part of a novation agreement requires 

successor entity to “seamlessly continue to service beneficiaries.” We believe that these 
CMS-1614-P 304 

 

proposed conditions are necessary for proper administration of the program, to ensure that 

payments are made correctly and also to ensure continued contract accountability and viability 

along with continuity of service and access to beneficiaries. We specifically invite comments on 

whether more or different conditions would be appropriate. 

 In addition, we are proposing to update the current CHOW regulation, § 414.422(d) to 

clarify the language to make it easier to comprehend. The proposed changes reformat the 

regulation so that the requirements applicable to successor entities and new entities are listed 

separately. These proposed changes to the regulation are technical, and not substantive in nature. 

CMS seeks comments on all changes proposed for § 414.422. 

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

Contract

 We propose to modify the DMEPOS CBP's appeals process for termination of 

competitive bidding contracts under § 414.423. First, we propose to modify the effective date of 

termination in the termination notice CMS sends to a contract supplier found to be in breach of 

contract. Currently, the regulation at 42 CFR 414.423(b)(2)(vi) indicates that the effective date 

of termination is 45 days from the date of the notification letter unless a timely hearing request 

“has been” filed or corrective action plan “has been” submitted within 30 days of the effective 

date of the notification letter (emphasis added). We propose to change these references to 

provide additional clarification. This change would emphasize that the contract will 

automatically be terminated if the supplier does not time file a hearing request or submit 

corrective action plan. This proposed change is also being addressed at 42 CFR § 414.423(l). 

We propose deleting the lead-in sentence, as it does not properly lead into the first paragraph. 

Additionally, we propose inserting language from the lead-in sentence in the second paragraph to 
CMS-1614-P 305 

 

indicate that the contract supplier, “whose contract has been terminated,” must notify 

beneficiaries of the termination of their contract. Second, we propose to modify the deadline by 

which a supplier whose competitive bidding contract is being terminated must notify affected 

beneficiaries that it is no longer a contract supplier. Current regulations at 42 CFR § 

414.423(l)(2)(i) require a contract supplier to provide this notice within 15 days of receipt of a 

final notice of termination. We propose to change the beneficiary notification deadline to no 

later than 15 days prior to the effective date of termination. This proposed change is intended to 

provide beneficiaries with the protection of advanced notice prior to a contract supplier being 

terminated from the CBP so they have sufficient time to plan/coordinate their current and future 

DMEPOS needs. 

XI. Technical Change Related to Submitting Bids for Infusion Drugs under the DMEPOS 

Competitive Bidding Program

The standard payment rules for drugs administered through infusion pumps covered as 

DME are located at section 1842(o)(1)(D) of the Act, and mandate that payment for infusion 

drugs furnished through a covered item of DME on or after January 1, 2004, is equal to 95 

percent of the average wholesale price for such drug in effect on October 1, 2003. The 

regulations implementing section 1842(o)(1)(D) of the Act are located at 42 CFR § 414.707(a), 

under Subpart I of Part 414. Section 1847(a)(2)(A) of the Act mandates the establishment of 

CBPs for covered items defined in section 1834(a)(13), for which payment would otherwise be 

made under section 1834(a), including items used in infusion and drugs (other than inhalation 

drugs) and supplies used in conjunction with DME. Section 1847(b)(2)(A)(iii) of the Act 

prohibits the awarding of contracts under a CBP unless the total amounts to be paid to contract 

suppliers are expected to be less than would otherwise be paid. The regulations implementing 
CMS-1614-P 306 

 

section 1847(b)(2)(A)(iii) of the Act with respect to items paid on a fee schedule basis under 

Subparts C and D of Part 414 are located at 42 CFR § 414.412(b)(2), and specify that “the bids 

submitted for each item in a PC cannot exceed the payment amount that would otherwise apply 

to the item under Subpart C or Subpart D of this part.” In addition, the regulations regarding the 

conditions for awarding contracts under the DMEPOS CBP at 42 CFR § 414.414(f) state that “a 

contract is not awarded under this subpart unless CMS determines that the amounts to be paid to 

contract suppliers for an item under a CBP are expected to be less than the amounts that would 

otherwise be paid for the same item under subpart C or subpart D.” The regulations 

implementing of section 1847(b)(2)(A)(iii) of the Act did not address payments for drugs under 

subpart I, which was an oversight. We therefore propose to revise §§ 414.412(b)(2) and 

414.414(f) to include a reference to drugs paid under subpart I in addition to items paid under 

subparts C or D. We propose to revise § 414.412(b)(2) to specify that the bid amounts submitted 

for each drug in a PC cannot exceed the payment limits that would otherwise apply to the drug 

under subpart I of part 414. This concerns certain infusion drugs with payment limits equal to 95 

percent of the average wholesale price for the drug in effect on October 1, 2003, in accordance 

with §414.707(a)(3). See http://www.ecfr.gov/cgi-bin/textidx?c=ecfr&SID=7065f17b411e37b3788b6e7fcce21f89&rgn=div8&view=text&node=42:3.0.1.

1.1.9.1.3&idno=42 We propose to revise § 414.414(f) to specify that a contract is not awarded 

under this subpart unless CMS determines that the amounts to be paid to contract suppliers for 

infusion drugs provided with respect to external infusion pumps under a CBP are expected to be 

less than the amounts that would otherwise be paid to suppliers for the same drug under subpart I 

of part 414. We seek comments on this proposal. 

XII. Accelerating Health Information Exchange 
CMS-1614-P 307 

 

HHS believes all patients, their families, and their healthcare providers should have 

consistent and timely access to their health information in a standardized format that can be 

securely exchanged between the patient, providers, and others involved in the patient’s care. 

(HHS August 2013 Statement, “Principles and Strategies for Accelerating Health Information 

Exchange).” The Department is committed to accelerating health information exchange (HIE) 

through the use of electronic health records (EHRs) and other types of health information 

technology (HIT) across the broader care continuum through a number of initiatives including: 

1) alignment of incentives and payment adjustments to encourage provider adoption and 

optimization of HIT and HIE services through Medicare and Medicaid payment policies, 2) 

adoption of common standards and certification requirements for interoperable HIT, 3) support 

for privacy and security of patient information across all HIE-focused initiatives, and 4) 

governance of health information networks. These initiatives are designed to encourage HIE 

among health care providers, including professionals and hospitals eligible for the Medicare and 

Medicaid EHR Incentive Programs and those who are not eligible for the EHR Incentive 

programs, and are designed to improve care delivery and coordination across the entire care 

continuum. For example, the Transition of Care Measure #2 in Stage 2 of the Medicare and 

Medicaid EHR Incentive Programs requires HIE to share summary records for at least 10 percent 

of care transitions. In addition, to increase flexibility in ONC's regulatory certification structure 

and expand HIT certification, ONC has proposed a voluntary 2015 Edition EHR Certification 

rule to more easily accommodate HIT certification for technology used by all health care settings 

to facilitate greater HIE across the entire care continuum. 

We believe that HIE and the use of certified EHRs can effectively and efficiently help 

ESRD facilities and nephrologists improve internal care delivery practices, support management 
CMS-1614-P 308 

 

of patient care across the continuum, and support the reporting of electronically specified clinical 

quality measures (eCQMs). More information on the 2015 Edition EHR certification rule can be 

found at: http://healthit.gov/policy-researchers-implementers/standards-and-certificationregulations

XIII. Collection of Information Requirements 

A. Legislative Requirement for Solicitation of Comments 

Under the Paperwork Reduction Act of 1995, we are required to provide 60-day notice in 

the Federal Register and solicit public comment before a collection of information requirement 

is submitted to the Office of Management and Budget (OMB) for review and approval. In order 

to fairly evaluate whether an information collection requirement should be approved by OMB, 

section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires that we solicit comment 

on the following issues: 

● The need for the information collection and its usefulness in carrying out the proper 

functions of our agency. 

● The accuracy of our estimate of the information collection burden. 

● The quality, utility, and clarity of the information to be collected. 

● Recommendations to minimize the information collection burden on the affected 

public, including automated collection techniques. 

B. Requirements in Regulation Text 

In section II.F of this proposed rule, we are proposing changes to regulatory text for the 

ESRD PPS in CY 2015. However, the changes that are being proposed do not impose any new 

information collection requirements. 

C. Additional Information Collection Requirements 
CMS-1614-P 309 

 

This proposed rule does not impose any new information collection requirements in the 

regulation text, as specified above. However, this proposed rule does make reference to several 

associated information collections that are not discussed in the regulation text contained in this 

document. The following is a discussion of these information collections. 

1. ESRD QIP 

The information collection requirements associated with the ESRD QIP are currently 

approved under OMB control number 0938-0386. 

a. Data Validation Requirements for the PY 2017 ESRD QIP 

Section III.F.9 in this proposed rule outlines our data validation proposals for PY 2017. 

Specifically, we propose to randomly sample records from 300 facilities as part of our continuing 

pilot data-validation program. Each sampled facility would be required to produce 

approximately 10 records, and the sampled facilities will be reimbursed by our validation 

contractor for the costs associated with copying and mailing the requested records. The burden 

associated with these validation requirements is the time and effort necessary to submit the 

requested records to a CMS contractor. We estimate that it will take each facility approximately 

2.5 hours to comply with this requirement. If 300 facilities are asked to submit records, we 

estimate that the total combined annual burden for these facilities will be 750 hours (300 

facilities x 2.5 hours). According to the Bureau of Labor Statistics, the mean hourly wage of a 

registered nurse is $33.13/hour. Since we anticipate that nurses (or administrative staff who 

would be paid at a lower hourly wage) would submit this data, we estimate that the aggregate 

cost of the CROWNWeb data validation would be $24,847.50 (750 hours x $33.13/hour) total or 

$82.83 ($24,847.50 / 300 facilities) per facility in the sample. 

Under the proposed feasibility study for validating data reported to the NHSN Dialysis 
CMS-1614-P 310 

 

Event Module, we propose to randomly select nine facilities to provide CMS with a quarterly list 

of all positive blood cultures drawn from their patients during the quarter, including any positive 

blood cultures collected on the day of, or the day following, a facility patient’s admission to a 

hospital. A CMS contractor will review the lists to determine if dialysis events for the patients in 

question were accurately reported to the NHSN Dialysis Event Module. If we determine that 

additional medical records are needed to validate dialysis events, facilities will be required to 

provide those records within 60 days of a request for this information. We estimate that the 

burden associated with this feasibility study will be the time and effort necessary for each 

selected facility to compile and submit to CMS a quarterly list of positive blood cultures drawn 

from its patients. We estimate that it will take each participating facility approximately two 

hours per quarter to comply with this submission. If nine facilities are asked to provide lists, we 

estimate the quarterly burden for these facilities would be 72 hours per year (9 facilities x 2 

hours/quarter x 4 quarters/year). Again, we estimate the mean hourly wage of a registered nurse 

to be $33.13/hour, and we anticipate nurses (or administrative staff who would be paid at a lower 

hourly wage) would be responsible for preparing and submitting the list. Because we anticipate 

nurses (or administrative staff who would be paid at a lower hourly rate) would compile and 

submit these data, we estimate that the aggregate annual cost of the feasibility study to validate 

NHSN data would be $2,385.36 (72 hours x $33.13/hour) total or $265.04 per facility ($2,385.36 

/ 9 facilities). 

b. Proposed NHSN Healthcare Personnel Influenza Vaccination Reporting Measure for PY 2018 

We are proposing to include, beginning with the PY 2018 ESRD QIP, a measure 

requiring facilities to report healthcare personnel influenza vaccination data to NHSN. The 

NHSN is a secure, Internet-based surveillance system which is maintained and managed by 
CMS-1614-P 311 

 

CDC. Many dialysis facilities already submit NHSN Bloodstream Infection clinical measure 

data to NHSN. Specifically, we are proposing to require facilities to submit on an annual basis 

an HCP Influenza Vaccination Summary Form to NHSN, according to the specifications 

available in the NHSN Healthcare Personnel Safety Component Protocol. We estimate the 

burden associated with this measure to be the time and effort necessary for facilities to complete 

and submit the HCP Influenza Vaccination Summary Form on an annual basis. We estimate that 

approximately 5,996 facilities will treat ESRD patients in PY 2018. We estimate it will take 

each facility approximately 75 minutes to collect and submit the data necessary to complete the 

Healthcare Personnel Influenza Vaccination Summary Form on an annual basis. Therefore, the 

estimated total annual burden associated with reporting this measure in PY 2018 is 7,495 hours 

[(75/60) hours x 5,996 facilities]. Again, we estimate the mean hourly wage of a registered nurse 

to be $33.13, and we anticipate nurses (or administrative staff who would be paid at a lower 

hourly wage) would be responsible for this reporting. In total, we believe the cost for all ESRD 

facilities to comply with the reporting requirements associated with the NHSN Healthcare 

Personnel Influenza Vaccination reporting measure would be approximately $248,309 (7,495 

hours x $33.13/hour) total, or $41.37 ($248,309 / 5,996 facilities) per facility. 

XIV. Response to Comments 

Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. We will 

consider all comments we receive by the date and time specified in the DATES section of this 

preamble, and, when we proceed with a subsequent document, we will respond to the comments 

in the preamble to that document. 

XV. Economic Analyses 
CMS-1614-P 312 

 

A. Regulatory Impact Analysis 

1. Introduction 

 We examined the impacts of this proposed rule as required by Executive Order 12866 

(September 30, 1993, Regulatory Planning and Review) and Executive Order 13563 on 

Improving Regulation and Regulatory Review (January 11, 2011). Executive Orders 12866 and 

13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if 

regulation is necessary, to select regulatory approaches that maximize net benefits (including 

potential economic, environmental, public health and safety effects, distributive impacts, and 

equity). Executive Order 13563 emphasizes the importance of quantifying both costs and 

benefits of reducing costs, harmonizing rules, and promoting flexibility. This rule has been 

designated economically significant under section 3(f)(1) of Executive Order 12866. 

Accordingly, the rule has been reviewed by the Office of Management and Budget. We have 

prepared a Regulatory Impact Analysis that to the best of our ability presents the costs and 

benefits of the proposed rule. We solicit comments on the regulatory impact analysis provided. 

2. Statement of Need 

This rule proposes a number of routine updates for renal dialysis services in CY 2015 and 

proposes several policy changes to the ESRD PPS. The routine updates include proposed 

updates to the wage index values, the wage index budget-neutrality adjustment factor, and the 

outlier payment threshold amounts. The proposed policy changes to the ESRD PPS include the 

revisions to the ESRDB market basket, changes in the CBSA delineations, changes to the laborrelated share, clarifications in the low-volume payment adjustment, and additions and corrections 

to the ICD-10 codes that will be used for the comorbidity payment adjustment when compliance 

with ICD-10 is required beginning October 1, 2015. In addition, this rule implements sections 
CMS-1614-P 313 

 

1881(b)(14)(F)(i) and (I), as amended by section 217 (b)(1) and (2) of PAMA, under which the 

drug utilization adjustment transition is eliminated and a 0.0 percent update to the ESRD PPS 

base rate is imposed in its place. This rule also implements the delay in payment for oral-only 

drugs used for the treatment of ESRD under the ESRD PPS until January 1, 2024 as required by 

section 217(a) of PAMA. Failure to publish this proposed rule would result in ESRD facilities 

not receiving appropriate payments in CY 2015. 

This rule proposes to implement requirements for the ESRD QIP by proposing to adopt 

measure sets for the PYs 2017 and 2018 programs, as directed by section 1881(h) of the Act. 

Failure to propose requirements for the PY 2017 ESRD QIP would prevent continuation of the 

ESRD QIP beyond PY 2016. In addition, proposing requirements for the PY 2018 ESRD QIP 

provides facilities with more time to review and fully understand new measures before their 

implementation in the ESRD QIP. 

This proposed rule proposes to establish a methodology for adjusting DMEPOS payment 

amounts using information from the Medicare DMEPOS CBP. The proposed rule would also 

phase in special payment rules for certain DME and enteral nutrition in a limited number of areas 

under the Medicare DMEPOS CBP. This proposed rule also proposes to clarify the Medicare 

hearing aid coverage exclusion under section 1862(a)(7). In addition, this proposed rule would 

modify the definition of minimal self-adjustment at §414.402 to indicate what specialized 

training is needed by suppliers to provide custom fitting services if they are not certified 

orthotists. Finally, if finalized, this proposed rule would provide clarification of the CHOW 

under the Medicare DMEPOS CBP. 

3. Overall Impact 
CMS-1614-P 314 

 

We estimate that the proposed revisions to the ESRD PPS will result in an increase of 

approximately $30 million in payments to ESRD facilities in CY 2015, which includes the 

amount associated with updates to outlier threshold amounts, updates to the wage index, changes 

in CBSA delineations, and the labor-related share. 

For PY 2017, we estimate that the proposed requirements related to the ESRD QIP will 

cost approximately $27 thousand total, and the payment reductions will result in a total impact of 

approximately $16 million across all facilities. For PY 2018, we estimate that the proposed 

requirements related to the ESRD QIP will cost approximately $248 thousand total, and the 

payment reductions will result in a total impact of approximately $6.4 million across all 

facilities, resulting in a total impact from the proposed ESRD QIP of approximately $6.6 million. 

We estimate that the proposed methodology for adjusting DMEPOS payment amounts 

using information from DMEPOS CBPs would save over $7 billion over FY 2016-2020. The 

savings would be primarily achieved from the reduced payment amounts for items and services.

We estimate the special payment rules would not have a negative impact on beneficiaries 

and suppliers, or on the Medicare program. Contract suppliers are responsible for furnishing 

items and services needed by the beneficiary, and the cost to suppliers for furnishing these items 

and services generally would not change based on whether or not the equipment and related 

items and services are paid for separately under a capped rental payment method. Because the 

supplier’s bids would reflect the cost of furnishing items in accordance with the new payment 

rules, we expect the overall savings generally would be the same as they are under the current 

payment rules. Furthermore, as indicated above, the special payment rules would be phased in 

under a limited number of areas first to determine impact on the program, beneficiaries, and 

suppliers, including their effects on cost, quality, and access before expanding to other areas after 
CMS-1614-P 315 

 

notice and comment rulemaking, if supported by evaluation results. We believe that the special 

payment rules would give beneficiaries more choice and flexibility in changing suppliers. We 

estimate the proposed clarification of the statutory Medicare hearing aid coverage exclusion 

leading to withdrawal of coverage for bone anchored hearing aid (BAHA) devices would not 

have a significant fiscal impact on the Medicare program because the Medicare program 

expenditure for BAHA paid under Medicare during the period CY2005 through CY 2013 was 

less than 9,000,000 per year. This proposed regulation would provide guidance as to coverage of 

DME with regard to the statutory exclusion. The proposed rule proposes to specify that cochlear 

implants and brain stem implants are not hearing aids subject to the statutory exclusion and 

therefore, proposes no change to the current Medicare coverage status for these items. 

We estimate that the proposed clarification of the definition of minimal self-adjustment 

would have no significant impact on program expenditures or access to orthotics. This proposed 

clarification would impact suppliers furnishing custom fitted orthotics that do not have the 

expertise necessary to make more than minimal adjustments to an orthotic that a beneficiary or 

caregiver could be trained to make. The impact on these few suppliers will vary according to the 

caseload of custom fitted orthotics provided by an individual supplier. However, we believe the 

majority of custom fitted devices are currently being furnished by an individual with expertise. 

We estimate clarifying the CHOW under the Medicare DMEPOS CBP would have no 

significant impact to DMEPOS suppliers. 

B. Detailed Economic Analysis 

1. CY 2015 End-Stage Renal Disease Prospective Payment System 

a. Effects on ESRD Facilities 

To understand the impact of the changes affecting payments to different categories of 
CMS-1614-P 316 

 

ESRD facilities, it is necessary to compare estimated payments in CY 2014 to estimated 

payments in CY 2015. To estimate the impact among various types of ESRD facilities, it is 

imperative that the estimates of payments in CY 2014 and CY 2015 contain similar inputs. 

Therefore, we simulated payments only for those ESRD facilities for which we are able to 

calculate both current payments and new payments. 

For this proposed rule, we used the December 2013 update of CY 2013 National Claims 

History file as a basis for Medicare dialysis treatments and payments under the ESRD PPS. We 

updated the 2013 claims to 2014 and 2015 using various updates. The updates to the ESRD PPS 

base rate are described in section II.B of this proposed rule. Table 38 shows the impact of the 

estimated CY 2015 ESRD payments compared to estimated payments to ESRD facilities in CY 

2014. 

 
CMS-1614-P 317 

 

TABLE 38: IMPACT OF PROPOSED CHANGES IN PAYMENTS TO ESRD 

FACILITIES FOR CY 2015 PROPOSED RULE 

Facility Type 

Number 

of 

Facilities 

A 

Number of 

Treatments 

(in millions) 

B 

Effect of 2015 

Changes in 

Outlier Policy 

C 

Effect of 2015 

Changes in 

Wage 

Indexes, 

CBSA 

designations 

and LaborRelated Share 

D 

Effect of 2015 

Changes in 

payment rate 

update 

E 

Effect of Total 

2015 changes 

F 

All Facilities 5,996 39.1 0.3% 0.0% 0.0% 0.3% 

Type 

 Freestanding 5,520 36.6 0.3% 0.0% 0.0% 0.3% 

 Hospital based 476 2.5 0.3% 0.2% 0.0% 0.5% 

Ownership Type 

 Large dialysis 

organization 4,150 27.5 0.3% -0.1% 0.0% 0.2% 

 Regional chain 871 5.9 0.2% 0.2% 0.0% 0.4% 

 Independent 582 3.6 0.2% 0.2% 0.0% 0.4% 

 Hospital based1 393 2.1 0.3% 0.1% 0.0% 0.4% 

Geographic Location 

 Rural 1,212 5.9 0.3% -0.8% 0.0% -0.5% 

 Urban 4,784 33.3 0.3% 0.1% 0.0% 0.4% 

Census Region 

 East North Central 979 5.8 0.3% -0.3% 0.0% 0.0% 

 East South Central 497 2.9 0.3% -1.2% 0.0% -0.9% 

 Middle Atlantic 661 4.8 0.3% 0.9% 0.0% 1.1% 

 Mountain 352 1.9 0.2% -0.1% 0.0% 0.1% 

 New England 177 1.3 0.3% 1.3% 0.0% 1.5% 

 Pacific2 710 5.4 0.2% 1.5% 0.0% 1.7% 

 Puerto Rico and Virgin 

Islands 42 0.3 0.3% -3.9% 0.0% -3.6% 

 South Atlantic 1,333 9.1 0.3% -0.6% 0.0% -0.3% 

 West North Central 438 2.0 0.3% -0.2% 0.0% 0.0% 

 West South Central 807 5.6 0.3% -0.6% 0.0% -0.3% 

Facility Size 

 Less than 4,000 

treatments3

 1,086 2.7 0.3% -0.3% 0.0% 0.0% 

 4,000 to 9,999 treatments 2,226 10.5 0.3% -0.3% 0.0% 0.0% 

 10,000 or more 

treatments 2,523 25.7 0.3% 0.1% 0.0% 0.4% 

 Unknown 161 0.3 0.3% -0.1% 0.0% 0.2% 

Percentage of Pediatric 

Patients 
CMS-1614-P 318 

 

Facility Type 

Number 

of 

Facilities 

A 

Number of 

Treatments 

(in millions) 

B 

Effect of 2015 

Changes in 

Outlier Policy 

C 

Effect of 2015 

Changes in 

Wage 

Indexes, 

CBSA 

designations 

and LaborRelated Share 

D 

Effect of 2015 

Changes in 

payment rate 

update 

E 

Effect of Total 

2015 changes 

F 

 Less than 2% 5,885 38.7 0.3% 0.0% 0.0% 0.3% 

 Between 2% and19% 48 0.4 0.3% 0.0% 0.0% 0.2% 

 Between 20% and 49% 12 0.0 0.1% -0.4% 0.0% -0.3% 

 More than 50% 51 0.0 0.0% 0.2% 0.0% 0.3% 

1 Includes hospital-based ESRD facilities not reported to have large dialysis organization or regional chain 

ownership. 

2 Includes ESRD facilities located in Guam, American Samoa, and the Northern Mariana Islands. 

3 Of the 1,086 ESRD facilities with less than 4,000 treatments, approximately 422 would be expected to 

qualify for the low-volume adjustment in 2015. This estimate is based on actual claims for 2013 plus the 

number of hospital-based facilities that may newly qualify with a change in policy. The low-volume 

adjustment is mandated by Congress, and is not applied to pediatric patients. The impact to these lowvolume facilities is a 0.4 percent decrease in payments. 

Note: Totals do not necessarily equal the sum of rounded parts, as percentages are multiplicative, not 

additive. 

Column A of the impact table indicates the number of ESRD facilities for each impact 

category and column B indicates the number of dialysis treatments (in millions). The overall 

effect of the proposed changes to the outlier payment policy described in section II.B.4 of this 

proposed rule is shown in column C. For CY 2015, the impact on all ESRD facilities as a result 

of the changes to the outlier payment policy will be a 0.3 percent increase in estimated payments. 

The estimated impact of the changes to outlier payment policy ranges from a 0.0 percent to a 0.3 

percent increase. Nearly all ESRD facilities are anticipated to experience a positive effect in 

their estimated CY 2015 payments as a result of the proposed outlier policy changes. 

Column D shows the effect of the wage index, new CBSA delineations, and labor-related 

share on ESRD facilities and reflects the CY 2015 wage index values for the ESRD PPS 

payments. Facilities located in the census region of Puerto Rico and the Virgin Islands would 

receive a 3.9 percent decrease in estimated payments in CY 2015. Since most of the facilities in 
CMS-1614-P 319 

 

this category are located in Puerto Rico, the decrease is primarily due to the change in the laborrelated share. The other categories of types of facilities in the impact table show changes in 

estimated payments ranging from a 3.9 percent decrease to a 1.5 percent increase due to the 

update of the wage indexes, CBSA delineations and labor-related share. 

Column E shows the effect of the ESRD PPS payment rate update of 0.0 percent as 

required by section 1881(b)(14)(F) and (I) as amended by section 217 of PAMA 

Column F reflects the overall impact (that is, the effects of the proposed outlier policy 

changes, the proposed wage index, the proposed CBSA delineations, the proposed labor-related 

share, and the effect of the payment rate update. We expect that overall ESRD facilities will 

experience a 0.3 percent increase in estimated payments in 2015. ESRD facilities in Puerto Rico 

and the Virgin Islands are expected to receive a 3.6 percent decrease in their estimated payments 

in CY 2015. This larger decrease is primarily due to the negative impact of the change in the 

labor-related share. The other categories of types of facilities in the impact table show impacts 

ranging from a decrease of 0.9 percent to increase of 1.7 percent in their 2015 estimated 

payments. 

b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities are paid directly for the renal dialysis bundle and 

other provider types such as laboratories, DME suppliers, and pharmacies, may no longer bill 

Medicare directly for renal dialysis services. Rather, effective January 1, 2011, such other 

providers can only furnish renal dialysis services under arrangements with ESRD facilities and 

must seek payment from ESRD facilities rather than Medicare. Under the ESRD PPS, Medicare 

pays ESRD facilities one payment for renal dialysis services, which may have been separately 

paid to suppliers by Medicare prior to the implementation of the ESRD PPS. Therefore, in CY 
CMS-1614-P 320 

 

2015, we estimate that the proposed ESRD PPS will have zero impact on these other providers. 

c. Effects on the Medicare Program 

We estimate that Medicare spending (total Medicare program payments) for ESRD 

facilities in CY 2015 will be approximately $9.1 billion. This estimate takes into account a 

projected increase in fee-for-service Medicare dialysis beneficiary enrollment of 3.2 percent in 

CY 2015. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are responsible for paying 20 percent of the ESRD 

PPS payment amount. As a result of the projected 0.3 percent overall increase in the proposed 

ESRD PPS payment amounts in CY 2015, we estimate that there will be an increase in 

beneficiary co-insurance payments of 0.3 percent in CY 2015, which translates to approximately 

$10 million. 

e. Alternatives Considered 

 For this proposed rule, we proposed to implement a 50/50 blended wage index for CY 

2015 that would apply to all ESRD facilities. Specifically, the proposal would transition all 

ESRD facilities experiencing an impact, or not, due to the implementation of the new CBSA 

delineations. We considered proposing to implement the new CBSA delineations without a 

transition; however we decided to mitigate the impact this change would have on ESRD facilities 

that may experience a decrease in payments due to the change. 

 In addition, for CY 2015 we proposed to implement a revised 50.673 percent laborrelated share using a 2-year transition. This proposal would transition all ESRD facilities from 

the current labor-related share of 41.737 percent to the revised labor-related share of 50.673 

percent. We considered proposing to implement the labor-related share without a transition; 
CMS-1614-P 321 

 

however we decided to mitigate the impact this change would have on ESRD facilities that may 

experience a decrease in payments due to the change. 

2. End-Stage Renal Disease Quality Incentive Program 

a. Effects of the PY 2017 ESRD QIP 

The ESRD QIP provisions are intended to prevent possible reductions in the quality of 

ESRD dialysis facility services provided to beneficiaries as a result of payment changes under 

the ESRD PPS. The methodology that we are proposing to use to determine a facility’s TPS for 

PY 2017 is described in section III.F.5 of this proposed rule. Any reductions in ESRD PPS 

payments as a result of a facility’s performance under the PY 2017 ESRD QIP would affect the 

facility’s reimbursement rates in CY 2017. 

We estimate that, of the total number of dialysis facilities (including those not receiving a 

TPS), approximately 20 percent or 1,227 of the facilities would likely receive a payment 

reduction in PY 2017. Facilities that do not receive a TPS are not eligible for a payment 

reduction. 

In conducting our impact assessment, we have assumed that there will be an initial count 

of 5,996 dialysis facilities paid under the ESRD PPS. Table 39 shows the overall estimated 

distribution of payment reductions resulting from the PY 2017 ESRD QIP. 

 
CMS-1614-P 322 

 

TABLE 39: Estimated Distribution of PY 2017 ESRD QIP Payment Reductions. 

Payment Reduction 

Number of 

Facilities 

Percent of 

Facilities 

0.0% 4,484 78.5%

0.5% 887 15.5%

1.0% 264 4.6%

1.5% 58 1.0%

2.0% 18 0.3%

Note: This table excludes 285 facilities that we estimate will not receive a payment reduction because they will not 

report enough data to receive a Total Performance Score. 

To estimate whether or not a facility would receive a payment reduction in PY 2017, we scored 

each facility on achievement and improvement on several measures we have previously finalized 

and for which there were available data from CROWNWeb and Medicare claims. Measures 

used for the simulation are shown in Table 40. 

TABLE 40: Data Used to Estimate PY 2017 ESRD QIP Payment Reductions

Measure Period of Time Used to Calculate 

Achievement Thresholds, 

Performance Standards, 

Benchmarks, and Improvement 

Thresholds 

Performance Period 

Vascular Access Type 

 % Fistula Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

 % Catheter Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Kt/V 

 Adult HD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

 Adult PD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Pediatric HD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Hypercalcemia May 2012 – Dec 2012 Jan 2013 – Dec 2013 

SRR Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

Clinical measure topic areas with less than 11 cases for a facility were not included in 

that facility’s Total Performance Score. Each facility’s Total Performance Score was compared 
CMS-1614-P 323 

 

to the estimated minimum Total Performance Score and the payment reduction table found in 

section III.F.8 of this proposed rule. Facility reporting measure scores were estimated using 

available data from CY 2013. Facilities were required to have a score on at least one clinical and 

one reporting measure in order to receive a Total Performance Score. 

 To estimate the total payment reductions in PY 2017 for each facility resulting from this 

proposed rule, we multiplied the total Medicare payments to the facility during the one year 

period between January 2013 and December 2013 by the facility’s estimated payment reduction 

percentage expected under the ESRD QIP, yielding a total payment reduction amount for each 

facility: (Total ESRD payment in January 2013 through December 2013 times the estimated 

payment reduction percentage). For PY 2017, the total payment reduction for the 1,227 facilities 

estimated to receive a reduction is approximately $11.9 million ($11,873,127). Further, we 

estimate that the total costs associated with the collection of information requirements for PY 

2017 described in section VIII.1.a of this proposed rule would be approximately $27 thousand 

for all ESRD facilities. As a result, we estimate that ESRD facilities will experience an 

aggregate impact of approximately $11.9 million ($27,232 + $11,873,127 = $11,900,359) in PY 

2017, as a result of the PY 2017 ESRD QIP. 

Table 41 below shows the estimated impact of the finalized ESRD QIP payment 

reductions to all ESRD facilities for PY 2017. The table estimates the distribution of ESRD 

facilities by facility size (both among facilities considered to be small entities and by number of 

treatments per facility), geography (both urban/rural and by region), and by facility type (hospital 

based/freestanding facilities). Given that the time periods used for these calculations will differ 

from those we are proposing to use for the PY 2017 ESRD QIP, the actual impact of the PY 

2017 ESRD QIP may vary significantly from the values provided here. 
CMS-1614-P 324 

 

TABLE 41: Impact of Proposed QIP Payment Reductions to ESRD Facilities in PY 2017 

Number 

of 

Facilities 

Number of 

Treatments 

2013 (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 5,996 39.1 5,711 1,227 -0.14%

Facility Type: 

Freestanding 5,520 36.6 5,289 1,093 -0.13%

Hospital-based 476 2.5 422 134 -0.24%

Ownership Type: 

Large Dialysis 4,150 27.5 3,995 786 -0.12%

Regional Chain 871 5.9 836 169 -0.14%

Independent 582 3.6 534 157 -0.22%

Hospital-based (non-chain) 393 2.1 346 115 -0.25%

Facility Size: 

Large Entities 5,021 33.5 4,831 955 -0.12%

Small Entities1 975 5.7 880 272 -0.23%

Rural Status: 

1) Yes 1,212 5.9 1,167 187 -0.10%

2) No 4,784 33.3 4,544 1,040 -0.15%

Census Region: 

Northeast 792 5.8 770 160 -0.14%

Midwest 1,341 7.7 1,276 314 -0.16%

South 2,527 17.5 2,460 504 -0.12%

West 1,015 7.1 966 159 -0.10%

US Territories2 321 1.0 239 90 -0.33%

Census Division: 

East North Central 979 5.8 909 249 -0.19%

East South Central 497 2.9 475 92 -0.12%

Middle Atlantic 661 4.8 632 139 -0.16%

Mountain 352 1.9 335 55 -0.10%

New England 177 1.3 168 29 -0.13%

Pacific 710 5.4 671 119 -0.11%

South Atlantic 1,333 9.1 1,279 314 -0.15%

West North Central 438 2.0 417 81 -0.12%
CMS-1614-P 325 

 

Number 

of 

Facilities 

Number of 

Treatments 

2013 (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) 

West South Central 807 5.6 783 125 -0.10%

US Territories2 42 0.3 42 24 -0.42%

Facility Size (# of total 

treatments) 

Less than 4,000 treatments 1,086 2.7 928 211 -0.17%

4,000-9,999 treatments 2,226 10.5 2,174 423 -0.12%

Over 10,000 treatments 2,523 25.7 2,514 557 -0.14%

Unknown 161 0.3 95 36 -0.38%

1

 Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported 

status. 

2 Includes Puerto Rico and Virgin Islands. 

3

Based on claims and CROWNWeb data through December 2013. 

b. Effects of the PY 2018 ESRD QIP 

The methodology that we are proposing to use to determine a facility’s TPS for the PY 

2018 ESRD QIP is described in sections III.F.6 and III.F.7 of this proposed rule. Any reductions 

in ESRD PPS payments as a result of a facility’s performance under the PY 2018 ESRD QIP 

would apply to ESRD PPS payments made to the facility in CY 2018. 

We estimate that, of the total number of dialysis facilities (including those not receiving a 

TPS), approximately 16 percent or 919 of the facilities would likely receive a payment reduction 

in PY 2018. Facilities that do not receive a TPS are not eligible for a payment reduction. 

In conducting our impact assessment, we have assumed that there will be 5,996 dialysis 

facilities paid through the PPS. Table 42 shows the overall estimated distribution of payment 

reductions resulting from the PY 2018 ESRD QIP. 

 
CMS-1614-P 326 

 

TABLE 42: Estimated Distribution of PY 2018 ESRD QIP Payment Reductions 

Payment Reduction 

Number of 

Facilities 

Percent of 

Facilities 

0.0% 4,989 84.4%

0.5% 729 12.3%

1.0% 132 2.2%

1.5% 35 0.6%

2.0% 23 0.4%

Note: This table excludes 88 facilities that we estimate will not receive a payment reduction because they will not 

report enough data to receive a Total Performance Score. 

To estimate whether or not a facility would receive a payment reduction in PY 2018, we scored 

each facility on achievement and improvement on several measures we have previously finalized 

and for which there were available data from CROWNWeb and Medicare claims. Measures 

used for the simulation are shown in Table 43. 

TABLE 43: Data Used to Estimate PY 2018 ESRD QIP Payment Reductions. 

Measure Period of Time Used to Calculate 

Achievement Thresholds, 

Performance Standards, 

Benchmarks, and Improvement 

Thresholds 

Performance Period 

Vascular Access Type 

 % Fistula Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

 % Catheter Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Kt/V 

 Adult HD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

 Adult PD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Pediatric HD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

 Pediatric PD Jan 2012 – Dec 2012 Jan 2013 – Dec 2013 

Hypercalcemia May 2012 – Dec 2012 Jan 2013 – Dec 2013 

SRR Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

STrR Jan 2011 – Dec 2011 Jan 2012 – Dec 2012 

Clinical measure topic areas with less than 11 cases for a facility were not included in 
CMS-1614-P 327 

 

that facility’s Total Performance Score. Each facility’s Total Performance Score was compared 

to an estimated minimum Total Performance Score and an estimated payment reduction table 

that were consistent with the proposals outlined in Section III.G.9 of this proposed rule. Facility 

reporting measure scores were estimated using available data from CY 2013. Facilities were 

required to have a score on at least one clinical and one reporting measure in order to receive a 

Total Performance Score. 

 To estimate the total payment reductions in PY 2018 for each facility resulting from this 

proposed rule, we multiplied the total Medicare payments to the facility during the one year 

period between January 2013 and December 2013 by the facility’s estimated payment reduction 

percentage expected under the ESRD QIP, yielding a total payment reduction amount for each 

facility: (Total ESRD payment in January 2013 through December 2013 times the estimated 

payment reduction percentage). For PY 2018, the total payment reduction for all of the 919 

facilities expected to receive a reduction is approximately $7 million ($6,958,521). Further, we 

estimate that the total costs associated with the collection of information requirements for PY 

2018 described in Section VIII.1.b of this proposed rule would be approximately $248 thousand 

for all ESRD facilities. As a result, we estimate that ESRD facilities will experience an 

aggregate impact of approximately $7.2 million ($248,309 + $6,958,521 = $7,206,830) in PY 

2018, as a result of the PY 2018 ESRD QIP. 

Table 44 below shows the estimated impact of the finalized ESRD QIP payment 

reductions to all ESRD facilities for PY 2018. The table details the distribution of ESRD 

facilities by facility size (both among facilities considered to be small entities and by number of 

treatments per facility), geography (both urban/rural and by region), and by facility type (hospital 

based/freestanding facilities). Given that the time periods used for these calculations will differ 
CMS-1614-P 328 

 

from those we propose to use for the PY 2018 ESRD QIP, the actual impact of the PY 2018 

ESRD QIP may vary significantly from the values provided here. 

TABLE 44: Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2018 

Number of 

Facilities 

Number of 

Treatments 

2013 (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 5,996 39.1 5,908 919 -0.10%

Facility Type: 

Freestanding 5,520 36.6 5,455 818 -0.09%

Hospital-based 476 2.5 453 101 -0.17%

Ownership Type: 

Large Dialysis 4,150 27.5 4,115 580 -0.08%

Regional Chain 871 5.9 858 127 -0.10%

Independent 582 3.6 561 123 -0.15%

Hospital-based (non-chain) 393 2.1 374 89 -0.19%

Facility Size: 

Large Entities 5,021 33.5 4,973 707 -0.08%

Small Entities1 975 5.7 935 212 -0.16%

Rural Status: 

1) Yes 1,212 5.9 1,190 139 -0.07%

2) No 4,784 33.3 4,718 780 -0.10%

Census Region: 

Northeast 792 5.8 784 111 -0.08%

Midwest 1,341 7.7 1,318 226 -0.10%

South 2,527 17.5 2,517 337 -0.07%

West 1,015 7.1 1,008 109 -0.06%

US Territories2 321 1.0 281 136 -0.43%

Census Division: 

East North Central 979 5.8 952 202 -0.13%

East South Central 497 2.9 493 67 -0.09%

Middle Atlantic 661 4.8 650 106 -0.10%

Mountain 352 1.9 349 43 -0.08%

New England 177 1.3 172 21 -0.09%
CMS-1614-P 329 

 

Number of 

Facilities 

Number of 

Treatments 

2013 (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)

Pacific 710 5.4 703 90 -0.08%

South Atlantic 1,333 9.1 1,315 232 -0.10%

West North Central 438 2.0 426 53 -0.07%

West South Central 807 5.6 806 90 -0.07%

US Territories2 42 0.3 42 15 -0.25%

Facility Size (# of total 

treatments) 

Less than 4,000 treatments 1,086 2.7 1,032 215 -0.16%

4,000-9,999 treatments 2,226 10.5 2,225 277 -0.07%

Over 10,000 treatments 2,523 25.7 2,523 352 -0.07%

Unknown 161 0.3 128 75 -0.59%

1

 Small Entities include hospital-based and satellite facilities and non-chain facilities based on DFC self-reported 

status. 

2 Includes Puerto Rico and Virgin Islands. 

3

Based on claims and CROWNWeb data through December 2013. 

3. DMEPOS Provisions 

a. Effects of the Proposed Methodology for Adjusting DMEPOS Payment Amounts using 

Information from Competitive Bidding Programs 

We estimate that the proposed methodology for adjusting DMEPOS payment amounts 

using information from DMEPOS CBPs would save over $7 billion over FY 2016 through 2020. 

The savings would be primarily achieved from price reductions for items. Therefore, most of the 

economic impact is expected from the reduced prices. We estimate that approximately half of 

the DMEPOS items and services furnished to Medicare beneficiaries are furnished to 

beneficiaries residing outside existing CBAs. (See Table 45.) 

 
CMS-1614-P 330 

 

TABLE 45: Impact of Pricing Items in Non-Competitive Areas Using Competitive Bidding 

Pricing

FY 

Impact on the federal 

government in dollars (to the 

nearer ten million) 

Impact on beneficiary cost 

sharing in dollars (to the 

nearer ten million) 

2016 -880 -270 

2017 -1,430 -470 

2018 -1,520 -510 

2019 -1,630 -540 

2020 -1,750 -580 

Although these transfers create incentives that very likely cause changes in the way society uses 

its resources, we lack data with which to estimate the resulting social costs or benefits. 

b. Effects of the Proposed Special Payment Methodologies and Payment Rules for Durable 

Medical Equipment and Enteral Nutrition Furnished under the Competitive Bidding Program 

We believe that the proposed special payment rules would not have a significant impact 

on beneficiaries and suppliers. Contract suppliers are responsible for furnishing items and 

services needed by the beneficiary, and the cost to suppliers for furnishing these items and 

services does not change based on whether or not the equipment and related items and services 

are paid for separately under a capped rental payment method. Because the supplier’s bids 

would reflect the cost of furnishing items in accordance with the new payment rules, we expect 

the overall savings would be generally the same as they are under the current payment rules. 

Furthermore, as indicated above, we are proposing that the alterative payment rules would be 

phased in under a limited number of areas first to determine impact on the program, 

beneficiaries, and suppliers. If supported by evaluation results, a decision to expand the 

proposed special payment rules to other areas would be addressed in future rulemaking. 
CMS-1614-P 331 

 

c. Effects of the Proposed Clarification of the Scope of the Medicare Hearing Aid Coverage 

Exclusion

This proposed rule proposes to clarify the scope of the Medicare coverage exclusion for 

hearing aids and proposes to no longer cover BAHAs. However, if finalized, this proposed rule 

would have no significant fiscal impact on the Medicare program, because Medicare program 

expenditures for BAHAs during the period CY2005 through CY 2013 have been insignificant. 

This proposed clarification would provide clear guidance about coverage of DME with regard to 

the statutory hearing aid exclusion. The proposed regulation, if finalized, would explicitly 

except cochlear implants and brain stem implants from the hearing aid exclusion, and therefore, 

Medicare coverage for these devices would continue. 

 We estimate that the proposed clarification of the scope of the Medicare hearing coverage 

exclusion would save Medicare approximately $80 million dollars over five years beginning in 

January 1, 2015 through September 30, 2019. The savings would be primarily achieved from 

removing coverage of the BAHA device. (See Table 46.) 

TABLE 46: Clarification of the Statutory Medicare Hearing Aid Coverage Exclusion

FY Impact to the Federal Government (rounded to 

the nearer $10 millions) 

2015 -10 

2016 -10 

2017 -20 

2018 -20 

2019 -20 

d. Effects of the Proposed Definition of Minimal Self-Adjustment of Orthotics Under 

Competitive Bidding 

The proposed rule would modify the definition of minimal self-adjustment to indicate 

that it means an adjustment that the beneficiary, caretaker for the beneficiary, or supplier of the 
CMS-1614-P 332 

 

device can perform and does not require the services of a certified orthotist (that is, an individual 

certified by either the American Board for Certification in Orthotics and Prosthetics, Inc., or the 

Board for Orthotist/Prosthetist Certification) or a physician as defined in section 1861(r) of the 

Act , a treating practitioner means a physician assistant, nurse practitioner, or clinical nurse 

specialist as defined in section 1861(aa)(5) of the Act, an occupational therapist as defined in 42 

CFR 484.4, or physical therapist as defined in 42 CFR 484.4 in compliance with all applicable 

Federal and State licensure and regulatory requirements. We estimate that the proposed 

clarification of the definition of minimal self-adjustment would have no significant impact on 

program expenditures or access to orthotics. This proposed clarification would impact suppliers 

furnishing custom fitted orthotics that do not have the expertise necessary to make more than 

minimal adjustments to an orthotic that a beneficiary or caregiver could be trained to make. 

e. Effects of the Proposed Revision to Change of Ownership Rules to Allow Contract Suppliers 

to Sell Specific Lines of Business 

 This rule would clarify the change of ownership rules so as to not interfere with the 

normal course of business for DME suppliers. This rule would establish an exception under the 

CHOW rules to allow transfer of part of a competitive bidding contract when a contract supplier 

sells a distinct line of business to a qualified successor entity r under certain specific 

circumstances. This clarification would impact businesses in a positive way by allowing them to 

conduct everyday transactions without interference from our rules and regulations. 

C. Accounting Statement 

 As required by OMB Circular A-4 (available at 

http://www.whitehouse.gov/omb/circulars_a004_a-4), in Table 47 below, we have prepared an 
CMS-1614-P 333 

 

accounting statement showing the classification of the transfers and costs associated with the 

various provisions of this proposed rule. 
CMS-1614-P 334 

 

Table 47. Accounting Statement: Classification of Estimated 

Transfers and Costs/Savings 

ESRD PPS for CY 2015 

Category Transfers 

Annualized Monetized Transfers $ 30 million 

From Whom to Whom Federal government to ESRD providers 

Category Transfers

Increased Beneficiary Co-insurance Payments $ 10 million 

From Whom to Whom Beneficiaries to ESRD providers 

ESRD QIP for PY 2017

Annualized Monetized Transfers -$11.9 million 

From Whom to Whom Federal government to ESRD providers 

Category Costs 

Annualized Monetized ESRD Provider Costs $27 thousand 

ESRD QIP for PY 2018

Annualized Monetized Transfers -$7 million 

From Whom to Whom Federal government to ESRD providers 

Category Costs 

Annualized Monetized ESRD Provider Costs $248 thousand 

Pricing Items in Non-competitive Areas Using Competitive Bidding Pricing 

Category Transfer

Annualized Monetized 

Transfer on Beneficiary 

Cost Sharing 

Estimates Year Dollar Discount Rate Period 

Covered 

-$464.5 million 2014 7% 2016 – 2020

-$469.9 million 2014 3% 2016 - 2020

From Whom to Whom Beneficiaries to Medicare providers 

 Transfers 

Annualized Monetized 

Transfer Payments 

Estimates Year 

Dollar Discount Rate Period Covered 

-$1,415.4 million 2014 7% 2016 - 2020 

-$1,430.5 million 2014 3% 2016 - 2020 

From Whom to Whom Federal government to Medicare providers. 

Clarification of the Statutory Medicare Hearing Aid Coverage Exclusion 

Category Transfers

Annualized Monetized 

Transfer Payments Estimates Year Dollar Discount Rate 

Period 

Covered 

-$15.6 million 2014 7% 2015 - 2019 

-$15.8 million 2014 3% 2015 - 2019 

From Whom to Whom Federal government to Medicare providers. 
CMS-1614-P 335 

 

XVI. Regulatory Flexibility Act Analysis 

The Regulatory Flexibility Act (September 19, 1980, Pub. L. 96-354) (RFA) requires 

agencies to analyze options for regulatory relief of small entities, if a rule has a significant 

impact on a substantial number of small entities. For purposes of the RFA, small entities include 

small businesses, nonprofit organizations, and small governmental jurisdictions. Approximately 

16 percent of ESRD dialysis facilities are considered small entities according to the Small 

Business Administration’s (SBA) size standards, which classifies small businesses as those 

dialysis facilities having total revenues of less than $35.5 million in any 1 year. Individuals and 

States are not included in the definitions of a small entity. For more information on SBA’s size 

standards, see the Small Business Administration’s Web site at 

http://www.sba.gov/content/small-business-size-standards (Kidney Dialysis Centers are listed as 

621492 with a size standard of $35.5 million). 

We do not believe ESRD facilities are operated by small government entities such as 

counties or towns with populations of 50,000 or less, and therefore, they are not enumerated or 

included in this estimated RFA analysis. Individuals and States are not included in the definition 

of a small entity. 

For purposes of the RFA, we estimate that approximately 16 percent of ESRD facilities 

are small entities as that term is used in the RFA (which includes small businesses, nonprofit 

organizations, and small governmental jurisdictions). This amount is based on the number of 

ESRD facilities shown in the ownership category in Table 38. Using the definitions in this 

ownership category, we consider the 582 facilities that are independent and the 393 facilities that 

are shown as hospital-based to be small entities. The ESRD facilities that are owned and 

operated by LDOs and regional chains would have total revenues of more than $35.5 million in 
CMS-1614-P 336 

 

any year when the total revenues for all locations are combined for each business (individual 

LDO or regional chain), and are not, therefore, included as small entities. 

For the ESRD PPS updates proposed in this rule, a hospital-based ESRD facility (as 

defined by ownership type) is estimated to receive a 0.4 percent increase in payments for CY 

2015. An independent facility (as defined by ownership type) is also estimated to receive a 0.4 

percent increase in payments for CY 2015. 

We estimate that of the 1,217 ESRD facilities expected to receive a payment reduction in 

the PY 2017 ESRD QIP, 275 of those facilities would be ESRD small entity facilities. We 

present these findings in in Table 39 (“Estimated Distribution of PY 2017 ESRD QIP Payment 

Reductions”) and Table 41 (“Impact of Proposed QIP Payment Reductions to ESRD Facilities 

for PY 2017”) above. We estimate that the payment reductions will average approximately 

$9,353 per facility across the 1,217 facilities receiving a payment reduction, and $8,698 for each 

small entity facility. Using our estimates of facility performance, we also estimated the impact 

of payment reductions on ESRD small entity facilities by comparing the total payment 

reductions for the 275 small entity facilities with the aggregate ESRD payments to all small 

facilities. We estimate that there are a total of 885 small facilities, and that the aggregate ESRD 

PPS payments to these facilities would decrease 0.23 percent in PY 2017. 

 We estimate that of the 1,320 ESRD facilities expected to receive a payment reduction in 

the PY 2018 ESRD QIP, 282 are ESRD small entity facilities. We present these findings in 

Table 39 (“Estimated Distribution of PY 2018 ESRD QIP Payment Reductions”) and Table 41 

(“Impact of Proposed QIP Payment Reductions to ESRD Facilities for PY 2018”) above. We 

estimate that the payment reductions will average approximately $7,119 per facility across the 

895 facilities receiving a payment reduction, and $6,294 for each small entity facility. Using our 
CMS-1614-P 337 

 

estimates of facility performance, we also estimated the impact of payment reductions on ESRD 

small entity facilities by comparing the total estimated payment reductions for 209 small entity 

facilities with the aggregate ESRD payments to all small entity facilities. We estimate that there 

are a total of 975 small entity facilities, and that the aggregate ESRD PPS payments to these 

facilities would decrease 0.16 percent in PY 2018. 

We expect that the proposed methodology for adjusting DMEPOS payment amounts 

using information from DMEPOS CBPs would have a significant impact on a substantial number 

of small suppliers. Although suppliers furnishing items and services outside CBAs do not have 

to compete and be awarded contracts in order to continue furnishing these items and services, the 

payment amounts for these items and services would be reduced using the methodology 

established as a result of the proposed rule. The statute requires that the methodology for 

adjusting payment amounts take into consideration the costs of furnishing items and services in 

areas where the adjustments will occur and these considerations are discussed in the preamble 

(refer to section IV(A)(5) of the preamble). The proposed methodology for making payment 

adjustments would allow for adjustments based on bids in different geographic regions to reflect 

regional variation in costs of furnishing items and services and the national floor for adjustments 

in states with unique costs. We believe that suppliers would be able to continue furnishing items 

and services to beneficiaries in areas outside the CBAs after the reductions in the payment 

amounts are applied without a significant change in the rate at which they accept assignment of 

Medicare claims for these items and services. Because section 1834(a)(1)(F)(ii) of the Act 

mandates that payment amounts for DME subject to competitive bidding be adjusted in areas 

where CBPs are not implemented, the only alternative we can consider other than paying based 

on adjusted fee schedule amounts is to implement CBPs in all areas. However, this approach 
CMS-1614-P 338 

 

would have an even greater impact on small suppliers. 

 We expect the proposed special payment rules for DME and enteral nutrition would not 

have a significant impact on small suppliers. We believe that these rules would benefit affected 

suppliers since payment for rental of DME and enteral nutrition infusion pumps would no longer 

be capped and suppliers would retain ownership to the equipment. 

We expect that the proposal to modify the definition of minimal self-adjustment of 

orthotics would not have a significant impact on small suppliers. According to the Medicare 

Pricing, Data Analysis and Coding (PDAC) Contractor from FY 2010 through FY 2013 there 

were approximately 6,000 DMEPOS suppliers with a provider transaction access number 

(PTAN) registered with the National Supplier Clearinghouse to supply orthotics. In addition, 

there are a limited number of applicable HCPCS codes (approximately 77) that require a skilled 

individual's expertise. We believe that the majority of businesses providing orthotics already 

employ a “skilled individual.” However, for those few businesses that do not already have a 

skilled individual providing custom fitted orthotics they could comply with the proposed changes 

to the definition and requirements by hiring a skilled individual. For example, according to the 

Bureau of Labor Statistics Occupational Employment Statistics May 2013 the median pay for a 

certified orthotist was $30.27 an hour. The impact will vary according to the caseload of custom 

fitted orthotics provided by an individual supplier. 

 We expect that although the proposal which clarifies the scope of the Medicare statutory 

exclusion for hearing aids would withdraw the coverage for BAHAs, it would not have a 

significant impact on small suppliers since the volume of allowed services for bone anchored 

hearing aids covered by Medicare is very small (less than 2,000 nationwide) and would not 

account for a large percentage of any individual supplier’s total revenue. 
CMS-1614-P 339 

 

 We expect that the proposed revisions to CHOW rules to allow contract suppliers to sell 

specific lines of business provision would have a positive impact on suppliers and no significant 

negative impact on small suppliers. 

 Therefore, the Secretary has determined that this proposed rule would have a significant 

economic impact on a substantial number of small entities. We solicit comment on the RFA 

analysis provided. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis 

if a rule may have a significant impact on the operations of a substantial number of small rural 

hospitals. Any such regulatory impact analysis must conform to the provisions of section 603 of 

the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a 

hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. We 

do not believe this proposed rule will have a significant impact on operations of a substantial 

number of small rural hospitals because most dialysis facilities are freestanding. While there are 

145 rural hospital-based dialysis facilities, we do not know how many of them are based at 

hospitals with fewer than 100 beds. However, overall, the 145 rural hospital-based dialysis 

facilities will experience an estimated 0.1 percent decrease in payments. As a result, this 

proposed rule is not estimated to have a significant impact on small rural hospitals. Therefore, 

the Secretary has determined that this proposed rule will not have a significant impact on the 

operations of a substantial number of small rural hospitals.

XVII. Unfunded Mandates Reform Act Analysis 

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4) 

also requires that agencies assess anticipated costs and benefits before issuing any rule whose 

mandates require spending in any 1 year $100 million in 1995 dollars, updated annually for 
CMS-1614-P 340 

 

inflation. In 2013, that threshold is approximately $141 million. This proposed rule does not 

include any mandates that would impose spending costs on State, local, or Tribal governments in 

the aggregate, or by the private sector, of $141 million. 

XVIII. Federalism Analysis 

Executive Order 13132 on Federalism (August 4, 1999) establishes certain requirements 

that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that 

imposes substantial direct requirement costs on State and local governments, preempts State law, 

or otherwise has Federalism implications. We have reviewed this proposed rule under the 

threshold criteria of Executive Order 13132, Federalism, and have determined that it will not 

have substantial direct effects on the rights, roles, and responsibilities of States, local or Tribal 

governments. 

XXI. Congressional Review Act 

 This proposed rule is subject to the Congressional Review Act provisions of the Small 

Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and has been 

transmitted to the Congress and the Comptroller General for review. 

 In accordance with the provisions of Executive Order 12866, this proposed rule was 

reviewed by the Office of Management and Budget. 

XX. Files Available to the Public via the Internet 

The Addenda for the annual ESRD PPS proposed and final rulemakings will no longer 

appear in the Federal Register. Instead, the Addenda will be available only through the Internet 

and is posted on the CMS 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-
CMS-1614-P 341 

 

Order/LimitedDataSets/EndStageRenalDiseaseSystemFile.html. Readers who experience any 

problems accessing the Addenda or LDS files, should contact Stephanie Frilling at (410) 786-

4507. 

 

 
CMS-1614-P 342 

 

List of Subjects 

42 CFR Part 405 

Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, 

Medical devices, Medicare, Reporting and recordkeeping requirements, Rural areas, and X-rays 

42 CFR Part 411 

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

42 CFR Part 413 

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

42 CFR Part 414 

Administrative practice and procedure, Health facilities, Health professions, Kidney diseases, 

Medicare, and Reporting and recordkeeping requirements 
CMS-1614-P 343 

 

For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services 

proposes to amend 42 CFR chapter IV as follows: 

PART 405—FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED 

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

Authority: Secs. 205(a), 1102, 1861, 1862(a), 1869, 1871, 1874, 1881, and 1886(k) of 

the Social Security Act (42 U.S.C. 405(a), 1302, 1395x, 1395y(a), 1395ff, 1395hh, 1395kk, 

1395rr and 1395ww(k)), and sec. 353 of the Public Health Service Act (42 U.S.C. 263a). 

§ 405.2102 [Amended] 

 2. Section 405.2102 is amended by removing all the definitions, with the exception of 

two definitions, “Network, ESRD”, and “Network organization”. 

Part 411—EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 

PAYMENT 

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

 Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of the Social 

Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, and 1395nn). 

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

§ 411.15 Particular services excluded from coverage. 

* * * * 

(d) Hearing aids or examinations for the purpose of prescribing, fitting, or changing 

hearing aids. 

(1) Scope. The scope of the hearing aid exclusion encompasses all types of air 

conduction and bone conduction hearing aids (external, internal, or implanted). 
CMS-1614-P 344 

 

(2) Devices not subject to the hearing aid exclusion. Cochlear implants and auditory 

brainstem implants that replace the function of cochlear structures or auditory nerve and provide 

electrical energy to auditory nerve fibers and other neural tissue via implanted electrode arrays. 

These devices produce the perception of sound and do not meet the definition of hearing aid. 

* * * * * 

PART 413—PRINCIPLES OF REASONABLE COST REIMBURSEMENT; PAYMENT 

FOR END-STAGE RENAL DISEASE SERVICES; OPTIONAL PROSPECTIVELY 

DETERMINED PAYMENT RATES FOR SKILLED NURSING FACILITIES 

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

 Authority: Secs. 1102, 1812(d), 1814(b), 1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883 and 1886 of the Social Security Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 

1395l(a), (i), and (n), 1395x(v), 1395hh, 1395rr, 1395tt, and 1395ww); and sec. 124 of Pub.L. 

106-113 (113 Stat. 1501A-332), sec. 3201 of Pub.L. 112-96 (126 Stat. 156), sec. 632 of Pub. L.

112-240 (126 Stat. 2354), and sec. 217 of Pub.L. No. 113-93.

§ 413.174 [Amended] 

 6. In § 413.174, paragraph (f)(6) is amended by removing “January 1, 2016” and by 

adding in its place “January 1, 2024.” 

7. Section 413.232 is amended revising paragraphs (b) introductory text and (f) and 

adding paragraph (h) to 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 (h) of this section: 
CMS-1614-P 345 

 

* * * * * 

(f) Except as provided in paragraph (g) of this section, to receive the low-volume 

adjustment an ESRD facility must provide an attestation statement, by November 1st of each 

year preceding the payment year, to its Medicare Administrative Contractor that the facility 

meets all the criteria established in this section. For calendar year 2012, the attestation must be 

provided by January 3, 2012. For calendar year 2015, the attestation must be provided by 

December 31, 2014. 

* * * * * 

(h) To receive the low-volume adjustment, an ESRD facility must include in their 

attestation provided pursuant to paragraph (f) of this section a statement that the ESRD facility 

meets the definition of a low-volume facility in paragraph (b) of this section. To determine 

eligibility for the low-volume adjustment, the Medicare Administrative Contractor (MAC) on 

behalf of CMS relies upon as filed or final settled 12-consecutive month cost reports for the 3 

cost reporting years preceding the payment year to verify the number of treatments, except that: 

(1) In the case of a hospital-based ESRD facility as defined in § 413.174(c), the MAC 

relies upon the attestation submitted pursuant to paragraph (f) of this section and may consider 

other supporting data in addition to the total treatments reported in each of the 12-consecutive 

month cost reports for the 3 cost reporting years preceding the payment year to verify the number 

of treatments that were furnished by the individual hospital-based ESRD facility seeking the 

adjustment; and 

(2) In the case of an ESRD facility that has undergone a change of ownership that does 

not result in a new Provider Transaction Access Number for the ESRD facility, the MAC relies 

upon the attestation and when the change of ownership results in two non-standard cost reporting 
CMS-1614-P 346 

 

periods (less than or greater than 12-consecutive months), does one or both of the following for 

the 3 cost reporting years preceding the payment year to verify the number of treatments: 

(i) Combines the two non-standard cost reporting periods of less than 12 months to equal 

a full 12-consecutive month period; and/or 

(ii) Combines the two non-standard cost reporting periods that in combination may 

exceed 12-consecutive months and prorates the data to equal a full 12-consecutive month period.

§ 413.237 [Amended] 

8. In § 413.237, paragraph (a)(1)(iv) is amended by removing “January 1, 2016” and 

adding in its place “January 1, 2024.” 

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

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

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

1395hh, and 1395rr(b)(l)). 

 10. Section 414.105 is added to read as follows: 

§414.105 Application of Competitive Bidding Information and Limitation of Inherent 

Reasonableness Authority

 (a) For enteral nutrients, equipment and supplies furnished on or after January 1, 2011, 

the fee schedule amounts may be adjusted based on information on the payment determined as 

part of implementation of the programs under subpart F using the methodologies set forth at 

§414.210(g). 

(b) In the case of such adjustments, the rules at §405.502(g) and (h) of this chapter shall 

not be applied. 

Subpart D—Payment for Durable Medical Equipment and Prosthetic and Orthotic Devices
CMS-1614-P 347 

 

 11. The heading for subpart D is revised to read as set forth above. 

12. Section 414.202 is amended by: 

A. Adding the definition of “Frontier state”. 

B. Revising the definition of “Region”. 

C. Adding the definition of “Rural State”. 

The additions and revision read as follows: 

§ 414.202 Definitions. 

* * * * * 

 Frontier state means a state where at least 50 percent of counties in the state have a 

population density of 6 people or less per square mile. 

* * * * * 

 Region means, for the purpose of implementing § 414.210(g), geographic areas defined 

by the Bureau of Economic Analysis in the United States Department of Commerce for 

economic analysis purposes, and, for the purpose of implementing § 414.228, those contractor 

service areas administered by CMS regional offices. 

 Rural State means a state where more than 50 percent of the population is rural as 

determined through census data. 

13. Section 414.210 is amended by revising paragraph (a) and adding paragraph (g) to 

read as follows: 

§ 414.210 General payment rules. 

(a) General rule. For items furnished on or after January 1, 1989, except as provided in 

paragraphs (c) , (d), and (g) of this section, Medicare pays for durable medical equipment, 
CMS-1614-P 348 

 

prosthetics and orthotics, including a separate payment for maintenance and servicing of the 

items as described in paragraph (e) of this section, on the basis of 80 percent of the lesser of— 

(1) The actual charge for the item; 

(2) The fee schedule amount for the item, as determined in accordance with the 

provisions of §§ 414.220 through 414.232 

* * * * * 

(g) Application of Competitive Bidding Information and Limitation of Inherent 

Reasonableness Authority. For items furnished on or after January 1, 2011, the fee schedule 

amounts may be adjusted based on information on the payment determined as part of 

implementation of the programs under subpart F, of this part, excluding information on the 

payment determined in accordance with the special payment rules at § 414.409. In the case of 

such adjustments, the rules at § 405.502(g) and (h) of this chapter shall not be applied 

(1) Payment adjustments for areas within the contiguous United States using information 

from competitive bidding programs. For an item or service subject to the programs under 

subpart F, that payment amount for such item or services for areas within the contiguous United 

States shall be established as follows: 

(i) CMS determines a regional price for each state in the contiguous United States and 

the District of Columbia equal to the un-weighted average of the single payment amount for an 

item or service established in accordance with § 414.416 for competitive bidding areas that are 

fully or partially located in the same region where the state or District of Columbia is located. 

(ii) CMS determines a national average price equal to the average of the regional prices 

determined under paragraph (g)(1)(i) of this section. 
CMS-1614-P 349 

 

(iii) A regional price determined under paragraph (g)(1)(i) of this section cannot be 

greater than 110 percent of the national average price determined under paragraph (g)(1)(ii) of 

this section nor less than 90 percent of the national average price determined under paragraph 

(g)(1)(ii) of this section. In addition, a regional price determined under paragraph (g)(1)(i) of 

this section for a state designated as a rural or frontier state cannot be less than 110 percent of the 

national average price determined under paragraph (g)(1)(ii) of this section. 

(2) Payment adjustments for areas outside the contiguous United States using 

information from competitive bidding programs. For an item or service subject to the programs 

under subpart F, the fee schedule amounts for areas outside the contiguous United States are 

adjusted based on the greater of— 

(i) The average of the single payment amounts for the item or service for CBAs outside 

the contiguous United States. 

(ii) 110 percent of the national average price for the item or service determined under 

paragraph (g)(1)(ii) of this section. 

(3) Payment adjustments for items and services included in no more than ten competitive 

bidding programs. Notwithstanding paragraph (g)(1) of this section, for an item or service that is 

included in ten or fewer competitive bidding programs as defined at § 414.402, the fee schedule 

amounts applied for all areas within and outside the contiguous United States are adjusted based 

on 110 percent of the un-weighted average of the single payment amounts for the item or service. 

(4) Payment adjustments using data on items and services included in competitive 

bidding programs no longer in effect. In the case where adjustments to fee schedule amounts are 

made using any of the methodologies described, if the adjustments are based solely on single 

payment amounts from competitive bidding programs that are no longer in effect, the adjusted 
CMS-1614-P 350 

 

fee schedule amounts shall be increased on an annual basis using the percentage change in the 

Consumer Price Index for all Urban Consumers (CPI-U) from the mid-point of the last year the 

single payment amounts were in effect to the month ending 6 months prior to the date the initial 

payment adjustments would go into effect. Following the initial adjustment to the fee schedule 

amounts, the adjusted fee schedule amounts would continue to be updated every 12 months using 

the percentage change in the CPI-U for the 12-month period ending 6 months prior to the date 

the updated payment adjustments would go into effect. 

(5) Adjusted payment amounts for accessories used with different types of base 

equipment. In situations where a HCPCS code that describes an item used with different types 

of base equipment is included in more than one product category in a CBA under competitive 

bidding, a weighted average of the single payment amounts for the code is computed for each 

CBA, weighted based on national allowed services for the code when used with different 

equipment. The weighted average single payment amount per code per CBA would then be used 

in applying the payment adjustment methodologies proposed in this section. 

(6) Payment adjustments consistent with items and services furnished. In the case where 

payment amounts are established under subpart F of this part for an item or service that are 

greater than the payment amounts established under subpart F of this part for a higher level item 

or service (i.e., one with additional features or functionality), the payment amounts for the lower 

level of service are adjusted so that they are no greater than the payment amounts for the higher 

level of service before making payment adjustments using any of the methodologies above. 

(7) Payment adjustments for mail order items furnished in the Northern Mariana Islands. 

The fee schedule amounts for mail order items furnished to beneficiaries in the Northern Mariana 
CMS-1614-P 351 

 

Islands are adjusted so that they are equal to 100 percent of the single payment amounts 

established under a national mail order competitive bidding program. 

(8) Updating adjusted fee schedule amounts. The adjusted fee schedule amounts are 

revised each time a single payment amount for an item or service is updated following one or 

more new competitions and as other items are added to programs established under subpart F of 

this part. 

14. Section 414.402 is amended by revising the definition of “Minimal self-adjustment” 

to read as follows: 

§414.402 Definitions.

* * * * * 

Minimal self-adjustment means an adjustment the beneficiary, caretaker for the 

beneficiary, or supplier of the device can perform and does not require the services of a certified 

orthotist (that is, an individual certified by either the American Board for Certification in 

Orthotics and Prosthetics, Inc., or the Board for Orthotist/Prosthetist Certification), or a 

physician as defined in 1861(r) of the Act, a treating practitioner which means a physician 

assistant, nurse practitioner, or clinical nurse specialist as defined in section 1861(aa)(5) of the 

Act, an occupational therapist as defined in §484.4 of this chapter, or physical therapist as 

defined in §484.4 of this chapter who are in compliance with all applicable Federal and State 

licensure and regulatory requirements. 

* * * * * 

 15. Section 414.408 is amended by adding paragraph (l) to read as follows: 

§ 414.408 Payment rules. 

* * * * * 
CMS-1614-P 352 

 

 (l) Exceptions for certain items and services paid in accordance with special payment 

 rules. The payment rules in paragraphs (f) thru (i), (j)(2), (j)(3), (j)(7), and (k) of this 

 section do not apply to items and services paid in accordance with the special payment 

 rules at § 414.409. 

 16. Section 414.409 is added to read as follows: 

§ 414.409 Special payment rules. 

(a) Payment on a bundled, continuous rental basis. (1) In no more than 12 CBAs, in 

conjunction with competitions that begin on or after January 1, 2015, payment is made on a 

bundled, continuous monthly rental basis for enteral nutrients, supplies and equipment, oxygen 

and oxygen equipment, standard manual wheelchairs, standard power wheelchairs, CPAP and 

respiratory assist devices, and hospital beds. The CBAs and competitions where these payment 

rules apply are announced in advance of each competition, with the payment rules in this section 

used in lieu of the payment rules at §414.408(f) thru (i), (j)(2), (j)(3), (j)(7), and (k). The single 

payment amounts are established based on bids submitted and accepted for furnishing rented 

DME and enteral nutrition on a monthly basis for each month of medical need during the 

contract period monthly single payment amount would include payment for all nutrients, 

supplies and equipment. 

(2) Payment is made on a continuous monthly rental basis for DME. The single payment 

amount for the monthly rental of DME includes payment for the rented equipment, maintenance 

and servicing of the rented equipment, and replacement of supplies and accessories necessary for 

the effective use of the rented equipment. Separate payment for replacement of equipment, repair 

or maintenance and servicing of equipment, or for replacement of accessories and supplies 

necessary for the effective use of equipment is not allowed under any circumstances.
CMS-1614-P 353 

 

(3) Payment is made on a monthly basis for enteral nutrition. The single payment 

amount includes payment for all nutrients, supplies and equipment. Separate payment for 

replacement of equipment, repair or maintenance and servicing of equipment, or for replacement 

of accessories and supplies necessary for the effective use of equipment is not allowed under any 

circumstances. 

(b) Payment for grandfathered DME items paid on a bundled, continuous rental basis.

Payment to a supplier that elects to be a grandfathered supplier of DME furnished in CBPs where 

these special payment rules apply is made in accordance with § 414.408(a)(1). 

(c) Supplier transitions for DME and enteral nutrition paid on a bundled, continuous 

rental basis. Changes from a non-contract supplier to a contract supplier at the beginning of a 

CBP where payment is made on a bundled, continuous monthly rental basis results in the 

contract supplier taking on responsibility for meeting all of the monthly needs for furnishing the 

covered DME or enteral nutrition. In the event that a beneficiary relocates from a CBA where 

these special payment rules apply to an area where rental cap rules apply, a new period of 

continuous use begins for the capped rental item, enteral nutrition equipment, or oxygen 

equipment as long as the item is determined to be medically necessary. 

(d) Responsibility for repair and maintenance and servicing of power wheelchairs. In no 

more than 12 CBAs where payment for power wheelchairs is made on a capped rental basis, for 

power wheelchairs furnished in conjunction with competitions that begin on or after January 1, 

2015, contract suppliers that furnish power wheelchairs under contracts awarded based on these 

competitions shall continue to repair power wheelchairs they furnish following transfer of title to 

the equipment to the beneficiary. The responsibility of the contract supplier to repair, maintain 

and service beneficiary-owned power wheelchairs does not apply to power wheelchairs that the 
CMS-1614-P 354 

 

contract supplier did not furnish to the beneficiary. For power wheelchairs that the contract 

supplier furnishes during the contract period, the responsibility of the contract supplier to repair, 

maintain and service the power wheelchair once it is owned by the beneficiary continues until 

the reasonable useful lifetime of the equipment expires, coverage for the power wheelchair ends, 

or the beneficiary relocates outside the CBA where the item was furnished. The contract 

supplier may not charge the beneficiary or the program for any necessary repairs or maintenance 

and servicing of a beneficiary-owned power wheelchair it furnished during the contract period.

 17. Section 414.412 is amended by revising paragraph (b)(2) and adding paragraphs 

(b)(3) through (5) to read as follows: 

§ 414.412 Submission of bids under a competitive bidding program.

* * * * * 

 (b) * * * 

(2) The bids submitted for each item or drug in a product category cannot exceed the 

payment amount that would otherwise apply to the item under Subpart C, Subpart D, or Subpart I 

of this part. 

(3) The bids submitted for enteral nutrition, oxygen and oxygen equipment, standard 

manual wheelchairs, standard power wheelchairs, and hospital beds paid in accordance with the 

special payment rules at § 414.409(a) cannot exceed the average monthly payment for the bundle 

of items and services that would otherwise apply to the item under subpart C or subpart D of this 

part. 

(4) The bids submitted for continuous positive airway pressure (CPAP) devices and 

respiratory assist devices paid in accordance with the special payment rules at § 414.409(a) 
CMS-1614-P 355 

 

cannot exceed the 1993 fee schedule amounts for these items, increased by the covered item 

update factors provided for these items in section 1834(a)(14) of the Act. 

(5) Suppliers shall take into consideration the special payment rules at § 414.409(d) when 

submitting bids for furnishing power wheelchairs under competitions where these rules apply. 

* * * * * 

 18. Section 414.414 is amended by revising paragraph (f) to read as follows: -- 

§414.414 Conditions for awarding contracts. 

* * * * * 

 (f) Expected savings. A contract is not awarded under this subpart unless CMS 

determines that the amounts to be paid to contract suppliers for an item or drug under a 

competitive bidding program are expected to be less than the amounts that would otherwise be 

paid for the same item under subpart C or subpart D or the same drug under subpart I based on 

95 percent of the average wholesale price in effect on October 1, 2003. 

* * * * * 

 19. Section 414.422 is amended by revising paragraph (d) to read as follows: 

§414.422 Terms of contracts. 

* * * * * 

 (d) Change of ownership. (1) A contract supplier must notify CMS if it is negotiating a 

change in ownership no later than 60 days before the anticipated date of the change. 

 (2) CMS may transfer a contract to an entity that merges with, or acquires, a contract 

supplier if the entity meets the following requirements: 

 (i) A successor entity--- 
CMS-1614-P 356 

 

 (A) Meets all requirements applicable to contract suppliers for the applicable competitive 

bidding program; 

 (B) Submits to CMS the documentation described under § 414.414(b) through (d) if 

documentation has not previously been submitted by the successor entity or if the documentation 

is no longer sufficient for CMS to make a financial determination. A successor entity is not 

required to duplicate previously submitted information if the previously submitted information is 

not need to make a financial determination. This documentation must be submitted no later than 

30 days prior to the anticipated effective date of the change of ownership; and 

 (C) Submits to CMS, at least 30 days before the anticipated effective date of the change 

of ownership, a signed novation agreement acceptable to CMS stating that it will assume all 

obligations under the contract; or 

 (ii) A new entity --- 

 (A) Meets the requirements of (d)(2)(i)(A) and (B) of this section; and 

 (B) Contract supplier submits to CMS, at least 30 days before the anticipated effective 

date of the change of ownership, its final draft of a novation agreement as described in paragraph 

(d)(2)(iii) of this section for CMS review. The new entity submits to CMS, within 30 days after 

the effective date of the change of ownership, an executed novation agreement acceptable to 

CMS. 

 (3) Except as specified in paragraph (d)(4) of this section, CMS transfers the entire 

contract, including all product categories and competitive bidding areas, to a new entity. 

 (4) For contracts issued in the Round 2 Recompete and subsequent rounds in the case of 

a CHOW where a contract supplier sells a distinct company, (e.g., an affiliate, subsidiary, sole 

proprietor, corporation, or partnership) that furnishes a specific product category or services a 
CMS-1614-P 357 

 

specific CBA, CMS may transfer the portion of the contract performed by that company to a 

successor, if the following conditions are met: 

 (i) Every CBA, product category, and location of the company being sold must be 

transferred to the new qualified owner who meets all competitive bidding requirements; i.e. 

financial, accreditation and licensure; 

(iii) All CBAs and product categories in the original contract that are not explicitly 

transferred by CMS remain unchanged in that original contract for the duration of the contract 

period unless transferred by CMS pursuant to a subsequent CHOW; 

 (iv) All requirements of paragraph (d)(2) of this section are met; and 

 (v) The sale of the distinct company includes all of the contract supplier’s assets 

associated with the CBA and/or product category(s); and 

(vi) CMS determines that transfer of part of the original contract will not result in 

disruption of service or harm to beneficiaries. 

* * * * * 

20. Section 414.423 is amended by revising paragraphs (b)(1)(vi), (l)(2) introductory text, 

and (l)(2)(i) to read as follows: 

§ 414.423 Appeals Process for Termination of Competitive Bidding Contract. 

* * * * * 

 (b) * * * 

 (1) * * * 

(vi) The effective date of termination is 45 days from the date of the notification letter 

unless a timely hearing request is filed or a corrective action plan (CAP) is submitted within 30 
CMS-1614-P 358 

 

days of the date on the notification letter. 

* * * * * 

(l) * * * 

(2) A contract supplier whose contract has been terminated must notify all beneficiaries 

who are receiving rented competitive bid items or competitive bid items received on a recurring 

basis, of the termination of their contract. 

(i) The notice to the beneficiary from the supplier whose contract is terminated must be 

provided no later than 15 days prior to the effective date of termination. 

* * * * * 
CMS-1614-P 

(Catalog of Federal Domestic Assistance Program No. 93.773, Medicare--Hospital Insurance; 

and Program No. 93.774, Medicare--Supplementary Medical Insurance Program) 

Dated: June 24, 2014. 

 _________________________ 

 Marilyn Tavenner, 

 Administrator, 

 Centers for Medicare & Medicaid Services. 

Approved: June 27, 2014. 

_____________________________ 

 Sylvia M. Burwell, 

 Secretary, 

Department of Health and Human Services. 

BILLING CODE 4120-01-P
CMS-1526-P 

. 

[FR Doc. 2014-15840 Filed 07/02/2014 at 4:15 pm; Publication Date: 07/11/2014]